Tuesday, March 14, 2006

Major Stock Averages Follow-Through On Heavier Volume To Confirm Current Rally; SP 500, DJ, And NYSE Hit New Multi-Year Highs.

Another day, another opposite of the previous day. Bonds and Financial stocks were the reason the markets rallied today, according to the media. The Nasdaq was up 1.3%, SP 600 up 1.1%, SP 400 up 1.05, SP 500 up 1%, and the Dow Jones up .7%. The biggest winners however were in the Semiconductor Index, which was up 2.2%, and the IBD 100 up 1.4%.

The breadth behind the rally was very strong, with 2.5 stocks positive for every 1 down. Volume was also higher than the day before, confirming the current rally, after the March downtrend we have been in. The volume, however, was below the 50 day volume average on both indexes. This indicates institutions were hungry for stocks, after the downtrend, but not hungry enough to step over each other in trying to bid them up.

One thing that was unequivecably bullish is the fact the NYSE, SP 500, and Dow Jones keep making new 5 year highs while market participants talk a bearish game. Those new highs along with the Financial stocks roaring and Telecom, Medical, Computer stocks moving suggest the bears are still wrong and will be for some time to come still.

The pullback is starting to look like it was in fact a rotation of leadership from the leaders from October into some fresh names in some of the industries mentioned above. This rotation with the continued leadership of Financial stocks is what some of the best bull markets are made of. Look at ET, AMTD, TRAD, LEH, GS, MER, MEL, UBS, BBD, and BSC. They have been moving higher the entire bull market that started in October 2002 and after every significant pullback the market has they take off again. They just do it with a new batch of leadership, each time.

There are still plenty of very good looking green charts out there and there is still plenty of negativity out there by market participants. These two factors help create that proverbial wall-of-worry the markets like to climb.

The fact that all of the reasons the market should have crashed by now have not actually caused the market to crack should be a wake up call to the bears. However, they are stubborn and hate the current President no matter what that they are willing to cloud their judgement with their hatred and try shorting stocks when the right play has been to be long stocks all the way from the 2002 bottom.

I wish everyone the best. Good luck out there and stay positive. This is a great country and Capitalism is the best chance for the poor to become rich. And becoming rich isn't what it is all about. But, darn it, it helps a lot!!!

New Swing Longs: FRGB IVAC MXWL ORCC ELMG--To read more about these longs go to Investors Paradise and scroll down to Josh Hayes and then go to the 'Longs' thread.

New Swing Shorts: NONE

Longs Outperforming Market: MFLX-195% RATE-128% BOOM-365% SCHK-33% CBG-96% UHAL-102% RUTH ERS-129% CYBS XRTX-27% TRAD-51% IHS STX NVDA-64% CLZR-34% LCRD-90% NTAP BBD-139% PKE KDN SCVL VTS CIB-38% WIRE-146% TMI CTXS-30% MTU KEYS-40% ROK FFIV ASVI LTM MDCC-37% VIMC-39% RUSHA HEIA-31% TNOX-33% SLW-97% CVN SPWR-47% MMK-38% FWLT-62% IKAN-36% PEC DRH ALTU SSW NVAX-46% EVST-63% ISV EMKR-122% KNOL-42% GNBT-57% OPLK LRCX-29% GEMS STXN-54% LSI UBS CVO-79% CHRD IED-81% EAGL-47% EDS SWW MT CONR RCNI GNA BAM FDRY ARS-45% BEL-25% IMMR TISA ICTG-73%

Shorts Outperforming Market: NONE

Stocks On Radar Screen: RMBS CMG PTIE POL

9 comments:

Anonymous said...

Hey, Josh, thoughts on KNDL, ISIS, and GIGM as possible buys on breakouts?

With the weaker volume on the averages the past few days compared to last week's selling, is it better to still wait on buys here?

Thanks - I agree with the comments made this weekend - you do a great service with this blog. It is much appreciated.

Joshua_NControl said...

Bro, you are 3 for 3. These are hot charts! I suggest all traders put up an alert on all three for breakouts above the February highs on the recent basing areas. GREAT STOCKS.

Long: GIGM

I think it is safe to go long here, with 3 indexes making 5 yr highs. Even though the Nasdaq hasnt made a new high yet it still looks good overall. I think the bearishness that we are hearing out there is clouding our judgment. The indexes look damn good overall, if you look at weekly charts.

Thank you so much for your nice comments. It is wonderful knowing that people appreciate this. I can't promise my advice will be free forever but for now it is my pleasure to do this for you guys!

It helps me grow as a trader more than it probably helps you guys. But what do I know? :)

ALOHA!

Y.Y. said...

can you explain the strange huge bids the past few sessions on stxs
TIA
(in my past trading experience such an accurance was negative)

Joshua_NControl said...

Y.Y., dont worry about that. You can not learn anything by that. Those bids might be real, they might be fake.

Just know the chart. The chart is perfect for now. Bids and ask can't teach you anything.

Level II is useless. Back in 1999 it helped. Nowadays it does nothing.

Ignore the noise.

Y.Y. said...

i totaly agree that level II these days are meaningless in most cases
can you explain how level II was working in 1999?

Y.Y. said...

but i do use level II to front run orders for example if i have 1000 shares to sell of XYZ corp and there is a large offer for lets say 10.98 i will place my sell order a few pennies less

Anonymous said...

PMCS breakout looks clean today

Joshua_NControl said...

Actually, level II really didnt work then either. It worked better during the times when I was not yet mastering my stock trading. It was around 1994-1998 that you could trust the orders in the Level II.

Now, the orders are fake, tricks, or just lies. There are a lot of hidden orders you dont see cross on the Level II also. This tool just isnt that reliable anymore. Market Makers know how to use it to trick traders now.

The tools may still be usefull, but there are no more SOES bandits.
.....................................

The problem with PMCS is that it is breaking out from this base from a big previous downtrend. While enough time has gone by to shake out the holders in losing positions, the chart just doesnt seem right.

I have ugly BOP on my tcnet, a big downtrend, and a lot of high volume days during the base. Normally you want to see big price spikes with little trading on down days. However, this one has been active.

Does that mean it is a bad long? Absolutely not. This is a solid chart still and the fundamentals are very solid. To me this is a good long if you can't find anything else. Right now I can find a lot nicer setups.

PMCS looks very good; it just doesn't make my cut.

Joshua_NControl said...

OOPS. I just read what I posted. I did not complete that.

It should say also...unless the stock is too extended from pivot point. In that case, I put a market order and a limit order at the pivot point. Good example is ECIL today. The pivot point is 9.25 plus .10.