Saturday, March 31, 2007

Stressed Out And Tired; Stocks End The Week With A Boring Session, Leaving The Indexes Mixed And Flat

Stressed Out And Tired; Stocks End The Week With A Boring Session, Leaving The Indexes Mixed And Flat
By MauiTrader

Another wild-yet-boring intraday session came to an end, with stocks going nowhere. The lack of action today is a bit of a surprise, considering all the news items we had to digest. First, we got off to a positive start and continued higher early on, on the back of a bunch of macro news. The core personal consumption index rose .3% in Feb (biggest jump since August) and personal income and spending rose .6%, contributing to the fact that core inflation is now at 2.4% which is outside the Fed comfort zone of 1%-2%. This data should make it clear that the Fed will not be cutting interest rates anytime soon.

There were two more headlines of interest: The University of Michigan consumer confidence survey was revised down to 88.4 from 88.8 and the Chicago Purchasing Managers index rose to 61.7 in March from 47.9 in February. Anything over 50 on the CPMI indicates expansion.

However, news that the Bush administration via the Commerce Department are going to put economic sanctions/tariffs on China to protect the US paper producers from unfair subsidies. That sent stocks and the dollar lower. I hate ANY kind of economic sanction but we will see how this turns out.

It turned out, for the day, stocks weren’t that worried over it and they managed to recoup almost all of the losses that were sustained from the intraday highs. This was the second day in a row stocks have reversed after selling off hard in early hours of trading.

When the closing bell rang, stocks ended up mixed all over the board. The Nasdaq led the way with a .2% gain, the SP 400 gained .1%, and the DJIA ticked higher by .05%. On the downside, the NYSE led the way with a .2% loss, the SP 500 followed with a .1% loss, and the SP 600 ticked slightly lower by .03% basically closing flat. Leading stocks, via the IBD 100, closed flat with a 0.0% move. Like I said, boring. If you fell asleep before the market opened and woke up after the bell, you might question if it really opened.

The Nasdaq, SP 500, and DJIA are all below their 50 day moving averages and the NYSE, SP 400, and SP 600 are above their 50 day moving averages, showing you exactly how mixed this market really is, not only today but the past week.

Volume ticked higher today on both the NYSE and the Nasdaq. However, volume does not really matter today. What does matter is knowing this was not churning because volume was below the 50 day volume average; signaling the big boys were not interested in pushing the market around today.

Advancers beat decliners by a 6-to-5 margin on the NYSE and by an 8-to-7 margin on the Nasdaq. The fact that the NYSE was down today but breadth was up is very positive and shows you which index is leading. Speaking of leading, just look at the 52-week new highs. There were 132 NH on the NYSE and only 11 NL. On the Nasdaq it was 85 NH to 45 NL. Obviously, the strength, is clearly in the NYSE. Metals, Steel, Oil, and Food stocks; the NYSE is their home.

If you still don’t believe me that this market is boring and trendless, check out these numbers. For the week, the Nasdaq and the SP 500 lost 1.1%, the DJIA and SP 600 lost 1%, and the NYSE lost .8%. For the quarter (A FULL THREE MONTHS), the SP 600 showed some action with a 3% gain (that is very impressive). But the rest of the indexes spent the last three months going nowhere. The NYSE gained 1.3%, the DJIA rose .9%, the Nasdaq gained .3%, and the SP 500 gained .2%. You have to give the SP-600 some credit, because a 12% annual gain is very nice, but the rest of the indexes show you why Jesse Livermore and many of the greatest traders only traded when the indexes were in clear trends. I hope you made money but if you did not make any money…how much did you trade this year? Was it worth it? Or was “sitting” the right play?

There was one pocket of action, on Friday. The Homebuilder-Residential/Commercial group tanked another 3% today. This sector continues to show you why you should NEVER buy stocks that are a “bargain,” are “cheap,” are “values,” and that you think have “bottomed.” How many dip buyers keep getting killed here? I know quite a few people buying these stocks thinking they are picking up bargains. Good luck fighting through all that resistance.

Oh my, so after a week and a half, since the follow-through day, here we are still waiting for another day of substantial gains on a surge in volume that will help produce many stocks breaking out of sound bases. Well, you may be waiting, but I really don’t care anymore. LOL. Bu the fact that we have not had an accumulation day since the follow-through is troublesome. Remember just because we are holding above the lows and have had only one distribution day–that, yes, can be taken as bullish–we still need more gains on higher volume if this is going to hold.

This market has some real problems. If we are going to be going higher, trust me, I will play it. Hell, I am already playing it with 200 stocks. But the fact that the CANSLIM select group of stocks is still only 58% invested a week and a half since the follow-through day is very very very troublesome. You want another troublesome fact? The Nasdaq is below the close of the follow-through day and since then has seen no accumulation days and one distribution day.

I am 100% sure that by now, if this market was really ready to blast-off, we would have the CANSLIM select at 100% invested, I would not be long 200 stocks with 130 of them being pure speculative to half-way-speculative issues (stocks not of CANSLIM quality), I would not continue to find only speculative stocks to go long, there would be more CANSLIM quality stocks breaking out of bases, and there would be more CANSLIM quality stocks setting up in bases. We do NOT have this happening. This is not a market for growth/momentum investors. If you are looking to hit a home run, you probably need to adjust your stance and swing. Because this market has a powerful pitching rotation that is on fire right now. Single, double, and MAYBE a triple, if you are lucky is all that growth investors can expect, with the VIX still below 20.

I guess with so many people expecting the worse and the put/call still over 1 at 1.05 shows that there is a lot of bearishness out there. However the AAII poll this week showed bears come way down and bulls go over 50%. Also, this weekend, the poll shows 54% bulls, only 19% bearish, and 26% neutral (or confused, whatever you want to call it). So to me it seems the crowd is now bullish. How confusing can it get????? But really the smart trader knows not to really care or give a damn. Until you get pretty green charts in stocks with excellent fundamentals we know it is just noise.

The dip buyers can continue to step in here and believe nothing is wrong and can continue to buy stocks thinking they will go to the moon. But the fact that we have the government stepping in with sanctions, poor economic numbers, lower GDP growth, inflation, and a new Congress that is about to raise taxes by not extending the Bush tax cuts and you have a disaster waiting to happen. What is wrong here? You retail money that is NOW just buying stocks (I can see this data via mutual fund inflows–January and February inflows were HUGE) are buying at the top AGAIN. These inflows always happen right at the end or near the end of a trend. What is wrong? You are four years too late! Where were you in October 2002? Where were you in March 2003? If you are just now buying stocks, you should look in the mirror and ask yourself who is really buying your stocks; you or the media that convinced you the evil George W. Bush’s economy was doomed to fail? Since the tax cuts the Nasdaq is up 90% and the SP 600 is up 137%. Yeah, tax cuts don’t work, do they?

Next week is a short week, with Good Friday occurring on…Friday. And we are also coming upon earnings season. We start to get numbers this week but the real action officially kicks off on the 10th when AA reports. There might be one minor problem this time, which you can add to the list of problems I have already mentioned, as wall street is looking for earnings to come in 4% to 6% higher YOY. Not bad you say? Yes, you are right. But the problem lies in the fact that earnings have come in over double digits for the past 14 quarters.

If earnings do not come in at double digits, this will be the first time since 2003 that we have not seen this. If you don’t think that is potential bearish, you really don’t understand the stock market. GDP growth and EPS growth is the two clear leading indicators for stock markets. Not just the US stock market, ALL MARKETS ALL OVER THE WORLD GOING BACK YEARS AND YEARS AND YEARS. Find a country check out the GDP growth and then watch the stock market follow. How is the USA GDP growth looking? I am a question asking fool tonight!!!

Expect more choppy and meaningless trading this week. I am only predicting this so that we actually get a follow-through to the downside or upside here. Normally, whatever I think will happen does not happen. So I predict the market will flatline and be choppy intraday every day next week.

This market is still in a very weak bullish phase. But it is still in a bullish trend so there is no reason to bet against it. I am sure the safe time to short will be soon; but with all these beautiful green charts in these tiny small cheap crap stocks I have to take them. They are working (80% of them) and some are producing some nice gains and have chart patterns for potential big gains. However, if the market weakens expect them to go with it. But that is why I am only 56% invested. Which is AMAZINGLY (not really, just showing you how discipline works) similar to the CANSLIM select only being 58% invested. CASH IS STILL KING!!! KING, I TELL YOU!!

Aloha and I will see you in the chat room. I am tired and stressed out (not from the market; from socialized medicine…the only medicine on Maui).

Market Commentary At Big Wave Trading Bronze Level One.

Top Holdings Up This Week - Signal Date

KNOL 295% - 1/12/06
AKAM 230% - 9/30/05
TRCR 161% - 1/12
TTEC 157% - 8/25
OMTR 131% - 9/15
JSDA 108% - 12/20
TNH 107% - 10/26
CCOI 107% - 9/27
HRZ 103% - 9/27
PRGX 97% - 1/12
BONT 87% - 10/3
MEH 83% - 8/30
EVEP 80% - 11/16
AOI 76% - 11/19
CLRT 75% - 11/30
CHINA 74% - 8/16
IMKTA 72% - 8/28
CPA 66% - 9/15
EPHC 66% - 12/20
DA 65% - 1/25/06
IIVI 61% - 8/30
PERY 59% - 10/4
ULTR 58% - 10/27
CXW 57% - 5/19
HURN 57% - 9/13
XIDE 56% - 1/29
APLX 54% - 9/28
BMTI 52% - 10/25
MFW 50% - 1/29
DECK 50% - 9/13
KHDH 49% - 5/30
OEH 48% - 11/20

New Swing Longs: Silver Level Two

New Swing Shorts: Silver Level Two

Stocks On My Watchlist: Gold Level Three

Complete Profits/Losses: Gold Level Three

Partial Profits/Losses: Gold Level Three

MauiTrader Forums: Gold Level Three

MauiTrader Chat Room: Gold Level Three

Longs Up On The Day: Gold Level Three

Shorts Up On The Day: Gold Level Three

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