Despite amazing earnings reports from BIDU, MSFT, VSEA, MFW, DV, TEX, MTD, NOV, VLCM, NTGR, and DRIV, stock indexes decided to focus on the early morning GDP report and opened flat to slightly lower. GDP growth came in at 1.3% in the most recent quarter, down from economist 1.8% expectations and a four-year low. The poor GDP reading and the fact that YOY inflation is running at 2.2% definitely had a slightly negative impact. This poor reading helped the Euro hit a record high against the US dollar. The poor numbers were enough to keep the market choppy most of the day but the DJIA still hit another all-time high.
At the close the DJIA and the Nasdaq led the way higher with .1% gains, the SP 500 finished flat, the NYSE fell .1%, the SP 600 fell .3%, and the SP 400 led the way lower with a .4% drop. Leading stocks, in the form of the IBD 100, did not lead to the upside but they did not lead to the downside either, falling .2%. A respectable showing.
The most impressive index out of the group continues to be the DJIA. The DJIA is now up 11 of the past 12 days and up 19 of the past 21 days. This is only the third time in the past 110 years that this index has closed up 19 of the past 21 days. The other two times? 1927 and 1929. How did that turn out? I think if you have done any research on your own, you know how it ends.
Volume was lower across the board, with volume coming in lower on the NYSE by about 12% and lower on the Nasdaq by about 14%. The most troubling of today’s action was breadth. Breadth was negative across the board and negative by a fair amount, despite the small gains and losses. Decliners beat advancers by a 4-to-3 margin on the NYSE and by an 8-to-5 margin on the Nasdaq. This negative divergence in breadth has been a constant theme all week long. New 52-week highs came in at only 388 but new 52-week lows were only at 68. So at least the new lows did not expand.
For the week, the DJIA and the Nasdaq led with 1.2% gains, the SP 500 and SP 400 followed with .7% gains, the SP 600 rallied .4%, and the NYSE gained .1%. The best news came from leading stocks. The IBD 100 gained 1.6% on the week, finally outpacing the broad market. This impressive week gave the indexes their fifth up week in the past six weeks and the fourth up week in-a-row. This market is clearly starting to enter a semi-crazy phase.
Despite the market not making much headways the past two days, there have been an insane amount of action in individual stocks during that time. Many stocks are gapping up and continuing to rally afterwards after reporting great earnings. Other stocks are going into climax runs which is starting to produce some substantial gains in a lot of the old leaders in metals and other steel related stocks. You can see a list of these climax runs on the Gold forums, if you are a subscriber. It is best to look at the stocks listed on an arithmetic chart going back to 2002. There you can clearly see that a lot of stocks are going on climax runs after years of strong gains. These kind of moves happen when too many people are shorting rising stocks. With the put/call still at .84 it is clear people are still betting against stocks even as they rally.
Another clear sign of out-of-control momentum can be found in China’s Shanghai index and the stocks in that index. A gold subscriber Randyy has posted an index chart and three charts of stocks clearly in parabolic rises. His charts are just as pretty as the charts in TC2007. I definitely recommend taking a look if and when you have a chance. You can clearly see it is getting down-right scary the mania that is going on in China.
The other thing about this insane rally is that the DJIA is clearly the leader now. The fact that after four plus years of gains that the DJIA is now leading clearly shows that we are near the end of this great bull market. The only positive to come with the DJIA gains is the fact that small cap stocks are still moving higher. As long as small caps and leading stocks can keep pace with the DJIA I doubt the top is going to happen tomorrow or very shortly. There is probably still plenty of time left for stocks to rally, even with the crowd getting more bullish and less bearish.
Since I go with the trend (ALWAYS) of the market, this market has been treating me very well recently as many of my top holdings representing significant portions of my account make substantial gains at this point in the rally. Still, back in 2003 when this rally started, people were bearish everywhere and I had charts breaking out of beautiful patterns on strong volume that made gains immediately. Despite being very long still, the recent buys simply don’t explode like they did when this whole thing started. The other clear thing about that rally was that everything was clicking on ALL cylinders. The only thing that was constant was the bearishness as stocks rose.
This time the crowd is very bullish and there are many warning signs that are starting to show up underneath the recent price gains. Some clear negative divergences that I am worried about are the relative strength of the Nasdaq and IBD 100 lagging well behind the SP 500, the moneystreams (technical indicator in tc2007) in the indexes are making lower highs with prices making higher highs, the amount of new 52-week highs keep decreasing on every new high in the markets (Nov-Jan-April), breadth is starting to be negative everyday even during the days when stocks rise, sentiment indicators are all bullish (realmoney, marketvane, investors intelligence, and AAII), GDP is trending down, and earnings growth is below 10% for the first time in four years. This is all troublesome. None of this existed during 2003 when this rally started.
The positive are few but still very important. The fact that the put/call is at .84 shows that the traders are still shorting this rally and the VIX is still not at new lows, despite the markets being at higher highs. There is more volatility in stocks right now which are producing better gains than the gains from August to late February. This is a positive but is typical of markets in speculative stages. This divergence however positive right now is actually bearish in the long-term as it shows the market is setting itself up for a dramatic move; that move would probably be lower, since the VIX is trending higher.
So to sum things up, this market is still trending higher and we must continue to be long here for some potential huge gains. But the fact that the DJIA is up 19 out of 21 and that hasn’t happened since 1929 is just showing you how insane this market has gotten. We are clearly in a very speculative stage and with all the breakouts I am still getting there should be more upside, but we must be ready for the eventual sell-off. When that happens it is probably going to be very ugly.
It is going to get ugly because everyone I know is long the stock market now and all the perma-bears that used to be around in all the chat rooms that I monitor are now virtually gone. There is also very few people talking about the possibility of the bubble popping. Instead I am starting to hear those famous words: it is different this time. Sure it is! Sure it is!
The one thing I want to make sure is that people that are thinking of going long DJIA stocks here should NOT move their portfolio into these stocks just because they are outperforming on the short term. Over the long-term it is clear that top stocks that breakout from sound chart patterns and that have great fundamentals via earnings, sales, ROE, and profit margin clearly outperform these stocks in the long run. Don’t forget, despite the DJIA beating the IBD 100 the past three months, since May 2, 2003 the IBD 100 index is up 164.5% compared to the SP 500’s 59.6% gain. It is clear where the big money is made: in top stocks.
There are more earnings and a lot of economic numbers coming up this week so traders are sure to have plenty of reasons to move stocks all over the place. Even though I don’t like all the negative divergences I have, as long as the trend is up I will keep riding it. Maybe the old axiom of sell in May and go away will come to fruition but until it the actual selling shows up it remains foolish to sell now. There is still a very high wall-of-worry out there for stocks to climb.
Aloha and I will see you in the chat room!!!
Market Commentary At Big Wave Trading Bronze Level One
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
Top Holdings Up This Week - Date Of Purchase
KNOL 353% - 1/12/06
TRCR 265% - 1/12
AKAM 191% - 9/30/05
TTEC 171% - 8/25
TNH 156% - 10/26
JSDA 155% - 12/20
MA 128% - 8/2
HRZ 115% - 9/27
MFW 109% - 1/29
ONT 105% - 12/21
MEH 102% - 8/30
IGLD 101% - 10/26
CPA 101% - 9/15
EVEP 98% - 11/16
ULTR 97% - 10/27
HMSY 94% - 6/23
ANO 94% - 2/14
PAE 90% - 3/22
CLRT 86% - 11/30
EPHC 85% - 12/20
LTS 85% - 1/11
BAM 83% - 11/17/05
MOS 82% - 10/12
KHDH 78% - 5/30
VDSI 72% - 1/4
CXW 71% - 5/19
PERY 65% - 10/4
CNH 64% - 11/2
DECK 62% - 9/13
IMKTA 61% - 8/28
XOMA 60% - 1/12
SLP 58% - 2/5
RKT 55% - 12/4
MNTG 55% - 11/9
TESO 51% - 2/16
Saturday, April 28, 2007
Saturday, April 21, 2007
Stocks End A Very Powerful Week With More Gains; Volume Picks Up On Options Expiration Day
By MauiTrader
On Friday, stocks did what they have been doing all week, finding dip buyers that send the indexes higher into the close or at least higher than the open. A rash of good earnings from some big players like SLB GOOG AXP CAT and HON sent stocks higher at the open. But right after that very powerful gap higher, stocks started pulling back, as investors were quick to take some profits. However, once again, dip buyers came in and smart market makers did their best job to make shorting and put buying as painful as possible for the bears and sent stocks higher into the close. It was a very bullish options expiration.
At the close, the DJIA led the way with 28 out of 30 components up and hit all-time highs for the third day in-a-row, with a 1.2% gain. That makes it seven straight days and 15 out of the last 16 days this index has been higher. If that isn’t excessive, I am not sure what is. The SP 600 followed with a 1.1% gain, the NYSE was behind it with a 1% gain, the SP 500 rallied .9%, and the Nasdaq lagged with a .8% gain. It was another all-time high for the NYSE and six-and-a-half year highs for the SP 500 and Nasdaq. Other indexes hitting all-time territory include the Russell 2000, DJ Transportation Average, DJ Utility Average, and the SP 400. The SP 600 is a fraction away from all-time highs.
The good news from Friday, out of the world of leading stocks, was that the IBD 100 finally stopped its streak of underperformance, rallying 1.3%. It was a very nice change after eight of nine days of clear underperformance. Does that mean that growth investing is back in style? Probably not. We are four-plus years into a bull market. The small-caps have moved on to the big-caps. Your last leaders of secular bull markets.
Volume was higher on both exchanges, with volume rising 1% on the Nasdaq and by 18% on the NYSE. The higher volume finally gives the market a good accumulation day but the volume was driven higher, without a doubt, by all the options expiration activity. Without that activity, it is doubtful that the gains would have come on higher volume, especially on the Nasdaq.
Internals were very bullish, for a change this week, with advancers beating decliners for the first time in three sessions. Advancing stocks beat declining issues by a 3-to-1 margin on the NYSE and by a 2-to-1 margin on the Nasdaq. New highs finally expanded, with 602 showing up on the 52-week high list and 62 stocks showing up on the new 52-week low list.
For the week, the DJIA led the way with a 2.8% gain, the SP 500 was next with a 2.2% rise, the NYSE gained 1.8%, the Nasdaq rallied 1.4%, and the SP 600 lagged with a 1.3% gain. Proving that big-caps is where it is at, the IBD 100 lagged all indexes hardcore, with a .5% gain. This was, without a doubt, one of the best weeks of the year.
It was a very good week that finally saw volume start to show up. That higher volume started out badly, with the markets suffering a distribution day or two. But after Friday, those distribution days have been forgotten. Like I said it was good to see volume show up. However, the best rallies have volume show up immediately as the market is following-through. That high volume is best when it is preceded by a low volume sell-off. But as this market has shown since July and August, where the indexes started rallying on lower volume, you don’t always need a ton of volume to have a rally. All you need are some big-cap stocks to move and volume becomes obsolete.
This market is, obviously, being led by big-cap stocks, as the DJIA hits highs day after day after day. This is not a great market for CANSLIM growth investors but there is still plenty of action in the big-cap markets and the smaller low-priced junk stocks. These may not be growth stocks, but they are moving like they are at this stage of the game. If you check out the chart, in IBD, of value funds vs. growth funds, you will see that the big caps are in favor. Big-caps and value stocks is what is moving. Growth stocks have been lagging but are finally starting to get some life after Friday. However, since this is not the start of a fresh bull market and we do not have growth stocks leading, I still advise against going all-in with margin at this stage of the game.
The strength of this market has been quite impressive, recently, as there are simply no pullbacks and every small intraday dip is being bought up quickly. I simply don’t like that action as it sends many great stocks past proper pivot points and then as they don’t pullback that leaves us with no option to jump on the great stock. Instead do to proper risk/reward analysis we just have to watch them keep moving higher. Luckily, I still am having no problem finding stocks that are bouncing off the 50 dma or breaking out without gonig too far too fast. But I am missing a few stocks that I really wanted due to this.
In my opinion, the retail crowd seems very giddy and exuberant-especially CNBC. But AMTD and ETFC earnings reports show that traders are not participating in this current move higher like they were earlier. Still the traders that are trading this move are very bullish. The MarketVane survey has 75% of futures traders bullish, the realmoney.com poll shows 61% are bullish, the Investors Intelligence survey shows newsletter writers bullish by 52%, and the AAII poll has 46% of participants bullish. That along with the put/call being down to the .68 area clearly shows that investors are getting more and more bullish. That is giving this market a bit of a frothy feel but overall this frothiness feels NOTHING like the froth we had in early 2000. I have a lot of amateurs that I know telling me stocks are going higher. But they aren’t telling me they are going to the moon and they are not telling me that “there is no way this market is going lower.” Most still see the possibility of lower prices. That shows that the current madness that is starting is just that: starting.
The speculative momentum that is picking up pace now in the Chinese solar stocks is getting evident in the charts as these stocks are moving higher in a quite dramatic expansion as volume picks up the higher it goes. That is normally good. But when you are so far away from a proper breakout pivot point and volume is this heavy it is potentially bearish. For now it is not bearish but in the future if prices start not moving very much, you will know you have churning. Until the churning happens, though, might as well ride the trend higher. I never fight the trend and you should not either. Ride the speculative momo in these higher until the train derails. Momentum is a strange beast as it will ALWAYS last longer than you think it can.
There are many reasons for this market to go lower. The weak dollar hitting 26-year lows against the British pound, the low volume rallies, big caps leading small caps, speculative crap moving, record short interest levels on the NYSE, and poor numbers from stock trading firms are all reasons to worry about with this market. But as long as market keeps going up I am not going to worry about these.
I am worried about some internal data.The number of new highs shrinks every day. And if you look at a long-term trend of new highs since November, you can see that the trend of new highs is lower despite the market going higher. Another nasty divergence showing up is in the Relative Strength line of the Nasdaq. If you look at the highs in November, you will see that each rally after a selloff brings the Nasdaq higher and higher. Now if you look at the RS line, you will see the opposite. As the Nasdaq hit a new high in January, the RS line lagged. When it hit a new high late February, the RS line lagged even more, and now with the Nasdaq hitting new highs again, the RS line is once again lower. Lower highs and lower lows in the RS and higher highs in the Nasdaq is a very negative divergence. On top of that divergence is the negative divergence in the moneystream (proprietary indicator of tcnet). If you look at the peak in MS in February you can see now that even with the Nasdaq in higher ground (or around the same area) the MS line is well off the highs. Higher highs in price, with lower volume and negative divergences in the MS and RS line, is not bullish for the near future.
But like I keep saying over and over and over, these are just things we need to keep in the back of our head. As long as the trend is up that is where we should be investing. These things just let us know that we probably do not have a lot of upside left and when the market does turn we should be ready for some real selling.
It seems that since the February 27th market sell-off, all the previous big worries over the sub-prime market leading to a broader sell-off in financials have past. The market looks like it is expecting a soft landing, instead of a hard landing.
Showing support of that thesis is the fact that earnings are coming in much higher than what was expected by the Thomson Financial combined estimates. Those estimates were looking for a 3.3% rise in earnings, instead of the usual 10% plus earnings growth we have seen for the past 14 quarters. So far earnings have come in averaging 5.2% growth and 66% of the companies that have reported have posted better than expected results. This is much better than those low estimates but still the trend in earnings is clear. They are down. As earnings and the GDP goes, so goes your stock market.
Speaking of GDP, next week we have the release of Q1 GDP. Estimates are for 1.8% but economist are telling us to not focus on that number and instead should wait for the final revision as there will be some data problem due to automobiles. This growth, as per earnings, is slowing and below the usual 3% we have seen since the Bush tax cuts. Other items on tap include the March durable good numbers, existing-home sales, and new-home sales. Besides that we have earnings from powerhouses such as F MMM BSX HAS TXN XOM LMT COH and MSFT. This will surely cause the market some excitement as traders continue to weigh the positives and negatives of this market.
Are we setting ourselves up for the proverbial “sell in May and go away” or will earnings keep us moving higher? We will know by the end of next week. Aloha and I will see you in the chat room!!
Market Commentary At Big Wave Trading Bronze Level One
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
Top Holdings Up This Week - Date Of Purchase
KNOL 332% - 1/12/06
PTT 317% - 11/16
AKAM 236% - 9/30/05
CVO 197% - 8/18/05
TTEC 169% - 8/25
TRCR 163% - 1/12
JSDA 153% - 12/20
TNH 144% - 10/26
OMTR 140% - 9/15
ANO 120% - 2/14
CCOI 117% - 9/27
HRZ 107% - 9/27
NEXC 102% - 10/25
CLRT 101% - 11/30
CPA 100% - 9/15
ULTR 95% - 10/27
ONT 94% - 12/21
EVEP 94% - 11/16
IGLD 91% - 10/26
MFW 86% - 1/29
IMMU 85% - 12/19
LTS 82% - 1/11
BAM 81% - 11/17/05
MOS 78% - 10/12
BONT 75% - 10/03
BMTI 74% - 10/25
IIVI 71% - 8/30
EPHC 69% - 12/20
HURN 66% - 9/13
XIDE 66% - 1/29
IMKTA 65% - 8/28
KHDH 63% - 5/30
DA 63% - 1/25/06
CXW 62% - 5/19
BMA 61% - 10/24
DECK 55% - 9/13
MNTG 52% - 11/9
TESO 50% - 2/16
On Friday, stocks did what they have been doing all week, finding dip buyers that send the indexes higher into the close or at least higher than the open. A rash of good earnings from some big players like SLB GOOG AXP CAT and HON sent stocks higher at the open. But right after that very powerful gap higher, stocks started pulling back, as investors were quick to take some profits. However, once again, dip buyers came in and smart market makers did their best job to make shorting and put buying as painful as possible for the bears and sent stocks higher into the close. It was a very bullish options expiration.
At the close, the DJIA led the way with 28 out of 30 components up and hit all-time highs for the third day in-a-row, with a 1.2% gain. That makes it seven straight days and 15 out of the last 16 days this index has been higher. If that isn’t excessive, I am not sure what is. The SP 600 followed with a 1.1% gain, the NYSE was behind it with a 1% gain, the SP 500 rallied .9%, and the Nasdaq lagged with a .8% gain. It was another all-time high for the NYSE and six-and-a-half year highs for the SP 500 and Nasdaq. Other indexes hitting all-time territory include the Russell 2000, DJ Transportation Average, DJ Utility Average, and the SP 400. The SP 600 is a fraction away from all-time highs.
The good news from Friday, out of the world of leading stocks, was that the IBD 100 finally stopped its streak of underperformance, rallying 1.3%. It was a very nice change after eight of nine days of clear underperformance. Does that mean that growth investing is back in style? Probably not. We are four-plus years into a bull market. The small-caps have moved on to the big-caps. Your last leaders of secular bull markets.
Volume was higher on both exchanges, with volume rising 1% on the Nasdaq and by 18% on the NYSE. The higher volume finally gives the market a good accumulation day but the volume was driven higher, without a doubt, by all the options expiration activity. Without that activity, it is doubtful that the gains would have come on higher volume, especially on the Nasdaq.
Internals were very bullish, for a change this week, with advancers beating decliners for the first time in three sessions. Advancing stocks beat declining issues by a 3-to-1 margin on the NYSE and by a 2-to-1 margin on the Nasdaq. New highs finally expanded, with 602 showing up on the 52-week high list and 62 stocks showing up on the new 52-week low list.
For the week, the DJIA led the way with a 2.8% gain, the SP 500 was next with a 2.2% rise, the NYSE gained 1.8%, the Nasdaq rallied 1.4%, and the SP 600 lagged with a 1.3% gain. Proving that big-caps is where it is at, the IBD 100 lagged all indexes hardcore, with a .5% gain. This was, without a doubt, one of the best weeks of the year.
It was a very good week that finally saw volume start to show up. That higher volume started out badly, with the markets suffering a distribution day or two. But after Friday, those distribution days have been forgotten. Like I said it was good to see volume show up. However, the best rallies have volume show up immediately as the market is following-through. That high volume is best when it is preceded by a low volume sell-off. But as this market has shown since July and August, where the indexes started rallying on lower volume, you don’t always need a ton of volume to have a rally. All you need are some big-cap stocks to move and volume becomes obsolete.
This market is, obviously, being led by big-cap stocks, as the DJIA hits highs day after day after day. This is not a great market for CANSLIM growth investors but there is still plenty of action in the big-cap markets and the smaller low-priced junk stocks. These may not be growth stocks, but they are moving like they are at this stage of the game. If you check out the chart, in IBD, of value funds vs. growth funds, you will see that the big caps are in favor. Big-caps and value stocks is what is moving. Growth stocks have been lagging but are finally starting to get some life after Friday. However, since this is not the start of a fresh bull market and we do not have growth stocks leading, I still advise against going all-in with margin at this stage of the game.
The strength of this market has been quite impressive, recently, as there are simply no pullbacks and every small intraday dip is being bought up quickly. I simply don’t like that action as it sends many great stocks past proper pivot points and then as they don’t pullback that leaves us with no option to jump on the great stock. Instead do to proper risk/reward analysis we just have to watch them keep moving higher. Luckily, I still am having no problem finding stocks that are bouncing off the 50 dma or breaking out without gonig too far too fast. But I am missing a few stocks that I really wanted due to this.
In my opinion, the retail crowd seems very giddy and exuberant-especially CNBC. But AMTD and ETFC earnings reports show that traders are not participating in this current move higher like they were earlier. Still the traders that are trading this move are very bullish. The MarketVane survey has 75% of futures traders bullish, the realmoney.com poll shows 61% are bullish, the Investors Intelligence survey shows newsletter writers bullish by 52%, and the AAII poll has 46% of participants bullish. That along with the put/call being down to the .68 area clearly shows that investors are getting more and more bullish. That is giving this market a bit of a frothy feel but overall this frothiness feels NOTHING like the froth we had in early 2000. I have a lot of amateurs that I know telling me stocks are going higher. But they aren’t telling me they are going to the moon and they are not telling me that “there is no way this market is going lower.” Most still see the possibility of lower prices. That shows that the current madness that is starting is just that: starting.
The speculative momentum that is picking up pace now in the Chinese solar stocks is getting evident in the charts as these stocks are moving higher in a quite dramatic expansion as volume picks up the higher it goes. That is normally good. But when you are so far away from a proper breakout pivot point and volume is this heavy it is potentially bearish. For now it is not bearish but in the future if prices start not moving very much, you will know you have churning. Until the churning happens, though, might as well ride the trend higher. I never fight the trend and you should not either. Ride the speculative momo in these higher until the train derails. Momentum is a strange beast as it will ALWAYS last longer than you think it can.
There are many reasons for this market to go lower. The weak dollar hitting 26-year lows against the British pound, the low volume rallies, big caps leading small caps, speculative crap moving, record short interest levels on the NYSE, and poor numbers from stock trading firms are all reasons to worry about with this market. But as long as market keeps going up I am not going to worry about these.
I am worried about some internal data.The number of new highs shrinks every day. And if you look at a long-term trend of new highs since November, you can see that the trend of new highs is lower despite the market going higher. Another nasty divergence showing up is in the Relative Strength line of the Nasdaq. If you look at the highs in November, you will see that each rally after a selloff brings the Nasdaq higher and higher. Now if you look at the RS line, you will see the opposite. As the Nasdaq hit a new high in January, the RS line lagged. When it hit a new high late February, the RS line lagged even more, and now with the Nasdaq hitting new highs again, the RS line is once again lower. Lower highs and lower lows in the RS and higher highs in the Nasdaq is a very negative divergence. On top of that divergence is the negative divergence in the moneystream (proprietary indicator of tcnet). If you look at the peak in MS in February you can see now that even with the Nasdaq in higher ground (or around the same area) the MS line is well off the highs. Higher highs in price, with lower volume and negative divergences in the MS and RS line, is not bullish for the near future.
But like I keep saying over and over and over, these are just things we need to keep in the back of our head. As long as the trend is up that is where we should be investing. These things just let us know that we probably do not have a lot of upside left and when the market does turn we should be ready for some real selling.
It seems that since the February 27th market sell-off, all the previous big worries over the sub-prime market leading to a broader sell-off in financials have past. The market looks like it is expecting a soft landing, instead of a hard landing.
Showing support of that thesis is the fact that earnings are coming in much higher than what was expected by the Thomson Financial combined estimates. Those estimates were looking for a 3.3% rise in earnings, instead of the usual 10% plus earnings growth we have seen for the past 14 quarters. So far earnings have come in averaging 5.2% growth and 66% of the companies that have reported have posted better than expected results. This is much better than those low estimates but still the trend in earnings is clear. They are down. As earnings and the GDP goes, so goes your stock market.
Speaking of GDP, next week we have the release of Q1 GDP. Estimates are for 1.8% but economist are telling us to not focus on that number and instead should wait for the final revision as there will be some data problem due to automobiles. This growth, as per earnings, is slowing and below the usual 3% we have seen since the Bush tax cuts. Other items on tap include the March durable good numbers, existing-home sales, and new-home sales. Besides that we have earnings from powerhouses such as F MMM BSX HAS TXN XOM LMT COH and MSFT. This will surely cause the market some excitement as traders continue to weigh the positives and negatives of this market.
Are we setting ourselves up for the proverbial “sell in May and go away” or will earnings keep us moving higher? We will know by the end of next week. Aloha and I will see you in the chat room!!
Market Commentary At Big Wave Trading Bronze Level One
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
Top Holdings Up This Week - Date Of Purchase
KNOL 332% - 1/12/06
PTT 317% - 11/16
AKAM 236% - 9/30/05
CVO 197% - 8/18/05
TTEC 169% - 8/25
TRCR 163% - 1/12
JSDA 153% - 12/20
TNH 144% - 10/26
OMTR 140% - 9/15
ANO 120% - 2/14
CCOI 117% - 9/27
HRZ 107% - 9/27
NEXC 102% - 10/25
CLRT 101% - 11/30
CPA 100% - 9/15
ULTR 95% - 10/27
ONT 94% - 12/21
EVEP 94% - 11/16
IGLD 91% - 10/26
MFW 86% - 1/29
IMMU 85% - 12/19
LTS 82% - 1/11
BAM 81% - 11/17/05
MOS 78% - 10/12
BONT 75% - 10/03
BMTI 74% - 10/25
IIVI 71% - 8/30
EPHC 69% - 12/20
HURN 66% - 9/13
XIDE 66% - 1/29
IMKTA 65% - 8/28
KHDH 63% - 5/30
DA 63% - 1/25/06
CXW 62% - 5/19
BMA 61% - 10/24
DECK 55% - 9/13
MNTG 52% - 11/9
TESO 50% - 2/16
Saturday, April 14, 2007
Bulls Fight Off The Bears, Once Again, As Stocks Rally On Lower Volume To Close At Their HOD
Bulls Fight Off The Bears, Once Again, As Stocks Rally On Lower Volume To Close At Their HOD
By MauiTrader
The recent theme of this market has been that all economic news is moving the market. This may be due to the fact that less institutional investors are around to make bets on stocks (the low volume confirms this) but still the fact that the market is so easily moved around shows just how uneasy and unsure investors are. Today was no different.
Early in the morning we received the latest PPI report that showed a 1% jump in March after February’s 1.3% gain. It was the core PPI, however, that had the positive impact on stocks as the core remained flat compared to expectations of a .2% increase. This, along with the earnings from GE, helped get stocks off to a positive start. But those gains were soon eliminated after the University of Michigan’s consumer sentiment survey fell to 85.3 in April from 88.4 in March, below expectations of 87.5, echoing the IBD/TIPP poll released earlier this month.
Proving, though, that the dip-buyers are still in complete control, right after that selloff, stocks found a bottom. Stocks then rallied for the rest of the session closing near or at their intraday highs. The rally picked up steam after comments from Dallas Fed President Richard Fisher made comments about how globalization is helping raise world productivity that in-effect has positive pricing pressure consequences for the USA. That was good enough to bring in the retail crowd. The rally was well along, when a little before 3pm EST the Chief Development/Operating Officer of CSCO said that Cisco’s customers were at the early stages of a new upgrade cycle. That helped give the Nasdaq a huge jolt sending it to its HOD.
At the close, bulls were in control, once again, with the DJIA, Nasdaq, SP 600, and NYSE all up .5%. The SP 500 lagged with a .4% gain. The DJIA got a big boost thanks to an 8% rise in MRK off the back of a positive ruling over Vioxx. Once again, for the fourth session in-a-row, the IBD 100 lagged the broad market with a .4% gain. I hate to tell you this, folks, the best bull markets that have long term staying power ALWAYS have these high quality stocks leading. The fact that they are still lagging this current rally and the overall rally since the July and August lows last year signals that we are on or near the last leg of this bull market that has been going on since March of 2003 without a 10% decline in the DJIA.
Volume was lower by about 5% on both the NYSE and the Nasdaq and once again neither average traded enough shares to even equal its 50 day volume average. Institutional investors are still on the sidelines except when they decide to sell stocks. Then they show up. That is why we have two distribution days with higher volume than the two accumulation days since we followed-through. The good news, today, on the volume, is that the volume picked up as we rallied late-in-the-day off the back of the CSCO news.
Underneath the price gains, the market showed that it is doing well and is not signaling anything drastic after Friday’s session. Breadth was positive on both exchanges, with advancers beating decliners by a 10-to-7 margin on the NYSE and by a 3-to-2 margin on the Nasdaq. There were 459 new 52-week highs and 50 new 52-week lows, with the Chemical-Fertilizer group having 36% of their components hitting that mark. The put/call ratio is still a bit high at .9, which indicates that options traders are still making enough bearish bets that fuel for more price gains.
For the week, the market did very well, with the NYSE leading the way with a 1% gain, the Nasdaq followed with a .8% gain, the SP 600 came in with a .7% increase, the SP 500 was next with a .6% gain, and the DJIA was the laggard with only a .4% gain. Overall it appeared to be a very bullish week but without volume it is hard to definitively say that this market deserves an all-clear signal. My defenses are still up and armed ready for a sudden change should it develop.
My problem is that this light volume rally still gives me the feeling that the retail crowd (dumb money), shorts that are forced to cover their shorts, and daytraders are the ones moving this market. There is a quick visual way to describe what I see: Look at a daily chart of the Nasdaq; now count how many big red bars you see this year compared to big green bars. Do the same thing for the NYSE. Now do this on a weekly chart of both indexes. You will clearly see that the big red bars (distribution) are more frequent than the green bars (distribution). Even though most indexes are overall doing fine in the acc/dist rating, the NYSE has a C and the SP 500 has a D. This despite both being at or very near their all-time highs. This is a bearish development. Now this can be worked off if a ton of accumulation rushes in but for right now that is not happening.
What appears to be happening is that after February 27 the big boys sold stocks, the dumb money came in and starting to buy the dip-since all dips are buys since 2003. When they started to buy the dip, the traders who were for sure the market had topped then started shorting stocks. As the dumb money keeps buying stocks and as the daytraders stay active in bidding up the hot momo stocks (bio and solar), the shorts are then forced to cover their poor trade. This then sends stocks higher and then the big boys dump on them creating another distribution day (April 11) and then we start the whole process all over again. That is why we keep having low volume rallies and we have two distribution days since the market followed-through on March 21st. It is a very smart game the best of the best play. I know this game well. They did it before the 20th century and they will be doing this in the 22nd century.
To go along with what I see in the indexes, I see classic situations of a market near its end. Daytraders are back and are moving stocks, once again. This time the solar stocks, as I have been saying for months now, are the momo monsters. However, another group has joined them after the DNDN announcement: biotech. Biotech stocks are now moving all over the place, with many making very large price gains. I am willing to play these momo monsters but they still must breakout from sound chart patterns. They have to setup like ASTI. Stocks like JASO, TSL, and SPWR are breaking out of sloppy ugly bases. If I was daytrading these bad boys, I am sure I would be doing OK. However, I like to position trade now for the big gains. If the base is ugly, I pass. It is a simple as that. However, the game right now is to daytrade the biotechs, golds, and solar.
Take that speculation now in this market along with all of these low-priced POS that I have flying everywhere and it becomes quite clear to me we are entering a very speculative stage of this market. So, if we are getting a lot of momo stocks in the low-priced, solar, gold, and bio area to prove that it is not speculative all the high priced stocks are moving too right? Wrong. The real leaders in these groups have already made their runs (besides solar) and now the sub-$5 stocks are cooking. Is that a problem? Not at all. In fact at this point this is where we can make a TON of money as long as this trend last. Even if it doesn’t last that long, that is why we cut losses. But if this is the last hurrah, many of the stocks I have recently gone long should produce some big gains.
What else makes me think we are near the end? The fact that the old leaders from the 2003-2006 bull are back again. Oil&Gas, Gold, Steel, Metals, Transports and Commodities are all moving again. This time the leaders are making moves in some and not in others. The old leaders that are not leading again are setting up bases so there could be a lot more upside left in these. But along with these stocks, we don’t have financials, tech, and housing. We have Utilities, Defense, Food, and Medical stocks. The rotation has been out of leading high-tech and high-growth stocks into defensive and safety issues.
Even though I am cautious as can be on this market and have outlined everything I find wrong with this market that I did not find wrong with the market AT ALL in 2003 and 2004, it doesn’t effect my trading. I am long 230 stocks and most are very speculative so are very small. The fact that few CANSLIM quality stocks are breaking out is the reason I am not 200% invested. This market is obviously not acting right to not have me fully invested with it at all-time highs. Trust me, if this market was a rip-roaring raging bull market full of CANSLIM quality charts breaking out left and right, I would be 200% invested. However, since it is all crap I am not looking to become a wealthy rich individual here. I am simple trying to make sure I make a comfortable living so I can pay all my bills on Maui. That is all I want right here. If these stocks FLY!!! then I will get very wealthy. If they don’t, they are breaking out of patterns that should provide some nice gains.
It should be a busy upcoming week, with earnings announcements everywhere and the CPI being released on Tuesday. The CPI is sure to be market moving news but the earnings are sure to make anything off of that meaningless by the end of the week. We have announcements from such tech companies as IBM INTC EMC STX YHOO GOOG. So far the earnings have not been that great and as I have said before Analyst are expecting gains of 3.7% in YOY earnings this quarter. That is down from 8.7% estimates, earlier this year (not a good sign). Also, the expected 3.7% YOY gain will be the first gain in 14 quarters of non-double digit growth. As earnings go, so goes the market. Historically you can watch the trend of the GDP growth and earnings growth of an economy and see that they are the best predictor of what direction the stock market will take. GDP and earnings lead the market.
Take that along with what I see in the indexes and in my charts and it just becomes clear to me that there is not a whole lot left in this rally. Maybe a month to three months. But I can’t imagine by next quarter we will be higher with all the bad numbers, old leaders, and speculative situations I see. We will know it is ending when we get more distribution days in the market. Right now, we have two since the rally followed-through on March 21. Two more next week would raise caution flags everywhere and would definitely make me think about cutting losses much shorter than I normally allow low-priced junk POS stocks. But until I see that distribution, I will continue to ride the trend of the cocky bullish daytraders. Those daytraders are a brazen bunch.
The only other interesting piece of information I saw this weekend was that the Bradley stock market model sees a significant turn date (bearish) on Friday April 20. This is a stock market timing model based off of astrology and has been quite impressive at calling turns. However, sometimes the turn it calls for happens…in the opposite direction. So this model is shaky but it did get the March 13, 2003 bottom right on the money. However, it has a spotty record of tops. But with all the bearish situations I see in a bullish rising market, along with all my longs being so speculative, this is something for me to keep in the back of my mind as we continue on with our overbought speculative low volume old-leader filled bull market.
Aloha and I will see you in the chat room. Have a great Saturday and Sunday!!!
Sidenote: DEATHS DOWN 45% FROM FEB 14 - APR 14 (1586) COMPARED TO TWO PRIOR MONTHS DEC 14 - FEB 14 (2871) IN BAGHDAD. I hate our liberal media. Thank God I know how to read and find information on my own.
Market Commentary At Big Wave Trading Bronze Level One.
Top Holdings Up This Week - Signal Date
KNOL 332% - 1/12/06
AKAM 230% - 9/30/05
TRCR 191% - 1/12
CVO 189% - 8/18/05
TTEC 175% - 8/25
JSDA 164% - 12/20
TNH 141% - 10/26
OMTR 134% - 9/15
CCOI 130% - 9/27
MEH 109% - 8/30
HRZ 105% - 9/27
NEXC 101% - 10/25
CLRT 100% - 11/30
EVEP 97% - 11/16
SLP 94% - 2/5
CPA 91% - 9/15
MFW 89% - 1/29
ONT 85% - 12/21
CHINA 82% - 8/16
IMMU 79% - 12/19
IGLD 77% - 10/26
ULTR 74% - 10/27
MOS 73% - 10/12
ANO 71% - 2/14
PRGX 69% - 1/12
IMKTA 69% - 8/28
HURN 69% - 9/13
IIVI 66% - 8/30
DA 64% - 1/25/06
PERY 64% - 10/4
KHDH 59% - 5/30
CXW 59% - 5/19
EPHC 59% - 12/20
BAM 56% - 11/17/05
DECK 51% - 9/13
ECGI 50% - 10/20
APLX 50% - 9/28
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
By MauiTrader
The recent theme of this market has been that all economic news is moving the market. This may be due to the fact that less institutional investors are around to make bets on stocks (the low volume confirms this) but still the fact that the market is so easily moved around shows just how uneasy and unsure investors are. Today was no different.
Early in the morning we received the latest PPI report that showed a 1% jump in March after February’s 1.3% gain. It was the core PPI, however, that had the positive impact on stocks as the core remained flat compared to expectations of a .2% increase. This, along with the earnings from GE, helped get stocks off to a positive start. But those gains were soon eliminated after the University of Michigan’s consumer sentiment survey fell to 85.3 in April from 88.4 in March, below expectations of 87.5, echoing the IBD/TIPP poll released earlier this month.
Proving, though, that the dip-buyers are still in complete control, right after that selloff, stocks found a bottom. Stocks then rallied for the rest of the session closing near or at their intraday highs. The rally picked up steam after comments from Dallas Fed President Richard Fisher made comments about how globalization is helping raise world productivity that in-effect has positive pricing pressure consequences for the USA. That was good enough to bring in the retail crowd. The rally was well along, when a little before 3pm EST the Chief Development/Operating Officer of CSCO said that Cisco’s customers were at the early stages of a new upgrade cycle. That helped give the Nasdaq a huge jolt sending it to its HOD.
At the close, bulls were in control, once again, with the DJIA, Nasdaq, SP 600, and NYSE all up .5%. The SP 500 lagged with a .4% gain. The DJIA got a big boost thanks to an 8% rise in MRK off the back of a positive ruling over Vioxx. Once again, for the fourth session in-a-row, the IBD 100 lagged the broad market with a .4% gain. I hate to tell you this, folks, the best bull markets that have long term staying power ALWAYS have these high quality stocks leading. The fact that they are still lagging this current rally and the overall rally since the July and August lows last year signals that we are on or near the last leg of this bull market that has been going on since March of 2003 without a 10% decline in the DJIA.
Volume was lower by about 5% on both the NYSE and the Nasdaq and once again neither average traded enough shares to even equal its 50 day volume average. Institutional investors are still on the sidelines except when they decide to sell stocks. Then they show up. That is why we have two distribution days with higher volume than the two accumulation days since we followed-through. The good news, today, on the volume, is that the volume picked up as we rallied late-in-the-day off the back of the CSCO news.
Underneath the price gains, the market showed that it is doing well and is not signaling anything drastic after Friday’s session. Breadth was positive on both exchanges, with advancers beating decliners by a 10-to-7 margin on the NYSE and by a 3-to-2 margin on the Nasdaq. There were 459 new 52-week highs and 50 new 52-week lows, with the Chemical-Fertilizer group having 36% of their components hitting that mark. The put/call ratio is still a bit high at .9, which indicates that options traders are still making enough bearish bets that fuel for more price gains.
For the week, the market did very well, with the NYSE leading the way with a 1% gain, the Nasdaq followed with a .8% gain, the SP 600 came in with a .7% increase, the SP 500 was next with a .6% gain, and the DJIA was the laggard with only a .4% gain. Overall it appeared to be a very bullish week but without volume it is hard to definitively say that this market deserves an all-clear signal. My defenses are still up and armed ready for a sudden change should it develop.
My problem is that this light volume rally still gives me the feeling that the retail crowd (dumb money), shorts that are forced to cover their shorts, and daytraders are the ones moving this market. There is a quick visual way to describe what I see: Look at a daily chart of the Nasdaq; now count how many big red bars you see this year compared to big green bars. Do the same thing for the NYSE. Now do this on a weekly chart of both indexes. You will clearly see that the big red bars (distribution) are more frequent than the green bars (distribution). Even though most indexes are overall doing fine in the acc/dist rating, the NYSE has a C and the SP 500 has a D. This despite both being at or very near their all-time highs. This is a bearish development. Now this can be worked off if a ton of accumulation rushes in but for right now that is not happening.
What appears to be happening is that after February 27 the big boys sold stocks, the dumb money came in and starting to buy the dip-since all dips are buys since 2003. When they started to buy the dip, the traders who were for sure the market had topped then started shorting stocks. As the dumb money keeps buying stocks and as the daytraders stay active in bidding up the hot momo stocks (bio and solar), the shorts are then forced to cover their poor trade. This then sends stocks higher and then the big boys dump on them creating another distribution day (April 11) and then we start the whole process all over again. That is why we keep having low volume rallies and we have two distribution days since the market followed-through on March 21st. It is a very smart game the best of the best play. I know this game well. They did it before the 20th century and they will be doing this in the 22nd century.
To go along with what I see in the indexes, I see classic situations of a market near its end. Daytraders are back and are moving stocks, once again. This time the solar stocks, as I have been saying for months now, are the momo monsters. However, another group has joined them after the DNDN announcement: biotech. Biotech stocks are now moving all over the place, with many making very large price gains. I am willing to play these momo monsters but they still must breakout from sound chart patterns. They have to setup like ASTI. Stocks like JASO, TSL, and SPWR are breaking out of sloppy ugly bases. If I was daytrading these bad boys, I am sure I would be doing OK. However, I like to position trade now for the big gains. If the base is ugly, I pass. It is a simple as that. However, the game right now is to daytrade the biotechs, golds, and solar.
Take that speculation now in this market along with all of these low-priced POS that I have flying everywhere and it becomes quite clear to me we are entering a very speculative stage of this market. So, if we are getting a lot of momo stocks in the low-priced, solar, gold, and bio area to prove that it is not speculative all the high priced stocks are moving too right? Wrong. The real leaders in these groups have already made their runs (besides solar) and now the sub-$5 stocks are cooking. Is that a problem? Not at all. In fact at this point this is where we can make a TON of money as long as this trend last. Even if it doesn’t last that long, that is why we cut losses. But if this is the last hurrah, many of the stocks I have recently gone long should produce some big gains.
What else makes me think we are near the end? The fact that the old leaders from the 2003-2006 bull are back again. Oil&Gas, Gold, Steel, Metals, Transports and Commodities are all moving again. This time the leaders are making moves in some and not in others. The old leaders that are not leading again are setting up bases so there could be a lot more upside left in these. But along with these stocks, we don’t have financials, tech, and housing. We have Utilities, Defense, Food, and Medical stocks. The rotation has been out of leading high-tech and high-growth stocks into defensive and safety issues.
Even though I am cautious as can be on this market and have outlined everything I find wrong with this market that I did not find wrong with the market AT ALL in 2003 and 2004, it doesn’t effect my trading. I am long 230 stocks and most are very speculative so are very small. The fact that few CANSLIM quality stocks are breaking out is the reason I am not 200% invested. This market is obviously not acting right to not have me fully invested with it at all-time highs. Trust me, if this market was a rip-roaring raging bull market full of CANSLIM quality charts breaking out left and right, I would be 200% invested. However, since it is all crap I am not looking to become a wealthy rich individual here. I am simple trying to make sure I make a comfortable living so I can pay all my bills on Maui. That is all I want right here. If these stocks FLY!!! then I will get very wealthy. If they don’t, they are breaking out of patterns that should provide some nice gains.
It should be a busy upcoming week, with earnings announcements everywhere and the CPI being released on Tuesday. The CPI is sure to be market moving news but the earnings are sure to make anything off of that meaningless by the end of the week. We have announcements from such tech companies as IBM INTC EMC STX YHOO GOOG. So far the earnings have not been that great and as I have said before Analyst are expecting gains of 3.7% in YOY earnings this quarter. That is down from 8.7% estimates, earlier this year (not a good sign). Also, the expected 3.7% YOY gain will be the first gain in 14 quarters of non-double digit growth. As earnings go, so goes the market. Historically you can watch the trend of the GDP growth and earnings growth of an economy and see that they are the best predictor of what direction the stock market will take. GDP and earnings lead the market.
Take that along with what I see in the indexes and in my charts and it just becomes clear to me that there is not a whole lot left in this rally. Maybe a month to three months. But I can’t imagine by next quarter we will be higher with all the bad numbers, old leaders, and speculative situations I see. We will know it is ending when we get more distribution days in the market. Right now, we have two since the rally followed-through on March 21. Two more next week would raise caution flags everywhere and would definitely make me think about cutting losses much shorter than I normally allow low-priced junk POS stocks. But until I see that distribution, I will continue to ride the trend of the cocky bullish daytraders. Those daytraders are a brazen bunch.
The only other interesting piece of information I saw this weekend was that the Bradley stock market model sees a significant turn date (bearish) on Friday April 20. This is a stock market timing model based off of astrology and has been quite impressive at calling turns. However, sometimes the turn it calls for happens…in the opposite direction. So this model is shaky but it did get the March 13, 2003 bottom right on the money. However, it has a spotty record of tops. But with all the bearish situations I see in a bullish rising market, along with all my longs being so speculative, this is something for me to keep in the back of my mind as we continue on with our overbought speculative low volume old-leader filled bull market.
Aloha and I will see you in the chat room. Have a great Saturday and Sunday!!!
Sidenote: DEATHS DOWN 45% FROM FEB 14 - APR 14 (1586) COMPARED TO TWO PRIOR MONTHS DEC 14 - FEB 14 (2871) IN BAGHDAD. I hate our liberal media. Thank God I know how to read and find information on my own.
Market Commentary At Big Wave Trading Bronze Level One.
Top Holdings Up This Week - Signal Date
KNOL 332% - 1/12/06
AKAM 230% - 9/30/05
TRCR 191% - 1/12
CVO 189% - 8/18/05
TTEC 175% - 8/25
JSDA 164% - 12/20
TNH 141% - 10/26
OMTR 134% - 9/15
CCOI 130% - 9/27
MEH 109% - 8/30
HRZ 105% - 9/27
NEXC 101% - 10/25
CLRT 100% - 11/30
EVEP 97% - 11/16
SLP 94% - 2/5
CPA 91% - 9/15
MFW 89% - 1/29
ONT 85% - 12/21
CHINA 82% - 8/16
IMMU 79% - 12/19
IGLD 77% - 10/26
ULTR 74% - 10/27
MOS 73% - 10/12
ANO 71% - 2/14
PRGX 69% - 1/12
IMKTA 69% - 8/28
HURN 69% - 9/13
IIVI 66% - 8/30
DA 64% - 1/25/06
PERY 64% - 10/4
KHDH 59% - 5/30
CXW 59% - 5/19
EPHC 59% - 12/20
BAM 56% - 11/17/05
DECK 51% - 9/13
ECGI 50% - 10/20
APLX 50% - 9/28
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
Saturday, April 07, 2007
HAPPY EASTER!!!, HAPPY GOOD FRIDAY!!!, AND HAPPY PESACH!!!; Stocks End Short Week With More Gains On Light Trade
HAPPY EASTER!!!, HAPPY GOOD FRIDAY!!!, AND HAPPY PESACH (PASSOVER)!!!; Stocks End Short Week With More Gains On Light Trade
By MauiTrader
Stocks started the morning off with a gap lower on the back of a currency tightening measures in China. But after the gap lower, stocks steadily climbed higher on very quiet trade for the rest of the day. That reversal off the gap lower was caused by the Labor Department announcing that jobless claims this week fell within forecast. Those jobless claims this week rose by 11,000 to 321,000.
Also helping to lift stocks was a couple of merger and acquisition related announcements. Kirk Kerkorian has made a $4.5 billion bid for DCX and WEBM agreed to be acquired by Software AG. WEBM rose 27% on the announcement. This now puts the 1Q M&A deals up 27% over this time last year. $1.1 trillion worth of M&A deals this year has us on pace to beat last years record. More amazing is private equity deals. Those have risen 47%, year-over-year in 2007 so far.
Combine the positive jobless claims with the M&A deals, and with most traders taking Thursday off to have a very long weekend, and you had a recipe perfect for higher stock prices, despite oil climbing back over $64 on the news that the EIA saying that oil inventories declined for the eight-week in a row.
At the closing bell, the Nasdaq led the way with a .5% gain, the NYSE and the SP 500 followed with .3% gains, and the SP 600 and the DJIA lagged with .2% gains. A tad more troublesome is the IBD 100. That index only managed a .2% gain, well lagging the Nasdaq on the session.
Volume was lower on both the NYSE and the Nasdaq by about 10%. The lower volume was well below the 50 day volume average and was the lowest total of the year. Advancers beat decliners by a 5-to-3 margin on the NYSE and by an 8-to-7 margin on the Nasdaq. There were 413 new highs to 53 new lows–and on the NYSE there were 234 new highs to only 13 new lows.
Today was another day of a low volume rally that saw the indexes barely move higher but once again shake off early weakness to do so. This is not a great trend we have developing, since the follow-through day on March 21st. Since that follow through day the market was been higher in seven sessions. All seven sessions have failed to have volume over the 50 day volume average and only two of the up sessions have come with volume heavier than the day before. This is a low volume rally that will not last much longer unless we get some clear accumulation days in here by big institutional traders. Until we have volume come in over the 50 day volume average on the upside, we are open to a severe sell-off still. Bottom line is that I would not take much away from this week’s holiday shortened trading.
For the week it was very positive with all indexes closing higher. The Nasdaq led the way with a 2.1% gain, the NYSE followed with a 1.8% gain, the DJIA was right behind with a 1.7% gain, the SP 500 rose 1.6%, and the SP 600 gained 1.5%. I could go into more detail about this weeks action but it would be silly to do so. All you need to know is that it was a holiday short week. The bulls almost always have control of these weeks. This week was no exception.
There is no doubt that we are still in rally mode but everything in my gut tells me we are not going far from here. Now I will change my stance in seconds, if I start to see CANSLIM stocks with consistent great EPS and sales growth breakout from fresh bases and the markets start moving higher on HUGE volume. However, all I keep seeing is the old leaders breakout from choppy bases, defensive and utility issues climbing, and little small sub-$10 momo stocks moving. This does not make a safe big bull market. If we start seeing some more buying here on a lot of volume I will be much happier. However, unless we see it soon, we are increasing our chances of failure each day that passes that volume on the up days remain under the 50 day volume average.
Can we make money here? Of course! If you are a subscriber at least on the silver level you can see for yourself that almost EVERYTHING that I have touched since the February 27th sell-off is either higher or has not violated a complete cut loss area. However, there is nothing over $10 breaking out from bases seven weeks long that have perfect accumulation/distribution and max green BOP. In March 2003, October 2004, and November 2005 there were plenty of beautiful charts. Even after the move in August 2006 there were a few SWEET gems. However, since March 21st there has been very few. The stocks that do have perfect charts are just not CANSLIM quality. If this market takes a turn for the worse, these stocks will not fall 8%–they will fall 20% or more before violating a key cut loss level. So I can not recommend them for newbies.
Give me a sell-off of 20% or more and a VIX near 20-30 and the next follow-through we get you will see the power of this strategy. Right now, very few people are making a killing. Remember back in March 2003 when the VIX was at 33? I had many stocks make 300-500% gains. So what can we compare it to now. How about KNOL. KNOL is up 301% for me since I purchased it. If the VIX was three times higher than now and around 36, KNOL would be up 900%. So basically you can take a look at my returns below this commentary and then double or triple them and then you will see the potential gains in a “REAL” bull market. Not a low volume snooze-fest higher.
Speaking of the VIX: The VIX fell 10.2% this week. LOL. With the VIX that low, you can forget about many MFW or TRCR type of stocks showing up. Normally I can find 10-20 MFW and TRCR type of stocks. Not in this market. However, the drop in VIX puts complacency in the market and that is bearish for stock prices. Another bearish item is the put/call ratio. That ratio after falling below .7 yesterday is still low at .74. Also, early on in the realmoney.com polls, bulls are beating bears 60% to 19%. The crowd appears to bullish again….for now. And we all know how quick this can change. More choppiness? Probably.
So remember, until we get more quality CANSLIM type stocks, keep your buys small in this speculative crap that is getting action. Also if you are brand new and are still inexperienced (you know who you are) and you buy a stock and it goes against you the next day, think about selling 25% to 33%. Also in these speculative stocks, don’t be afraid to take some gains at 25% or so. These things like to reverse in the kind of market environment we are in so you need to stay on your toes. Breakouts should work right away! Especially in rough markets. If they don’t move up right away, newbies, think of selling some down.
Before I move on to wishing everyone a Happy Easter, I want to talk about the March employment numbers. Expectations for 135,000 was well taken care of when headlines produced a gain of 180,000. Along with that nice gain, the previous two months employment figures were revised up. But more amazing, despite this “horrible-evil-economy-that-GWB-has-created,” unemployment came in at five-year lows at 4.4%, beating expectations of a tick up to 4.6% from 4.5% . That is simply incredible. This also comes with average hourly earnings rising .3%. That is a 4% gain year-over-year. Even though the economy is showing signs of slowing, these numbers show just how great this economy still is despite the slowdown.
Wall-street took the news quite well with the SP futures rising 5.75 and the NQ futures rising 10.75. Stocks were closed today, obviously, but futures still traded for a little while.
Earnings season officially starts next week when AA reports on Tuesday. Analyst are expecting gains of 3.7% in YOY earnings this quarter. That is down from 8.7% estimates, earlier this year (not a good sign). Don’t you find that a bit scary how far they have come down?? Also, the expected 3.7% YOY gain will be the first gain in 14 quarters of non-double digit growth. As earnings go, so goes the market. Historically you can watch the trend of the GDP growth and earnings growth of an economy and see that they are the best predictor of what direction the stock market will take. GDP and earnings lead the market.
With that I wish everyone a Happy Easter and Passover. Enjoy the time with loved ones. Aloha and I will see you in the chat room.
Market Commentary At Big Wave Trading Bronze Level One.
Top Holdings Up This Week - Signal Date
KNOL 301% - 1/12/06
AKAM 220% - 9/30/05
TRCR 188% - 1/12
TTEC 172% - 8/25
JSDA 139% - 12/20
TNH 132% - 10/26
OMTR 125% - 9/15
CCOI 107% - 9/27
MEH 105% - 8/30
HRZ 104% - 9/27
CLRT 98% - 11/30
PRGX 97% - 1/12
AOI 94% - 11/19
EVEP 93% - 11/16
MFW 91% - 1/29
BONT 87% - 10/3
NEXC 81% - 10/25
CPA 79% - 9/15
CHINA 78% - 8/16
IMKTA 74% - 8/28
SLP 73% - 2/5
BAM 73% - 11/17/05
DA 67% - 1/25/06
MOS 65% - 10/12
EPHC 64% - 12/20
ULTR 64% - 10/27
HURN 63% - 9/13
IIVI 63% - 8/30
PERY 61% - 10/4
ANO 58% - 2/14
CXW 58% - 5/19
XIDE 56% - 1/29
KHDH 55% - 5/30
APLX 53% - 9/28
BMTI 52% - 10/25
IMMU 52% - 12/19
ONT 52% - 12/21
BMA 52% - 10/24
DECK 51% - 9/13
OEH 48% - 11/20
VDSI 48% - 1/4
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
By MauiTrader
Stocks started the morning off with a gap lower on the back of a currency tightening measures in China. But after the gap lower, stocks steadily climbed higher on very quiet trade for the rest of the day. That reversal off the gap lower was caused by the Labor Department announcing that jobless claims this week fell within forecast. Those jobless claims this week rose by 11,000 to 321,000.
Also helping to lift stocks was a couple of merger and acquisition related announcements. Kirk Kerkorian has made a $4.5 billion bid for DCX and WEBM agreed to be acquired by Software AG. WEBM rose 27% on the announcement. This now puts the 1Q M&A deals up 27% over this time last year. $1.1 trillion worth of M&A deals this year has us on pace to beat last years record. More amazing is private equity deals. Those have risen 47%, year-over-year in 2007 so far.
Combine the positive jobless claims with the M&A deals, and with most traders taking Thursday off to have a very long weekend, and you had a recipe perfect for higher stock prices, despite oil climbing back over $64 on the news that the EIA saying that oil inventories declined for the eight-week in a row.
At the closing bell, the Nasdaq led the way with a .5% gain, the NYSE and the SP 500 followed with .3% gains, and the SP 600 and the DJIA lagged with .2% gains. A tad more troublesome is the IBD 100. That index only managed a .2% gain, well lagging the Nasdaq on the session.
Volume was lower on both the NYSE and the Nasdaq by about 10%. The lower volume was well below the 50 day volume average and was the lowest total of the year. Advancers beat decliners by a 5-to-3 margin on the NYSE and by an 8-to-7 margin on the Nasdaq. There were 413 new highs to 53 new lows–and on the NYSE there were 234 new highs to only 13 new lows.
Today was another day of a low volume rally that saw the indexes barely move higher but once again shake off early weakness to do so. This is not a great trend we have developing, since the follow-through day on March 21st. Since that follow through day the market was been higher in seven sessions. All seven sessions have failed to have volume over the 50 day volume average and only two of the up sessions have come with volume heavier than the day before. This is a low volume rally that will not last much longer unless we get some clear accumulation days in here by big institutional traders. Until we have volume come in over the 50 day volume average on the upside, we are open to a severe sell-off still. Bottom line is that I would not take much away from this week’s holiday shortened trading.
For the week it was very positive with all indexes closing higher. The Nasdaq led the way with a 2.1% gain, the NYSE followed with a 1.8% gain, the DJIA was right behind with a 1.7% gain, the SP 500 rose 1.6%, and the SP 600 gained 1.5%. I could go into more detail about this weeks action but it would be silly to do so. All you need to know is that it was a holiday short week. The bulls almost always have control of these weeks. This week was no exception.
There is no doubt that we are still in rally mode but everything in my gut tells me we are not going far from here. Now I will change my stance in seconds, if I start to see CANSLIM stocks with consistent great EPS and sales growth breakout from fresh bases and the markets start moving higher on HUGE volume. However, all I keep seeing is the old leaders breakout from choppy bases, defensive and utility issues climbing, and little small sub-$10 momo stocks moving. This does not make a safe big bull market. If we start seeing some more buying here on a lot of volume I will be much happier. However, unless we see it soon, we are increasing our chances of failure each day that passes that volume on the up days remain under the 50 day volume average.
Can we make money here? Of course! If you are a subscriber at least on the silver level you can see for yourself that almost EVERYTHING that I have touched since the February 27th sell-off is either higher or has not violated a complete cut loss area. However, there is nothing over $10 breaking out from bases seven weeks long that have perfect accumulation/distribution and max green BOP. In March 2003, October 2004, and November 2005 there were plenty of beautiful charts. Even after the move in August 2006 there were a few SWEET gems. However, since March 21st there has been very few. The stocks that do have perfect charts are just not CANSLIM quality. If this market takes a turn for the worse, these stocks will not fall 8%–they will fall 20% or more before violating a key cut loss level. So I can not recommend them for newbies.
Give me a sell-off of 20% or more and a VIX near 20-30 and the next follow-through we get you will see the power of this strategy. Right now, very few people are making a killing. Remember back in March 2003 when the VIX was at 33? I had many stocks make 300-500% gains. So what can we compare it to now. How about KNOL. KNOL is up 301% for me since I purchased it. If the VIX was three times higher than now and around 36, KNOL would be up 900%. So basically you can take a look at my returns below this commentary and then double or triple them and then you will see the potential gains in a “REAL” bull market. Not a low volume snooze-fest higher.
Speaking of the VIX: The VIX fell 10.2% this week. LOL. With the VIX that low, you can forget about many MFW or TRCR type of stocks showing up. Normally I can find 10-20 MFW and TRCR type of stocks. Not in this market. However, the drop in VIX puts complacency in the market and that is bearish for stock prices. Another bearish item is the put/call ratio. That ratio after falling below .7 yesterday is still low at .74. Also, early on in the realmoney.com polls, bulls are beating bears 60% to 19%. The crowd appears to bullish again….for now. And we all know how quick this can change. More choppiness? Probably.
So remember, until we get more quality CANSLIM type stocks, keep your buys small in this speculative crap that is getting action. Also if you are brand new and are still inexperienced (you know who you are) and you buy a stock and it goes against you the next day, think about selling 25% to 33%. Also in these speculative stocks, don’t be afraid to take some gains at 25% or so. These things like to reverse in the kind of market environment we are in so you need to stay on your toes. Breakouts should work right away! Especially in rough markets. If they don’t move up right away, newbies, think of selling some down.
Before I move on to wishing everyone a Happy Easter, I want to talk about the March employment numbers. Expectations for 135,000 was well taken care of when headlines produced a gain of 180,000. Along with that nice gain, the previous two months employment figures were revised up. But more amazing, despite this “horrible-evil-economy-that-GWB-has-created,” unemployment came in at five-year lows at 4.4%, beating expectations of a tick up to 4.6% from 4.5% . That is simply incredible. This also comes with average hourly earnings rising .3%. That is a 4% gain year-over-year. Even though the economy is showing signs of slowing, these numbers show just how great this economy still is despite the slowdown.
Wall-street took the news quite well with the SP futures rising 5.75 and the NQ futures rising 10.75. Stocks were closed today, obviously, but futures still traded for a little while.
Earnings season officially starts next week when AA reports on Tuesday. Analyst are expecting gains of 3.7% in YOY earnings this quarter. That is down from 8.7% estimates, earlier this year (not a good sign). Don’t you find that a bit scary how far they have come down?? Also, the expected 3.7% YOY gain will be the first gain in 14 quarters of non-double digit growth. As earnings go, so goes the market. Historically you can watch the trend of the GDP growth and earnings growth of an economy and see that they are the best predictor of what direction the stock market will take. GDP and earnings lead the market.
With that I wish everyone a Happy Easter and Passover. Enjoy the time with loved ones. Aloha and I will see you in the chat room.
Market Commentary At Big Wave Trading Bronze Level One.
Top Holdings Up This Week - Signal Date
KNOL 301% - 1/12/06
AKAM 220% - 9/30/05
TRCR 188% - 1/12
TTEC 172% - 8/25
JSDA 139% - 12/20
TNH 132% - 10/26
OMTR 125% - 9/15
CCOI 107% - 9/27
MEH 105% - 8/30
HRZ 104% - 9/27
CLRT 98% - 11/30
PRGX 97% - 1/12
AOI 94% - 11/19
EVEP 93% - 11/16
MFW 91% - 1/29
BONT 87% - 10/3
NEXC 81% - 10/25
CPA 79% - 9/15
CHINA 78% - 8/16
IMKTA 74% - 8/28
SLP 73% - 2/5
BAM 73% - 11/17/05
DA 67% - 1/25/06
MOS 65% - 10/12
EPHC 64% - 12/20
ULTR 64% - 10/27
HURN 63% - 9/13
IIVI 63% - 8/30
PERY 61% - 10/4
ANO 58% - 2/14
CXW 58% - 5/19
XIDE 56% - 1/29
KHDH 55% - 5/30
APLX 53% - 9/28
BMTI 52% - 10/25
IMMU 52% - 12/19
ONT 52% - 12/21
BMA 52% - 10/24
DECK 51% - 9/13
OEH 48% - 11/20
VDSI 48% - 1/4
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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