Indexes All Finish In The Red But Still Finish Well Off The Lows; Leading, Tech, And Small-Cap Stocks Lead This Week

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Indexes All Finish In The Red But Still Finish Well Off The Lows; Leading, Tech, And Small-Cap Stocks Lead This Week
By MauiTrader

Stocks finally decided to take a break, across the board, as stocks meandered in the red all day, closing off the lows. However, a slight change of character was the fact that there was no last hour rally. That is probably due to most traders starting the weekend early as an exhaustive holiday shortened week comes to an end. There was no doubt that with no economic news of significance today that digesting this week’s gains was a good thing.

When Friday’s session was over, the SP 500 and Nasdaq led to the downside with .4% losses, the DJIA and SP 600 fell .3%, and the IBD 100 held up the best only falling .2%. It was very nice to see leading stocks lag to the downside and the Nasdaq reverse an intraday loss of .7% to a .4% loss. The SOX index outperformed the indexes, once again, rallying .5%, after yesterday’s 2.8% gain.

Even with the losses, there were some sectors that had many stocks producing nice gains on the day. The clear winners were the Electronic-Parts, Electronic-Semi Equip, Computer-Data Storage, Computer-Integrated Devices, Commercial Services-Consulting, Steel-Specialty Alloy, and Metal Ores. If you were long stocks in these sectors, today’s selling didn’t affect you at all.

Volume was lower on the NYSE by a small amount. However, the lower volume combined with the small losses helps the NYSE/SP 500 avoid a distribution day. The volume on the Nasdaq was ever so slightly higher, according to TC2007’s data provider, but the intraday support off the lows with the lack of very heavy volume clearly signals that the big boys were not selling their tech shares today.

Breadth was almost even on both exchanges but there was a slight negative bias on the Nassy. Advancers pretty much were even with declining issues on the NYSE and on the Nasdaq decliners beat advancers by an 8-to-7 ratio.

For the week, it was a tale of two different markets. The big caps definitely felt pressured all week, possibly due to oil making strong gains this week. This was the first week since December that oil closed over $61. This caused the DJIA the worst damage as it helped sink the index .9% on the week. The SP 500 fell .3%, rounding out the big cap damage. However, the story was different, with leading, tech, and small caps. The SP 600 led the way, for the week, with a 1% gain, the IBD 100 gained a wonderful .9%, and the Nassy produced a .8% gain.

Today’s market session was another one of those great intraday reversal session. This was the sixth day in a row that the Nasdaq and the SP 600 rallied off their lows. This action is leaving tails all over the daily charts on these indexes which indicate great support for stocks at these prices. The fact that every dip gets supported is the reason these tails are created. The buyers are simply waiting to buy anything on any dip right now as they try to chase performance.

This week was just like the past eight month. We kept going higher and higher and the little bit of selling that did hit us sure did not do a lot of damage. Speaking of selling not doing a lot of damage, I believe we are now eight months past the last time this market had a real correction. Eight months without a correction is simply unheard of. But here it is and here we are. Where we are is at a point where there are very few great CANSLIM quality stocks breaking out of beautiful well formed bases, big-chips are getting more attention, momo remains HOT in stocks in the solar area, new breakouts are only happening in speculative low-quality cheap issues, and many many stocks are in the middle of climax runs or exhaustion runs. Some of these are showing the clear topping signals. If you are a gold member, you know which stocks I am referring to, because I list my complete and partial sales everyday. You have witnessed me nail many tops on short term and long term runs that stocks are having. This kind of action is the classic action of a market in its late to last stage of a long four-year-plus bull run.

However, this market has ONLY had one distribution day on the SP 500 and Nasdaq the past month. Even with all these new speculative longs, late climax type runs by stocks, and no new CANSLIM quality longs popping up, it doesn’t matter. Until we start getting clear distribution in the indexes, these stocks can keep making climax runs and take off to the moon if they want to. Momo has no logical stopping point; 100, 200, 300, to even 400. Nobody knows when Mr. Momo will stop. And right now does not appear to be that time either.

Did you see the put/call ratio after Friday’s close? The equity put/call ratio, according to IBD, is now a 1.08; the total put/call ratio, on the CBOE, is 1.42. This is stunning!! These are numbers you see after big declines that signal that the crowd is too bearish and that the market is ready to explode. However, seeing this number up here, with the market hitting all-time highs, is unbelievable. Traders are still betting against every uptick. When the market goes higher and these guys have to meet their margin they will be forced to cover their shorts and that only adds gas to the fire. Crazy, crazy, crazy game, trying to predict the top like so many options players are. If you know any of these guys, you really should just sit back and relax and watch them destroy their capital. Their mistakes and horrible trading methodology is a great learning experience on what NOT to do.

The bulls feel and look tired here but they still look a lot stronger than the bears. The bears simply have no control and the bulls are 100% in full control. Especially with the crowd placing bearish bets even though they say they are bullish. These are very disgusting low volatility times we are living in. And the fact that traders are only betting against this market ensures that prices will keep rising and volatility will keep falling. This gives us less bang for our buck.

Lets look at it this way, the eight months after the March 2003 lows produced over 1180 stocks up over 100%. The eight months after the June lows on the SP 500 have only produced 190 stocks up 100% or more. You don’t think low volatily has a difference in price gains? You are wrong. Every stock you see up 50% or more would be double to triple the gains in the 1999 and 2003 markets. You take what you can get. I gave you PTT. That is a 400% gain. Imagine what that would have been in 2003…it is nice to dream.

Aloha and I will see you in the chat room. Have a great weekend!!!

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Top Holdings - Date of signal (purchase the next morning)

PTT 405% - 11/16
KNOL 273% - 1/12/06
SVNT 142% - 8/24
TTEC 131% - 8/25
AOB 123% - 9/12
LTS 119% - 1/11
CCOI 117% - 9/27
ICE 115% - 9/21
CPA 110% - 9/15
CHINA 105% - 8/16
HMSY 103% - 6/23
IHS 103% - 12/21/05
CLEC 99% - 9/25
OMTR 96% - 9/15
ACP 92% - 11/13
IGLD 90% - 10/26
GVP 79% - 11/20
BAM 78% - 11/17/05
ULTR 77% - 10/27
IMKTA 76% - 8/28
HRT 76% - 10/23
NEXC 72% - 10/25
ACY 70% - 2/5
JST 70% - 10/13
TNH 69% - 10/26
BMA 68% - 10/24
HURN 68% - 9/13
FTEK 67% - 10/6
BONT 66% - 10/3
AOI 65% - 11/19
DA 64% - 1/25/06
XIDE 60% - 1/29
CXW 59% - 5/19
IIVI 59% - 8/30
MEMY 59% - 12/21
AMAG 49% - 11/7
CCBL 46% - 10/26
GLDN 45% - 11/21
ORBC 47% - 1/4
SNCR 50% - 12/13
BMTI 56% - 10/25
FTGX 52% - 12/4
PSPT 49% - 8/14
PCCC 60% - 10/26
MOS 48% - 10/12
IMMU 51% - 12/19
TYL 49% - 2/1/06
ECGI 50% - 10/20