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Joshua Hayes
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Joshua "MauiTrader" Hayes is CEO, President and founder of Big Wave Trading Inc., a Maui, Hawaii-based stock market advisory service. Hayes is a well-respected stock trader who combines fundamentals, technicals, psychology and money management to trade professionally for his personal,... More
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  • Stocks Surge on Light Volume 4 comments
    May 12, 2010 11:37 PM | about stocks: GLD, DIA, QQQ, VXX, EWY, TBT, SLV, GOOG, BIDU, AAPL, ISRG, GMCR, CMG, GS, C, EBAY, YHOO, MSFT, IBM, PG, MMM, SHLD, PCP, POT, PCLN, UGL, DGP, EGO, CRYFQ, IAG, NEM, DDC, SPY

    Just when we think the market could be heading much lower stocks rebound, but in light trade.  The NASDAQ retook its 50dma a positive sign, but the downside is we didn’t get the volume showing institutions weren’t throwing their weight behind the move.  Even the small cap stocks out performed with the Russell 2000 leading the way.  The market remains in limbo after clearing oversold conditions from the past few weeks and now we’ll certainly find out where the market is headed.

     

    There are always positives and negatives in the market.  We did see some very positive moves out of leading stocks with volume.  We are on day 3 of an attempted rally off the lows and we have yet to see a distribution day.  Normally, if a distribution day occurs within the first few days of an attempted rally the rally has a better than 50/50 chance of failing.  The bulls have something going, but we could very well see this market turn on a dime and head lower.  So it is best to use caution and wait for the market to confirm the new uptrend.

    The recent rally has cleared just above every oversold oscillator and indicators you can possibly imagine.  Since we’ve worked off the oversold conditions it will be important to see how the market reacts going forward.  It wouldn’t surprise us to see the market drift lower after its monster rise off the lows.  Although, distribution would certainly dampen the mood for this rally to gain much traction.

    Cash is king at this point until we get some sort of price and volume confirmation of this rally.  If we fail, it will only allow shorts to work and if a confirmed rally is in the cards we’ll get long stocks.  It is quite a simple formula, but many folks try to pick bottoms and guess where the market is going next.  Often times many focus on making “calls” rather than actually allow the market to guide them.  The stock market can’t be beaten it can only be played.  Much like golf, the stock market can be played and the sooner you stop trying to beat the game the better you will become.

    Keep a positive attitude and do not let the market or your trading to get you down.  If you are consistently losing money, trade smaller in size and sign up!  In the meantime, patience is of the utmost importance and remain an even keel.

    Stay disciplined




    Disclosure: No Positions
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Comments (4)
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  • untrusting investor
    , contributor
    Comments (9966) | Send Message
     
    No problem. GS, JPM and some of the other big prop desks and likely some of the HFT'er have total control. With GS, JPM and da boyz reporting 100% winning trading days for the past quarter, is it any wonder the artifical recovery rally continues. Must be great to have perfect information and total dominance of most of the daily trading volume. When you run the casino, it sure makes it easier to make all the winning bets all of the time.
    13 May 2010, 03:04 AM Reply Like
  • Joshua Hayes
    , contributor
    Comments (362) | Send Message
     
    Author’s reply » While you might not like it, you can still game it. I have been making a living at this game for 15 years by using technical analysis. If you study the greatest traders of all-time (Livermore, Darvas, O'Neil, Dreyfus, Wyckoff, Loeb, Lynch, and a few others) you can learn how to take chunks out of the market. At my website I have a list of MUST READ books that will help you become a better investor/trader. However, first you must drop the attitude and realize NO MAN can beat the market all the time but you can still beat the market sometimes. You must let your winners run and cut your losses short. When you study the greatest traders of all-time and then learn how the greatest stocks of the past 130 years have acted BEFORE their biggest moves you will see patterns repeat themselves over and over because human emotions never change: fear greed and hope. If the market was impossible to "get" then I don't think it would be possible to make a living doing this on such an expensive place to live like Maui.
    14 May 2010, 12:31 AM Reply Like
  • Stez
    , contributor
    Comments (49) | Send Message
     
    Agree 100% with what you said.

     

    Interesting thing has been that no one has looked at how light the volume was in this rebound.

     

    This will be read as the conspiracy theorists stoking the market.

     

    Ritholz followed the Buffet view that at uncertain times the best thing to do is stay away and have cash when you are ready to play.

     

    Tech valuations do look compelling in a number of areas.
    But as you say to early to tell for certain.
    13 May 2010, 11:24 AM Reply Like
  • Joshua Hayes
    , contributor
    Comments (362) | Send Message
     
    Author’s reply » Absolutely, Stez on the cash note.

     

    Right now, I have too many charts that look like good shorts, I have leading stocks selling off on heavy volume (GOOG, GMCR, PCLN, etc) and others putting in possible climax/parabolic runs (NFLX, BIDU, CMG, etc) and believe this rally is about over. It has been going almost non-stop for over a year and a real pullback looks like it is going to happen. I have too many stocks out there setting up in historically strong shorting patterns. I am currently short five stocks and have 12 longs. Before this selloff started, I had 30 longs with zero shorts. So things are definitely changing. If this pullback was not going to be that bad, I would not be finding proper short setups and would still be long most of what I was as the pullbacks would be on lower volume and find support above key support levels. Instead, my past longs have broken down and given full sell signals and the amount of ugly charts keep piling up.

     

    For most investors, ESPECIALLY new investors, cash is definitely still king.
    14 May 2010, 12:34 AM Reply Like
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