TODAY'S BREAKOUTS & BREAKDOWNS

You know what pisses me off the most? People who do the exact opposite of my time-consuming analysis. For example, someone who called me had the nerve to go long the material stocks today. What an idiot, and I’m not afraid to say it either. That was stupid beyond belief. He is now a “long-term” holder. I should have just hung up the phone.

When I highly not recommend something, it’s for a very good reason. Today is one of those days that make that reason reality. Who else gets on my nerves? People still hoping for that huge explosive rally. I guess they can blame it on human nature, but still, people get to a point where they have to see the reality of what’s going on right now and what the market is telling them…right now. We might get a major rally if (when) the House clears the vote, but the market just sold off after the Senate vote. It’s good to stay in all cash once things clear up. If I don’t have prior experience with an experience, then I’m not trading it. It’s like an IPO…I’ll never trade it when it first comes out.

We hit 4 new highs today and 778 new lows. The imbalance between the new highs and new lows is getting larger and larger. To confirm any type of rally, I have to see some type of improvement in the new highs-new lows indices for the NYSE and the NASDAQ. When I say there is an imbalance, this is what I mean:

So my question to the people who are hoping for that major rally is, “How on Earth are we going to rally if the NH-NL lines look like this? The Advance-Decline charts look just as bad. No trend lines needed; these chats remind me of my ski trip at Park City, Utah, more specifically, riding down the double black diamonds with some messed up looking moguls.

We had 3 breakouts today: Atmel (ATML), TreeHouse Foods (THS), and Diamond Foods (DMND). Interestingly, 2 out of three are food stocks, just like my favorite – CPB. I have no clue why they’re doing well, and I don’t care. All I need to know is if they’re the best performing stocks in the entire market. So if you want to go long, don’t do what my friend did, but rather, go for these very, very few stocks that make new 52-week highs. Stocks that are up on days like today exhibit unusual and maybe even supernatural strength. Kidding, but consider these stocks for possible long positions if you need defensive positions.

ATML is a type of swing trade; notice the wide ups and downs. ATML formed a breakaway gap to the upside today and finally has a chance of not hitting $3.20 again in the short-term.

THS formed an ascending triangle and broke out today. These are the types of stocks I would put my money in. I don’t care what the media says what some “guru” is recommending on TV or anything else. There’s only one criterion – the chart must support my decision to go long, and they do.

A similar pattern as THS above, DMND breakout to the upside while almost everything else liquefied into a huge mess. Don’t forget about CPB!

We had many, many breakdowns today. Most of these stocks lost 20% or more of its value. Even with a nice sized rally, some of these stocks are so deep in the hole, they don’t have a chance. It’ll take these stocks below a very long time to stabilize. In the meantime, feel free to short the ones that pullback to resistance, but don’t even think about going long. Here are today’s biggest losers:

READER'S REQUEST - Commodity Stocks

NO, NO, and NO! No long positions! In fact, most of these names are still short candidates for the long-term. Anyone hoping for some kind of nice big bounce will be disappointed. Fundamentals? Oh yea, look where they took you now. Technicals display price action, and price action is the consensus estimate of market participants, and I'm sure they know all the fundamentals they could possibly know. Sudden and dramatic changes in sentiment occur for any number of reasons, and the important thing is to react when that occurs, regardless of personal beliefs.

I love it when these dudes take long positions because these stocks are "cheap". They've fallen 25-50% further and I'm the guy on the other side shorting them. Ignoring technicals won't do you any good.

Do these names have a long ways to go down? You bet. There's too much excess "greed" money in these names and there are still people holding. Many of these names are dominated by hedge funds and as more funds blow up and have to force liquidation, you'll notice those intra-day 'blips' on the charts. That's a fund dumping a large position (get out of the way!)

Do I recommend shorting? Only on a pullback. Do not chase these stocks as they do tend to have sharp pullbacks into resistance. The only names I would short here are POT, AKS, and MOS because of the possible amount of future decline.