Sunday, June 01, 2008

Very Bullish Week Ends With Us Set Up For Some Big Gains

It was nice to see oil stop rising to the moon and for stocks to still continue higher as a constant rotation from commodity into higher quality tech stocks does seem to be evolving. In fact, it appears commodity stocks are going to continue higher with those new leaders that are starting to emerge. I can only pray that this trend of prettier charts and higher quality longs continues to show in the market.

There is no doubt when you see longs like HRS, PVA, FMC, COP, FST, JOYG, TUP, CRK, BUCY, and CLR move like they did today that we do not have some sort of speculative action in oil longs. Along with this action, you can see a lot of technology industries moving higher on the list of IBD industry groups. There is only one way to spin that: bullish.

The great thing that some commentators were actually complaining about being "nothing more than window dressing" was that volume did increase on the Nasdaq and on the NYSE with Friday's strong gains. I am not sure how they can spin that as bearish but they tried and probably succeeded amongst the masses as the majority of people I talk to HONESTLY believe we are in a recession. YET when I ask them how they are doing it doesn't seem to be at recession levels. So the facts remain that this is a much stronger market than anyone is giving credit for.

Not only was volume higher and above average on the Nasdaq but remember for the first time in almost a full month's worth of trading sessions the NYSE enjoyed volume above average on an up day. The Nasdaq is above the 50 and 200 day moving average...and is making gains on higher volume? Folks, I don't know about you but I know I do not want to be bearish even if the action is weak. And it is weak, there is no doubt about that. I still do not have any PERFECT charts and the near-perfect charts are still not producing HUGE GAINS IN extremely short period of times like they NORMALLY do in roaring bulls. So do not think this is 1999 or 2003. I doubt we are going to get any 1000% gainers, with a 18 VIX.

The good news included within this is that the market was just under a little bit of selling pressure and immediately has shaken it off. Are the skies all clear? Absolutely not. But I tell you what, thinks are looking better. I have a lot of stocks that have made some big gains in some short amounts of time but I am still waiting for a couple of more beautiful perfect stocks to setup and breakout on higher volume before I can get super bullish. But still the fact that we can bounce back so fast from a pickup in selling and after six days of distribution in the SP 500 and DJIA that is a bullish development; not bearish.

To go back to the "we are not in a bear market" rant again. The revised 1st quarter GDP was moved up to .9% and with a show of income growing faster than inflation I find to see where we are in a recession. Oh well. This just goes to show that following the price action of leading stocks, which while not being EXTREMELY BULLISH is STILL bullish none-the-less, is the most important factor in deciding when to go very long the market or rather to not go long at all. The market is telling us that it "is a bull market" (for those that have read "Reminiscences of a Stock Operator" you know what that means) and you will need to act accordingly. But remember this is a very lame rally for the time being and the market is going to have to prove a LOT MORE to me before I get too wildly involved with margin.

But I have to admit it would be nice to get some profit taking signals and some more climax runs so that I can shift topping stock's money to stocks that have a fresh rally ahead to come. Remember, a FRESH breakout to a new 52-week high is bullish; a 100th breakout to a 52-week high is bullish....but do you want to buy that breakout? Think about it.

Keep it simple, the trend is up for now. Aloha and I will see you in the chat room!

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