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 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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