Wednesday, October 04, 2006

Why Do Traders Try To Predict The Future And Fight Trends?

Bad news from the ISM service index and comments from Ben about the housing slowdown was no match for excited bulls on the back of possible rate cuts. Stocks soared, after a slow start, with indexes closing at their highs of the day. Hello bears! If this didn't convince you have been wrong since the August follow-through I am not sure what will.

At the close the Nasdaq led the way with a 2.1% gain, the SP 600 followed with a 1.9% gain, the SP 500 rallied 1.2%, and the Dow Jones Industrial Average rallied 1.1%.

Volume was a good amount higher and was well above the 50 day volume average on both indexes. Breadth was positive on the Nasdaq by a 7-to-3 margin and positive on the NYSE by a 13-to-4 margin.

This rally was strong and its breadth was broad. Some of the leading sectors included Internet, Software, Retail, Commercial Staffing, and Transportation stocks. This is bullish having all sorts of different industry groups moving up with a lot of stocks in each group participating in the rally. I know it says breadth is weak overall compared to previous highs. But in the industries that had the biggest gains today you can find many great looking charts in the group.

Large caps have been leading but small caps showed some major leadership today. I am seeing a lot more nice charts for traders to trade. If small caps, techs, and leading stocks keep making this many nice bases with green charts there should be no reason for anyone to complain about a lack of charts to trade. Also if the small caps and techs start leading nobody should be complaining about this rally. I think it would be funny to see them start to lead. If they don't, no big deal. That is why we have cut loss strategies.

There was a ton of negativity out there in the chatrooms and message boards I read. That tells me that a TON of people missed this whole move. That is awesome for me! I plan on getting more long if more charts keep popping up. If they do were not setting up I wouldn't be buying them now would I. The fact that stocks are forming bases and breaking out is all I need to know. I can worry about cutting losses if they don't work after I take my signal. It is all lined out in IBD'S CANSLIM. It isn't magic.

I am still hearing the overbought, too far too fast, negative divergences arguments and all I have to say to that is "I hear you." But look at your darn charts! What have the indexes been doing the past quarter? How many very green charts have setup broken out of bases and not violated sell rules? That is all the facts we need to know. Not some stupid overbought indicator. It is all fun to use. I use them all. But to trade off of them is just silly for long term gains.

Take profits in extended longs and don't get crazy on margin but don't expect a pullback to be too severe either. A TON of people have missed this move and they will be looking to get in on the action on any pullback.

What if the pullback gets severe? Well, if it does, cut your losses, raise cash, and take caution. I make money on what is happening now not what on I think might happen. That is not how I pay my bills.

Have you guys forgotten that since I started writing my blog I have NOT missed one important major turn in the market. Since March of 2005 I have ALWAYS been on the right side of the trend. Now is no different. If you don't believe me check out the October bottom on your charts then go read my blog. If you still don't believe me go check the May top on your charts and then go read my blog. So trust me bears this time ALSO you are wrong...for now. But when does it end? You and I don't know. That is why we play what is happening NOW. It is the whole basis of the CANSLIM system. The greatest stock market system in the business.

Aloha and I will see you at Investors Paradise.

New Swing Longs: BOT MPW PSYS EVR PERY REGN MNKD SVVS RWT LTM UAHC

Adding To Current Holdings: SIMO DIOD HURN NGPS PYX TSRA AVNC SUMT

New Swing Shorts: NONE

Longs Outperforming: AKAM-225 CVO-118 ZONS-51 SYKE-41 OMRI-30 MWRK-33 DA-38 IHS-66 TYL-36 INPH-45 STEC-36 AVNC-64 CLEC-40 BAM-40 TWGP SIMO XING ICE RICK CHINA DIOD ISE HEI HURN CPA ISYS SIMG NITE ABCB AOB BONT NGPS PSPT TIBX SEIC DECK SYX CAB BMC HCSG DKS INWK BEBE CGX IDXX ROG AHS BEAS TDY RSTI BMR LMT IMKTA HRZ DJO PT LWAY ORB IMA CACB ACGL BITS LINTA IIVI DLA DUCK CVLT OMTR MEH RAH BRLC NFLD WEN TSRA PYX BMRN CCOI SPG ASML CYBS GISX NHP VCP NXL HNZ STZ CMCSA OSIP WSH NWL NOC UHS ETR AXTI GMTC APRO SUMT SUAI

Shorts Outperforming: HYDL-25 ZRAN-34 NTE -41 TDW TTI IPS KMP

Stocks On Radar Screen: STKL MVSN AMG BKC MR COWN OFSI QDEL SKX HGSI ITC TRA STT CDWC UCTT

No comments: