Sunday, May 18, 2008

Bullish Week Ends With Leading Stocks And The SOX Taking The Lead; The IBD 100 Finishes Up 4.2% And The SOX Finishes Up 5.8% This Week, Clearly Showin

There is really only one word to describe Friday's intraday action: bullish. Right off the bat, thanks to a report showing the University of Michigan consumer confidence number fell below 60 to a 28-year low, the Nasdaq fell 1.2% within the first two hours. This selling was pretty nasty but still the report should not have shocked the informed investors who saw the IBD/TIPP poll hit an all-time low last month. I am sure we can expect more of the same come Tuesday when the new data is released. Thankfully, for the bulls, cooler heads prevailed and quickly the consumer confidence news was taken as old news and shaken off.

By the end of the day, it was an impressive turnaround on all the indexes, as everything closed near their HOD. The leading index was the NYSE which scored a .5% gain. The SP 500 also was up today, gaining .1%. On the other end, the Nassy lost .2% and the DJIA lost .1% but both still closed near their HOD. Considering the losses that all the indexes had going after the first two hours there is no other way to call today anything but a victory for the bulls.

That bullish action was the second day in-a-row and the fifth day out of six that the market has started the day off weak and finished strong. I hate to think of everyone out there that is watching their stocks too closely and therefore have been shaken out of some good longs by watching the market during the day. I suggest when you are using this superior methodology that you best use it the correct way. That means not watching your stocks intraday. If you want to daytrade, fine, do whatever you got to do. But if you went long DGLY, you should still pretty much be long 75% to 100% of it for possible MONSTER stock gains. Those that have sold more than 50% of it have traded poorly and this is due to you watching the stock too closely.

The best daytraders that I have ever met only daytrade index futures. And I will tell you this. I know this methodology. I know how to make the MONSTER gains. And I know daytrading stocks will never get me what CANSLIM can. I have seen it all by now. But if you want to daytrade futures, you have my complete blessing. If I was forced to be a daytrader, I would be trading ALL of the index futures with huge margin (preferably at least 25 to 1). I know that game. But guess what? I would rather go looking for surf and then paddle out into a lineup with a lot of pretty girls and bombing sets. You can watch the market intraday, I would rather attempt to get barreled. After a good session, then I will check out the stocks. This is my lifestyle and I LOVE IT. However, if I did like sitting on my fat butt all day watching 8 to 12 monitors of flashing quotes then I would be daytrading index futures and using CANSLIM after-hours. There is not one stock I would daytrade intraday. NEVER. I know the BIG GAINS are in the HOLDING.

Speaking of big gains, since the lows on March 17 when the Nassy hit a new 18-month low the index has recovered 17% with many of my best stocks returning 30% plus gains. A lot of JERKS tried to get me to bottom fish some horrible stocks, a few days after they made 200% moves off the bottom. Those stocks all of those people told me to buy, since those initial runs, have basically returned NOTHING. But I told you then that you DID NOT have to buy the EXACT BOTTOM to make a KILLING in the stock market. And I still believe if you are 100% cash right now, if you buy the right stock you can beat ANYONE reading this who bought SPY on March 17. They bought the exact bottom and NAILED the bottom!!! WOOPPIEEE! But you didn't and instead you bought MXC and PDO two weeks ago. Now you have a 115% and 95% gain!!! Oh, but wait!!!! You did not buy the bottom. How stupid of you! Do you NOW see how foolish those people were then?? Do you see how arrogant and IGNORANT of history those FOOLS were. They blasted me for not buying the exact bottom on full margin. Since then, the returns we are seeing at BigWaveTrading is crushing the returns I am seeing in some of the "more popular" guys that I follow that were laughing at me for not going 100% long on March 17.

Those same brilliant geniuses are also now calling for a top. They believe the market has come too far too fast. Don't they understand momentum and short squeezing. We don't need volume and we don't need to rest, if the market doesn't want it. It does whatever it wants to do. And right now all you need to know is that all news is good news and that is why people keep shorting the market (NYSE short interest ratio is at another all-time high at 13.40--it takes almost 14 days to cover all shorts on NYSE based on average volume. WOW.) as they keep hearing nothing bad but news from our EXTREMELY biased news media. These blatant political lies, along with a heavy dose of global (w)fear(m)ing, keeps the public scared of the market. This is the wall of worry the market is climbing now and it is proving that it doesn't need a lot of volume.

But have you noticed that volume is starting to come in above average on the Nasdaq more consistently now. The days when it shows up the Nasdaq is either up or it has a bullish intraday reversal. That is a very key tell folks. That tells me the marketis healthier on the short-term than most give it credit. Heck even oil hitting $127 and closing at $126.02 doesn't phase this market. That is why all of our indexes carry acc/dis ratings of A and B and why we see so many technology, retail, and other growth sensitive areas of the economy starting to climb up the list of top industry groups. It is great to see so many technology, software, hardware, computer, electronics, biotech, transportation, metals, oil, and internet stocks rallying all at once. Included in that are a lot of HOT HOT stock charts. Sadly, there still is only one perfect chart out there that is working perfectly and it is up 56% from my lowest hit limit in a little under a month. That is how they should all act. There are a few cheap stocks setting up like that but nothing of CANSLIM quality has me excited of a future MONSTER stock like TASR.

Still overall it was a great week and the bears can't keep me down even though the media sure is trying. Stocks like WBD HRS ESV EXM DO DSX MTL and UPL are not listening. URBN and CSH are the exceptions and with recent longs of top quality that I have sold watch these two come back. TITN was a recent example of a top stock sold that is now back immediately. This is one strong market. Even gold looks to be bouncing again. But the stocks that are clearly dominating are the Energy stocks, especially oil&gas. However, energy stocks are coming on strong and I got my eye on CSUN and SOLF to add to my SOL, CSIQ, and FSLR collection.

The only thing I need to watch out for is getting too excited about this rally. Getting cocky about my gains is the LAST thing I want to do as I have to remember I only have one perfect chart that is out there working. Are there a few setting up that could be perfect b/o's? Absolutely. However, there have been others that have started and failed. Remember, NEU and CMP. They both produced some nice gains but the perfection ended quickly there. BRKR and ADEP are two that completely failed. Both had OBVIOUS flaws that kept them from being huge holdings. But BRKR had a great company and good growth but things don't always work out. And that is why I always cut my losses. But just like TITN, BRKR appears to be firming back up again. It isn't nearly as strong as TITN but a theme of strong stocks having trouble going down is becoming a very large and growing theme in this market. That has to be bullish, heavy volume or not.

Yes it is true low volume rallies are not healthy overall, but nobody knows how long Mr. Momentum can last. Usually when I see people calling tops long-term or short-term I get happy when I am long stocks like I am now. It is not like I am loaded up with longs but I only have 20% in cash now because SO MANY CANSLIM quality longs have been breaking out or bouncing off of great patterns. They are all working. How can I sell stocks when NONE of them are giving me topping, take profit, or cut loss signals.

On top of that the index have taken their key 200 DMA lines which is a very important technical line in the sand. A lot of funds do NOT buy the market until these key indexes are above the lines. Now that they are, it would be nice to see some big fund buying come in. But before that happens, watch for a possible pullback as the put/call buyers are starting to take an interest in the call side again. The put/call fell to its lowest levels since January on Thursday when it hit .64. But oddly enough, just a little bit of selling (or in the case of the NYSE and SP 500, a rise) is enough to raise the put/call back to .79. It isn't 1.00 but it is funny to see a bit of fear enter the market on just a morning two-hour dip that has an EOD close near the HOD. is getting late on Maui as I had a nice (but small :() surf session that lasted 1 1/2 hours. But it was enough to tucker me out early. When I wake up I will have part two finished by the time the NHL game is over. Go Penguins. You gotta have Sidney Crosbey in the finals!!!.........

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