Even though I am vacation, if I did not have work to do on this site, I can literally scan my charts and place all my orders within an hour and a half. So remember, even though I am on vacation, I am ON TOP OF THIS MARKET. This market right now should NOT be bought until AFTER we get a follow through day after an attempt at a bottom. Seriously, with the put/call ratio so high for so long, it is possible that there is too much fear in this market and that the lows have been set. However, we very well could be topping, because that is what it looks like out there in the Financial stocks and the general market. However, with the NYSE short interest and put/call so high, it just seems hard to think we could really breakaway and crash from here. So one thing I doubt is going to happen will be a black Monday.
However, I would not buy ANY market EVER that looked the way it does right now. This next week will be the key. Further selling and we definitely have some problems. If we bounce, there is not much to do other than wait for the proper breakouts from top stocks. If we do not see this happen, then we will have probably topped and I will begin my raids on the short side. As for right now, the crack in the market is too new and the bearishness according to the actual money is too extreme. So, keep that cash heavy, get off margin, sell ALL your laggards, do not buy new longs unless the chart is perfect (NAK is not what I would call a perfect chart), and if you do decide to short, please keep it small.
You definitely should be doing what I am doing, which is raising cash. I took a big hit last week. But let's say I didn't cut my laggards and did not keep my new buys small, THEN what could have happened. A 68% YTD gain falling to 54% could have been as bad as 40% had I not sold what is and did not work. The market may not always be easy, but when those bright perfect moments come, we will be there to take advantage. Unlike, all the dip buyers that tried to buy this market last week. BIG MISTAKE.
I am off to San Antonio for the next three days and will have very limited connection time. Make sure to check the forums as everything will be updated there. ALOHA FROM TEXAS!!!
Saturday, July 28, 2007
Saturday, July 21, 2007
Nasty Selloff Hits Stocks Thanks To Misses By GOOG And CAT; Overall, There Is Not That Much Damage
Some big misses by two heavyweights weighed heavily on the indexes as the stock market suffered its second distribution day in as many days. GOOG and CAT were both nailed with 8% losses before the opening bell, after both issued poor earnings that missed estimates. However, as the day wore on neither of these issues saw much more selling and both found solid support at their 50 day moving averages, giving some comfort to the bulls. But, for the day, the damage was done.
The DJIA fell 1.1%, the SP 500, Nassy, and NYSE fell 1.2%, and the SP 600 led the way down with a 1.7% loss. The great news was that leading stocks, in the form of the IBD 100 only lost 1.3%, outperforming the SP 600. However, the losses were a bit worse during the day, so the fact that the indexes closed off the lows is a slight positive. Combine that with Wednesday’s action where the Nassy actually closed higher than the open and you can see we have two distro days that aren’t very powerful.
The higher volume in the market combined with breadth 3-to-1 negative on the NYSE, 11-to-4 negative on the Nassy, and 27-to-3 negative on the DJIA gave the impression that things were really bad out there. However, despite there being 326 new lows there were also 216 new highs which shows that there were some decent pockets of strength out there. If today was really as bad as the indexes looked, trust me, there would have been a lot less new highs. So that gives some indication that the selling was not that bad.
And to go along with the data, two things occurred that really stick out after Friday’s losses. The put/call ratio jumped and closed over 1 at 1.02. That high reading shows that as stocks fell, traders decided to buy puts betting that prices are going to continue to go lower. That in of itself is not that impressive. But when you combine that the options crowd is bearish with the fact that the NYSE short interest ratio is at ANOTHER all-time high you have some real interesting developments. The NYSE short interest ratio is now at 8.25% which is an all-time high!!! That means 8% of trading on the NYSE is done in shorts. This DESPITE THE MARKET BEING ONLY 1% TO 2% BELOW ALL-TIME AND SIX-AND-A-HALF YEAR HIGHS.
When you take all of this combined with some leading stocks like AAPL and ISRG still making new highs and it becomes clear that Friday produced some panic. Markets do NOT top with panic. They top with euphoria. Even though BIDU and GOOG dropped and some are calling for a top via those two stocks, you have to remember that BIDU is still in a solid uptrend and GOOG had a very bullish intraday reversal off its 50 dma. So you are really grabbing at straws if you are calling a top here. Unless you only look at bank stocks and GOOG, there is no way you can agree with that argument.
The rest of the market seems OK. I had only a handful of complete sells and almost all of those were in very poor issues. The partial sales I had were made based on pure discipline. But when looking at their weekly and long term daily charts it is obvious there is nothing wrong with these stocks. Hell, look at one of the best sectors out there Transport-Shipping. ESEA, TBSI, DRYS, and DSX show NO signs of topping and all are still on fire and look ready for plenty of gains. Then you have the clear leader during this current bull market: Chemicals. CF, TRA, TNH, and the other stocks in this sector show no signs of topping. Until you see those two sectors top, along with stocks like MA RIMM AAPL FWLT CME ICE and CROX, you can be sure the market top is not here. You will need to see ALL of these leaders suffer some major distribution and fail there rallies before we can even THINK of a top forming.
For the week, it seems obvious that it was not that bad, with the Nassy losing only .7% and the DJIA losing only .4%. But the SP 500 lost 1.2%, the NYSE lost 1.4%, and the SP 600 lost 1.6%. However, none of these losses were severe considering the run that they have been on this year. It was a wild week with a good Tuesday, bad Wednesday (but great close), great Thursday, and a terrible Friday. But that is what makes this market fun.
The one topic dejour this week was subprime loans. And if you don’t think it is going to get worse, I would love to bring your attention to the bank stocks. If you are an experienced chartist and you know what stocks look like when they top after multi-year runs then you are certainly taking notice at the banks. SINCE ALL OF THEM HAVE THE EXACT SAME CHART!! They are topping. Rather it is MER, C, BAC, USB, JPM, UBS, BBT, GS, LEG, LEH, BSC, WB, or SBNY it doesn’t matter. These stocks are rolling over on MASSIVE distribution that has been playing itself out ALL YEAR LONG. That is why you see ALL of those big tall red bars where volume is during 2007 in ALL of these stocks. That is why ALL of them are rolling over. Unless these stocks get a HUGE bid right here, these charts are setup for some shorts to make a lot of money. These daily or weekly charts going back to late 2002 is just what ALL classic tops look like. This is some massive distribution in the whole sector.
The best thing about this that confirms my charts is that earnings that are being reported are great. Last quarters and the few banks that have released this quarter are releasing some great fantastic learning earnings. However, as all of us experienced investors know, the fundamentals ALWAYS!!! look the best at the top. The current charts are telling us that the subprime and housing market is about ready to start to show up in the books of the financials. What even makes this better is that all of you who read me and do not subscribe to me can watch me RIGHT NOW either help you not lose money or make you money by shorting the financials.
While this is happening, all of your brilliant MBA analyst and big money traders like Joe Capone and Scott Rothbort are telling you that they are bargains on this selloff and that you must buy. Until the “smart” fundamentalist and analyst start issuing sells in this sector, you can guarantee these stock aren’t going to stop falling. When they start issuing sells, that is when you should cover. These dummies just don’t get it and they never will. Yet, you will probably give them your money since they sound oh so smart and have one of those fancy degrees on their walls. These “higher educated” fundamental morons are going to lose their clients some money on the short term. While this “dumb surfer” either helps mine make money or not lose money. If you are long ANY stock in the bank sector and it is below the 50 and 200 day moving average, get the hell out!!!! While you are losing money, you are missing out on stocks like PRGX which make 7% gains on days where the market is down 1.5%. Which stocks are you in? If you are a subscriber to my service I know which stocks you are in.
Back to the market: Despite the ugliness in the financials, I have to say that my leading stocks continue to look great. Even though the DJIA did the 14k breakout and trap (which I eluded that it was going to do that last week) it still remains a strong market in an uptrend with all indexes still above their 50 day moving averages. Earnings season is always a rough one and many stocks are either punished HARD or rewarded handsomely. But with the trend still up, even bad earnings can turn into good so it is not smart to panic if your stock sells off a little after a miss. However, if the indexes cut their 50 day moving averages, leading stock falter, all your new buys start sucking up the joint, and good earnings are treated like bad earnings, then you will have a reason to get defensive.
The possibility out there is for anything right now as it always is in earnings season. This upcoming week we have AXP KLAC MRK X MMM NFLX T DD PEP AMZN GLW and XOM set to report. As it is now we have a lot more disappointments than we are used to seeing but like I have said now 100 times, unless we start to actually selloff and fail rally attempts there is no reason to worry about anything.
Two more points I want to hit before I am finished: The amount of new lows that kept expanding while stock prices kept hitting new highs did hint that Friday was coming. On Wednesday we had a TON of new lows which clearly showed that their was weakness in the market building up to the losses on Friday. So, honestly, this selling should have caught NO ONE off guard. Especially my subscribers. And the last thing is BX. How about that scam stock. What is it now? Down 30%. Can anyone say Refco. This is why you must ALWAYS wait for a stock to trade long enough to create a base. Buying stocks before a proper breakout put you into things like Refco, BX, and IBKR. I use IBKR as my broker. I LOVE THEIR SOFTWARE!!!!! Did you see me buy the stock because of that? Did I buy it because my emotions told me to since I love the company so much? No. Do you know why? Because I am a professional.
If you buy ANY stock for ANY other reason than due to historical analysis and fundamental and technical actions, you are nothing but a gambler. And my suggestion to you is to get your act together or go find a new hobby. People like me are going to take ALL of your money. Why gamble when their is one book out there that can teach you how to fish for yourself? How To Make Money In Stocks by William J ONeil. I know one thing, I sure would not want to feel like the loser down the street that can only invest off of tips. How powerless are you when you make investment decisions off of tips? I know one thing: I LOVE BEING IN COMPLETE CONTROL. And the first step in becoming completely in control is admitting you control nothing. Especially the market. The stock market does not care about YOU or your opinions. Which is, sadly, about all I hear out there in the free chat rooms and on this island.
Aloha and I will see you in the chat room.
PS: This is the last weekend post for the free blog for two weeks. I will be on vacation. For paid subscribers you will still see plenty of me, don’t worry.
top current holdings up this week - purchase date
TRCR 536% - 1/12
MA 241% - 8/2
OMTR 192% - 9/15
IHS 155% - 12/21/05
CKSW 148% - 10/11
ULTR 147% - 10/27
KHD 140% - 5/30/06
DECK 124% - 9/13
PRGX 123% - 1/12
TTEC 120% - 8/25
HRZ 117% - 9/27
CNH 114% - 11/2
EVEP 114% - 11/16
CPA 105% - 9/15
FTEK 99% - 10/6
HURN 99% - 9/13
VDSI 98% - 1/14
IGLD 93% - 10/26
VSR 87% - 6/15
CXW 86% - 5/19/06
NAVI 79% - 12/18
APLX 77% - 9/28
INNO 74% - 6/4
HURC 73% - 12/18
FSLR 72% - 5/22
TESO 70% - 2/16
LFL 66% - 12/13
AFSI 65% - 4/12
TASR 64% - 6/6
CRNT 63% - 5/21
SNDA 55% - 12/26
NTLS 55% - 1/30
IMA 55% - 8/2
XRA 50% - 5/24
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
The DJIA fell 1.1%, the SP 500, Nassy, and NYSE fell 1.2%, and the SP 600 led the way down with a 1.7% loss. The great news was that leading stocks, in the form of the IBD 100 only lost 1.3%, outperforming the SP 600. However, the losses were a bit worse during the day, so the fact that the indexes closed off the lows is a slight positive. Combine that with Wednesday’s action where the Nassy actually closed higher than the open and you can see we have two distro days that aren’t very powerful.
The higher volume in the market combined with breadth 3-to-1 negative on the NYSE, 11-to-4 negative on the Nassy, and 27-to-3 negative on the DJIA gave the impression that things were really bad out there. However, despite there being 326 new lows there were also 216 new highs which shows that there were some decent pockets of strength out there. If today was really as bad as the indexes looked, trust me, there would have been a lot less new highs. So that gives some indication that the selling was not that bad.
And to go along with the data, two things occurred that really stick out after Friday’s losses. The put/call ratio jumped and closed over 1 at 1.02. That high reading shows that as stocks fell, traders decided to buy puts betting that prices are going to continue to go lower. That in of itself is not that impressive. But when you combine that the options crowd is bearish with the fact that the NYSE short interest ratio is at ANOTHER all-time high you have some real interesting developments. The NYSE short interest ratio is now at 8.25% which is an all-time high!!! That means 8% of trading on the NYSE is done in shorts. This DESPITE THE MARKET BEING ONLY 1% TO 2% BELOW ALL-TIME AND SIX-AND-A-HALF YEAR HIGHS.
When you take all of this combined with some leading stocks like AAPL and ISRG still making new highs and it becomes clear that Friday produced some panic. Markets do NOT top with panic. They top with euphoria. Even though BIDU and GOOG dropped and some are calling for a top via those two stocks, you have to remember that BIDU is still in a solid uptrend and GOOG had a very bullish intraday reversal off its 50 dma. So you are really grabbing at straws if you are calling a top here. Unless you only look at bank stocks and GOOG, there is no way you can agree with that argument.
The rest of the market seems OK. I had only a handful of complete sells and almost all of those were in very poor issues. The partial sales I had were made based on pure discipline. But when looking at their weekly and long term daily charts it is obvious there is nothing wrong with these stocks. Hell, look at one of the best sectors out there Transport-Shipping. ESEA, TBSI, DRYS, and DSX show NO signs of topping and all are still on fire and look ready for plenty of gains. Then you have the clear leader during this current bull market: Chemicals. CF, TRA, TNH, and the other stocks in this sector show no signs of topping. Until you see those two sectors top, along with stocks like MA RIMM AAPL FWLT CME ICE and CROX, you can be sure the market top is not here. You will need to see ALL of these leaders suffer some major distribution and fail there rallies before we can even THINK of a top forming.
For the week, it seems obvious that it was not that bad, with the Nassy losing only .7% and the DJIA losing only .4%. But the SP 500 lost 1.2%, the NYSE lost 1.4%, and the SP 600 lost 1.6%. However, none of these losses were severe considering the run that they have been on this year. It was a wild week with a good Tuesday, bad Wednesday (but great close), great Thursday, and a terrible Friday. But that is what makes this market fun.
The one topic dejour this week was subprime loans. And if you don’t think it is going to get worse, I would love to bring your attention to the bank stocks. If you are an experienced chartist and you know what stocks look like when they top after multi-year runs then you are certainly taking notice at the banks. SINCE ALL OF THEM HAVE THE EXACT SAME CHART!! They are topping. Rather it is MER, C, BAC, USB, JPM, UBS, BBT, GS, LEG, LEH, BSC, WB, or SBNY it doesn’t matter. These stocks are rolling over on MASSIVE distribution that has been playing itself out ALL YEAR LONG. That is why you see ALL of those big tall red bars where volume is during 2007 in ALL of these stocks. That is why ALL of them are rolling over. Unless these stocks get a HUGE bid right here, these charts are setup for some shorts to make a lot of money. These daily or weekly charts going back to late 2002 is just what ALL classic tops look like. This is some massive distribution in the whole sector.
The best thing about this that confirms my charts is that earnings that are being reported are great. Last quarters and the few banks that have released this quarter are releasing some great fantastic learning earnings. However, as all of us experienced investors know, the fundamentals ALWAYS!!! look the best at the top. The current charts are telling us that the subprime and housing market is about ready to start to show up in the books of the financials. What even makes this better is that all of you who read me and do not subscribe to me can watch me RIGHT NOW either help you not lose money or make you money by shorting the financials.
While this is happening, all of your brilliant MBA analyst and big money traders like Joe Capone and Scott Rothbort are telling you that they are bargains on this selloff and that you must buy. Until the “smart” fundamentalist and analyst start issuing sells in this sector, you can guarantee these stock aren’t going to stop falling. When they start issuing sells, that is when you should cover. These dummies just don’t get it and they never will. Yet, you will probably give them your money since they sound oh so smart and have one of those fancy degrees on their walls. These “higher educated” fundamental morons are going to lose their clients some money on the short term. While this “dumb surfer” either helps mine make money or not lose money. If you are long ANY stock in the bank sector and it is below the 50 and 200 day moving average, get the hell out!!!! While you are losing money, you are missing out on stocks like PRGX which make 7% gains on days where the market is down 1.5%. Which stocks are you in? If you are a subscriber to my service I know which stocks you are in.
Back to the market: Despite the ugliness in the financials, I have to say that my leading stocks continue to look great. Even though the DJIA did the 14k breakout and trap (which I eluded that it was going to do that last week) it still remains a strong market in an uptrend with all indexes still above their 50 day moving averages. Earnings season is always a rough one and many stocks are either punished HARD or rewarded handsomely. But with the trend still up, even bad earnings can turn into good so it is not smart to panic if your stock sells off a little after a miss. However, if the indexes cut their 50 day moving averages, leading stock falter, all your new buys start sucking up the joint, and good earnings are treated like bad earnings, then you will have a reason to get defensive.
The possibility out there is for anything right now as it always is in earnings season. This upcoming week we have AXP KLAC MRK X MMM NFLX T DD PEP AMZN GLW and XOM set to report. As it is now we have a lot more disappointments than we are used to seeing but like I have said now 100 times, unless we start to actually selloff and fail rally attempts there is no reason to worry about anything.
Two more points I want to hit before I am finished: The amount of new lows that kept expanding while stock prices kept hitting new highs did hint that Friday was coming. On Wednesday we had a TON of new lows which clearly showed that their was weakness in the market building up to the losses on Friday. So, honestly, this selling should have caught NO ONE off guard. Especially my subscribers. And the last thing is BX. How about that scam stock. What is it now? Down 30%. Can anyone say Refco. This is why you must ALWAYS wait for a stock to trade long enough to create a base. Buying stocks before a proper breakout put you into things like Refco, BX, and IBKR. I use IBKR as my broker. I LOVE THEIR SOFTWARE!!!!! Did you see me buy the stock because of that? Did I buy it because my emotions told me to since I love the company so much? No. Do you know why? Because I am a professional.
If you buy ANY stock for ANY other reason than due to historical analysis and fundamental and technical actions, you are nothing but a gambler. And my suggestion to you is to get your act together or go find a new hobby. People like me are going to take ALL of your money. Why gamble when their is one book out there that can teach you how to fish for yourself? How To Make Money In Stocks by William J ONeil. I know one thing, I sure would not want to feel like the loser down the street that can only invest off of tips. How powerless are you when you make investment decisions off of tips? I know one thing: I LOVE BEING IN COMPLETE CONTROL. And the first step in becoming completely in control is admitting you control nothing. Especially the market. The stock market does not care about YOU or your opinions. Which is, sadly, about all I hear out there in the free chat rooms and on this island.
Aloha and I will see you in the chat room.
PS: This is the last weekend post for the free blog for two weeks. I will be on vacation. For paid subscribers you will still see plenty of me, don’t worry.
top current holdings up this week - purchase date
TRCR 536% - 1/12
MA 241% - 8/2
OMTR 192% - 9/15
IHS 155% - 12/21/05
CKSW 148% - 10/11
ULTR 147% - 10/27
KHD 140% - 5/30/06
DECK 124% - 9/13
PRGX 123% - 1/12
TTEC 120% - 8/25
HRZ 117% - 9/27
CNH 114% - 11/2
EVEP 114% - 11/16
CPA 105% - 9/15
FTEK 99% - 10/6
HURN 99% - 9/13
VDSI 98% - 1/14
IGLD 93% - 10/26
VSR 87% - 6/15
CXW 86% - 5/19/06
NAVI 79% - 12/18
APLX 77% - 9/28
INNO 74% - 6/4
HURC 73% - 12/18
FSLR 72% - 5/22
TESO 70% - 2/16
LFL 66% - 12/13
AFSI 65% - 4/12
TASR 64% - 6/6
CRNT 63% - 5/21
SNDA 55% - 12/26
NTLS 55% - 1/30
IMA 55% - 8/2
XRA 50% - 5/24
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
Friday, July 13, 2007
Leading Stocks Help Take Indexes To All-Time And Six Year Highs; The Bears Who Continue To Fight This Trend Get What They Deserve
For the second week in a row, stocks put in one impressive week of gains, with today’s gains coming in some small part to the University of Michigan consumer confidence index coming in at 92.4 above estimates of 86. However, that simply was not the reason for today’s gains, as another round after afternoon short squeezing hit the indexes sending them near the highs of the session with the Nasdaq closing just short of its HOD. The gains also came in the face of oil rising $1.43 to $73.93.
At the close, the DJIA, SP 500, and SP 600 all hit new all-time highs rallying .3% and the NYSE and Nasdaq gained .2%. The NYSE hit another all-time high and the Nasdaq hit a new 6 1/2 year high. The best part about today’s gains, of course, comes in the fact that leading stocks led the way, once again. The IBD 100 gained .7%, doing much better than the broad market.
Volume was lower today, compared to yesterday’s volume. But considering that we produced some really big gains (biggest on the DJIA since 2003) and were right before the weekend, today’s action has to be considered very bullish and constructive. We could have sold off on lower volume or even higher volume.
There were some weak points with the internals. Despite the gain in the Nasdaq, decliners beat advancers by a 7-to-6 ratio and advancers barely beat decliners on the NYSE. There were also 150 new 52-week lows, despite the markets hitting new highs. But with 683 new 52-week highs, it is not anything to worry about.
For the week, it really doesn’t get much better than what we saw. The DJIA led the way with a 2.2% gain, the Nasdaq followed with a 1.5% gain, and the NYSE and SP 500 gained 1.4%. The best new, obviously, was that leading stocks, once again, beat the broad market for the week. The IBD 100 produced a 2.5% gain, after last weeks 5.2% gain. The best news, however, comes from my own personal IB portfolio. After having a poor weak last week, I managed to return a 10.3% gain for the week. This is what happens when you are in the right stocks. The outperformance has been there every week, except for one, since the March lows. This is what proper disciplined growth momentum investing is all about. There is no doubt, this is a great short-squeezing July, full of breakout in many leading stocks.
I remember, last year, constantly referring to our market as having a potential to repeat a 1995 scenario. Not long after, I heard Kudlow and IBD also bring this up. Now recently Cramer has brought it up, refreshing my memory on that scenario. The only thing that is different is that rates are not being cut yet. If the market keeps rallying and inflation does come into a more moderate pricing zone that would be great. However, no matter what happens, it looks like the 1995 scenario has and is playing itself out. This continues to be the most amazing market that gets absolutely no credit on major media outlets. And if Cramer and history is right and this is a replay of 1995 we have a lot more room to run, especially with tech just now joining the party.
This, however, creates the perfect wall of worry that the stock market needs to climb higher. If you think there is not any fear out there and that everybody is just giddy and happy with this market, let me remind you that the put/call ratio spiked to .99 on Tuesday after the market “swooned,” according to the media. The fear and blatant top calling is, ONCE AGAIN, something you do NOT see at market tops. EVERYBODY and I mean EVERYBODY is in love with the market and everybody will be talking about these good times.
Now, if you are a subscriber to my gold service, I know it seemed like Christmas this week as a LOT of gains were made in many favorite stocks. We did have one suck it up (MTOX) but one out of every other one is not that bad. However, I am not losing my mind over the gains and understand that this is what is supposed to happen in bull markets. It is when my neighbors start celebrating their gains that I will get nervous.
As of right now, to go along with the put/call still being at .76, the NYSE short-interest ratio is still near all-time highs at 7.52. LOL, this is not the number you will see at a market top. The other thing with this bearishness and start of parabolic runs in the charts is the fact that stocks are not doing crazy splits yet. Well, I take that back. I did see RIMM announce a 3-for-1. PEOPLE THAT IS A WARNING. PARABOLIC RUNS AND EXCESSIVE STOCK SPLITS ALWAYS LEAD TO A TOP. So keep your eyes out, even though I don’t expect one for months and months. It pays to be prudent.
And when we do top I have my list of stocks to short: GOOG, AAPL, RIMM, AMZN, ICE, BIDU, FWLT, FSLR, TNH, MA, and CME. I’ll give them to you for free, knowing that most of traders will NOT be able to short these at the right moment and history shows that most will be squeezed out of their shorts many times before the real fall comes. And by that time traders are so dejected that they miss the right moment. I won’t. :)
To prove my point that most will not be able to short the market when they are supposed to, I am finding out many traders are not very good at going long stocks either. In the free chat rooms I monitor I see a lot of traders selling prematurely all the time. Many have bought stocks to sell them on the smallest uptick and now want back in. By watching this action, I can understand why more gains at this juncture will not need a lot of volume. This retail crowd buying on top of the shorts being forced to cover due to them not being able to take the squeeze anymore ensures we will keep going higher. Even thought the crowd is bullish, yet betting bearishly, it doesn’t take much to take a market up with low supply and high demand.
If you did not notice this week, GE, COP, JNJ, HD, SHLD, and AMGN all announced stock buyback. FOLKS! These are no small-fries. These are real big giant companies. This along with all the M&A’s and leaders going into exponential to parabolic moves is the reason why you have to be long here. ABN is selling its LaSalle bank to BAC, ENR is buying PYX, and RTP outbid AA for AL with a $38 billion bid, and you want to be short stocks and long puts? Yeah right! Not me! You want to be short stocks only in a bear market and this is not a bear market. This market is not yet ready to top.
The reasons I see for a top are weak. They involve us being overbought and it involves the high bullishness in the surveys. The overbought can be attributed to the McClellan, 10-DMA of Adv/Dec line, and Arms index. The McClellan is moving overbought but it is nowhere near the 80s at only 68.6. The 10-dma index is overbought but nowhere near extreme levels, and the Arms index is overbought ALL THE TIME. It is almost useless. As for the surveys: the realmoney.com poll shows 69% bulls, 11% bears, and 20% netural. The Investors Intelligence is at 69.5% bulls and 21.8% bears. The AAII is at 44% bulls and 30% bears. However, relying on these for tops is useless. It is better using the UBS euphoria index and that is NOWHERE near euphoric levels seen in 2000.
Also, with the Gold, Steel, Metal, Mining, and all the old leaders moving along with the SOX index and all the technology stocks moving up the IBD 197 industry list it is very hard for me to be worried about a top. Look at AA. It is moving like a tech stock. That is a bull market if I have ever seen a bull market. Seeing the SOX and electronic stocks help leading the market to new highs is just a beautiful thing to see. Especially, when they are joined by so many other groups.
My suggestion is to continue to stay long and strong. Don’t go out trying to chase performance and do not chase stocks way beyond logical pivot points. If you are long, continue to enjoy the gains, but make sure you take some profits along the way when the stock’s price and/or volume acts odd. When the market tops and leading stocks are rolling over, trust me, I will let you know. You will see me selling off many of my top stocks and cutting my new buys short very quickly by them failing immediately. Also the amount of longs will dry up. As they are starting to do on my scans. Most stocks are well beyond proper buy points. Right now, it is all about holding the stocks you are long and riding the gains. Going long a lot of stock here is just a little too risky.
So let the overseas money with a strong Euro continue to find a safe home in the US equity market. As long as they are buying this market, you have to stay long.
Second quarter earnings really start rolling out this week. Expect a rise in volatility, as always happens during earnings season. Remember, going long a stock before earnings is a dangerous play. But selling a long ahead of earnings is an immature amateur play that only newbie emotional inexperienced traders do. Normally, if the stock is in an uptrend, the earnings don’t matter, as the stock will rise. Vise versa, in a bad market. VSCN is a perfect example. They miss, yet their stock rises. Such is a bull market. And that is what we are in.
Aloha and I will see you in the chat room!
Sidenote: Since May 2, 2003 the IBD 100 is up 216% compared to the SP 500’s 66% gain. The greatest traders are the greatest traders for a reason: history.
top holdings up this week - purchase date
TRCR 531% - 1/12
MA 240% - 8/2
OMTR 192% - 9/15
KHD 150% - 5/30/06
IHS 146% - 12/21/05
ULTR 141% - 10/27
TTEC 129% - 8/25
CPA 128% - 9/15
DECK 117% - 9/13
IGLD 103% - 10/26
CNH 103% - 11/2
CKSW 103% - 10/11
HURN 96% - 9/13
APLX 95% - 9/28
EVEP 94% - 11/16
AFSI 89% - 4/12
CXW 89% - 5/19/06
VDSI 85% - 1/14
CTCH 83% - 1/24
INNO 83% - 6/4
FSLR 76% - 5/23
HURC 71% - 12/18
LFL 66% - 12/13
ATX 65% - 12/12
VSR 63% - 6/15
CRNT 62% - 5/21
TESO 60% - 2/16
NAVI 58% - 12/18
IMA 57% - 8/2
SNDA 55% - 12/26
SMTX 55% - 6/15
NTLS 55% - 1/30
TASR 54% - 6/6
ICOC 52% - 5/18
IMMR 50% - 6/21
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
At the close, the DJIA, SP 500, and SP 600 all hit new all-time highs rallying .3% and the NYSE and Nasdaq gained .2%. The NYSE hit another all-time high and the Nasdaq hit a new 6 1/2 year high. The best part about today’s gains, of course, comes in the fact that leading stocks led the way, once again. The IBD 100 gained .7%, doing much better than the broad market.
Volume was lower today, compared to yesterday’s volume. But considering that we produced some really big gains (biggest on the DJIA since 2003) and were right before the weekend, today’s action has to be considered very bullish and constructive. We could have sold off on lower volume or even higher volume.
There were some weak points with the internals. Despite the gain in the Nasdaq, decliners beat advancers by a 7-to-6 ratio and advancers barely beat decliners on the NYSE. There were also 150 new 52-week lows, despite the markets hitting new highs. But with 683 new 52-week highs, it is not anything to worry about.
For the week, it really doesn’t get much better than what we saw. The DJIA led the way with a 2.2% gain, the Nasdaq followed with a 1.5% gain, and the NYSE and SP 500 gained 1.4%. The best new, obviously, was that leading stocks, once again, beat the broad market for the week. The IBD 100 produced a 2.5% gain, after last weeks 5.2% gain. The best news, however, comes from my own personal IB portfolio. After having a poor weak last week, I managed to return a 10.3% gain for the week. This is what happens when you are in the right stocks. The outperformance has been there every week, except for one, since the March lows. This is what proper disciplined growth momentum investing is all about. There is no doubt, this is a great short-squeezing July, full of breakout in many leading stocks.
I remember, last year, constantly referring to our market as having a potential to repeat a 1995 scenario. Not long after, I heard Kudlow and IBD also bring this up. Now recently Cramer has brought it up, refreshing my memory on that scenario. The only thing that is different is that rates are not being cut yet. If the market keeps rallying and inflation does come into a more moderate pricing zone that would be great. However, no matter what happens, it looks like the 1995 scenario has and is playing itself out. This continues to be the most amazing market that gets absolutely no credit on major media outlets. And if Cramer and history is right and this is a replay of 1995 we have a lot more room to run, especially with tech just now joining the party.
This, however, creates the perfect wall of worry that the stock market needs to climb higher. If you think there is not any fear out there and that everybody is just giddy and happy with this market, let me remind you that the put/call ratio spiked to .99 on Tuesday after the market “swooned,” according to the media. The fear and blatant top calling is, ONCE AGAIN, something you do NOT see at market tops. EVERYBODY and I mean EVERYBODY is in love with the market and everybody will be talking about these good times.
Now, if you are a subscriber to my gold service, I know it seemed like Christmas this week as a LOT of gains were made in many favorite stocks. We did have one suck it up (MTOX) but one out of every other one is not that bad. However, I am not losing my mind over the gains and understand that this is what is supposed to happen in bull markets. It is when my neighbors start celebrating their gains that I will get nervous.
As of right now, to go along with the put/call still being at .76, the NYSE short-interest ratio is still near all-time highs at 7.52. LOL, this is not the number you will see at a market top. The other thing with this bearishness and start of parabolic runs in the charts is the fact that stocks are not doing crazy splits yet. Well, I take that back. I did see RIMM announce a 3-for-1. PEOPLE THAT IS A WARNING. PARABOLIC RUNS AND EXCESSIVE STOCK SPLITS ALWAYS LEAD TO A TOP. So keep your eyes out, even though I don’t expect one for months and months. It pays to be prudent.
And when we do top I have my list of stocks to short: GOOG, AAPL, RIMM, AMZN, ICE, BIDU, FWLT, FSLR, TNH, MA, and CME. I’ll give them to you for free, knowing that most of traders will NOT be able to short these at the right moment and history shows that most will be squeezed out of their shorts many times before the real fall comes. And by that time traders are so dejected that they miss the right moment. I won’t. :)
To prove my point that most will not be able to short the market when they are supposed to, I am finding out many traders are not very good at going long stocks either. In the free chat rooms I monitor I see a lot of traders selling prematurely all the time. Many have bought stocks to sell them on the smallest uptick and now want back in. By watching this action, I can understand why more gains at this juncture will not need a lot of volume. This retail crowd buying on top of the shorts being forced to cover due to them not being able to take the squeeze anymore ensures we will keep going higher. Even thought the crowd is bullish, yet betting bearishly, it doesn’t take much to take a market up with low supply and high demand.
If you did not notice this week, GE, COP, JNJ, HD, SHLD, and AMGN all announced stock buyback. FOLKS! These are no small-fries. These are real big giant companies. This along with all the M&A’s and leaders going into exponential to parabolic moves is the reason why you have to be long here. ABN is selling its LaSalle bank to BAC, ENR is buying PYX, and RTP outbid AA for AL with a $38 billion bid, and you want to be short stocks and long puts? Yeah right! Not me! You want to be short stocks only in a bear market and this is not a bear market. This market is not yet ready to top.
The reasons I see for a top are weak. They involve us being overbought and it involves the high bullishness in the surveys. The overbought can be attributed to the McClellan, 10-DMA of Adv/Dec line, and Arms index. The McClellan is moving overbought but it is nowhere near the 80s at only 68.6. The 10-dma index is overbought but nowhere near extreme levels, and the Arms index is overbought ALL THE TIME. It is almost useless. As for the surveys: the realmoney.com poll shows 69% bulls, 11% bears, and 20% netural. The Investors Intelligence is at 69.5% bulls and 21.8% bears. The AAII is at 44% bulls and 30% bears. However, relying on these for tops is useless. It is better using the UBS euphoria index and that is NOWHERE near euphoric levels seen in 2000.
Also, with the Gold, Steel, Metal, Mining, and all the old leaders moving along with the SOX index and all the technology stocks moving up the IBD 197 industry list it is very hard for me to be worried about a top. Look at AA. It is moving like a tech stock. That is a bull market if I have ever seen a bull market. Seeing the SOX and electronic stocks help leading the market to new highs is just a beautiful thing to see. Especially, when they are joined by so many other groups.
My suggestion is to continue to stay long and strong. Don’t go out trying to chase performance and do not chase stocks way beyond logical pivot points. If you are long, continue to enjoy the gains, but make sure you take some profits along the way when the stock’s price and/or volume acts odd. When the market tops and leading stocks are rolling over, trust me, I will let you know. You will see me selling off many of my top stocks and cutting my new buys short very quickly by them failing immediately. Also the amount of longs will dry up. As they are starting to do on my scans. Most stocks are well beyond proper buy points. Right now, it is all about holding the stocks you are long and riding the gains. Going long a lot of stock here is just a little too risky.
So let the overseas money with a strong Euro continue to find a safe home in the US equity market. As long as they are buying this market, you have to stay long.
Second quarter earnings really start rolling out this week. Expect a rise in volatility, as always happens during earnings season. Remember, going long a stock before earnings is a dangerous play. But selling a long ahead of earnings is an immature amateur play that only newbie emotional inexperienced traders do. Normally, if the stock is in an uptrend, the earnings don’t matter, as the stock will rise. Vise versa, in a bad market. VSCN is a perfect example. They miss, yet their stock rises. Such is a bull market. And that is what we are in.
Aloha and I will see you in the chat room!
Sidenote: Since May 2, 2003 the IBD 100 is up 216% compared to the SP 500’s 66% gain. The greatest traders are the greatest traders for a reason: history.
top holdings up this week - purchase date
TRCR 531% - 1/12
MA 240% - 8/2
OMTR 192% - 9/15
KHD 150% - 5/30/06
IHS 146% - 12/21/05
ULTR 141% - 10/27
TTEC 129% - 8/25
CPA 128% - 9/15
DECK 117% - 9/13
IGLD 103% - 10/26
CNH 103% - 11/2
CKSW 103% - 10/11
HURN 96% - 9/13
APLX 95% - 9/28
EVEP 94% - 11/16
AFSI 89% - 4/12
CXW 89% - 5/19/06
VDSI 85% - 1/14
CTCH 83% - 1/24
INNO 83% - 6/4
FSLR 76% - 5/23
HURC 71% - 12/18
LFL 66% - 12/13
ATX 65% - 12/12
VSR 63% - 6/15
CRNT 62% - 5/21
TESO 60% - 2/16
NAVI 58% - 12/18
IMA 57% - 8/2
SNDA 55% - 12/26
SMTX 55% - 6/15
NTLS 55% - 1/30
TASR 54% - 6/6
ICOC 52% - 5/18
IMMR 50% - 6/21
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
Saturday, July 07, 2007
Fourth Of July Holiday-Shortened Week Goes Out With A Bang; Shorts Continue To Feel The Squeezing Pain Of The Bulls
A positive employment report, positive revisions to past reports along with the unemployment rate holding steady at 4.5%, and acquisition news that EYE raised the offer from a previous company to buy BOL for $75 a share helped stock indexes rise steadily higher all day long in a nice stair step fashion. By the closing bell, all indexes ended in the green, with big-cap tech leading. All of this came despite another increase in oil to $72.81 a barrel-highest close since September. This market continues to move higher despite the highs in oil, confirming that this is the greatest market story never told. (this refers to the severely biased media that REFUSES to acknowledge how INCREDIBLE this rally from October 2002 is).
The NYSE led the way, closing at an all-time high, with a .5% gain and the Nasdaq and Nasdaq 100 gained .4%, hitting 6 1/2 year highs. The DJIA and SP 500 closed slightly higher with a .3% gain and the SP 600 gain was even smaller with a .1% gain. The great news, once again, was that leading stocks trumped the general market indexes, with a 1.2% gain. This is the picture perfect action that you want to see in a bull market. When leading stocks are leading the general indexes, there are much larger gains being made in top growth stocks than value stocks.
Volume was lower than the day before, as it appeared traders started the weekend and/or their vacations early. The lower volume does help alleviate fears that if volume on the downside shows up soon that it will not be that heavy. As it stands now, the NYSE has five distribution days (many weak distro days) and the Nasdaq only has one, signaling that the market is still very healthy up here hitting new highs despite the lower volume.
With the lower volume, however, we did get good breadth confirming the gains today. The other positive is that the breadth improved as the rally continued throughout the day. Advancers beat decliners by a 5-to-3 margin on the NYSE and by a 3-to-2 margin on the Nasdaq. New 52-week highs beat new 52-week lows by 527 to 83, clearly showing the strength of this market after four days of strong price action.
For the week, the Nasdaq led the way with a 2.4% gain, the NYSE followed with an impressive 2%, the SP 500 and SP 600 rallied 1.8%, and the DJIA gained a solid 1.5%. The clear obvious winner this week was the IBD 100 index and my account. The IBD 100 rallied 5.2% and my account rallied 7.3%. This week reversed my poor showing from last week and continued the trend of my account well outperforming the market for the past sixteen weeks (the length of this rally from the March lows).
It has been a powerful four days of low volume gains for the market but I would not be surprised if we get a pullback here as it seems we have worked off the oversold condition and turned some bears into bulls the past week. Some of the key numbers comes from the realmoney.com poll this weekend. It shows that those surveyed lean bullish with 70% expecting price gains for the upcoming week. There are only 13% registering as bears. This also comes with the McClellan and other overbought/oversold indicators get overbought after the past week of price gains. The VIX has also worked off its bullish higher volatility from late June, signaling that the easy money has been made.
However, despite this, the NYSE short interest ratio rose again to near all-time highs closing at 7.66 on Friday. That and the put/call ratio is still around the level it was at the beginning of the week with it closing at .76. This clearly states that despite what people say, traders did not make bullish bets and in fact continued to take the opposite side of the clear trend. The other slightly bullish sentiment news is that bullishness from the Investors Intelligence survey fell to 49.4%. But, bearishness fell also to very low levels of 18%.
The other sentiment index that I noticed giving a signal that the market might be tired here is the ISEE Options put/call index. This index hit 186% on Thursday which is a level where the market normally does not do very well in the short-term following this reading. Combine this with some of the events above, the fact that new buys are starting to get a little difficult to find in top stocks, and the new buys that do show up are in low-float small cap stocks with mixed/poor fundamentals and we just shouldn’t be surprised if we get a pullback. Now a severe pullback–that is something I just don’t see in the cards with this much negativity pouring out of our nightly news.
Another clear reason why I don’t see a top happening anytime soon is that leading stocks with top fundamentals are simply not topping. And history shows that the leaders top BEFORE the market tops. So as long as AAPL, RIMM, BIDU, GOOG, and Chemical stocks are making new highs and are not churning, putting in heavy volume selloffs, or cutting their 50 day moving averages, there is absolutely NO reason to even think of trying to call a top. Once you see these four horseman top and reverse and then can look at the major indexes and see a clear downtrend, on heavy distribution, with lower highs and closes below the 50 day moving average then, and only then, will I listen to the bears.
Until then, the bears are just filled with nothing but pure crap and lies. And their opinions are worth the equivalent of the returns you have received as a bear this year: NOTHING! Pure worthless opinions that do NOT agree with the facts on the ground. This is why trend followers will ALWAYS outperform the top and bottom callers. They will NEVER return what the greatest traders of all-time returned by simply following and listening to top stocks and the general direction of the market.
Now, like I have said before, and like I keep listing on my forums, there are a lot of charts starting parabolic runs. But that is just it: they are starting them or in the middle of them. Very few appear to be in the late stages of runs seen in other parabolic runs in stocks like ERS in 2006 and tech stocks in the 2000 market. Even RevShark sees this, confirming what I have been seeing for weeks and weeks now. Still, until they top, there is no reason to predict when the run will end.
There is even evidence, in the Semiconductor index, that many large big-cap tech stocks are ready to run there. Many are at new 52-week highs and a lot of the sub-components of the Semiconductor/Electronics group have made big moves in the IBD 197 industry group list. It is very good to see the Semi’s join the market as this appears to be very bullish and should help turn some of those bears into the bulls camp, since they always say that it isn’t a real bull market unless the Semi’s are moving. Maybe I am stuck in years gone by, with this statement, but I still have heard plenty of people tell me that this rally (FOR THE PAST FOUR YEARS MIND YOU) is not that great of a rally because Semi stocks never led. Uhm, who said they had to lead? It is much better just seeing stocks like INTC, NVEC, NVDA, ADM, etc. making solid consistent gains. And that is what they are doing. The whole sector looks great. Of course, the best looking one recently has been SMTX. Those who subscribe at the gold level are well familiar with that very very pretty chart.
With a lot of the bullish leanings you are reading in this weekends post, you must also realize that I am no idiot. I have been partial selling many stocks that are in climax/parabolic type runs. Many, not all, of the stocks you see listed below have recently had 10-25% sold via the basic trading necessity of locking in profits. Holding your whole load as the stock continues to race up the charts in an exponential matter is not smart as sudden reversals become more and more likely. Small and smart selling based on either new highs with low volume, new highs with little price change and huge volume, or major reversals where the stock is up a lot on the day but then reverses to close lower are clear places to selloff 10%-20% of your big winners. Locking in some gains and then holding on for a possible climax run is just what the smart traders of yesteryear did and the smart traders of today do. One thing we definitely don’t do (not saying I am great, btw. Trust me I am FAR from it) is call tops. And that is one thing you will not see me do as long as we are moving higher and hitting new all-time and six-and-a-half year highs.
We have earnings season officially kicking off on Monday, with AA releasing earnings after the close. During the week we have numbers from stocks like INFY, PBG, DNA, MAR, YUM, and CTAS, and to close the week off we have GE. After that the fireworks really get going when the earnings really start pounding the table. Isn’t it funny how fast this time of the year can sneak up on you? Besides that there are, like always, economic numbers to digest. But nothing this week should impact the market like earnings will.
Aloha and I will see you in the chat room where you can guarantee we are ALWAYS on the right side of the market.
top holdings up this week - purchase date
TRCR 463% - 1/12
MA 223% - 8/2
OMTR 185% - 9/15
IHS 146% - 12/21/05
CPA 133% - 9/15
KHD 130% - 5/30/06
TTEC 128% - 8/25
ULTR 125% - 10/27
DECK 120% - 9/13
CXW 96% - 5/19/06
HURN 95% - 9/13
CNH 94% - 11/2
CRY 90% - 1/10
VDSI 89% - 1/14
EVEP 89% - 11/16
ZNH 84% - 12/26
APLX 84% - 9/28
AFSI 83% - 4/12
CKSW 69% - 10/11
LFL 68% - 12/13
HURC 66% - 12/18
VSNT 64% - 2/5
ATX 62% - 12/12
IMA 61% - 8/2
NAVI 59% - 12/19
TESO 58% - 2/16
XRA 58% - 5/24
KMGB 57% - 6/1
CRNT 54% - 5/21
TTG 54% - 11/30
CCC 53% - 3/26
FSLR 50% - 5/22
NTLS 50% - 1/30
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
The NYSE led the way, closing at an all-time high, with a .5% gain and the Nasdaq and Nasdaq 100 gained .4%, hitting 6 1/2 year highs. The DJIA and SP 500 closed slightly higher with a .3% gain and the SP 600 gain was even smaller with a .1% gain. The great news, once again, was that leading stocks trumped the general market indexes, with a 1.2% gain. This is the picture perfect action that you want to see in a bull market. When leading stocks are leading the general indexes, there are much larger gains being made in top growth stocks than value stocks.
Volume was lower than the day before, as it appeared traders started the weekend and/or their vacations early. The lower volume does help alleviate fears that if volume on the downside shows up soon that it will not be that heavy. As it stands now, the NYSE has five distribution days (many weak distro days) and the Nasdaq only has one, signaling that the market is still very healthy up here hitting new highs despite the lower volume.
With the lower volume, however, we did get good breadth confirming the gains today. The other positive is that the breadth improved as the rally continued throughout the day. Advancers beat decliners by a 5-to-3 margin on the NYSE and by a 3-to-2 margin on the Nasdaq. New 52-week highs beat new 52-week lows by 527 to 83, clearly showing the strength of this market after four days of strong price action.
For the week, the Nasdaq led the way with a 2.4% gain, the NYSE followed with an impressive 2%, the SP 500 and SP 600 rallied 1.8%, and the DJIA gained a solid 1.5%. The clear obvious winner this week was the IBD 100 index and my account. The IBD 100 rallied 5.2% and my account rallied 7.3%. This week reversed my poor showing from last week and continued the trend of my account well outperforming the market for the past sixteen weeks (the length of this rally from the March lows).
It has been a powerful four days of low volume gains for the market but I would not be surprised if we get a pullback here as it seems we have worked off the oversold condition and turned some bears into bulls the past week. Some of the key numbers comes from the realmoney.com poll this weekend. It shows that those surveyed lean bullish with 70% expecting price gains for the upcoming week. There are only 13% registering as bears. This also comes with the McClellan and other overbought/oversold indicators get overbought after the past week of price gains. The VIX has also worked off its bullish higher volatility from late June, signaling that the easy money has been made.
However, despite this, the NYSE short interest ratio rose again to near all-time highs closing at 7.66 on Friday. That and the put/call ratio is still around the level it was at the beginning of the week with it closing at .76. This clearly states that despite what people say, traders did not make bullish bets and in fact continued to take the opposite side of the clear trend. The other slightly bullish sentiment news is that bullishness from the Investors Intelligence survey fell to 49.4%. But, bearishness fell also to very low levels of 18%.
The other sentiment index that I noticed giving a signal that the market might be tired here is the ISEE Options put/call index. This index hit 186% on Thursday which is a level where the market normally does not do very well in the short-term following this reading. Combine this with some of the events above, the fact that new buys are starting to get a little difficult to find in top stocks, and the new buys that do show up are in low-float small cap stocks with mixed/poor fundamentals and we just shouldn’t be surprised if we get a pullback. Now a severe pullback–that is something I just don’t see in the cards with this much negativity pouring out of our nightly news.
Another clear reason why I don’t see a top happening anytime soon is that leading stocks with top fundamentals are simply not topping. And history shows that the leaders top BEFORE the market tops. So as long as AAPL, RIMM, BIDU, GOOG, and Chemical stocks are making new highs and are not churning, putting in heavy volume selloffs, or cutting their 50 day moving averages, there is absolutely NO reason to even think of trying to call a top. Once you see these four horseman top and reverse and then can look at the major indexes and see a clear downtrend, on heavy distribution, with lower highs and closes below the 50 day moving average then, and only then, will I listen to the bears.
Until then, the bears are just filled with nothing but pure crap and lies. And their opinions are worth the equivalent of the returns you have received as a bear this year: NOTHING! Pure worthless opinions that do NOT agree with the facts on the ground. This is why trend followers will ALWAYS outperform the top and bottom callers. They will NEVER return what the greatest traders of all-time returned by simply following and listening to top stocks and the general direction of the market.
Now, like I have said before, and like I keep listing on my forums, there are a lot of charts starting parabolic runs. But that is just it: they are starting them or in the middle of them. Very few appear to be in the late stages of runs seen in other parabolic runs in stocks like ERS in 2006 and tech stocks in the 2000 market. Even RevShark sees this, confirming what I have been seeing for weeks and weeks now. Still, until they top, there is no reason to predict when the run will end.
There is even evidence, in the Semiconductor index, that many large big-cap tech stocks are ready to run there. Many are at new 52-week highs and a lot of the sub-components of the Semiconductor/Electronics group have made big moves in the IBD 197 industry group list. It is very good to see the Semi’s join the market as this appears to be very bullish and should help turn some of those bears into the bulls camp, since they always say that it isn’t a real bull market unless the Semi’s are moving. Maybe I am stuck in years gone by, with this statement, but I still have heard plenty of people tell me that this rally (FOR THE PAST FOUR YEARS MIND YOU) is not that great of a rally because Semi stocks never led. Uhm, who said they had to lead? It is much better just seeing stocks like INTC, NVEC, NVDA, ADM, etc. making solid consistent gains. And that is what they are doing. The whole sector looks great. Of course, the best looking one recently has been SMTX. Those who subscribe at the gold level are well familiar with that very very pretty chart.
With a lot of the bullish leanings you are reading in this weekends post, you must also realize that I am no idiot. I have been partial selling many stocks that are in climax/parabolic type runs. Many, not all, of the stocks you see listed below have recently had 10-25% sold via the basic trading necessity of locking in profits. Holding your whole load as the stock continues to race up the charts in an exponential matter is not smart as sudden reversals become more and more likely. Small and smart selling based on either new highs with low volume, new highs with little price change and huge volume, or major reversals where the stock is up a lot on the day but then reverses to close lower are clear places to selloff 10%-20% of your big winners. Locking in some gains and then holding on for a possible climax run is just what the smart traders of yesteryear did and the smart traders of today do. One thing we definitely don’t do (not saying I am great, btw. Trust me I am FAR from it) is call tops. And that is one thing you will not see me do as long as we are moving higher and hitting new all-time and six-and-a-half year highs.
We have earnings season officially kicking off on Monday, with AA releasing earnings after the close. During the week we have numbers from stocks like INFY, PBG, DNA, MAR, YUM, and CTAS, and to close the week off we have GE. After that the fireworks really get going when the earnings really start pounding the table. Isn’t it funny how fast this time of the year can sneak up on you? Besides that there are, like always, economic numbers to digest. But nothing this week should impact the market like earnings will.
Aloha and I will see you in the chat room where you can guarantee we are ALWAYS on the right side of the market.
top holdings up this week - purchase date
TRCR 463% - 1/12
MA 223% - 8/2
OMTR 185% - 9/15
IHS 146% - 12/21/05
CPA 133% - 9/15
KHD 130% - 5/30/06
TTEC 128% - 8/25
ULTR 125% - 10/27
DECK 120% - 9/13
CXW 96% - 5/19/06
HURN 95% - 9/13
CNH 94% - 11/2
CRY 90% - 1/10
VDSI 89% - 1/14
EVEP 89% - 11/16
ZNH 84% - 12/26
APLX 84% - 9/28
AFSI 83% - 4/12
CKSW 69% - 10/11
LFL 68% - 12/13
HURC 66% - 12/18
VSNT 64% - 2/5
ATX 62% - 12/12
IMA 61% - 8/2
NAVI 59% - 12/19
TESO 58% - 2/16
XRA 58% - 5/24
KMGB 57% - 6/1
CRNT 54% - 5/21
TTG 54% - 11/30
CCC 53% - 3/26
FSLR 50% - 5/22
NTLS 50% - 1/30
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
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