Thursday, May 28, 2009

Small Cap and IBD Indexes Lag the Major Indexes with Volume Higher Across the Board

by Market Speculator

Those who have been day trading the index futures know today gave many traders whiplash as stocks bounced around for much of the day's trading session. Intial jobless claims helped the market at the open, but troubling news from the housing put the brakes on and sent stocks lower. For much of the day stocks simply bounced around in lackluster trade. Stocks found it difficult to sustain a movement in either direction showing the epic battle between the Bulls and Bears. It wasn't until 2pm EST when the Bulls began to win the struggle and pushed the major indexes higher. Crude Oil prices closed above $65 a barrel helping oil related names push higher into the close. Closing in their upper ranges along with higher volume notched a day of accumulation for the market.

On the downside our IBD indexes lagged the entire market. In addition, Small and Mid-Caps were left behind leaving a few dark clouds lingering over the market. We must be mindful of the NASDAQ's 5 distribution days and 4 distribution days on the Dow. Although we haven't had any MAJOR bouts of distribution we still have them piled up here in recent weeks. The market is telling us it might not be ready to move higher and will need to continue to be cautious as sideways action may continue for the coming weeks.

Regardless of the political landscape the market does feel like it is in base building mode. Even though we have yet to see any major distribution day we could still end up rolling over a bit. It is not necessarily bad if we had lower as long as volume doesn't pick up but subsides. The market simply could be allowing quality growth stocks to build sound, "pretty" bases. Regardless, we simply need our quality growth stocks to setup properly so we can begin to plunge into them and get our much needed MONSTER STOCKS.

First Quarter GDP number is set to be released, preliminary GDP tomorrow morning at 830am EST. There will be a laser focus on this release as it will shed light on whether or not things are as bad as they appear. I am sure CNBC will have a panel discussion on the effects the Treasury and Federal Reserve have taken to rescue this economy and market. They have yet to begin dialogue about the ill effects inflating your money supply a few times over. As I digress, look for the futures to spin around as the numbers are released as traders look to position themselves for the day.

We are certainly finding some decent looking charts here at Big Wave Trading and we are not missing a beat. It is quite nice to be able to normalized the days activity and not trade emotionally. Be nimble and take nothing for granted in this market.

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Tuesday, May 26, 2009

Finally We Have The IBD Indexes Leading The Way As Stocks Rally On Heavier Trade

By Market Speculator

Stocks defied negative news from North Korea as the rogue country tested its nuclear and missle strike capabilities. Consumer confidence jumped big fueling institutional buying pushing stocks even higher and the buying continued right up into the close. Volume was up across the board compared to Friday's trade, but it was below the 50dma. Not a terrible sign, but its more showing institutions are still being a bit shy. Rapping up the day, seeing the indexes close out near the highs on volume was a positive step in the right direction.

Finally, we see the IBD indexes leading this market. The trend will need to continue, but today was a step in the right direction. It is nice to see quality growth stocks lead for once and not the junk off the bottom. Remember, in past uptrends which followed severe bear markets leaders took months to form. We may be seeing this begin to take shape as stocks with quality growth characteristics are beginning to take shape. As these stocks begin to show up and present opportunities to get long it'll allow us to get bigger in a position rather than taking small positions in speculative stocks. This is exactly why we stress keeping the powder dry for opportunties to get long quality stocks.

Other notable positive is news is the number of New Highs hit relative to New Lows. The NH vs NL ratio ran better than a 7 to 1 ratio showing the market continues to have strength from within. In John Boik's research he found that when the NH vs NL was favorable the probability of Monster Stocks appearing soars. Although I do not trade off of the Nh vs NL ratio it is a simply another secondary indicator that hints at the power of this uptrend.

Keep perspective is quite difficult for most as we have rallied off of a massive downturn. This uptrend will not mimic prior uptrends which started with downturns of only 20-30%. We have to look back to prior uptrends off massive decline, much like the 1938 rally. The 1938 rally was far from pretty as it witnessed turbulent consolidation periods and leadership took more than 3 months to emerge. We are now bumping up against the 3 month mark for this most recent uptrend. It should be interesting if we see a pick up in the IBD indexes to push this market higher.

A few things to be concerned with is the number of Distribution Days remaining on the NASDAQ and Dow Jones Industrial averages. At the moment, both indexes have 4 distribution days in recent weeks. History has shown when a market flashes 5-6 distribution days the uptrend is broken and we need to raise cash. So far we've avoided ending this rally prematurely. However, it is something we should be aware of and if our IBD leaders begin to crack and fall apart we'll need to raise our cash levels and look for shorting opportunities. With that said, the positives are outweighing the negatives, but we need to keep our heads up and avoid from being blindsided.

I am very happy to quality leadership emerge, it sheds some light on this uptrend which has been lead by Junk-off-the-bottom stocks. It is what it is, nothing wrong with an uptrend lead by the JOTB stocks. However, for a sustainable rally and a chance to get large gains in stock you need quality growth stocks as your market leaders. We'll be continue our quest in finding the market leaders and as always we continue to right on top of this market.

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Monday, May 25, 2009

Stock Indexes End Slightly Lower On Lowest Volume Since The Beginning Of The Year


I have scanned over 5,000 stocks this weekend and can honestly say that there are some very nice charts out there. SADLY, those charts are all in the sub-$10 category with most sub-$5. The good news is that there are still a lot of high quality CANSLIM stocks like GMCR, PEGA, NTES, TNDM, HMSY, CMG, NFLX, AAN, JOSB, SNDA, AMT, CRM, EQIX, and ASIA that are moving higher, even if they are not setting up and breaking out of the chart patterns I like. However, at the same time, it is a very mixed market, as stocks like AIPC, ALGT, IDCC, QSII, and DMND have setup and broken out of bases, started to move higher, and then have all disappointed by falling below their pivot points.

This mixed action is common and not surprising after the huge selloff we just went through. A lot of people that are not focused on the cheap stocks and most beaten up stocks basically missed the sweet part of the move higher, but if this market is going to turn into a bull, and not die as just another bear market rally, they will be rewarded as those stocks will be the stocks that produce the largest gains in a sustained bull.

Is this going to be a sustainable uptrend? Right now the verdict is mixed as cheap, small, and beaten stocks have been the only stocks to really profit after such a downtrend like we had in late 2007 to March 2009. It is always good when these stocks rally but it is twice as nice if they rally with CANSLIM quality longs. This was the case in late 2002 and especially in March 2003 as both CANSLIM quality and beaten up cheap stocks took off toward the heavens. It still appears to be a market where you must take gains fast at the 25%, 33%, 50%, 66%, 75%, 100%, and 150% moves in the stock. The time to hold for the 300%-1,000%+ returns still is not here. When it is here, you can be sure I will let you know.

PLEASE, if you see a soldier anywhere at a store, airport, mall, etc..., make sure you say hello and give them a big thank you even if it feels odd. It means a lot and is just a small way for us to say 'thank you.' God bless you troops.

I hope everyone has a great Memorial Day and I hope you had a wonderful weekend. I will be back later on this evening to expand on my weekend market thoughts. Platinum subscribers remember to check the 'new Platinum longs' area for new longs off the lows (five new longs). Silver, Gold, and Platinum members if you checked out the 'New Longs' earlier in the weekend, you might want to check back as another CANSLIM quality (yet speculative) long has been added. Once again, have a wonderful Memorial Day. I will be back with more market commentary whenever I finish my first surf session of the day (it feels good to be surfing again). Aloha!

Monday thoughts:

Looking ahead to the short week, I believe that we must remain fluid and unbiased as the market is in a mixed trend on multiple time frames with some trends up and some down. The only stocks that continue to produce good sized gains are the thin, low volume, and cheap stocks. The top quality longs still are not setting up in proper bases to have a breakout be worth a long-term hold. The way stocks have been acting it still seems that it is smart to take profits on the way up, instead of looking at those early big profits as "just the start."

Whenever stocks start to breakout, continue to run, setup, and then breakout and run higher, then I will look to go back to my historically proven methodology of producing the largest gains which is a form of growth-momentum-CANSLIM position investing. Like I posted earlier some stocks like GMCR are acting just like they should but at the same time stocks like QSII are still out there. That kind of action is what keeps me from going fully invested.

Some people were even questioning me for not being fully invested. I had to remind these investors/traders that my main methodology is not daytrading the 3x ETFs and futures or swing trading. My main methodology is the #1 strategy since 1998 according to AAII with a return over 1,500% AFTER the bear market of 2008. The CANSLIM methodology along with my own momentum/growth position trading with stocks with beautiful chart patterns, allows me to produce returns that have allowed me to make investing in the markets my full-time profession since I was a late-teenager. Not too many young guys can make a consistent decent living on an island where the cost of living is a tragedy of expensive proportions. Thanks to IBD and the CANSLIM methodology, along with a lot of market experience now, I can do that. However, is it IBD and CANSLIM that has allowed me this great life? No. It is the men and women that serve in the armed forces.

Once again, soldiers, I want to say thank you. I can not express my gratitude enough to you men and women that serve in uniform and the only thing I know that I can do to express how thankful I am is to post it multiple times on my blog. You guys and girls are the reason why people like me can do what we love to do for a living. THANK YOU!

We will see where we end up at the end of this week. I just want to remind all those that are now fully bearish again that, so far, we are pulling back on lower volume after rallying on heavier volume. For those of you that are fully bullish, I want to remind you that in bull markets that I have been a part of in 1997, 1998, 1999, and 2002-2007, you can not find ONE TIME where the low-quality longs have dominated an uptrend the way low-quality longs have this one. Another thing you do not see often in rallies is leading stocks lag. In fact, I almost can not remember the last time I saw leading stocks lag like this, unless I look at the bear market of 2000-2002. The rally attempt of May to July in 2000 had leading stocks lag. That rally failed. From April to June in 2001 leading stocks lagged. That rally attempt failed. The September 2001 to January 2002 had leading stocks lag. That rally failed. The summer rally of 2002 had leading stocks lag. That rally attempt too failed.

In late 2002, leading stocks in the internet-ISP group which was the #1 group at the time start breaking out. Telecom stocks then follow unleashing a powerful rally with leading stocks producing huge gains. Once again leading stocks lead. In bull markets, leading stocks lead. In bear markets, they lag. Leading stocks have been lagging. How do you think this is going to end?

Stay alert and ready for anything, remember to take gains when you have them, and to get rid of losses before they accumulate into anything serious, and stay positive. Trending markets on the upside will return. Watch the IBD 100 and IBD 85-85 for the signal to get back to the long side in a large way. When it is time to rally big, I will let you know. Well, I'll let the subscribers know, at least. Aloha!

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Friday, May 22, 2009

Indexes End In The Red With A Push Off The Lows While Volume Eases Across the Board

From the onset the picture looked bleak for stocks as selling appeared to be slightly higher on the NASDAQ but lower on the NYSE. Selling pressure picked up just after 10am EST as the hot money was moving out of stocks. Interestingly enough money was pouring out of treasuries along with stocks suggesting traders weren't chasing after treasuries. Money was certainly moving into gold and gold related stocks. During the final our of trading we did find support off the lows showing signs the market still has some life left in it. Given the action earlier in the trading session the push off the lows simply confirmed my neutrality on this market.

Gold, Treasuries, and the Dollar are all troubling signs. With Gold moving above 950, Treasurie Yields racing higher and the dollar moving lower is spelling trouble. All 3 items are related and are quite troublesome to watch. The higher the yields on treasury bonds the more costly ALL Government programs become. Utlimately, this burden lies on the US Taxpayer who is already feeling the pinch from the current economic climate. The safe haven is gold and silver as these metals are seen to have intrinsic value. The move in gold will continue as the United States and other Global Central Banks print more fiat currency. Rather than let the market course correct itself we are delaying the natural process a free market provides.

An encouraging sign from the market was the IBD indexes didn't sell off on higher trade and outperformed the major indexes showing signs of strength. Not all is great, the IBD indexes did fall more than 1% and steep price declines are never welcomed. However, like the major indexes the IBD indexes found support intraday and finished well off the lows. A positive development for the market.

At the moment we appear to be in limbo. The AAII investor sentiment survey showed bears up to 45% while bulls slipped to 33%. This suggests that the crowd swung hard to the bears side in a matter of a week. I may remind everyone the AAII Investors Sentiment survey tends to be volatile in nature. It should only be used as a secondary indicator and should have investment decisions directly derived from this data. Nonetheless, with fear growing and the indexes failing to follow through to the downside there may be light at the end of this tunnel.

Other positive note for the market was that New Highs outpaced New Lows by a margin of 4 to 1. Have we got the leadership to take us forward is the biggest question that has not been answered. We are quite long in the tooth from the follow-through day and we are experiencing a stall. It is up to leading stocks to carry us forward and we are in need of them.

Keep your eye on the ball!

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Tuesday, May 19, 2009

Ending in Mixed Fashion Stocks Fail to Close Out With Gains Seen Earlier in the Session; IBD Indexes Take the Lead

Following through on yesterday's gains stocks took the lead and moved higher as volume tracked higher. A very bullish sign to see stocks moving higher with higher volume especially right after a day where prices advanced on lower trade. All was well and good with stocks until the final hour of trading where we began to see selling pressure. The selling pressure was enough to send the S&P 500 and Dow Jones Industrial Average into negative territory but the NASDAQ was able to slip in a small gain. Preliminary volume indicates NASDAQ saw higher trade while the NYSE declined avoiding a distribution day. A positive sign is we saw IBD indexes lead the market and we'll await to see if volume on the IBD indexes came in higher. In summary, not a terrible day following yesterday's move, but signs of bullishness are appearing in the leaders.

We've been waiting to see if the IBD indexes would begin to show some light. Yesterday, the IBD 100 was able to see gains on higher volume while other exchanges saw lighter trade. Although it lagged, the volume compenent was important to see. It meant that leading stocks were being accumulated rather than see shorts simply covering. The probability of stock gains improve dramatically when we begin to see growth stocks lead the way. IBD is on the forefront of these stocks and a proven method to capturing these leaders. BigWave Trading is certainly on top of these and ready to pounce given the opportunity to get long leaders.

An interetsing note is seeing the put/call ratio rise today given the stock gains. Although the S&P500 and Dow Jones finished negative they were showing gains earlier in the day. While these indexes were green the intraday put/call ratio (overall) was sitting above .80 4% higher than the previous day. It shows that the move today was not being bought into by option players. The higher put/call ratio suggests the move is showing option traders not terribly confident in the move.

A favorite secondary indicator is the number of stocks making a new high versus making a new low. John Boik pointed out in his book "MONSTER STOCKS" the need to for this ratio to be positive for the market to show Monster Stocks. Today, the market saw (preliminary) 95 New Highs versus 15 New Lows. Again, this NH vs. NL ratio has been positive for quite some time showing us that there is strength to this market. Having a positive NH vs. NL ratio is certainly a welcoming sign that we may begin to see more MONSTER STOCKS on the way.

top longs/(shorts) w/ total returns since purchase making money today: KONG 42% ASCA 34% ISTA 29% (CYT 57% CHTT 17%)

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Monday, May 18, 2009

Shorts Ran For Cover as Stocks Run Higher on Lower Volume; Some Leaders Show Support With Volume

Lacking any economic catalysts to begin the week stocks started the day off gapping higher. Volume tracked lower for much of the day indicating institutional players were sitting on the sidelines staying away from the action. It appeared the action was driven by short-sellers covering their positions. It was certainly disappointing to see volume come in lower on such a large percentage move on the indexes. At this point, a day with gains is nice but at some point we need accumulation to support this uptrend.

Price and volume action is the most, the most important action to consider on the exchanges. The next is seeing how leaders are acting. Leaders are found in the IBD 100 and IBD 85-85. Normally, leaders emerge rather quickly from market corrections. However, this correction was quite severe and from past severe market corrections leadership may take months to form. It should come to no surprise that this market is lacking IBD leadership. At some point, for this uptrend to continue the IBD 100 and IBD 85/85 indexes must be leading this market.

There were some positives today as we did see leaders have an excellent day. A few of them found support with volume. A clue that there is institutional support for these leaders. We are on top of them here at Big Wave Trading and are ready to take advantage of these leaders if they begin to breakout. These leaders will run and show is Monster Stock gains. Not only will they be Monster Stocks but they will be the tell when the market begins to stall out. Junk-off-the-bottom have led this market up to this point but for this uptrend to continue any further we'll need to see the IBD indexes lead.

top longs/(shorts) w/ TOTAL returns since purchase making me money TODAY: AVNR 48% INOD 41% ASCA 33% FIRE 28% PALM 28% ISTA 20% (CHTT 16% DV 15%)

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Sunday, May 17, 2009

After All That Bottom Fishing The Past Two Months It Looks Like CANSLIM Stocks Are Ready To Lead Next; Stock Indexes Pullback On The Week On Lower Vol

Stocks pulled back this week and those that read this commentary daily know that we were expecting a pullback and we are getting it. If you remember I wanted the pullback to come on lower volume and that is exactly what we are getting on the IBD indexes, the Nasdaq, NYSE, and SP 500. If stocks continue to pullback this week, I will be more than OK with it as I think stocks are starting to look really good out there in the charting landscape. If this continues I am sure that we will be moving from trading everything breaking out in uptrends and downtrends and will be able to move on to going long the historical patterns that come about right before stocks go on major advances.

If you are not familiar with these chart patterns, you can find them on the 'past big winners' area at my .com site or you can visit the IBD Investors Education site and go over the historical chart patterns that lead to big gains there. If you are a subscriber you can also go all throughout the 'General Market' post to find a ton of beautiful chart examples of other past winners that I was not part of but have studied. The bottom line is that if you are a subscriber, you have no excuse to not know a chart pattern. We have example after winning example on the site and IBD's past studies to look at to know what we need to see before we go heavily long.

The good news is that thanks to the Nasdaq losing RS to the SP500 about two weeks ago and that turning into a pullback it has allowed charts to build better basing patterns. As the rally was moving along I was getting confused as to why the IBD indexes continued to lag while stocks coming off the lows were doing so well. I believe that the market was beaten down unlike anything ever seen and besides an initial oversold burst of breakout momentum most stocks simply can not sustain big uptrends with the weight of past resistance ahead.

The 200 day moving average has proven to be very tough for the indexes to break through. However, the more the indexes test the line the higher the chances are that we will break to the upside. The charts that I see in my scans are hinting that we will be able to make some good money on the long side very soon. While it is VERY NICE to get a 200% to 300% pop from beaten down stocks, the plain truth is that the best, longest, safest, and biggest gains come AFTER a stock has setup over the 50 DMA with the 50 DMA over the 200 DMA. The most important part of all of this is to have a market in an uptrend on strong volume. We are getting that but until the past week we were not getting any pullbacks. So it is nice to see pullbacks as you need these to help launch sustainable long term rallies.

Indexes can not just keep rallying without pulling back and be healthy. When that happens you get 2008. From 2003-2007 the DJIA didn't even pullback 10% ONCE! As you can see 2008 proved that "that" wasn't healthy at all. The gains were great but those that are clueless to cutting their losses or in their ability to spot a top lost a lot of money. Thankfully those of us at BWT went short in November and pretty much stayed cash/short until March. By April we had some longs but it was apparant the stocks off the lows with the "hot" chart patterns were working better than history's past big winners. However, this was because of the depth of the 2008 destruction.

If this rally continues to pullback on lower volume, can hold the March lows, and then make higher highs, I think we are going to see a LOT of CANSLIM quality longs and beautiful max-green BOP filled speculative stocks setup and breakout and work. If this rally rolls over I am ready to go short the new leaders and get short the past leaders that are still LOVED like AAPL and RIMM. The fact these are so loved prove to me that I want to continue to look to short these stocks. However, setups like the new short we have for Monday is the main bandit I will be looking for.

Still focusing on the short side should not be in the interest of momentum traders right now. If the volume would have been higher the past week than the previous few weeks with the 3% to 5% losses on the indexes it would have been very bearish and I am sure we would have more active short scans. As it is, even on a down 1% day there weren't even 10 shorts in each of my scans. Heck there was barely 10 stocks COMBINED in my scans. Still there was a new short but for it to be a short now, for me, it has to show negative divergences in its chart. Obviously this one does.

Don't get me wrong just because I am going short doesn't mean I am focusing on them. No; with the volume coming in lower on the indexes and the charts in my long scans expanding on a down day with more-and-more stocks ending up on my 'possible future longs' list, it would be a crime for this market to fail right now. Especially with so many green BOP filled charts that have very strong price and volume action. It has been a VERY LONG time since i have seen SO MANY green to max-green BOP filled charts. The best news is that these bases aren't the 5th stage or 6th stage bases you would find in 2007 and early 2008 before it all broke loose. No, these bases, our the fresh bases that come in the start of new bulls from downtrends.

I am not certain that this is a bottom at all. In fact, I still lean on the side of it being a bear market rally that will eventually lead to a wonderful shorting opportunity for me. The best thing about the CANSLIM methodology, however, is that my opinion doesn't mean crap. For all I know, we could have "the bottom" and we are about to see a lot of stocks setup in the max-green BOP, huge accumulation filled, and tight price pattern charts that we saw in 1999 and 2003. Every regular bull market looks like 2003 so that should give a lot of you comfort in knowing that if we are only weeks to months away from a real bull market we are going to be making a lot of money in leading stocks soon.

If, however, the economy is as bad as it looks and that the extremely foolish socialist policies of this incompetent administartion is going to continue, I can't see why stocks would rise for the long term. Still if stocks setup in base-on-base, double bottom, cup, cup w/ handle, ascending base, or high-tight-flag patterns with max green BOP and huge accumulation with "fresh" breakouts you better believe I will be putting my opinions on the backburner and will be having a grand ole typing profiting from another wonderful bull market. The charts look a lot better, this pullback has been very constructive, and now the next step is for breakouts and bounces off key support/averages to start happening rapidly everywhere. If charts continue to look the way they do I will soon be spending 3-4 hours scanning stocks. That is a good thing!

Overall, the market still could go any which way it wants. The bull is not strong enough to give me confidence higher prices are in the bag. Better charts, which are starting to try to show, would improve that outlook. However, the way the longs are holding up and still moving higher, with the lack of new shorts showing up or working when they do offer short positions, is a reason to lean to the long side. My mind might say no, but the charts are saying yes.

The current longs I have are weakening but the purchases I am making off the lows for trades still look good. When the proper breakouts start acting like FITB and HBAN did from the lows with their beautiful green BOP/volume filled charts, I will be giving you the clear sign that I am fully invested and holding on for the big gains. For now I say when you get some big gains make sure you take them in. If you go long (or short) and you do not see gains immediately, while we have a bit of a mixed market, make sure you take some to half to even all off. The only exception to hold on to a stock when it does not show you a gain immediately is when you get a very bullish intraday tail with it on volume.

As long as my charts look good, I feel good. My only beef is that the IBD indexes are lagging. I am not used to seeing these indexes lag and I am not used to being 1 1/2+ months deep into a rally and STILL not have ONE stock up 50%, after a breakout over the 50/200 DMA. The weakness is confirmed in the RS line and after reviewing all the big winners it is clear they are 99% from 52-week lows.

I am still going to focus on trading the bottoming stocks and I have two new longs we must watch for swing/day trading positions. I also have a list of longs for Platinum members, not listed to other areas, of stocks with very pretty charts I want everyone to watch off the bottom. One was up 8% immediately and while it isn't a RAD or CAR it has the start to be one. As long as these trading stocks want to rally from very oversold conditions I will continue to trade them in a bullish tape. When the CANSLIM and my 'Past Big Winner' max-green BOP stocks setup, then you can move your focus off the stocks from the bottom, because the only stocks that can produce 2,000% and 3,000% moves without whipping the hell out of you come after a base pattern is built and completed from a previous uptrend with the price above the 50 and 200 DMA. Another very important key to huge gains is huge EPS/sales growth. My best and greenest/prettiest longs in 2003-2007 almost all had very strong fundamentals either as a new company or a turnaround.

Great luck out there everyone. Subscribers you have four videos with over one hour of important stock market information in there and the longs and shorts analysis needs to be read before the start of the week. Great luck everyone, God bless, and ALOOOOOOHA from Maui where volcanic ash sure does make the daylight sky look very surreal. It also makes for killer sunsets!

top longs/(shorts) w/ TOTAL returns making me money TODAY: INOD 36% ASCA 24% FIRE 21% PALM 20% (CYT 59% OKE 39% PG 20% CHTT 15%)

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Thursday, May 14, 2009

Volume Slides as Stocks Move Higher After Suffering from Wednesday's Price Decline

The market was able to avoid further price deteriotion with a low volume move higher. Volume on the NYSE fell nearly 15% while the NASDAQ volume fell 8%. Although the rebound lacked volume it was nice to see the market not follow through to the downside. Ideally, today we would have seen institutions step up and support this market. Instead, it appears for the moment they simply stood aside while stocks moved higher. All in all not an excellent day, we just need more work if this uptrend is going to last.

The NASDAQ led the market in gains finishing up 1.5% while the IBD 100 index was right behind it. A glimmer of hope as we will need the IBD indexes take over as the leaders of this market. It will have to come relatively soon as we do have quite a bit of distribution days we are dealing with on the indexes. The Dow Jones has 5 distribution days while the NASDAQ and S&P500 have 4. When we see a major index hit 5 or 6 distribution days it ends the confirmed uptrend. It is vital we starting see the market do the following: show accumulation and all pullbacks in lighter volume with nominal price declines. The market will show us the clues it is up to us to take them and act appropriately.

The good news is we are still seeing New Highs beat New Lows but the number of New Highs slowed up today on the rebound. Again, there was underlying weakness to the move today as we are not seeing BULLISH signals. New Highs vs. New Lows is not the end all be all, but it is somewhat telling the type of market we are in. I would love to see NH vs NL stay above 1.0 even with a pullback on lighter volume to signal that there is strength within this market.

What we need now is the market to start showing accumulation with IBD stocks leading the way. In order for this market to continue to march higher we'll need CANSLIM stocks leading the way otherwise this uptrend will certainly fizzle into oblivion. We do have stocks that could be potential big winners but this market will need to cooperate in order for these potential big winners come to life.

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Monday, May 11, 2009

Volume slides Across the Board as Small Cap Stocks Lead the Market Lower with the S&P500 Not Far Behind

Opening the week stocks end lower on lighter trade as Big Cap Techonology stocks aid the NASDAQ finishing well off the days low. The S&P500 was unable to sustain any buying as the index closed near its low-of-the day. A day of consolidation is welcomed, but having a large percentage drop is a bit concerning. Let's not overshadow the NASDAQ's resilency here even though volume finished the day lower. Today, in of itself wasn't a bad day but will need to be taken into context over the next few trading sessions.

A positive note would be to see the Small Caps lead the market tomorrow in higher trade signaling the market is being accumulated. It'll be important that we do not sell off any further on volume as this would highlight there is more weakness to come. Remember, we have come a long way off the lows and have yet to see the market consolidate it's move. Ideally, we'll remain quiet in the indexes over the next week or two while we have the IBD Indexes taking charge. IBD indexes are a signal of strength and will alert us whether or not the current rally has the juice to continue the uptrend. Leading stocks in leading industries are our key to this the uptrend and we are in need of their leadership.

The issue for the indivdual trader is whether or not you have been caught up in the intraday noise. It is the market's job to wear out its participants and if you do not have a sound game plan you are going to be warn out along with your capital. If you are following the number one rules, cutting losses short you are most definitely on the path of destorying your capital. Cutting losses will save your portfolio and will keep you in the game for when CANSLIM stocks begin to start flying.

For now, we'll need the IBD indexes to sure up while the rest of the market pulls back. This will clue us into if we are going to see another leg up with this rally. As always, we'll be on top of the action and will react accordingly.

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Saturday, May 09, 2009

Big Cap Technology Holds Back the Nasdaq as Small Caps Lead the Market Higher on Lower Volume Across the Board

By Market Speculator

It was all about the April Employment figures released by the Government this morning which showed the economy lost 539,000 jobs during the month of April. March job losses were revised down to 699,000 lost. The unemployment rate, reported by the government was 8.9%. Futures reacted positively to the news and helped stocks gap higher at the open. However, big cap technology weighed heavily on stocks yanking the Nasdaq into negative territory. Volume was running hot during the morning hours and as stocks began to see support volumed tailed off into the end of the day. The positive on the day was that stocks did not accelerate to the downside, but lacked the volume and conviction to overcome Thursday's session.

Leading stocks were left behind has Super Regional banks led the market higher. Since the 3/12/2009 follow-through day on the S&P500 we have yet to see any of the IBD indexes lead this market. For a more sustainable move we'll need to see the Relative Strength lines of these indexes to begin to tick higher. Today, once again the IBD indexes lagged highlighting the weakness which is leading this market.

At some point this market will need to take a significant breather. Up to this point we have yet to see this be fullfilled, but we've seen signs that we could be on the verge of a pull back. Thursday we witness the market finally succumb to the selling pressure and end in a nasty day of distribution. Friday the market had the chance to re-establish itself and it failed to do so. This failure could be significant if we begin to roll over this coming week on higher volume. Ideally, the market simply rests here for a few weeks while volume remains tame allowing CANSLIM stocks setup in longer bases.

Up to this point, as to be expected we've seen very sloppy chart patterns where stocks are moving out of. Unfortunately, these tend to fail and do signal the market is headed for another turn. There are a few stocks that have made nice runs from the March bottom, but it is time to see these stocks setup in clean bases. Breakouts have a better probability of success when it is from a sound base rather than a sloppy base.

Keep your eye on the ball.

top longs/(shorts) w/ TOTAL returns since PURCHASE making me money TODAY: SIGA 21% THM 20% FIRE 32% SOLR 36% ASCA 42% ARST 20% (MOS 47% CHTT 15%)

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Thursday, May 07, 2009

A Very Nasty Reversal Hits Stocks With Volume Higher Across The Board; Today Was The First Time Both Indexes Fell Hard On Volume Since The March Rally

I have not done commentary for a while because things were pretty steady there for us since the March lows. Basically all that we have had to do was just manage our longs and our profits as those longs gave them to us. However, what happened on Thursday was a little different than what we have seen before on previous selloffs.

On previous selloffs that we have had, we have either had one or the other index selloff on heavy volume or when the indexes sold off it was on pretty light volume. Thursday, however, came on heavy volume for both indexes. Not only that but stocks like TSYS, SWHC, and NFLX are just some of the examples of how leading stocks were treated on Thursday.

Now, do not get me wrong, we still have a lot of solid charts out there that tell us to stay pat and not get too spooked on this one selloff. However, at the same time, I must say that I have not seen a pullback during this previous uptrend that has given us as much reason for concern as this one has. Just the fact that leading stocks and my best looking stocks had such a poor day tells me that today was just not a weak day for lagging stocks. It was a weak day for all stocks.

The biggest problem in this rally, for me personally, has been the lack of max-green BOP filled charts with wonderful price/volume action. With that, at the same time, leading stock have lagged the ENTIRE rally. If you go back to November, when some indexes bottomed, you can see that the IBD 100 and IBD 8585 continued to selloff into the March lows.

When we finally hit the March lows and the Nasdaq and SP 600 hit recent lows and ran hard (up around 45% for both indexes) the IBD 100 and IBD 8585 did not lead at all. Sure, there might have been a day or two but a day or two does not a rally make. If this rally was for real, you would be able to take one look at the IBD 100 and IBD 8585 and go "yep, those indexes sure are stronger than the overall market." This would appear with a RS line that was in an uptrend off the lows (not a downtrend like this is) and an IBD100 and IBD8585 index in a steeper uptrend. Instead these indexes uptrend has been very much sideways.

Now with today's selloff added to the recent stall the past couple of days on these indexes and NOW it appears that the indexes are rolling over. If that is the case, I still have 20 shorts and am ready to add to those gains and pick up more shorts while getting rid of my longs. But I have to admit it would be nice to keep my 25 longs and get rid of the remaining shorts. Either way, it doesn't really matter because these positions still make up a very short amount of my portfolio.

Well, if I don't have a lot of longs and I don't have a lot of shorts, what do I have a lot of? That's easy at these levels: cash! Cash is still the asset I hold the most of because all during the rally I waited and waited and waited and waited for my max green BOP charts to build with TIGHT bases. At the same time, I waited for high quality CANSLIM longs to setup and breakout of proper basing patterns that were high quality. We did run into some of those and more worked than did not. However, the few that worked did not put in a ton of "impressive" gains. Instead small gains and maybe a 20% here and there and we call ourselves lucky. That sure is a LOT less than we used to get in previous uptrends.

Maybe we got too many bulls too quickly. Last week, in the middle of the rally, we were comforted by knowing that bulls beat bears on the AAII poll and on the Investors Intelligence poll (36% bulls to 37.2% bears). However, this week, the Investors Intelligence poll shows 40% bulls and 35% bears which shows that some are starting to embrace this bounce. Not only is this embrace not wise by some but it is dangerous. Some are getting long without any resolve to where they are going to cut their lost. The good news about BigWave investing is that if you have a gain you let it ride...unless it took too long to get the 20% gain at first...and if you have a loss you get wrong of it quickly.

Stay patient, stay flexible with a bias to both longs and shorts but mainly to cash, and remember this too shall pass and we will have a market that rewards patient and smart investors. Remember, Jesse Livermore clearly stated that the big money was made only ONE WAY for him: in his sitting. It was never his trading that made him the BIG money he said. It was ALWAYS his sitting. Sitting during a big uptrend (like TASR in 03 or LMLP in 99) on the long side, sitting in a big downtrend (like CETV and CEDC 2008) on the short side, and sitting on cash when the market was in no trend whatsoever other than a painful chop for those forced to be long or shorts. Aloha and GREAT LUCK!! :)

--Joshua Hayes, CEO BigWaveTrading Capital Management


Wednesday, May 06, 2009

IBD Indexes Lag, Along With The Nasdaq, As The Market Starts To Feel Toppy On The Short Term; Individual Stock Charts Look Great And A Low Volume Pull

By Market Speculator

Today was owned by the banking sector as the "Bank Stress Tests" were released today. By in large this stress was viewed vastly different from all sides of the aisle. Regardless of anyone's opinion, the market's opinion was positive as banks roared higher pushing the NYSE composite Index and S&P500 higher. Lagging behind was the NASDAQ composite index and the IBD indexes. It shouldn't be a major surprise seeing the banks leading for one day as the stress tests showed most banks can withstand further downside, but we'll need to see leadership from the IBD indexes. Once again, we did see major support for the NASDAQ and other indexes showing there is a bullish tint to this market.

It would be fabulous if we could simply settle and consolidate at these current levels. This market has made a long run from its lows and its time we head sideways for a week or two. However, this Friday we'll see the latest employment figures from the government and it is sure to set the market in one direction or another. At this point, if we could simply get quiet action with the NASDAQ holding its 200dma it would be quite constructive. It would allow the IBD 100 and IBD 85/85 indexes to retake the lead in this market.

The fever over the banks is quite a picture to look at. Taken into context the ENTIRE FINANCIAL sector was essentially blown up since November of 2007. They have been due for a rebound from the constant downtrend. At this rate, we'll see bank stocks running towards their 200dma.

What is has been largely overshadowed by the banking sector are the Chinese related stocks. We are seeing some very nice action coming from stocks who are in China. Remember, China had VAST RESERVES (aka Savings) to prop up there economy. Savings is what drives innovation and production not DEBT. Therefore, the action we are seeing from China is driven by a sound economic position. This surge we are seeing from their investment from savings is sustainable unlike the United States which is using DEBT to spur investment. Unfortunately for Americans, we'll fall further behind the Chinese as they benefit from their savings.

The market will be looking towards Friday Employment figures and should provide us with a little breathier tomorrow. However, anything is possible and we are ready for anything to happen.

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Tuesday, May 05, 2009

Stocks Find Support off Lows; NASDAQ Holds Its 200 Day Moving Average

by Market Speculator

Stocks were hit hard from the onset, even leaders found themselves being sold. Ben Bernanke was testifying on the hill while traders were dumping stocks. Selling accelerated as the day wore on but were able to find footing prior to lunch time. Stocks then were hit hard after 2pm hitting new lows but support was able to come in. Stocks once again were able to avoid a nasty distribution day if the NASDAQ had gone out on its lows. This market is once again proving there is an underlying bid to the market.

Two key levels were held today and an important moving average. The NASDAQ was able to hold 1750 which happens to be its 200 day moving average while the S&P500 was able to hold a psychological level of 900. Holding the 200dma is very important level for the NASDAQ as it appears we might be able to produce consolidation above this moving average. It would be a very bullish sign for the NASDAQ to consolidate at this level. Same is to be said about the S&P500 and the 900 level as consolidation above 900 would label it a support level. It is a wait and see game but so far we are seeing bullish action.

Some leading stocks were hit hard in the morning hours, but patience was rewarded as many found support. Leading stocks will always get support in a relatively strong uptrend. Remember, we are coming off lows that were well over 50% of the highs. That kind of damage will ruin many stocks. Another bullish sign is our leading stocks finding support.

One ratio to highlight here is the number of new highs 71 that were hit today while only 12 new lows were observed. New highs are continuing its winning streak by dominating new lows. This ratio must be taken into consideration, remember we have rebounded from an incredible downturn and the expectation to see a massive amount of new highs is unrealistic. Pay attention to the actual ratio and it is showing a bullish tint to this market.

top longs/(shorts) w/ TOTAL return since my FIRST purchase making money TODAY: ANCI 83% ASCA 46% INOD 38% LFT 35% SIGA 27% ARST 22% PALM 22% RGR 25% AIPC 26% (CYT 55% TITN 48% OKE 37% POT 40% MANT 32% PG 21%)

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Monday, May 04, 2009

Stocks Soar on Higher Volume Led by NYSE Composite and Mid-Cap Stocks

By Market Speculator

From the open bell to the close stocks were being accumulated. Institutional players stepped up to the plate with cash from the sidelines. Leading the way was the NYSE Composite index up 4.16% followed by the S&P 400 (Mid-Cap) up 4.15%. Small caps weren't far behind. Volume was up double digits (percentage terms) acorss the board marking a heavy accumulation day.

While Small and Mid-Cap stocks were the highlight of the day it is important to note the NASDAQ composite index was able to retake its 200dma on higher volume. A very important and highly positive move for the index. Although the NASDAQ has been the leading index it lagged today as other indexes are now playing catch up. Since the follow-through day the NASDAQ has been the index who has seen the accumulation. It will be important for the NASDAQ continue its lead.

Leading stocks are continuing to shine through, but the majority of that light is coming from China. China has been leading the world's stock markets higher and have been under a tremendous amount of accumulation. We are certainly seeing this translate into the Chinese ADRs who are traded on our markets. These stocks are, if not already must own stocks by mutual funds. China is the only country in the world with MASSIVE reserves and they have the ability to take those savings and pump them back into their economy. Unlike the United States that has to borrow, China will simply use its savings and drive new investment. Continue to pay attention to these leaders as they will help push this market higher.

The important note here is to pay attention to leading stocks and how they are responding to the market. At the moment, they are leading and building bases. It will be important to continue and watch their action and take advantage of the situation. This market is acting awfully bullish, keep your eye on the ball and keep losses small.

top longs/(shorts) w/ TOTAL returns since 1ST purchase making me money TODAY: ASCA 37% KONG 30% SOLR 41% FIRE 26% RGR 21% INOD 29% (MANT 32% DV 25%)

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Sunday, May 03, 2009

The Nasdaq And SP-600 Make It Eight In-A-Row With Weekly Gains As More And More CANSLIM Quality Longs Begin Setting Up In Proper Bases; The Crowd Sure

So the Nasdaq snagged that eighth-straight week of gains after all. A flurry of buying at the end of the session saved the day. That the IBD 100 led the way with a 2.8% gain for the week is what impresses me though. According to my records, there were 62 winners to 38 losers. GMCR, of course, went on the warpath to the tune of a 35% plus gain, leaving in its wake the carcass of many an unwise short-seller. Even before blowing away earnings, GMCR had printed a new all-time high and formed a very bullish three-weeks tight pattern. I remember quite clearly Bill O’Neil being asked at a workshop last December what most caught his attention when he looked at a stock’s chart: “Tight closes,” he said. “When you see tight price action you’re seeing institutions at work.” Guess those GMCR short-sellers didn’t make it to that workshop. Maybe next time.

Something else that impressed me was that the American Association of Individual Investors (AAII) reported their members had only 41% of their portfolios in stocks. Apparently, this is the lowest amount devoted to equities in AAII history. 40-50% sell-offs have a way of doing that. While equity allocation was at its all-time low, cash levels were at an all-time high: 45%. This has never happened before. It all makes sense if you recall that just a few days before the Follow-Through Day the AAII came out with a report showing 70% of respondents expected the market to continue to tank. This was the highest level of bearishness the AAII had ever seen.

This continued agnosticism, however, is intriguing. Looking at the monthly charts of, say, TNDM, LFT and ARST, I can’t help but wonder what they are waiting for.

As I write this, the Asian markets have jumped quite a bit. We shall see if this carries over to our markets. If so, we might be chalking up week number nine in a row for the Nasdaq when it’s all said and done.

--John "Author Ego" Ward, BWT analyst

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top longs/(shorts) w/ TOTAL returns since FIRST purchase making me money TODAY: FIRE 25% KONG 20% SOLR 28% LFT 25% INOD 22% ANCI 86% (CYT 62% MANT 30% DV 22% CHTT 17% MCY 17%)

Friday, May 01, 2009

A Weak Day For The Market Indexes Has A Silver Lining As Leading Indexes Outperformed The Market With The IBD 85-85 Closing Up 1.5%+ And The IBD 100 F

Commentary by John Ward

Well, Investor’s Business Daily published an interesting fact in the “Big Picture” column tonight:

“In the past 22 years, the Nasdaq has made eight-week win streaks only six times. Only three of those times did the streak extend past the eighth week.” So if the Nassy can eke out a gain today, my friends, that will make it eight straight weeks of gains. From there it’s 50-50. It could go either way.

Still, if you think that today marks the end of the rally just because the Nasdaq got rejected at the 200 day moving average, I would like to call your attention to the Shanghai Composite, to my mind the world’s leading index. Back on February 17 it too was rejected at the 200 day. It fell back to its 50 (roughly a 10% pull back), only to find support. Look at the chart today. It has since broken above the 200 day and run up about 20%.

Now, given that the Nasdaq’s 50 day has turned higher over the past month (just as the Shanghai’s had in February) it is not unreasonable to think that should the Nasdaq correct it will most likely be about a 10% pullback. Whether it would be supported at the 50 day remains to be seen. Yet it could very well be that we’re just a few of months behind the Shanghai Index. Frankly, I would love to see us pullback to the 50 day. That wouldn’t be bearish. Far from it. I’ll explain why:

In the April 16 Market Commentary, I pointed out that I was watching CANSLIM-quality stocks such as VNUS, VPRT, RMG CYBS, LL, BKE, POWL to see how the market treated these kinds of equities, as it would go a long way in determining the health of the overall market. Well, I don’t know if you’ve taken a look at these stocks lately, but they’ve more than held in there. Couple this with the likes of TNDM, GMCR, NTES, STAR, etc., and I just can’t see being afraid of a pullback here. It would actually be very healthy.

Think about it: if the market pulls back and these sorts of stocks can form handles or three week tight patterns or flat bases, this will cause RS Lines to hit new highs well ahead of price. Then if the market indeed follows the lead of the Shanghai Composite and rallies again, you will get some absolutely beautiful-looking breakouts. Tell me how bullish would that be? More than that, I have no doubt that a 10% pullback would turn many traders bearish, cause the VIX to spike and the Put-Call to rise. Nothing would make me happier.

Could it all fall apart, though? Could these CANSLIM-type stocks all get blown out of the water? Well, yes, but is that what your charts are telling you? So whether you want to call this a “bear market rally’ or just a rally, there is just no denying that it has been nothing if not strong. The rest is just semantics. Jesse Livermore eschewed the terms “bull” and “bear” because they foist upon one a bias that causes the mind to be less flexible. That’s why he used the term “line of least resistance” instead. I’m guessing a lot of people are dismissing this rally simply because they’ve missed it. Missing and then dismissing the gains is what they do best. You’d think it was beneath them to go long a “bear market rally.”

All I know is that my account doesn’t know or care to know the difference.