Tuesday, September 12, 2006

A Stunning Rally Hits Wall Street; Nasdaq Leads Stocks Higher, With A 2% Gain On Heavy Trade.

What an exciting day! Falling oil to the tune of 2.8% and a batch of good earnings news helped spark the market to a fantastic rally that spread across all sectors.

The SP 600 rose 2.2%, the Nasdaq rose 2%, the SP 500 rose 1%, and the Dow Jones Industrial Average rose .9%. The IBD 100 rose 1.5%, staying in the middle of the action. I would still prefer to see this index lead ALL of the major indexes but I will take what I can get.

Volume rose much higher on the Nasdaq and was well above the 50 day volume average. However, the volume was lower on the NYSE and well below the 50 day volume average. It would have been better to see both of these indexes rally on good volume. But, once again, I will take what I can get. Beggars can't be choosers. Breadth was positive on both the NYSE and the Nasdaq by about a 3-to-1 margin.

Semiconductor stocks offered some of the best gains today with the SOX up 3.8%, the Electronic-Semi Equip up 4.3%, and the Electronics-Semi Mfg. up 3.2%. These gains along with the gains in Retail and Transportation had the market looking much more healthy than what it actually might be.

Even though the DJ is at 4-month highs and the Nasdaq is at 3-month highs, there are some negative divergences with new highs that point that this rally might not be "the rally." However, as long as the trend is up we must be bullish and go with the trend. Until the trend turns back down, do NOT short. This market can run further than what you think it can.

The divergences I am speaking of is the amount of new highs now compared to the new highs in May. Even though the big indexes are around only 2% off of their highs, the new highs in individual stocks are well below the levels they were in May. The other negative thing is after we had that one down week last week, new lows expanded much higher than what they were at this time last May. This is all not bullish. However, the tape is bullish so we must go with the longs.

BTW, look at how many longs I have that are outperforming the market; I am long around 100 stocks. Even though they don't even make up 25% of my portfolio, the fact that I am long these pretty charts and did not let "my opinions" interfere has now positioned me for a possible nice rally. This is why it pays to play your strategy all the time, once you know it works.

If this rally has legs, plenty of charts will pop up from solid patterns. These breakouts will be pretty and will have legs. If the markets don't keep following through or we don't get many new buying opportunities then I have to question this rally even more. But for now, I am going with the flow and if stocks like OMRI, IIVI, and CXW are any indication...there is always a bull market somewhere.

If you cut your losses fast and stay in your winners when you have them, you will ALWAYS come out on top if you buy right. I have been whipped around like an acrobat but I am still feeling great! Why? Because, I am sticking with my disciplined approach to trading and I am now long a bunch of beautiful charts simply because I listened to the facts and not my opinions.

Do I wish I was 200% invested now? HELL NO! Are you kidding me. There are not enough HOT charts breaking out of bases that are in long enough bases. These bases are too small and all of this looks like a trading rally. When a real rally occurs, trust me, just like in 99, end of 01, March 2003, and Oct 2005 I will be ready. I will also let everyone know because I will have so many longs and the trend will be such an obvious uptrend in the market that I know I will have the "go long and strong on margin" capital at work. Right now, I don't feel it. The negative divergences, overbought indicators, yield curve, and choppy market tell me the safest and SMARTEST play is to still keep cash heavy. You don't need to trade all of the time. That is a game for outright MORONS!!! MORONS I tell you. You are an idiot if you trade all the time. I am talking to myself also. So don't get your panties in an uproar if it hits home. IT IS SUPPOSED TO!

Have a great day and I will see you at Investors Paradise.

PS: As everyone at IP knows, I will be on vacation from Wed 13- Wed 20 in Southern California. If you live in the Ventura/ LA area and would like to meet up for some drinks, feel free to drop me a private message at Investors Paradise and I will leave you some contact info.

New Swing Longs: DECK LCAPA AOB

Adding To Position: NGPS

Longs Outperforming (low vol non-IBD excluded): OMRI-38 IHS-57 CTCI-58 CVO-136 Q-93 DA-34 CXW-33 HMSY-27 SYKE-29 AVNC-50 BAM-43 VRGY IIVI PSPT NGPS ABCB HCSG WEBX NITE DDS WGA AHS TTEC CHINA RNST BEBE SEIC ORB BTJ MWRK DKS GROW INPH BW ISYS VTIV RAH STEC BEAS TRMB CGX IMKTA VARI BMC DGX MA CTCM PRFT ACGL IDXX FCSE MDRX ALSK ABI IGT BMR IMA BMRN AIQ ICI PLM

Shorts Outperforming (all): SWC-45 PDCO WTI HYDL IXC TDW ARLP ASA KNDL SM DO IPS TTI MDG NUE WIRE

Completely Cover Shorts: GTRC PII POOL IYT DSL CPF XPRSA NCI FDX SIGI CFC MTB

Stocks On Radar Screen: SIMG SAIA COGO HS CWTR MOLX JCG CCBL EVVV TSRA UAG LEAP WEN ATK RMTR GSOL

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