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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