“Higher oil, rate-hike fears and new regulations in the financial sector handed stocks their biggest beating in nearly a month…”

- Stocks Get Hit In Heavier Volume, By Vincent Mayo of Investor’s Business Daily.

There is some truth to the statement above but the charts have clearly been raising red flags that this market may be heading lower. I highlighted this trend over the past week or so I as I started to see the same faulty charts appearing on my screens. Visit these posts to see what I have been saying over the past week:

• The Big Decline
• DryShips (DRYS) Drying up?
  (By the way, DRYS was down 2.87% on above average volume – distribution)

The NASDAQ, DJIA and S&P 500 fell about 1.8%, 1.6% and 1.8% respectively as crude oil was up $1.69 to close above $123 a barrel (a new record).

I originally started to point out market troubles back on March 14, 2008 in a post titled Snapshot Friday; I highlighted both the Dow Jones and NASDAQ with clear yellow shaded areas showing the 200-day moving averages pointing down for the first time since 2003 (that’s huge if you ask me).

Yes the market is now higher than it was in March but the recent bounce is smacking up against the 200-d m.a. for the first time since 2003 for both indices. The last time the market crossed below a down-trending 200-d moving average and couldn’t recover was back in 2000 and 2001.

So what does that mean? As I said yesterday, I think it means a possible Big Decline.

The Dow Jones is now back below the 200-d m.a. and is failing to challenge recent highs. The day’s action came on above average volume which makes today pure distribution.

I hate to pick tops but we may be coming off the official top of the bull market that lasted from 2003 to 2007.

Read more »

I am a positive person by nature and I prefer to buy stocks going up but I am starting to see several leading stocks struggle to hold new highs or fail to challenge recent highs. These patterns are familiar and they are suggesting that the recent bounce is the final stage before a possible market decline. A perfect example can be the charts posted of DRYS yesterday.

Now, this big decline could take years to materialize so I don’t want to jump the gun and start yelling sell or short sell everything in sight. I trade to catch the mid to long term trends so time is on our side to determine what is happening.

• I don’t need to call the tops and bottoms of moves
• I just need to be able to identify the trend (if one exists) and then trade accordingly.
• It’s a fairly easy method of investing and doesn’t require watching the market every hour of every day.
• Trending markets are not very common to begin with but certain sectors, industries or markets are always forming some type of trend.

I will look to post up examples from former declining markets and will highlight what the charts looked like before those big declines.

Now, take a look at the charts of First Solar Inc. (FSLR). The market leader recently recorded new highs after the first correction since its IPO but it is now starting to churn. We have witnessed three consecutive weeks of churning action as the stock is not moving higher on above average volume.

I do admit that the overall trend is still higher but the red flags are starting to appear (with this stock and others).

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I start by giving a hat tip to Don Harrold from DonHarrold.net for providing the in-depth research and video highlighting the Cramer BS! And that’s what it is, BullSh*t!

The second hat tip goes to Adam from Daily Options Report who uploaded the YouTube video to his site, where I first viewed it.

Watch the video and understand what TheStreet.com is doing here. I mean, all credibility goes out the door if this is true and the image is not altered.

How many other lousy, losing stock picks does TheStreet.com erase from their website without anyone noticing? Do they really go back and toss out poor stock picks without telling the public? They should lose ALL journalistic credibility and ALL equity research credibility (if they had any to begin with).

I am glad people like Don Harrold keep an eye on the big guys because so many sheep do watch these shows and trade based off of what they say.

The second beef I have is the fact that Jim Cramer claims he was talking about Bear Stearns, the bank, and not the stock (BSC). Maybe he was because he does refer to the “liquidity” based on the caller’s question but I still have reservations.

I am wondering why a stock chart was uploaded on the screen if he was talking about Bear Stearns the bank and not the stock; they post these charts on the screen with every other stock analyzed.

Why too, did Jim forget to say the words “common stock” during the initial telecast? Let me guess: because he was talking about the stock just as he has been calling it a buy since last summer (the start of the big crash). The follow-up video of Cramer stresses the words “common stock” but he forgot to iterate this during the initial telecast. He has to be clearer considering he is speaking to an audience that takes his words at face value.

Anyway, I am wondering why the mainstream media or even competitors such as the Fox Business Network (or whatever it is called – I don’t watch these channels) isn’t calling out TheStreet.com and/ or Cramer.

I try not to be a Cramer basher but he’s such an easy target when he does stuff like this and his company does something so despicable. I leave the day-to-day nit-picking and bashing for others but I have to jump in and make it clear when something is very wrong (and involves a public company). I mean, I almost worked for TheStreet.com and Jim Cramer (I made it several rounds deep in the interviewing process to become a part of their equity research team). Fortunately for me, they went with the business school lad instead of the architecture grad.

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Advancers lead decliners by a 17-to-1 ratio on the NYSE Tuesday and 10-to-3 on the NASDAQ. The DOW was up 3.5% with the NASDAQ up 4.2% making it seem like we had a follow-through but volume was lower. Besides, the NASDAQ violated the reversal range intraday on Friday and then again this past Monday. Because of this violation, the count had already reset and Tuesday’s huge gain acts as day 1 for a new rally. I know this can be confusing but it makes sense after you study the rules and then watch it happen over several years.

We can’t call this a follow-through on day 6 for the DOW because trading volume dipped from yesterday’s totals. The count does not reset because we have not violated the intraday low from the reversal day or day 1 of the rally attempt. Leading stocks didn’t do much to lift the market today so it is better off that we didn’t have a suspect follow-through. Rebounding financial stocks lead the market higher, not something we can hang out hats on.

Read up on the CANSLIM rules if you don’t completely follow what I am talking about when it comes to reversals, rallies and follow-throughs.

Past CANSLIM Articles:

• CAN SLIM Breakdown
• IBD’s 20 Rules for Success
• Understand the ‘M’ in CANSLIM

Interesting Chart Snapshots: