Monday, February 09, 2009

Stocks Put In A Very Impressive Bullish Session On Friday, Sadly, With The Leading IBD Indexes Lagging; Leaders Are Leading For The First Time Since A

Stocks ended the week with a little bang as the Nasdaq went out with a 2.9% close, the NYSE had a 2.8% close, the DJIA had a 2.7% close, and the SP 600 led the way with a very impressive 3.6% move. There were two slight "bummers" to today's rally. The first was that volume came in lower than the day before. But, honestly, the volume difference isn't enough to have an argument over it. It was basically the same as the day before just slightly lower. The more important problem was that for the second day in-a-row, even with small-cap stocks doing relatively well, the IBD 85-85 lagged the general market with only a 0.3% gain today. Add that .3% to the SP-600 3.6% and Thursday's IBD 85-85's gain of 1.1% which lagged the Nasdaq's 2.1% gain and the SP-600's 1.4% gain and you have leading stocks not leading this rally.

Why is this bad? It is only bad, for now, because new LASTING stock market rallies need leading stocks to be leading the market higher for the market to sustain a long-lasting rally. Do we have leading stocks leading the way higher? Yes. Gold, Security, Medical, Stem Cells, Software-Medical, Education, Food, Utility, Telecom-Wireless Equipment, and Retail/Wholesale groups and their leading stocks are moving higher. This is the first time since the August to October 2007 small rally where leading stocks actually have gone up with the market. The entire year of 2008 was just a changing of guard at the top constantly from one new leader breaking down to the next. While that has set us up in a better market has that put us in the clear? The answer is not yet.

Why? If we were in the clear, the groups that I mentioned earlier would not be filled with what are considered as "boring" groups during this upturn. Instead, besides stem-cells, we would have many more innovative and technology driven groups. However, facts are facts and groups like Banks, Retail, Transportation, and Homebuilders did better than the new leading groups. This tells me, just like yesterday, that we are still in a rally where vultures are definitely out there trying to pick the dead carcasses off the road of the laggard stocks.

When you look at the simple ETFs of the most beaten up sectors you can see how they are leading. XLF the financial ETF was up 7.6%, XHB the homebuilder ETF was up 7%, and XRT the retail ETF was up 4.3% on Friday. So it is clear to see the two most beaten up sectors, which are banks and homes, are once-again, so far, leading us higher and this tells us that a new bull market is probably not going to start here with these laggards leading.

There is, for the first time, like I mentioned earlier, some great news in that leading stocks in leading sectors are finally moving higher with the market during the pullbacks and rallies. This is the first time this has happened in the market since August 2007 to October 2007 when stocks like APPY DRYS and FSLR put in strong gains for us in short amounts of time. So obviously there is something bullish that could turn out for this rally. Sadly we are missing something that we DID HAVE in 2002 while we were bottoming. Those were hot charts! Even though we have a lot of nice charts the amount of perfect charts shows that this is probably not a bottom. "Bottom" line is that we should have charts like GERN with a lot of max green BOP, heavy volume surges, and a nice flat perfect price action setup like it is currently going through. When max green "hotties" like this start to show up in my scans as we rally higher I will then get more and more bullish. But for now I have to take it easy.

Conditions could be right for those type of stocks to setup soon as most traders and investors are starting to lose their faith in a market rally. I have heard a friend recently say "the next rally I see I am shorting the pants out of it." I think that since people I know that barely know how to invest are now making comments like this, it is safe to say that maybe shorting isn't the safest play RIGHT NOW. A lower volume rally on this rally attempt to the 200 day moving average might make some stocks worth a short play.

But right now the market's movement is clearly mixed with the long-term trend down with the market down over 43%, the intermediate term is down with the market down over 38%, the sub-intermediate term is FLAT FLAT FLAT with the market going nowhere from 10/23/08 to 2/6/09 on the Nasdaq as it has returned a dead -0.76% during that time (zzzzzzzzzzzzzz...), and the NYSE has had the same luck with a +0.88% return from 10/24/08 to now. So obviously over the past few months it has been pretty boring as the market has basically gone nowhere. Short-term the trend is now up for me and not sideways thanks to the last two-days.

I want to remind everyone also that you do not need to buy the exact bottom of this low if you think a new bull market is ready to be unleashed. If you go back and study my best longs from 2003, 2004, 2005, 2006, and 2007 I think it becomes OBVIOUSLY CLEAR that you NEVER have to buy the exact bottom of the stock market to come out a huge winner. Just ask everyone that bought TASR in July of 2003 which was nine months past the 2002 lows and then after the July buy made a near 3,000% gain in nine months.

Knowing history and how the greatest stocks work can greatly help you relax and stay calm when everyone is running around like a chicken with its head cut off. There sure are a lot of wild and crazy traders that really think they need to know the future to make big money. The best investors/traders that I have met in my life are NEVER worried about the future. They are only prepared for it. They are prepared for a bull market, a bear market, or a range-bound market. The best are never off with their market calls. Why? They never make calls. They just move with the trend. Just like the best new market students do.

Since I have not gone over the stats for the week I think I should do that now to revisit the fact that we simply do not have leading stocks blasting away higher. While these are necessary, like I said, for long lasting bull markets. Heck, if you are happy with just a few months of a rally right now then things will be fine. But when the week ends out with the Nasdaq up 7.8%!, the SP 600 up 5.9%, the NYSE up 5.4%, the SP 500 up 5.2%. But the DJIA only came in with a weak 3.5%. So if the DJIA was weak you would think small-caps would be strong...and they were up 5.9%. However, in a shocking development, even though nice charts started showing up in my scans, the IBD 85-85 kept lagging only rising 1.2% on Thursday when everyone else was up 1.6% to 2.1% then on Friday it was only up .3% on a day when the indexes were up 2.7% to 3.6% on Friday. These lame returns are just a hint that those nice leading stocks are going to either not lead us up and then fail and help lead us down to new lows or else they are going to have to reverse their lagging status and become leading stocks.

Only when leading stocks like the IBD 100 and IBD 85-85 are leading the overall market higher can you be completely confident that the rally attempt is not just an attempt but is in fact a start of something new. The other KEY important development that must occur is for "hot" charts like SINA, SOHU, NTES, USNA, GRMN, and UNTD show up in those green BOP to max green BOP charts loaded with accumulation. During the 2002 lows they were looking good and were leading industries at the top of the list of IBD's leading industry growth. Now we have leading industries with charts that are lame. Some do look good like Gold and Education stocks. However, a lot of Gold stocks are not yet showing massive accumulation with max green BOP and huge accumulation. However, with them rising to the top of the charts and with a few showing these very nice chart patterns it appears soon Gold will move.

Not only is Gold moving but Education stocks are too. I am long a recent education stock but do not have more do to the fact that the charts are not LOADED with green to max green BOP right now.

Well I have gone very long in my analysis for tonight and would like to continue with this tomorrow. I am sleepy and have loaded this area with information. Great luck this coming week and if you need any extra help that is what the subscriber longs and shorts pages, videos, forums, and chat room are for! Have a wonderful Monday. I will see you here after the Monday stock market session.

Some other key points that I don't have time to go over but want to post before the market opens includes:

--Futures not looking good in the AM. But remember futures don't usually matter because most of the time if futures are green you get a red close and when futures are red you get a green close.

--Shanghai Composite is the only index up with a 2%+ gain at my last look. If you look at the Chinese Hang Seng and Se Composite you can see the market is rounding out and moving higher on strong volume. The leading innovative fundamentally strong stocks in that market are going to make their investors very wealthy.

--I still believe that since the amazing accumulation that I have seen in Gold, Silver, and Platinum since September that there is some amazing long-term accumulation in these metals going on. Therefore, any bounce off the key 50 and 200 DMA (or even the 21 DMA) or even breakout to new recent highs above key resistance levels.

--some leading stocks to watch that were mentioned in IBD that I don't like but we'll see they are acting in a few week to months include SQM RDM SYT TNDM UPS FDX AAWW. I only don't like them because their charts are jacked a little. RGLD would be great to get long soon!

--IBD called this a FTD on 1/28. I called it a "technical" one but it was so ugly I said it would fail. I was right and it did fail. However, on Thursday we had a FTD on the fourth day of the recent rally attempt from the 1/30 short-term lows. The higher lows combined with the big day on Thursday coming on day four of that rally attempt gives me a sign (since CANSLIM stocks are moving up; HOT, pretty, maxed out green, and sexy beautiful stocks are not though) that this rally could have some legs. And we need a rally not only to make money now but to either have it turn into a real bull to make some 200% to 1500% to maybe 2400% gains again or to rally on low volume back to the 200 DMA so we cant get short the past laggard stocks that are now back near their recent 52-week highs. Eiher way a rally here is good. Good for the bulls now and good for the long term bears later.

--There were 3 clearly bullish reversals this week in the stock market. Study 2/2, 2/3, and 2/5 to see how a market should be acting if it has good news possibly coming.

--put/call is .71 signaling the option market players are complacent/bullish

--Investors Intelligence shows 35.2% bulls to 36.3% bears. So it is neither bullish or bearish.

--despite the impressive Friday gains there were still ONLY 10 new 52-week highs compared to 67 52-WEEK LOWS.

--YTD the Nassy is up .93%, the SP 500 is -3.8%, the NYSE is -4.9%, and sadly the IBD 85-85 is -5%. The good news is that I am beating the overall markets with a LAME (this is what happens in dead markets that go nowhere since October) 2% gain thanks to my recent longs and all those profits I took on shorts this year. I don't have a lot of shorts (37 total but 37 SMALL positions) and my 10 longs (10 longs 10 small positions but dollar average is the same as shorts) aren't that huge. So that must mean...


--don't fool yourself. This is one of the MOST DIFFICULT markets ever. The beautiful or nice chart setups I saw ALMOST ALL the time from the age of 16 in 1996 to 2006 were like golden tickets. Then in 2007 it got much harder as stocks like AFSI, TESO, APPY worked but stocks like FALC and INXI really fooled us with their SUPER HOT and AMAZING green to max green BOP filled charts. They failed and thus the pattern on those hotties failing more to working started. It seems to be coming back but there are not enough of the charts I like to see with strong enough fundamentals to get me excited here.

--I will need to continue to see volume and hotter charts on the rally or else I will look to be going short the rally with a heavy volume failure at the 200 day moving average. For now, I feel a lot better about the stock markets chance to rally. But still I need better charts to believe it can stay.


Top longs/(shorts) with total returns MAKING ME MONEY on Friday: ANCI 55% (OKE 36% LLL 16%)



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