November 26 Premarket – Stick To The Right Side – ALWAYS

More new lows for the things which I have been warning about, again:

For several years I have been bearish on of course bonds, LQD, JNK, plus DB, CS, plus GS, C, BAC, MS. They held longer than I thought they would, but I always believe in my work, ALWAYS. When I identify a TREND, (know your timeframes of that trend) then my belief in and respect for it, and am stubborn as heck about that. It serves me very very well – on net. People who want to bounce around guess jump from one thing to another will NEVER make it.”

Do you think I just come up with stuff to write about out of the blue, and jump around from one thing to another as 90% of the people do? I stick to what I know and do trades based on setups I know. PERIOD – and work, work, work, observe, observe, follow, follow, watch the technical action develop, develop scenarios watch for confirmations – when I believe that I understand the action, watch for the beginnings of setups, watch those setups develop, continue to watch the action and confirming behavior – wait for my trigger.

AVOID THE LEFT SIDE:

And I stick to the RIGHT SIDE, NOT THE LEFT SIDE, OF THE MOVE. So a bottom?, I’m looking to enter on what I believe is the right side, same with a top?. I want to be in sync with the FRONT SIDE of a move. AVOID THE LEFT SIDE.

Again this business is pure hard work and consistency. Markets, tops, bottoms, accum reacc, distr, redist, trends, trading ranges – IT IS A PROCESS, hence OUR WORK needs to be a PROCESS. The vast majority of people show up only occasionally and can not figure out what the problem is – they will never succeed. Are you working hard at this, and with consistency? We all make our choices.

So here is the process. Are you constantly consistently reviewing the quality competent work laid out to you every week? I’ve been around this business a long time. In my early days the really good traders seemed to have some great talent, high IQs, some magical system. WRONG. Pure hard work, consistency, and the years of that then becoming – EXPERIENCE. I’ve seen so much disgusting sloth over the years. No matter how many times I have repeated this over the last few years, happy to see the ones who have listened, but it has sunk in with a disappointing number of people. I have tried.

 

So again, with discussion of the shorter-term, the performance in after-Thanksgiving and December for this type of year are again repeated, and updated the charts. The next leg of the bull, FAANGs will trade with the market returns, no longer way ahead, as stated multiple times – fads in markets are always replaced by something new – and theories in markets – ALWAYS WRONG – ALWAYS. What did I say about BTC last December:

“..aware of the huge runs, big EA areas, and the total arrogance of the BTC permabulls. Every time there’s a huge run in a market, there are always rearview mirror theories made up about the “price action”. And the “confirmation” with the “price action” gets the permabulls to enlist the new permabulls to their ranks. And they get very arrogant, and downright nasty, to anyone who would dare to disagree with their theories. Well gosh, why not. I mean look at the price action. Like 2011 with PMs or the last few years in bonds.”

The QQQ, thanks to FAANGs and newer software stocks, would be much lower, old tech – COMIs, plus telecoms are holding up the index. I was very early to begin posting telecoms, the sector is doing beautifully – they have become leaders. Also restaurants, big medical and medical equipment. I continue to believe those cloud stocks and the “edge” technology have outstanding potential. The stocks which lead the market in the “corrections” become the great performers out of that correction. I am trading very little these days, mostly options, no trades Friday – but do you think I am not working just as hard tho?

 

From a couple weeks ago:

Sort of intermediate-term, the way this bigger area sets up to me in SPY is we have got to have a big rally out of here, up to the 281 big bko area, and then another big selloff, maybe another spike lower low spring, then we should have set up a lot more stocks in the meantime.

So bit bigger picture, plus near term, we have the total bickering fighting investigating power grabbing for the next 2 years and beyond actually with the new crop of clowns into the Congress, that setting the stage for consistent volatility in markets, along with the higher yields, tariffs, and then oil getting clobbered. A traders stock market. None of this will kill the secular bull, I discussed a lot of this stuff over the years, have expected the general tone and trend of where we are headed, was aware of these types of things when I did this post many years ago as to my extreme bullishness for the long-term stock market. That belief takes into account a USD losing at least “unofficial” reserve status.

And for the incompetent permabears, here is what they should be worried about – JNK CS DB.”

For several years I have been bearish on of course bonds, LQD, JNK, plus DB, CS, plus GS, C, BAC, MS. They held longer than I thought they would, but I always believe in my work, ALWAYS. When I identify a TREND, (know your timeframes of that trend) then my belief in and respect for it, and am stubborn as heck about that. It serves me very very well – on net. People who want to bounce around guess jump from one thing to another will NEVER make it. After all this time with me, if you have not relentlessly studied how to identify A TREND, why not? All of those stocks plus the bonds above, I have believed are in big or huge distr or redist areas or already downtrends. DB new all-time lows, the others multi-year lows. This all plays into my view of where we are at in the stock market. As discussed several times recently, Treasuries continuing to benefit from the current situation vs/relative to corporates.

So again, discussed this so many times, gave you guys plenty of warning to get out of the stock market:

Aug 17 I discussed why I was going to 100% cash in my account for bigger position-type trades, and discussed why only will be trading indexes and small stocks.

The summer doldrums trading has been, and, is going on in the stock market. The occurrence of tops in July/August was discussed previously. And the SPY charts from the previous 5 were discussed as models. I’m always looking for/trying to recognize stocks which are – setting up for breakouts, turning the corner to the upside of accum or reaccum, setting up for bounces (smaller stocks), or setting up for springs. I’m not finding many setups in the bigger-type stocks. Small and intermediate ones, there are always opportunities there (and the daytrade stuff), but there are less opportunities. Speaking of daytrades, I totally screwed up a MOSY trade yesterday, losing trade, missed the low and chased it.

I am out of all position trades,100% cash in my bigger-type stock account.  My focus will now be on my account used for the small and intermediate stocks, as discussed previously. That discussion below.

In the last week or so, I sold INTC, long-time 10 month holding IMMU, VNOM from the 4/2 stock list. And yesterday – I sold AMD from the recent bko (when it had broken out) in the 17s, used the rally in the SPY into the top of the gap. That SPY gap resistance was drawn in with Wednesday’s SPY chart. Also, I lost 5% on AMAT sold in after hours, it came out with earnings.”

Still have not done any bigger stocks, there are more setups, but just not nearly enough, some working some not. So to me it is still a market to take quick profits, which I always do anyway, but that strategy in a strong market makes me look like, and am a, fool. Remember back in Feb with those lows, I did not put out my list until 4/2, the very low day of the retest as the indexes went to all-time highs in September, that list was two months after the 2/9 low. That long before I started doing actual position trading in earnest.

Discussed several times – not enough individual stock setups. I judge the “breaking out” of the indexes themselves much more by how the overall individual stock situation looks to me. The stock indexes are much more prone to “false” bkos, up or down, above or below the range. Not false at all actually, but what are “false bkos”? If you do not know that, I have been over this from day one. Think about it, the thought process to come up with the answer will help you a lot.

The selloffs in the main stocks are deeper and wider than earlier in the year. Many of the leaders are done. Yes new leaders are being formed, setting up a very vibrant uptrend to come. But my belief still is that no matter what, there will be a 25% selloff at some point in the next 2 years. I have given my “laundry list” of factors. Currently, pure market factors only, oil, GS, AAPL, NVDA, FB, LQD, JNK If the Fed does pause, and we get a rally back to the highs without a solid core of quality stock setups in a multitude of big stocks, I do not short stocks very often, but will consider getting short on a bigger basis for the first time since correctly “calling” the top in Dec 2015. I had been discussing shorting stocks in a few posts before then. That rally into the Dec 2015 highs was the final SECONDARY RALLY – the selloff and the rally back to the highs:

From 12/9/15:

My last update 5 weeks ago, my intermediate outlook changed to bearish on stocks, for the first time in over 4 years. Since then, I’m even more bearish. While still very bullish long term, stocks need a large selloff to reset the bull market and build a solid foundation for Dow 100,000 well down the road. A 25% selloff is a decent possibility. Both stocks and gold will eventually rise together, courtesy of the upcoming bond market demolition.”

Back then, the S&P sold off 15%, Russell 27% top-bottom. Those shorts, like my standard approach, would be in former leaders failing RS stocks, on secondary rallies, entering on the backside of that secondary rally. What have I said about the FAANGs several times over the last few months, discussed again? – I generally do not like the faangs overall, a fad to me, they will not be the “faangs’ in a few years, there will be something else to replace them in a secular bull.”

But in the meantime, Friday intraday drew in my LHBL res in IWM, I did not believe we had yet bottomed, poor quality bko. Also the big LHBL. There should be a rally attempt into mid-December, possibly coinciding with a very interesting Fed meeting. Stats from Bespoke already given to you beginning of the week, a bullish period:

On a day to day basis, for both all years since WWII and in years where the S&P 500 was up less than 5% heading into Thanksgiving week, Monday has been the worst trading day as it is the only day of the week with negative average returns and positive returns less than half of the time. Tuesdays and Friday (73%), however, have been positive days, though, with average gains of 0.10% and 0.29%, respectively. Additionally, for those years where the S&P 500 was up YTD but up less than 5%, Tuesdays and Fridays have been even stronger with average gains of 0.26% and 0.35%, respectively.”

Also, historically December is the best month of the year especially with “corrections” in October, and then historically late November on is another good period. As for this year as we stand – “as we move past Thanksgiving, though, seasonal trends for the market based on this year’s performance so far improve. In those years where the S&P 500 was up less than 5% YTD heading into Thanksgiving week, the average gains the week after Thanksgiving was 0.41% with positive returns 55% of the time. For the remainder of the year, average returns were even stronger at +2.83%. Not bad for a period of just over five weeks!”

The big LHBLs shown again, the abating weekly volume not as concerning. Also, with red volume, not always bearish, green not always bullish. So again to repeat – the concentrated compressed red volumes, that is much more likely to be bullish.

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About traderscott 1110 Articles
Trader Scott has been involved with markets for over twenty years. Initially he was an individual floor trader and member of the Midwest Stock Exchange, which then led to a much better opportunity at the Chicago Board Options Exchange. By his early 30’s, he had become very successful in markets, but a health situation caused him to back away from the grind of being a full time floor trader. During this time away from markets, Scott was completely focused on educating himself about true overall health and natural healing which remains a passion to this day. Scott returned to markets over fifteen years ago where he continues as an independent trader.

4 Comments

    • Visao there has been very heavy volume the last 2 weeks, the biggest overall since December and the biggest green volume since Feb. And yes, then the building of the right side is the bowl in accum. That is, to me, what I wait for. Bitcoin has done this same thing in its other major bottoms, like just about everything, stock or market, also does.

  1. Hi Scott,

    I was just wondering whether the Italian debt/political situation featured on your radar at all? Whether independently or as part of the wider global debt/yield time bomb. I seem to recall you mentioning European banks being a cause for concern some time ago, and if Italy’s debt situation were to finally spook markets, what that might bring about in its wake.

    Also, a couple of days ago you mentioned Bitcoin was approaching near to your long term target. Are we closer to that mark yet?

    Thanks
    Chris

    • Yes definitely Chris. As ugly as our debt situation is here in my country, the European debt situation is likely to be the one which has the massive dislocation first. Ours is much worse overall, just because everything is bigger over here, and we have been in distribution since 2008, Europe about 4 years. And I do watch Italy in particular because it appears that is going to be the one which goes first and the first to break out. So then we get into the European banks, DB and CS for years I have been bearish on. This stuff is an underlying bullish fundamental for gold but meaningless for judging timing. I just want people to understand that it is the low/zero yields which has dampened volatility for so very long, and it is the higher yields which causes the unwind of the dampening, and it will be a consistent feature.

      Bitcoin yes last year before the big top I put out a post, which understandably no one was interested in at the time, seemed kind of a waste of time, but I was just pointing out how the cycles have run in it since inception, and then I updated it again. Small sample size but instructive, the next major bottom should be Jan/Feb next year. But I also stressed in there that it would be many years before the next big breakout, around 4 years. A long period of preparation. Also, I go by my 85% rule, a market or stock, tho the stock may be done for good, but a massive bubble goes down on average 85% into the next low. Bitcoin has followed that the previous times. That is around 3000 in this situation, but still need to get into next year.