Markets Continue To Soar; Underlying Weakness Cautions Short-Term Pullback

The Nasdaq has now made it seven days in a row with a positive close. What a wonderful way to start 2006. It doesn't get much better than that.

All market indexes finished up today with volume increasing across the board. Breadth was mediocre today but still closed positive. That was probably caused by the weakness in small caps and the strength in big caps. However, the strength of this market can not be ignored. All seven days of this rally has come on volume well above average. If you look at the Nasdaq, especially, you can see the institutions are obviously putting a lot of money to work. Today's volume was especially heavy.

So, until the trend reverses you should stay very long and bullish. That does not mean that you should not be taking some profits now though in extended stocks. As I suggested yesterday, selling 10-30% of some of your big winners that have made some extended/climax like runs late in their rallies is a smart money management move. The recent lower new highs, mediocre breadth, extended stocks, and seven up days in a row just seems to signal a warning that a short-term pullback could start soon. Some stocks could be finished now or the majority of them could just form another base and breakout. No one knows but being prepared and using a good money management policy ensures that you will at least lock in some gains if your stocks are topping. If they are not? Great!! Hold the rest for more profits.

This market has been great. Let's not get undisciplined and lose our heads in all the euphoria. But also remember Mr. Momentum can last a long time and really hurt the bears and the bulls who sell too much too soon.

New Swing Longs: LEND SCHK AIX

New Swing Shorts: NONE

Longs Outperforming Market: ENER MORN IHS RAIL-27% ORA-27% MSCC-71% ERS-36% CKCM AAPL-75% NVDA-45% RES-129% TESOF PAY-34% DB NTG ADBE BBD-98% VSEC-25% OXPS-64% SILC-45% NWRE-77% BOOM-391% STD SRA ALY-48% ROK VTS FAST EAGL-29% MFLX-149% STMP BNT-50% CRDN-40% CBG-71% ASVI SXC NEM SUPX-69% TRAD-56% KNXA WBMD SPWR-32% FWLT-50% AATI DRH VIMC LMIA-79% CNXT-48% BKHM CPST GIGM-49% OPLK ELN-44% BMD-301% TXCO ANX-33% SFE Q LFL ONT RTK-60% JDSU DMX UBS OMNI AVN HOMS-28% LRCX NSTK NAK DEPO THQI EMKR-120% ARS KGC-31% NTO RDCM STEL BCON DDD-28% MEL SVR-62% MYE CERS-162% MCX-45% LTRX TFR-41% GAIA RESC

Shorts Outperforming Market: NONE

Stocks On Radar Screen: LVS ORCT SEED BLDR CNTF RNAI DWCH QSFT WEDX OPTC OTIV

Side Note: Thank you to the heads up by the reader who pointed out DWCH to me. This stock looks really good.