Today was nearly a mirror of yesterday, minus the bigger point losses and the higher volume. But that to me doesn’t matter as what is more important is the fact that for the second day in a row the market appeared as if it was ready to crack WIDE OPEN but instead caught a heavy bid rallying into the close to pair back a lot of the damage. Yes it was a down day but it was a “good” down day.

The selling was pretty bad intraday and in fact I did get a bit nervous. However, when I get nervous it is normally a good sign as the market normally doesn’t move well with my emotions. So the fact that I got a bit fearful was a contrarian signal. If I would have come back in the final hour, however, and the market would have been lower the entire tone of this commentary would be different. Instead of talking about stocks holding strong in the middle of selling, I would be discussing how pathetic the market is to set us up with some HOT charts and then slam the door shut in our face. Thankfully, the late day support came for the second day in a row and the bad news column was avoided.

However, throughout the day all I kept reading was bad news. I saw a report that said due to the poor growth of the factory orders and the pressure of rising oil were hurting stocks, when the market sold off. However, right at that moment Barack Obama started talking about his marxist dream that EVERYONE seems to be falling for. But did the liberal media pen anything on him? Of course not. Maybe it wasn’t him but I find it funny that as soon as the marxist starts talking the market starts falling. And then they go blame oil and traders now coming to grips of the factory orders report that caused the selling. Others said the selling was due to LEH needing $4 billion to rebuild its balance sheet. I could see that being the reason as at the same time Obama started talking LEH started tanking taking the banks and the market with it. So to me you can blame BOTH. If it was GWB giving the speech, you know everyone would have blamed him.

However, with an hour to go in the trading day, LEH came out and said that it was NOT seeking help from the Fed noting that the company has enough money. That then sent the stock off the lows moving into a strong close. That strong rally killing some of the losses earlier posted proved to me that some of the selling was LEH related. But the fact the market did not recover all the selling and then make some further progress proves to me it was NOT just LEH that caused the selling. Still, overall, the selling was nothing to worry about. Why?

Well, yesterday brought some of my longs down to key support. The funny thing is that all of those stocks bounced today, right when they needed to. If this market was real bad, easily 3/4 of them would have failed. Instead only 3 out of 10 stocks at important support failed. The other seven succeeded. Besides that my longs overall held up very well including most having bullish intraday reversals showing strong support.

To top that off, speaking of tops, the chemical-fertilizer and other agriculture related stocks like CMP, MON, MOS, POT, and SQM refuse to top. The ags seemed destined to top soon or so you would think. But these bad boys just keep moving higher and higher. I thought this group was definitely going to top in January as every single leading stock fell into some heavy distribution with some very red BOP. However, they all fought back and even though they can barely rally anymore, the fact that they do not fail proves that this market has some strength underneath. Not even the possibly topping laggards can stay down, if they were ex-leaders.

But if you are a bank stock forget it. And that brings me to my final point of the night. On 1/22 I was attacked by a vicious reader for not being smart enough to notice it was the bottom. Stocks that were recommended to me ranged from BYI (down 4% since then) to LEH (down 48%) to GS (down 10%). As you can see all of those are down. I tried to tell this FOOLISH MORON then that they were an idiot for thinking that you had to buy the exact bottom of the market to make money. I warned that person then that buying the laggards and stocks hit the hardest was a stupid way to invest and that the stocks she was recommending would all probably be lower six months out. We are almost six months removed and three of the stocks recommended are down anywhere from 4% to 48%. If you were in a comma, did not buy the exact low on 1/22, thus NAILING THE BOTTOM!!!!!!!!!!!!!, and instead you bought ROYL two days ago, you are now up 91% in two days. Oh but who would have picked ROYL?????? Uhm….ME!!!!!!! That is who. I have a personal 85% gain, and sold 20% this AM, selling another 20% tomorrow morning. A 91% gain in two days should not be taken lightly. LOCK IN THOSE GAINS.

The point is you do NOT have to EVER buy the EXACT low in a market to make a TON of money. You can be weeks to months (ROYL came 4 months after the bottom) late and as long as you know how to buy leading stocks and ACTUALLY TAKE THE TIME TO LEARN CHART PATTERNS–because this stuff actually works sometimes, duh–you can and will get the next ROYL when it comes up. So even after 4 months in a comma, I still beat this person that nailed the bottom. Great trade in LEH and GS!!!!!! Those banks sure were a “MUST BUY” and “OBVIOUS BUY.”

Nothing is for sure in the stock market but I can be sure of one thing: If you buy “value” stocks without using ANY technical analysis or fundamental analysis that looks at some growth, you can be sure that your personal performance will never match those of active investors that use a form of the CANSLIM system. I don’t even think this is a plausible argument, against my position, as AAII has proven that the IBD CANSLIM system has been the 3rd best growth system since they started tracking the 50 or so strategies in 1998. IBD’s CANSLIM has returned 1,500% since 1998, while the two other systems that are beating it are both up over 2,000%. Those two methods look at growth in the form of earnings and sales while adding value metrics to their system. The CANSLIM system has been proven to work and in a difficult market like this the testimonial below from a “newbie” investor says it all.

He is not even fully educated or experienced enough to be producing returns of this sort. If he was down 2% or breakeven I would even be proud, in this market. So the fact he is up at all, in this market, is very impressive. Tom you are almost not a newbie!!! Well, to be honest, we are all really newbies. We never ever will not be newbies to the eyes of the stock market. She will always humble you and every once in a while will make you look stupid. It has a knack of doing that.

I hope everyone is making good money right now. Despite my reluctance to get long I have still returned around 35% the past three months which puts only two growth mutual funds ahead of me which is just where I prefer to be.

Aloha and I will see you in the chat room where we all need to welcome the infamous Quint Tatro as he will be stopping in and out of the chat room until June 15. Quint Tatro is formerly from Sharkinvesting.com and is now part of the great group at Minyanville.com and is an extremely well-respected individual in this business. Let’s make him feel welcome! ALOHA!!

Last 5 posts by Joshua Hayes

• After An Ugly Open, Stocks Rally On Lower Volume, Saving The Market From A Possible Very Painful Day - December 13th, 2008
• A Failure At The 50 Day Moving Average Combined With Breakdowns And Reversals In Leading Issues Tells Us That We Need To Be Ready For The Reality Of New Lows - December 12th, 2008
• Stock Indexes Pause At The 50 Day Moving Average; Another Long Bites The Dust Indicating This Isn’t A Bottom Yet - December 10th, 2008
• Stocks Selloff On Lower Volume As The Major Market Indexes Hit Resistance At The 50 Day Moving Average - December 10th, 2008
• Impressive Rally Across The Board On Higher Volume Sends The Indexes To Their 50 DMA; Some Stocks Are Looking Much Better And Making Bases - December 8th, 2008