ETF SWING & DAY TRADING

[SyndicateTwo]

I have been doing alot of research over the weekend because as you all know I'm in the camp that says we're about to see a major rally here coming any day now. Don't confuse that with being a bull. I'm not. I'm a trader who goes either way. I don't care which way, I just go with it. But whenever you get protracted pullbacks, you start to reassess your opinion and try to re-evaluate just exactly why you're thinking is the way it is. I'll be honest, I have been 'slightly' second guess my opinion. But that's just natural. After all, you never really know when the market is actually going to roll over. So, I started reading...

Many of you know from you're own experiences that there are some financial writers or people in the biz who write about this stuff that you have become followers of because of their past accuracy in predicting the market. I have a few myself. The really only two out there who I can say truly have been right on are both Bob Brinker and Bill Fleckenstein. Funny thing about those two is that they are totally polar opposites. Brinker is a bull who never shorts the market, but will bail into 100% cash when he sees fit - as he did in 2000. Fleckenstein runs a short seller fund who by definition is most of the time a bear. But I can tell you with absolute certainty from my following both of them now since I think about 1997, both have been dead on in terms of calling the market. I mean dead on. Fleckenstein was a bit early, but still proved everyone wrong.

What makes them similar and yet so credible is that neither is a technician. They are both pure fundamentalists and that's why I always come here trying to explain why so many bears are so wrong so often. It's them that I learned this stuff from. Technicals don't predict anything and that's why so many technicians are usually wrong in predicting the market. Of course support and resistance are powerful things, but beyond that, it's mostly voodoo that ends up costing many their accounts. There's a reason why 90% of fund managers can't beat the S&P.

Brinker explains it very well in his monthly newsletter about how bear markets start and why. They are purely fundamental events. For example, the 1987 crash was a purely fundamental event caused by the Democrats the week before passing the law that banned corporations from deducting debt interest in mergers. The 1998 mini crash was I think a currency crisis thing that killed liquidity in the market and was one of the things that made Greenspan such a star by the way he handled it. (I think though that we're paying for it now with the devaluation of the dollar)

Where does Brinker stand? He's calling for S&P (the only thing he really focuses on) to run into the mid 1300s on a purely growth and valuation basis within this first half and that's been his stand since the beginning of I think two years ago. How many bears have been calling for the end of the market on just about every pullback? I can tell you first hand that the Stock Traders Almanac has been dead wrong and it's why I cancelled my subscription to them last year. Last April in their May edition they were calling for the market to roll over. Funny thing is that was at the bottom of the market. Ooops!

So, that leads me to Bill Fleckenstein. I think that everyone here should read his weekly articles on MSN. Here's the link...

http://moneycentral.msn.com/content/P146593.asp

He writes under 'contrarian chronicles' in the commentary section of the site. What got me to be a follower of him was back in the late 1990's CNBC used to constantly put him on to debate the total perma bulls who were always talking up the market to DOW 20k and all that nonsense. I can't believe I can't think of his name right now, but the biggest bull was always almost nearly insulting Bill for his negative views and how Bill was a joke for (in 1999) calling for a massive correction coming. The difference between his arguments and anyone who went up against him was that his arguments were always based on the fundamental facts of the overall market structure, and not just because he 'thought' that way.

Well, history proved him right to say the least and the rest that were calling bottoms from Nasdaq 5000 all the way down to 1100 and expecting this ellusive 'v' bottom to happen went broke.

Bill is by means no fan of the market where it stands today. But he does call it the way he sees it. And I think that article says alot about what's coming and why so many people are wrong. And this is from a short seller.

The only time I think we have to be worried about truly entering the next bear market is when both of these guys are on the same page. When Brinker says sell and when Bill says he's shorting again, then you know you better be on that side. Right now they're no where near that.

The reason in 2000 the market rolled over was not just because valuation. It was mainly because of the Fed choking off liquidity and that's the fuel behind every market. At funds rate of 6.75% (prime at 3% higher) and M3 cut by a third, you had all the makings of a fall. Add to it many of the companies not even making money with truly no valuation, it was the perfect storm. The problem was for short sellers trying to pick the top was that you never really know where the top is. Rallys and declines always extend further than anyone thinks. That's why technicians usually end up losing. Not because the technicals are wrong, but because the people reading them don't truly understand what they're looking at.

So, fundamentally, the market is stronger than ever. CSCO for example makes more money today then they did in 2000 when their stocks was 3 times higher. Most stocks in the DOW are more flush with cash today and also make more money then they did back then and most stocks that make up the NDX are in the same boat. Like I said, the money that moves these things has been busy in other areas such as Real Estate and commodities. But as my previous post showed, those are all rolling over which tells you the money is bailing. Smart money follows value and the only asset class out there undervalued is stocks.

Just watch....