Wait for the Trend to Confirm Your Call

It sure has been fun watching the action, while being mostly on the sidelines, with about 25% long, 25% short, and 50% cash, and I have to admit, it has been nice sitting here watching everyone freak out over every little market move.

The sad part about this, however, is the basic lack of historical knowledge that the bottom callers seem to have. For those who believe it is the bottom, we only have to go back to the last "real" bottom back in October 2002 and March 2003 to see that we don't have anything shaping up now like we had then.

Nasdaq Composite - 2002-2003

Click here for larger image.

Source: TeleChart Gold

As you can see in the 2002-'03 Nasdaq chart, we had a lot of accumulation (circles and trendlines) off the lows with volume well over the average for the past 50 days.

Nasdaq Composite - Current

Click here for larger image.

Source: TeleChart Gold

Not only do we not have any real accumulation off of the lows, today, we don't have any above-average volume. This "bottom" has been extremely lame compared to the 2002 lows or the 2003 follow-through day, to say the least.

This is why it is impossible for me to become a raging bull here. I can tell that it is time to take in some of our shorts and raise cash, as we could get a bounce lasting between one month and three months. The last four times, before the March 11 and 18 rallies, the DJIA gained 400 points, the rally lasted between one and three months (2000-'02).

So while all the same people that told you we bottomed in November, December, January, February and earlier in March tell you that we have hit the real bottom here, I will let the market be my guide. That guide is telling me to be extremely careful here.

---

At time of publication, Hayes was long Bruker Corp. and Buckle Corp., although positions can change at any time.

Joshua "MauiTrader" Hayes is CEO, president and founder of Big Wave Trading LLC, a Maui, Hawaii-based stock market advisory service. Hayes also runs BigWaveTrading.com, an online stock market commentary and stock selection service for short- and intermediate-term investment strategies using CANSLIM and other strategies. Under no circumstances does the information in this commentary represent a recommendation to buy or sell stocks. Hayes appreciates your feedback; click here to send him an email.