Saturday, August 22, 2009

Factory Index Gives a Boost to Stocks

Just no quit in this market, stocks rose for the third straight day as positive news from the Philadelphia Fed Factor Index rose unexpectedly. In other economic news jobless claims rose as well giving some concern a recovery jobs has yet to materlize. The 3+ million jobs President Obama promised with the stimulus has netted a loss of over 2 million jobs. Historically speaking jobs is a lagging indicator and we continue to see jobs being lost. Volume was mixed in the morning with a buying surge on the NASDAQ while the NYSE was quiet. As the day wore on the tide shifted towards the NYSE as volume picked up while the NASDAQ volume drifted lower. Although volume was lower on the NASDAQ it was still a bit higher than Monday and Tuesday's volume showing buyers continued to step in. A very nice day for stocks as leaders kept pace as well as new leadership groups emerging.

We are heading into options expiry Friday while existing home sale data will be released. More often than not, odds are, volume will more than likely be skewed to the upside. Friday happens to be Day 5 of this rally attempt from Monday's global sell off and options expiry might skew the volume enough to where we could find ourselves following through confirming the rally attempt. The ideal situation would for the market to simply inch back to Monday's lows (a few weeks to do so) and begin another rally attempt. This would allow our leaders to set up in proper bases and not shoot up from 1-3 week bases. At any rate, we can dream of ideal conditions, but focusing on what is and going with the trend is the proper course of action. If we follow through tomorrow so be it and we'll take it from there.

Hard to imagine what a week does to stocks, but looking at a weekly chart we are back where we started last Friday. After Monday's hiccup stocks have been pushed higher; the NASDAQ flashing signs of accumulation. This market is ready to dish out blows that can come from any where and we better be ready for it.

Looking at secondary indicators in the market we can see New Highs aren't quite up to other bull market standards. This doesn't have me worried too much because there has only been 3 other occasions in the history of the stock market where stocks fell more than 60% across the board. Putting this rally into context with other great bear markets it is quite conceivable we'd see a lagging New Highs compared to more recent bull markets. Even the put/call ratio really isn't show extremes on either side which leads me to believe the market is finding equilibrium between sentiment. There is one story out there and that is the VIX's failure to keep above its 50dma. This may be an overlooked area but in 2003 the VIX had a terrible time with its 50dma as well. It continued its slide into the teens from well above 30. These areas are secondary to price and volume action and should be treated as such. No one indicator will ever take over price and volume.

Enjoy your Friday and make sure you cut your losses short.

top longs up TODAY w/ total returns since 1st buy: DAN 224% KONG 133% CAR 101% FIREE 115% ATSG 125% CAMP 86% TEN 82% CHBT 21% BZ 39%(79% EARLY) NAVI 23% LAD 47% VOCL 26% CISG 23% FUQI 36% RINO 20% GRRF 20% OMN 43% OPWV 26% IILG 25% OGXI 21% ACTG 56%

Wednesday, August 05, 2009

Late Day Support Kicks the NASDAQ into Positive Territory as Small Caps Take Charge

Small caps continue their reign over larger cap stocks as small cap indicies notch very nice gains. Going against the common thought of a pull back stocks continued their march higher despite the majority calling for a pullback. Just about 2pm EDT stocks took a dive, as the NASDAQ headed back to the 2000 level. Buyers stepped up to the plate showing their support and as the late day surged grew so did volume. More importantly, leadership is strong and is showing the strength needed for this market to continue moving forward. In the face of the market needing a pull back it thrusted forward with leaders out in front.

Regardless of whether or not this market needs a pullback I immediately point to the leadership of this market. They will be the ones telling you the health of this market. At the moment, we are seeing big stock leadership taking over this market suggesting institutional cash is beginninig to flow steadily back into the market. Off the March lows we simply saw a junk-off-the-bottom rally where many shorts were being forced out of their positions due to extreme price action in many stocks. Whether or not the selling was "overdone" it sparked a fierce short-covering rally that is on its last legs. This is why it is extremely important for big stock leadership to emerge because without their leadership this market would wilt and roll over.

At this point, if we begin to roll over or go higher I welcome any move the market decides to make here. The market and leading stocks will guide me through the waters of this market. At the moment, it simply appears the fat is being trimmed off and the true leadership is beginning to emerge from the bottom. It won't be long before many of these leaders will show tremendous strides and possibly turn into Monster Stocks. While this may not be a perfect bull market it is certainly a bull market that is trying to shed its excess fat. We'll be on the stocks that are making their moves.

There is no need to get cute with this market, trying to plow into stocks that are extended or short stocks anticipating a turn is downright dangerous. Carefully planned execution and picking the right spots to get long is what is warranted. I do believe this market will continue on its upward path before seeing any type of major correction. Since 7/8 Day 1 of this most recent rally attempt the market has yet to see any distribution yet it has seen more than a few accumulation days. It is this type of action that indicates to me this market will continue its upward trend.

Always remember to cut your losses, you never want losses to take out your trading capital.

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