Thursday, October 05, 2006

Stocks Rally On Lower Volume; SP 600 and Leading Stocks Are Showing Leadership.

For the third day in a row, stocks rose across the board after a dull opening. After going nowhere basically for most of the day, by mid-afternoon stocks started to rise and by the end of the day were closing at their highs of the day.

At the close, the SP 600 led with a 1.2% gain, the Nasdaq followed with a .7% gain, the SP 500 rose .2%, and the Dow Jones Industrial Average rallied .1%. Leading stocks joined the SP 600 with a 1.4% gain on the IBD 100, leading the way.

Volume was lower on the NYSE and on the Nasdaq as it appears the rally might be getting a bit tired here. Breadth was positive on both exchanges by a 2-to-1 margin.

Leading stocks and small caps are now taking leading rolls in this rally. Like I said yesterday, this now should give no one an excuse for excusing this rally as just a big cap, poor breadth rally. Since this was one of the biggest complaints from most traders I know, this has hopefully convinced some of them that some stocks are in fact doing quite well. I know the advances in some stocks may seem not real but according to the brokerage statements they are real if they are cashed out today.

Today’s action seemed quite positive, in my opinion. Stocks were pretty much listless and just drifting around then after noon either bulls came back to work on what they started in August or the shorts sensed that the gains of yesterday were in fact the real deal and they may hold. Therefore, they covered their shorts into the close. That is what allowed the indexes to rise to their HOD’s.

Thank God, today was a much quieter day than yesterday. LOL. I did not feel the panic in the air like I felt it yesterday by overinvested bears and underinvested bulls. Sadly, the majority of these traders, are new to trading and have not learned that the market will be there forever and that there will be other rallies to invest in. Just because you missed this one or someone else is having success that you are not gives you no reason to lose your cool. However, I enjoy it when you do!! It is very fun to watch.

A pullback should be expected soon as people scramble to chase stocks that have rallied quite well since this follow-through day in August. But at the same time betting against momentum and the trend is a suckers play at best. I don’t know about you, but when I play any game on Wall Street or in Vegas I want the odds completely in my favor. If they are not and the trend is against me and my cut losses are hit I walk away and wait. So if you missed this move, no big deal; just stay patient and learn what you did wrong with this one so you don’t miss the next one.

The most important thing, however, is to never lose your cool. You should be playing this game like a world class poker player. How does Phil Ivey react when he wins a big hand? How does he act when he loses a big pot? He reacts the same way. There is nothing there. He is completely professional when it comes to this game of highs stress and wild emotions. Learn a lesson from Phil Ivey and learn to follow the trend and don’t argue with the market. And when you get it wrong, don’t freak out and player hate on the winners like RevShark. That just shows no class. There is only room for one classless guy in the world of stock trading. That is me.

I am very tired after the past two days of exciting baseball playoffs, excellent market action, and playing tour guide on the Upper West Side of Maui. I will see you tomorrow at Investors Paradise. Aloha!

Sidenote: New longs and other data will be finished before the opening bell. I have tour guide obligations to meet first.

New Swing Longs: INAP SMSC KBAY ETE GSTL

Adding To Current Positions: PERY PSYS MPW BRLC

New Swing Shorts: NONE

Longs Outperforming: AKAM-228 CVO-124 CXW-39 ZONS-58 INPH-51 IHS-73 OMRI-35 TYL-40 STEC-39 DA-38 SYKE-41 MA-45 CLEC-43 BAM-41 BONT PSPT HSR SYX HRZ RMTR IMA HCSG PSYS SIMG ICE WEBX IIVI DIVX UAHC INWK HURN DJO IMKTA ISYS LTM TWGP BEAS CACB CHINA BMR AHS ABCB LINTA HMSY ORB CPAK BITS PERY SXCI HEI ACGL CGX DLA BOT AOB IDXX AVCA SEIC CTCM ISE ROG TDY NITE DKS DUCK TIBX CAB APLX BMC SIMO OMTR HDIX BRLC VSNT LMNX SVVS CCOI MDRX FCSE ALSK ALTH MCDT MYE BMRN NHP REGN PCTI SPG SVNT AUXL MNKD NXL NFLD HB

Shorts Outperforming: HYDL-25

Stocks On Radar: NVEC TZOO CMI MVSN DVA FDS DHIL IHR OFSI COWN NGA FRG DSX ITC CCK

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