How did I determine that? A new high, a failed high and now a challenge to the minor low (see chart for visual). It’s essentially a Dow Theory reversal setup.

System Development and Market Psychology:

Great All-around Reads:

Others:

Visa (V) turned out to be the stock I tweeted about the most starting on March 31, 2009 (my first day of twitter) at $55.60. I mentioned that “the pivot point is $61.50…then look for $60-$100 move” on April 26 2009. Well, the stock closed the year just shy of $90 and is well on it’s way to a $60-$100 run for a near 60% gain. Disclosure: I personally owned more shares of Visa in 2009 than any other stock listed below (my position is currently 100% closed).

The top gaining stock of the year was MELI, featured on May 12, 2009 at $25.60; it closed the year at $51.87 for a 103% gain.

Here is a re-cap of all the stocks that I featured on twitter in 2009:
Total Stock Selections : 63
Total Winners : 50
Win % : 79%
Total Losers : 13
Loss % : 21%

Total Average Gain : 24%
Average Gains (winners) : 36%
Average Loss (losers) : (15%)

**Keep in mind, these stats are based on pure buy and hold (no trading rules calculated in)**

A full spreadsheet of my picks can be found below.

If you can take anything away from my recent tweets, focus on the message of the following ten tweets, reference the bold type (they all show caution and skepticism in the market based on the lack of individual leaders). New Highs have been reaching levels not seen in years but they are still far below the levels necessary for a “true bull market”, one that will be sustainable.

1. $V – hit new highs day after day on volume less than half the ave. Gets rocked today on above ave vol. Clear sign of market – told ya! $$8:47 PM Sep 25th from web

3. NASDAQ: 135 NH’s today, the most in 2009 but we had more declining issues than advancers. Still suspect market $$9:13 PM Sep 17th from web

7. Markets near new highs but individual stocks are not making NH’s! Subtle divergence to watch. Adv-Dec is not making NH’ss either $$10:54 PM Sep 14th from web

8. $V – 72.87, another new high, more below ave volume.8:48 PM Sep 14th from web

17. $V – 72.31, hits a 52-wk NH but vol still concerns me. Holding but thoughts of cashing in creeping into mind. Up 30% since March (10 tweets)8:23 PM Sep 10th from web

35. Is the head forming in the market for a Head-and-Shoulders pattern ($SPX & $COMPQ)? It’s early but maybe…Time for bed! $$12:28 AM Aug 30th from web

47. The buy isn’t there yet but the inverse ETF’s can be a nice tool if the market drops, especially NASDAQ: $PSQ, $SH, $DOG, $QID11:39 AM Aug 19th from web

48. $GS – $160.48, has the same short term topping pattern as the NASDAQ on the weekly candlestick charts9:37 PM Aug 18th from web

49. @zaiteku However, the NASDAQ is weak. NH’s weak. Short term topping pattern & triple bottom breakdown. 200d is a nice support level $$9:21 PM Aug 18th from web in reply to zaiteku

56. Confusing market? “Keep cash if enough issues w/ such promise cannot be found or if the investment per issue becomes unwieldy” Loeb $$11:32 AM Aug 15th from web

*********************
See below for the complete list of my most recent tweets (100 total tweets – all dated and reproduced exactly as they appear on twitter).

1. $V – hit new highs day after day on volume less than half the ave. Gets rocked today on above ave vol. Clear sign of market – told ya! $$8:47 PM Sep 25th from web

2. “Play for more than you can afford to lose and you will learn the game.” – Winston Churchill, Nice quote to apply to the market $$7:19 PM Sep 19th from web

3. NASDAQ: 135 NH’s today, the most in 2009 but we had more declining issues than advancers. Still suspect market $$9:13 PM Sep 17th from web

4. NYSE: 354 new highs today, the most since 10/11/2007 when it closed at 383-35. Only 2 NL’s today. 0 days above 300 in 08 $$7:47 PM Sep 16th from web

5. @rbanta Correct, DJIA was at 13,930 on 10/31/07. NL’s topped 600 on NYSE 20 days later. Hit 1,114 NL’s on 1/22/08 $$8:28 PM Sep 15th from web in reply to rbanta

6. Most NH’s on NYSE since October 31, 2007 when we hit 269-60. Today closed at 230-2. The first 200+ day since September 2008 $$8:07 PM Sep 15th from web

7. Markets near new highs but individual stocks are not making NH’s! Subtle divergence to watch. Adv-Dec is not making NH’ss either $$10:54 PM Sep 14th from web

8. $V – 72.87, another new high, more below ave volume.8:48 PM Sep 14th from web

9. NASDAQ Stat Check: 2009, 3 days w/ 100+ NH’s; 2008, 3 days; 2007, 107 days; 2006, 119 days $$9:40 PM Sep 13th from web

10. RT @lhsilva MONEY MANAGEMENT & POSITION SIZING | Investor Central Blogs http://cli.gs/2YpGy9:34 PM Sep 13th from web

11. @Jediphone @upsidetrader: KEN FISCHERS NEW BOOK ON HOW TO SPOT FINANCIAL DISASTERS BEFORE THEY HAPPEN, TNX 4 AFTER THE FACT-> NO VALUE ADDED11:19 AM Sep 13th from web in reply to Jediphone

12. RT @steenbab Which stocks are most overbought: http://rurl.org/1w0a $$1:21 PM Sep 12th from web

13. @upsidetrader $$ Amazing stat,, DOW closes 9605, day before 9/11 attacks in 2001, we also closed at 96058:39 PM Sep 11th from web in reply to upsidetrader

14. @rbl656 Read this book to learn “When to Sell” – I highly recommend! http://bit.ly/1IcRQE $$7:55 AM Sep 11th from web in reply to rbl656

15. @rbl656 I base it on the overall market & the individual action. Going higher on weak volume is a sign to take profits if market is weak $$9:00 PM Sep 10th from web in reply to rbl656

16. NYSE: 179 NH’s, the most since September 19, 2008 (almost 1 year). 107 NH’s for NASDAQ, only 3rd time this year @ 100+ $$8:29 PM Sep 10th from web

17. $V – 72.31, hits a 52-wk NH but vol still concerns me. Holding but thoughts of cashing in creeping into mind. Up 30% since March (10 tweets)8:23 PM Sep 10th from web

18. Top EPS stocks making NH’s on volume 100%+ than 50-d ave: $HITK, $JDAS, $SIG, $TECD, $ININ, $EMS, $DLM (not a buy list, just research) $$8:52 PM Sep 9th from web

19. $HMIN – $28.88, up 48% since 8/4/09 tweet at $19.57. Profit taking time in my opinion, that gap-up at $20 has to fill $$8:41 PM Sep 9th from web

20. RT Excellent @Jediphone @EdgeTrader “This has been a Fed-muscled rally using Permanent Open Market Operations”: http://bit.ly/R8XPn $$8:25 PM Sep 9th from web

21. RT @IBDinvestors The NASDAQ hit a new high Wednesday and volume rose, putting the market back in a confirmed uptrend http://bit.ly/KTMeF8:18 PM Sep 9th from web

22. NYSE: 173 New Highs (1 NL), the 2nd most NH’s in 2009, the 3rd most since 9/19/08. Advancers up 2.6x more than decliners $$8:07 PM Sep 9th from web

23. NYSE: 160 NH’s today, who can tell me the last date with more New Highs? We have now logged twelve 100+ NH days in 2009 $$12:22 AM Sep 9th from web

24. RT @TraderMike Employers’ hiring plans drop to record low (going back to 1962) $$ http://icio.us/tfuwje $$9:12 AM Sep 8th from web

25. Gold Rises to $1,000 an Ounce for First Time in Six Months on Dollar Drop $$9:04 AM Sep 8th from web

26. Our son’s christening was yesterday so I want to invest rather than savings. Dow 30 baby stocks ($JNJ, $WMT, $PG), Index fund. Suggestions?3:08 PM Sep 7th from web

27. **Read the last 2 paragraphs, understand them** RT @IBDeditorials “Envy is the driving force behind socialism.” http://bit.ly/a7kpU2:43 PM Sep 7th from web

28. “Socialism has bankrupted and failed every society, while capitalism has lifted more people out of poverty than any other system.”2:37 PM Sep 7th from web

29. RT Excellent @zaiteku -importance of investment process: http://tinyurl.com/m7wo6w $$12:11 PM Sep 4th from web

30. Excellent charts RT @dvolatility Chart Comparison of Four Bear Markets http://bit.ly/yupOd $$8:54 PM Aug 31st from web

31. $VMW – $36.03, one of the few stocks acting strong with vol support. Up 38% from 4/1 tweet @ $26.12, +20% from 4/8 tweet @ $30.099:19 PM Aug 30th from web

32. EXCELLENT CHART – RT @IBDeditorials History Lesson: Current bank failures not the worst ever – by far. http://bit.ly/461kTd $$10:05 AM Aug 30th from web

33. @timothysykes To add to my 1st response, Phimai Historical Park is in Nakhon Ratchasima. Am I right? One month free?9:54 AM Aug 30th from web in reply to timothysykes

34. @timothysykes You are sitting in front of Phimai historical park9:51 AM Aug 30th from web in reply to timothysykes

35. Is the head forming in the market for a Head-and-Shoulders pattern ($SPX & $COMPQ)? It’s early but maybe…Time for bed! $$12:28 AM Aug 30th from web

36. Stats say stocks are having their best 6-month rally since 1933, +52%. They rose more than 53% from 2/27/33 to 7/17/33 $$9:41 PM Aug 27th from web

37. What are Point and Figure Charts : http://bit.ly/38FvuE $HANS example from ‘07 http://bit.ly/PUNVl $$9:41 PM Aug 26th from web

38. $MDAS – $23.11, up 10.42% on vol 286% larger than ave. Tweets 4/23 @ $16.79 +38%, 6/10 @ $17.49 +32% & 7/12 @ $18.26 +27%10:23 PM Aug 25th from web

39. $GS – $164.94, 6 wk flat base consolidation. Triple bottom breakdown would be below $158 on P&F chart. $171 is new high area5:25 PM Aug 25th from web

40. RT @howardlindzon If you are on recommended stocktwits list put tome tweets out between 2 mins to 4 and 10 after 4 to get on broadway $$3:41 PM Aug 25th from web

41. NYSE: 118-0 NH/NL diff, the strongest since 8/7/09 (130-0). NASDAQ was stronger as well at 75-3 $$8:45 PM Aug 24th from web

42. Learn to spot a climax top – example is $PLAT from 2/18/08 blog post http://bit.ly/7htvs. Charts talk so listen! $$8:39 PM Aug 23rd from web

43. $KNOT – $10.69, a rebound stock? I tracked it as a short in ‘07 http://bit.ly/RudgZ and a buy in ‘05 & ‘06 http://bit.ly/ssb1w4:41 PM Aug 21st from web

44. Could you Trade Full Time? http://bit.ly/gFjmf Take this quick quiz and honestly determine if you are built to trade full time $$9:17 PM Aug 20th from web

45. “UPS & FedEx are doing just fine. It’s the Post Office that’s always having problems.”Barack Obama. And we want to privatize Health Care?10:16 PM Aug 19th from web

46. @wsProphet “Stick with shorting socks and don’t give these JO’s any more” True but a lot of people don’t want to short stocks $$11:56 AM Aug 19th from web in reply to wsProphet

47. The buy isn’t there yet but the inverse ETF’s can be a nice tool if the market drops, especially NASDAQ: $PSQ, $SH, $DOG, $QID11:39 AM Aug 19th from web

48. $GS – $160.48, has the same short term topping pattern as the NASDAQ on the weekly candlestick charts9:37 PM Aug 18th from web

49. @zaiteku However, the NASDAQ is weak. NH’s weak. Short term topping pattern & triple bottom breakdown. 200d is a nice support level $$9:21 PM Aug 18th from web in reply to zaiteku

50. @zaiteku I wouldn’t short $RST or $KIRK – just noting the weakness. I would look to buy them in the future if they hold major trend lines9:20 PM Aug 18th from web in reply to zaiteku

51. $KIRK – 11.29, closed below the 50-d ma for first time since up-trend started in March near $3 per share. Retail hit hard today.9:47 PM Aug 17th from web

52. $RST – 20.63, Rosetta Stone rocked today, down 27% on vol 2,000% larger than ave. 3rd qtr earnings cut.9:45 PM Aug 17th from web

53. NASDAQ: down 2.8% today. The 1st negative NH/NL diff in more than a month: 8-11, -3. 7/13/09 last time at 11-19. Dec lead Adv by 8-to-1 $$8:50 PM Aug 17th from web

54. 51% of NASDAQ stocks are above their 200-d ma, levels not seen since 2007. 60% hasn’t been reached since 2003/2004. $$9:46 PM Aug 16th from web

55. 74% of NYSE stocks are above their 200-d ma, levels not seen since the summer of 2007 (overbought) $$9:43 PM Aug 16th from web

56. Confusing market? “Keep cash if enough issues w/ such promise cannot be found or if the investment per issue becomes unwieldy” Loeb $$11:32 AM Aug 15th from web

57. “The critical test in managing investments is individual judgment – the ability to interpret information correctly.” -RS Love4:03 PM Aug 12th from web

58. “An investor can have the latest facts but if he does not have the ability to arrive at the correct conclusion, he is bound to have trouble”4:03 PM Aug 12th from web

59. $RAX – $15.88, up 10.20% on volume 252% larger than ave. 1st tweet 6/9/09 @ $12.20, up 30%. Said: “Momentum stock, add on low volume dips”9:16 PM Aug 11th from web

60. @howardlindzon Well, I wouldn’t have the platform without you (stocktwits)! Glad you & others enjoy. Hopefully someone is making money! $$10:01 AM Aug 11th from web in reply to howardlindzon

61. $HMIN – $26.34, up 35% in less than one week (tweet 8/4/09 at $19.57 – NH that post with double top breakout, vol +221%)9:07 PM Aug 10th from web

62. $IPCM – $31.05, up 5.22% on volume 52% above ave. Up 23% since tweet on 6/17/09 at $25.349:05 PM Aug 10th from web

63. $SD – $11.76, darling of my blog last spring, ‘08. Triple top breakout above $12. Up on heavy volume http://bit.ly/hAbR59:03 PM Aug 10th from web

64. Do you want a good risk-to-reward ratio? 1,000+ followers, only 242 Tweets. Quality, not quantity! I don’t waste people’s time! Follow $$8:45 PM Aug 10th from web

65. NYSE NH’s drop below 100 threshold for first time in more than a week. $$8:31 PM Aug 10th from web

66. Agreed RT @FinanceTrends Loeb’s “Battle for Investment Survival” one of the best books I’ve read on speculation & investing @derekhernquist8:29 PM Aug 10th from web

67. RT @upsidetrader Thomas Jefferson, 1802: ‘I believe that banking institutions are more dangerous to our liberties (cont) http://tl.gd/cbq41:13 PM Aug 10th from web

68. Fantastic article about NH’s on NYSE: Meisler: Why Common Stocks Are Absent from New Highs http://bit.ly/zMzAU $$10:04 PM Aug 9th from web

69. Interesting: Homebuilders & REIT’s close week up on above ave volume w/ more bad news (Half U.S. mortgages underwater by 2011) $$9:51 PM Aug 9th from web

70. “The factors that make an ideal investment are never all present at the same time” GM Loeb $$4:58 PM Aug 9th from web

71. “It always was and always will be the power to understand and the ability to act that turns information into profits” GM Loeb4:57 PM Aug 9th from web

72. “I do not think anyone really knows when a particular security is “cheap” or “dear”…” GM Loeb @howardlindzon, good quote for $AAPL4:56 PM Aug 9th from web

73. “Diversification is a necessity for the beginner. On the other hand, the really great fortunes were made by concentration.” GM Loeb4:54 PM Aug 9th from web

74. “When governments pay the bills, then they want to interfere with how that money is going to be spent.” – Ron Paul3:14 PM Aug 9th from web

75. RT @wsmco china cutting taxes to spur economy. liberals here raising taxes. wonder which will work better spurring investment/innov/jobs11:41 AM Aug 9th from web

76. RT very cool @timothysykes Check Out This Cool Map Of Worldwide Internet Users [Picture] http://bit.ly/eWvQl11:38 AM Aug 9th from web

77. NASDAQ: Two days of distribution (down on above average volume). Negative pattern on P&F chart. NH’s 1/3 of Monday’s total $$10:50 PM Aug 6th from web

78. NYSE: NH’s still 100+ but Adv-Dec is negative the past two days $$10:40 PM Aug 6th from web

79. “When everybody thinks alike, Everyone is likely to be wrong.” Humphrey Neill, factor behind economic booms & busts that blight civilization10:03 PM Aug 5th from web

80. Investors Intelligence Bulls jumped to 47.2% (not quite 50% yet – this level suggests a correction is due). $$9:33 PM Aug 5th from web

81. @rbanta Correct, both times showed us a correction (July 07 and May 08).9:31 PM Aug 5th from web in reply to rbanta

82. 6 of the top 10 stocks on IBD 100 are China based – total lack of US strength, especially common stocks (no where to be found) $$9:28 PM Aug 5th from web

83. NYSE NH’s last 5 days: 151, 158, 177, 110, 127, May 08 last time 5 days in a row. July 07 last time for 6+ consec days (17 total) $$7:53 PM Aug 5th from web

84. Happy to pass 1,000 followers – glad people enjoy what a have been writing the past few months.2:48 PM Aug 5th from web

85. REIT’s up on above ave volume: $AVB $SLG $BXP $BPO $SPG $VNO. REIT Index $RMZ has long tail up on P&F chart so look for base $$9:03 PM Aug 4th from web

86. $KIRK – $15.40, another new high – this one is on fire! 99 RS rating.8:36 PM Aug 4th from web

87. $EJ – $20.12, up 86% since 4/9/09 Tweet at $10.79 – My top performing stocktwits coverage (started on twitter 3/31/09)8:31 PM Aug 4th from web

88. $CXO – $34.86, up 5.51% on volume 119% larger than ave. Ascending triple top break-out on P&F chart8:28 PM Aug 4th from web

89. HMIN – $19.57, up 12.73% on volume 221% larger than ave. 92 RS rating & new 52-wk high. Double top break-out on P&F chart $$8:24 PM Aug 4th from web

90. Investor Intelligence Bulls: 42.2%, update due tomorrow (50%+ is extreme). AAII Sentiment: 48% $$8:17 PM Aug 4th from web

91. @TheKirkReport A lot of screens are empty or lacking these days – go figure. The market talking… $$3:50 PM Aug 4th from web in reply to TheKirkReport

92. NYSE: NH’s past three days: 177, 110, 127; NL’s: 4, 7, 7. May 2008 was the last time we had 3 100+ NH days. $$10:43 PM Aug 3rd from web

93. Must Read: New High New Low Data you can’t find anywhere else: http://bit.ly/pZYXj and if you can, show me where! $$1:23 PM Aug 3rd from web

94. RT @TheKirkReport Must read: Lessons from my dear friend Irwin T. Yamamoto… http://bit.ly/2V7eWsb1:22 PM Aug 3rd from web

95. All-Time Top 10 NASDAQ Daily New Highs: http://bit.ly/pZYXj What was the most new highs in one day, find out what year! $$8:56 AM Aug 3rd from web

96. Who can tell me the highest number of New Highs in one day for the NASDAQ, all time? All-time top 10 on my blog tomorrow. $$12:20 PM Aug 2nd from web

97. “The way to get started is to quit talking and begin doing.” – Walt Disney – The RE market is calling my name.9:13 PM Aug 1st from web

98. RT @copyblogger Consultant: Someone you call in at the last minute to share the blame. – Sounds like my day to day career (some clients).9:44 AM Aug 1st from web

99. @jmadden76 elections are in 3 years and no one can prop a market that long. Just follow the market, don’t try to predict or assume.5:35 PM Jul 31st from web in reply to jmadden76

100. In 1938, the S&P 500 rallied 46% in 147 days before crashing 85%. So far, the S&P 500 has rallied 46% in 145 days (Roberto Pedone) $$3:59 PM Jul 31st from web

NASDAQ All-time
This first table shows us that seven of the top ten days with the most new highs came during the bull run of the 1990’s. The top day, Thursday, November 4, 1982 gave us the most NH’s all-time for the NASDAQ with 525 (only 13 new lows). The NH/NL 10-d MA Diff was 222, the NH/NL 30-d MA Diff was 196, the Adv-Dec Ratio was 1,087-469 and the NASDAQ closed at 225.01, up 1% for the day. The stock market bottomed on August 12, 1982 and rose 35 percent by the end of the year as we can see in the powerful NH/NL ratio averages listed above. The NH/NL 10-d MA Diff switched from negative to positive on Thursday, August 26, 1982 and never looked back (the tally was 180-15 that day); this was also the first day the NASDAQ NH/NL Diff popped above 100 since May that year. Talk about a market timer.

NASDAQ – 2009
The list from 2009 is freshest in our minds because it’s present day data. All but one of the top ten NH days for the NASDAQ happened last month with the 10th day happening at the end of June. It’s interesting because the ratio is getting stronger but the leaders aren’t cooperating and we aren’t “blasting-off” with 200 & 300+ NH’s as we did in the 1982 bull, the 1991 bull, the 2003 bull or the bulls of the mid and late 1990’s.

NASDAQ – 2008
We only logged three days above 100 NH’s in 2008, enough said. If you didn’t sell your long holdings and were still trying to pick a bottom, pay attention to this data next time; you won’t get hurt so badly!

NASDAQ – 2007
The NH/NL moving averages sunk deep into the red by the fall of 2007, giving every investor the opportunity to lock in gains and prepare for the ensuing bear market. I’ve already “tooted” my own horn for writing multiple blog posts to lock in gains on this site in late 2007 and early 2008 (see here: Calling Tops and Bottoms: Trend Changes). More articles are listed below. The NH/NL 10-d MA Diff went negative on Tuesday, October 23, 2007, 10 trading days before the NASDAQ’s ultimate top. The index went on to drop more than 40% in one year and 55% to the bottom. Once again, pinpoint accuracy for the NH/NL data.

List of articles on NH/NL Data:

• NH NL picks Market Tops and Bottoms
• Calling Tops and Bottoms: Trend Changes
• New High New Low Data
• Market Breadth
• New High New Low (NH-NL) Chart

NASDAQ – 2006
Not much to talk about in 2006 – it was an average year with ups and downs but nothing drastic and not too much trending using this indicator. A drop in the markets took place in the summer of ’06 which the NH/NL’s picked up.

NASDAQ – 2005
This year was similar to 2006 as the NH/NL data was fairly quiet with no extremes in either direction.

NASDAQ – 2004
This year’s NH/NL data started off extremely strong with the second highest NH daily total ever for the NASDAQ. Nine of the top ten NH days came in January as the bull market of 2003 (recovery from bubble burst) was coming to an end. The market reached a top in January and didn’t surpass these levels until the following winter. January of 2004 gave us 6 days with a NH/NL 10-d MA Diff above 300, 5% of the total number of times this has happened to the NASDAQ over the past 30 years (128 total times).

NASDAQ – 2003
The bull market of 2003 gave us some of the strongest overall (average) NH readings of all-time. Wednesday, September 3, 2003 is the 8th highest daily total ever (only 2 NL’s that day for a 99% NH/NL ratio rating). The NH/NL 10-d MA Diff turned positive for the first time on Wednesday, March 26, 2003 while the NH/NL 30-d MA Diff turned positive on Tuesday, April 8, 2003. The up-trend started in March and blasted off in April, once again proving that the NH/NL data is pinpoint accurate – better than any stochastic, oscillator or other market tool available. We can’t argue with history.

In closing, the difference between the past turning points and 2009’s turning point is that the former up-trends quickly showed many consecutive days of more than 100+ NH’s, soon to be 200+ NH’s per day. This year has failed to do that time and time again. Until it does, we’ll wait patiently and continue to watch the data, looking to pounce on the signal!

I hope you enjoyed this historical and educational post. If so, follow me on twitter for my nightly and weekly updates (the NH/NL data is the majority of my focus along with individual growth stocks): Follow Me On Twitter

Don’t forget to subscribe to my free blog feed so you can get my blog updates e-mailed directly to you or listed on your RSS home page.

“The bottom may be near but the upswing could take years if you go back and research history. Badly beaten down industries can take anywhere from two to five years to rebound and start trading higher.”

Give it time, past industries can and usually do take years to recover. The one “prediction” I did make has held true, NVR continues to be the group’s leader. Since my blog post on 8/24/07, NVR is the ONLY stock showing a gain with Hovnanian still down more than 75%. Toll Brothers is a distant second with a 10.77% loss.

(NVR) NVR Inc.: + 7.74%
(TOL) Toll Brothers Inc.: -10.77%
(MDC) MDC Holdings Inc.: -19.99%
(DHI) DR Horton Inc.: -22.76%
(RYL) Ryland Group Inc.: -30.15%
(PHM) Pulte Homes Inc.: -40.29%
(KBH) KB Home: -43.33%
(LEN) Lennar Corp.: -58.49%
(CTX) Centex Corporation: -67.11%
(BZH) Beazer Homes USA Inc.: -75.27%
(HOV) Hovnanian Enterprises Inc.: -75.99%

I guess it helped to work in this industry during the boom for approximately five years but I am sill surprised that some of the big guys haven’t merged or taken over their competitors.

Other than Housing, Biotech and Cyclicals also lead the market this past week (+26% & +10% respectively), these are not the groups of choice for leaders (in my opinion).

Here’s the original post from August 24, 2007:

The analysis below will show you why I select this stock as the best bet when the builders eventually hit a bottom and start moving higher.

Nathan Rothschild, founder of one of Europe’s most-powerful economic dynasties, uttered one of the most frequently quoted maxims on investment timing in the early 19th Century when he said, “The best time to buy is when blood is running in the streets.”

Now, blood is running in the streets for this industry and the homebuilders are getting their rear-ends kicked by Wall Street, the media and anyone else that will jump on the bandwagon.

So, when will the bottom arrive? Who the hell knows? And if someone tells you they know, just walk away because they are fooling themselves and anyone who listens.

The bottom may be near but the upswing could take years if you go back and research history. Badly beaten down industries can take anywhere from two to five years to rebound and start trading higher.

With that said, I would like to tell you why I feel that NVR Homes (NVR) is the best bet when the bottom does arrive and we start to see some life in this area.

Let’s start with the charts above. They shows us that NVR now has the sixth largest market cap and is the only leading US Big Builder to boast a current ROE above the double digit threshold (positive of course). Of the ten other major players, only Ryland Group (RYL) has a positive ROE while writing this piece. This is major because every one of these stocks were reporting 20%+ ROE’s over the past five to seven years with several of them averaging 35% or better. NVR had an ROE of 105.2% in 2003, 78.7% in 2004 and 92.3% in 2005.

NVR was one of the smarter builders by scaling back their land purchases in 2005 and 2006 when everyone else was going nuts buying land that was way overvalued. They were also the only homebuilder to receive a report card grade of A- by Big Builder Magazine in the May 8, 2007 edition. The magazine said:

NVR’s inimitable focus on EPS growth through capital allocation discipline and land-risk minimization has positioned the company to weather a deep and long downturn in superb condition. The company’s extreme concentration in the Washington, D.C., market and its immediate environs exposes it to that market’s vulnerabilities but allows for peerless operational discipline and flexibility in light of situational opportunities that emerge before a wider recovery. The company’s market share strength in its competitive arena give it leverage in renegotiating terms on optioned takedowns, allowing the builder to remain in control of assets even in a slower sales pace environment.

Financially, the company is maintaining its leadership role in areas such as cash flow, earnings, long term debt, ROA, ROE, net income and revenue. Since they are writing off the least amount of land due to their foresight in 2005, they are managing to keep their financial numbers above their peers and remain the best investment from this industry for Wall Street.

Finally, we must look to the charts where we see that NVR has the strongest relative strength (RS) rating versus every one of its peers in the industry. NVR is the only stock of the big builders to show a double digit gain over its price from one year ago; up 15.82%. Actually, MDC is the only other stock to show a positive gain from this time last year at 8.77%. Comparatively, BZH is down over 73% and HOV is down 55%.

Looking at the next set of charts, we can see that NVR has dropped the least year-to-date versus the other leading builders in the US. They have only corrected by 11.47% while the rest of the pack has corrected by an average of 45%. Once again, BZH has dropped the most in 2007 at 78.09% with HOV right behind at 65.04%.

Therefore, I rate NVR the best value buy in this group when it decides to hit bottom and turn higher over the next couple of years. Long term, I see NVR reaching the $700 to $800 range while some of the other builders will still be struggling to reach $15 to $20 per share. Amateur investors may argue that it is easer for a $12 stock to go to $20 but I will argue and place my money behind the $550 stock to move $250 points higher to $800. NVR almost reached $1,000 per share at its peak and I have no doubt that we will see it there one day but that could take a long time and beaten down industries need years to recover.

FYI: I do NOT own any shares in any of the companies listed below. If I do buy in this industry, it will most likely be NVR based on the intelligence of its management leadership.

Closing prices from 8/23/07:
(DHI) DR Horton Inc., $16.11
(LEN) Lennar Corp., $29.99
(PHM) Pulte Homes Inc., $17.59
(CTX)Centex Corporation, $31.86
(TOL) Toll Brothers Inc., $22.65
(NVR) NVR Inc., $571.00
(KBH) KB Home, $31.80
(MDC) MDC Holdings Inc., $45.41
(RYL) Ryland Group Inc., $31.47
(HOV) Hovnanian Enterprises Inc., $11.85
(BZH) Beazer Homes USA Inc., $10.24

7/11/09: DXO – $3.48, down more than 26% from sell calls. DXO gained more than 74% from my first twitter buy calls

Who says charts don’t work?

• 7/6/09: $DXO – 3.90, down 18% since my sell tweets in June. 6/10 @ 4.67 & 6/12 @ $4.76. Always ignore analysts, never ignore charts! 10:04 AM Jul 6th from web
• 7/6/09: RT 6/12/09 @cperruna $DXO – $4.76, “talking heads” now debating $250 oil prices…charts are saying resistance in this area. Lock in gains. 8:29 AM Jul 6th from web
• 6/12/09: $DXO – $4.76, “talking heads” now debating $250 oil prices but the charts are saying resistance in this area. Lock in gains. 6:38 AM Jun 12th from StockTwits
• 6/10/09: $DXO – $4.67, up 72% from 4/20 $2.72 twitter coverage. Lock in gains here, resistance above at 200d ma 11:18 PM Jun 10th from StockTwits
• 5/29/09: $DXO – $4.21, talk about blast off above $3.75 breakout. Made nice profit but sold too soon, ignoring my own chart analysis. Entry is gone 12:00 PM May 29th from StockTwits
• 5/29/09: $DXO – $4.03, it blasted past the $3.75 triple top breakout point, highlighted in this blog post, see P&F chart http://bit.ly/wTjX 9:07 AM May 29th from StockTwits
• 5/26/09: $DXO – $3.79, cashing in profits. See April twits on DXO, buy at $2.72. 11:00 PM May 26th from StockTwits
• 4/20/09: $DXO – $2.72, the gap has filled, down 10% on heavy volume in early trade. 50d ma is at $2.62 (support entry?). 9:38 AM Apr 20th from StockTwits
• 4/6/09: $DXO – I am looking for the gap to fill down near $2.70; will grab short term shares between $2.50 – $2.70. Moving ave support at $2.55 8:26 PM Apr 6th from StockTwits
• 3/30/09: $DXO is dropping back to the moving average – watch it for setup 8:59 PM Mar 30th from StockTwits

2/09/09 Blog Post:

Play with fire and you get burned – that’s what they say. I guess it doesn’t appear to be smart to leverage yourself (2x’s) with crude oil futures through an ETN but that’s precisely what I started to do in December. My tool of choice: DXO Oil Double Long ETN

• February 9, 2009: Oil Double Long ETN (DXO)
• December 12, 2008: Dollar falls, Crude up
• December 02, 2008: Dollars, T-Bonds and Crude Oil
• November 26, 2008: Oil a Value Buy?

It’s still the trade that intrigues me the most…

I grabbed shares that represented 25% of my typical position size so my risk is greatly limited but I am looking to add shares, only this time with an official buy signal…the current charts are showing that potential with a jump above the moving average or a breakout on the point and figure chart.

A strong move above $3.75 on the point and figure chart will be a major buy signal, especially if it is accompanied with heavy volume.

I’ll be honest; it might be too early (still) as the chart could drag along the bottom of the moving average for months before it decides to pick a direction. However, when it does, I’ll be ready to pounce and add shares to my first position.

Let’s wait and see but don’t let this one off of you watch list.

As I said in the post NH NL Picks Market Tops and Bottoms:

Consistent Nasdaq readings above 100-200+ will be the official confirmation to grab and add shares for trend traders!

That’s what I am looking for! Until that happens, a “true” up-trend is not sustainable. The up and down whipsawing of the past several month is what we can continue to expect until we see consistent readings in the triple digits.

System Development and Market Psychology:

Great All-around Reads:

All Others: