Date: March 3, 2008
Charts provided by Bigcharts.com
Fundamental Data provided by Investors Business Daily
F.I.T. STOCKS
Finding High Quality Growth Stocks to Build Healthy Investment Habits.
Market Update
MARKET HEALTH: MARKET IS in CORRECTION! BEARS DELIVER KNOCKOUT PUNCH!
The markets couldn't trade within this tight Triangle Pattern range forever, and Friday Feb. 29, 2008 all three of the major indexes busted through their triangle pattern on BIG VOLUME. Unfortunately, it was the BEARS that delivered the final KNOCKOUT PUNCH. As stated in previous newsletters and updates, the markets had been very news driven. One day the markets would move down on credit crunch issues and troubles in the bond insurers', and the next day the markets would head into positive territory when word would arise that the bond insurers' would be bailed out by the big banks or Warren Buffet. So you could almost anticipate that NEWS would be the culprit that breaks the camels back when it came to the major indexes. On Friday we couldn't get enough BAD NEWS to DRIVE the markets down. The biggest news was that insurance giant AIG suffered its biggest quarterly loss ever after writing down $11 billion in bad mortgages. UBS believes that they under estimated the global toll of the sub prime mess from 400 billion to 600 billion. Finally, real consumer spending numbers did not even budge for the second time in 2 months. All of this TERRIBLE NEWS was just what the BEARS had been waiting for and the BIG INSTITUTIONS began dumping their shares. So, for now the BEARS WIN this heavyweight bout, but mark my words there will be a rematch, there always is.
Last week we had 2 F.I.T. Stocks that broke out of their base patterns. If you entered into these stocks hopefully you got out at the 10% profit target. If you did not NGS and GGB are still up from their proper buy points so there is still time to take some profits off the table. What ever you do, please do not let these profits turn to losses. Every profit is a good profit. If you have entered into other stocks it is time to either cut your losses quickly or make sure you follow your STOP LOSS rules if the stocks you are in hit those levels. This is the time to use great discipline and follow strict rules, that is what HEALTHY INVESTORS DO.
Since the BEARS delivered the KNOCKOUT PUNCH, it is time for F.I.T. Investors to go back to training, working on our watch list, studying charts, and analyzing fundamentals to see which stocks and industries hold up well. DO NOT BE A BUYER AT THIS TIME. Be patient and wait for the rematch between the Bulls and the Bears.
Let's take a look at the longer term, 6 month chart of the NASDAQ with a daily time frame.
Clearly you can see the Triangle Pattern was broken by the BEARS to the downside, as indicated by the white oval. Look at the volume associated with the move. There are 2 areas of possible support, indicated by the two horizontal lines. The first level of possible support is 2252. If we break through this last low we will most likely head to the next area of support at 2200. If we break through this level, LOOK OUT. There is plenty of room below.
Let's look at the 6 month chart of the DOW.
The DOW has created the same exact Triangle Pattern as the NASDAQ and S&P 500. The white oval is Fridays break down by the BEARS, with huge volume to confirm the move and power behind it. The DOW is showing two areas of support we should be concerned with. The first level is 12000 and if we break through that we will head straight to the 11500, which is where the Bulls tried to stage their comeback the last time. If we break below this level of 11500, look out as it could be free sailing below.
What to Do? The BEARS win this FIGHT, so it is time to get back to training. Make a sound watch list, monitor which stocks and industries hold up well, study your technical chart patterns and read up on fundamental analysis. The BULLS are known for ther STRONG comebacks and when they start to run again we need to be prepared as the biggest PROFITS will be made when the BULLS make their RUN AGAIN. FOR NOW, NO BUYING IS RECOMMENDED.
Top 10 Sectors: F.I.T. Stocks within the Sector:
- Energy
- Medical
- Telecom
- Agriculture
- Finance
- Business Services
- Transport
- Machinery
- Metals/Steel
- Chemicals
Also of special note is the Top 10 Fidelity Industry Funds since Jan. 1, 2008 as reported in Investors Business Daily:
- Gold
- Transportation
- Medical Equipment & Systems
- Chemicals
- Natural Gas
- Construction & Housing
- Consumer Discount
- Multimedia
- Biotechnology
- Home Finance
These areas will be the areas to search for when looking for F.I.T. Stocks. As sound Technical Base Patterns begin to develop in fundamentally sound stocks, and as Institutions begin to start accumulating stocks, we will once again begin posting F.I.T. Stocks formulating F.I.T. Formations to the Newsletter.
F.I.T. STOCK EDUCATION
ELECTRONICALLY TRADED FUNDS or ETF's - A security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange, thus experiencing price changes throughout the day as it is bought and sold.
SHORT SELLING - The selling of a security that the seller does not own, or any sale that is completed by the delivery of a security borrowed by the seller. Short sellers assume that they will be able to buy the stock at a lower amount than the price at which they sold short.
There are two ETF's that F.I.T. Stocks has been watching closely, that one can BUY like a stock, but actually short and run reciprocal of the indexes they follow. Below we will show you the charts of the NASDAQ and the S&P 500 and the two ETF's that short these indexes thus running reciprocal of the markets. To put it simply, when the markets are heading south these two ETF's are heading north and making money. The best part is, although these ETF's are actually short selling the major indexes, you actually buy them like a stock thus reducing the confusion people feel when short selling.
Let us take a look at the Powershares QQQ which tracks the NASDAQ index.
The QQQQ's are an ETF that tracks the NASDAQ. Notice the Triangle Pattern and the break to the down side just like the NASDAQ in our charts above.
Below is the QID or the Ultrashort QQQ Proshares chart.
Because QID trades in the opposite way or Short of the QQQQ, notice how on Friday when the QQQQ was breaking down through its Triangle Pattern the QID was breaking up through its Triangle Pattern. Therefore if you had bought QID on Friday, while everyone else was losing money on their bullish positions, someone in QID would have been feeling rather happy as they watched their QID make them money. PRETTY NEAT HUH!
Now let's compare the S&P 500 to its corresponding reciprocal SDS Pro Shares Ultrashort S&P 500 6 month charts.
The S&P 500 has been in a nice downtrend since the end of October when we first started suggesting this market was in trouble. Friday, Feb. 29 the S&P broke down from its Triangle Pattern. Meanwhile, if you notice in the chart below, the SDS Pro Shares Ultrashort S&P 500 has been trending up since the end of October, and its Triangle Pattern has broken up through resistance. Take a look at the Chart.
These two ETF's (QID and SDS) are very interesting and F.I.T. Stocks will buy a few shares of each to see how they perform over the next couple of weeks. There are a couple of areas of thought on how to use these ETF's. First, one can buy these ETF's as a HEDGE or Insurance against a downside market if they are caught holding a lot of positions. Secondly, these ETF's could be used to generate more profits in your portfolio once correct chart patterns and buy points present themselves.
Stay tuned as F.I.T. Stocks monitors the situation and researches various options using ETF's as a vehicle for profits.
Until then please remember the BEARS have taken this FIGHT from the BULLS and it is time to go back to training camp to prepare for the next BIG BATTLE. When the BULLS decide to take over F.I.T. Stocks will be ready. Remain spectators for now.
Please remember to stick with your Investment business plan, be disciplined, monitor price and volume daily and make money.
Happy and Healthy Investing,
Steve Martin
Founder
www.fitstocks.com