Stocks started the day off on a very positive note thanks to a couple of big merger rumors and more positive earnings from top stocks that outweighed the poor jobs report. Reports that MSFT wants to buy the search engine YHOO (around a $50 billion transaction) and that RTRSY is being offered takeover bids possibly by Thomson Financial definitely put a fire to a market that is just flush with M&A activity. Great earnings from CROX FSLR UEIC PCLN and RIO did not hurt either.
Good news from the micro could not be found in the macro today. The April jobs report showed only 88,000 jobs were added this month. This was below the 100,000 expected by pundits and was the smallest increase in two years. This is another sign that the economy is starting to slow down. Unemployment ticked up to 4.5% and average hourly earnings rose .2% below expectations of .3%. This can be taken as slightly positive since it does not show rapid inflation in wages.
The good start gave way to a midday reversal that was quickly supported by the dip-buyers, possibly thanks to another fall in oil, and they proceeded to abid stocks up in a choppy fashion into the close. Oil fell $1.26 to $61.93 ending a week where crude oil fell a total of 6.8%. That obviously is good news for consumers.
At the closing bell the SP 600 led the way hitting an all-time high with a .5% gain, the NYSE followed also hitting an all-time high with a .4% gain, the Nasdaq neared 7-year highs closing with a .3% gain, and the DJIA hit an all-time high and the SP 500 came near a 7-year high gaining .2%. Growth investors had a lot to be thankful for today as the IBD 100 led for the third session in-a-row with a .8% gain.
Volume was slightly higher on the Nasdaq by about 2% and for the second day in-a-row the NYSE’s volume came in lower. That is a slight negative divergence with the NYSE hitting all-time highs the past two sessions on lighter volume. However, breadth was very positive which does put a slight positive spin on the lower volume. Advancers beat decliners by a 3-to-2 margin on the NYSE and by an 8-to-7 margin on the Nasdaq. There were a healthy amount of new 52-week highs with 609 and even though there were 66 new 52-week lows the fact that they didn’t expand on an up day is good enough.
For the week the DJIA led the way higher with a 1.1% gain, the NYSE followed with a .9% gain, the SP 500 and the SP 600 rose .8%, and the Nasdaq lagged with a .6% gain. The IBD 100 finally did something two weeks in a row that it has not done for months–lead the market. The IBD 100 gained 1.2% for the week, outpacing the DJIA by a tiny amount. However, that is not nearly as impressive as the fact that the DJIA is up 23 out of the past 26 sessions (I have not checked but I think I got that wrong yesterday) and has hit record highs in seven of the last eight sessions. The current streak of 23 up days out of 26 is one short of the record set in 1927 when it was 24 for 27. Get your “24 for 27″ rally hats on (not really–there is no need to cheer).
I have to admit, last week was one of the more exciting weeks I have been a part of in a while. I am not sure why but I believe it has to deal with the fact how confused everyone seems to be about this market. I have to admit I am not a genius to know why we are rallying. But I am smart enough to know that that is all I really need to know. While I continue to go long stocks, I still see a lot of people hesitant to buy stocks here.
I have to admit, I am, in my IRA. But in my regular accounts I am not afraid at all. There were only two stocks that I am going to have to completely sell-off yesterday due to breakdowns. One was E** (4% loss) and the other was I*** (8% loss). I scaled into INXI so that position did not hurt me and then EDS was bought so close to the 50 dma that that did not hurt me. It is hard for me to be bearish on that. But what I can take away as bearish is the fact that both of these stocks had BEAUTIFUL charts and had strong fundamentals. I have not seen such pretty charts with strong fundies breakdown like that since late February.
So how does that prove the crowd is bearish? It doesn’t. This does: The AAII survey came in with 55% bears this week which was the number seen at the July lows. There were only 29% bulls in the survey. Even though this survey is very fickle it still shows how bearish the crowd is still. If that doesn’t convince you the crowd is bearish let’s take a look at their actions.
The put/call ratio is still above the .6 area at .75. Until the number is below .6 it is hard to say that the crowd is not making bearish bets. And the biggest piece of interesting figures I could find on how investors are actually investing came from AMG. They report that mutual funds had outflows of $5.41 billion for the week ending on May 2. First quarter mutual fund inflows are down 30% from last year!! You do NOT see mutual fund outflows at the top of a market. So when people remind you that this market feels like 1999–it may in fact feel that way, but in 1999 mutual fund inflows were pouring in. It wasn’t until well after the market top that the trend reversed.
Rolling with this theme it also becomes clear that many market pundits are nervous with the rally (I am slightly in the boat–but I still go with the trend). Don Hays, Al Goldman, David Peroni, Dick Arms, James DePorre, Cody Willard, and a few others are issuing either cautious outlooks and in a few cases are starting short positions and/or taking longs off the table. This along with Seeking Alpha’s data showing that sell-side analyst have SP 500 stocks as buys at the lowest level in over ten years!!! Did you get that. The sell-siders are not telling you to buy stocks yet. When they start issuing buys and strong buys, then we probably should be worried. For now it seems everyone is doing the worrying for us.
The other incredibly bullish working thesis this market has going for it is earnings. Earnings are now coming in at a 12% YOY increase, KILLING estimates of 3.2%. This was supposed to be the first quarter in fourteen quarters that earnings grew under 10%. Well have now erased that possibility and now it is 15 quarters in-a-row of stocks showing 10% or higher YOY EPS gains. This is the greatest economic story ever and it gets absolutely NO attention paid to it by the biased media. It is shameful and disturbing that people do not even understand how incredible it is that we are about ready to have 10% gains 15 quarters in-a-row. One more quarter like this and it would be a full four years of 10% gains. INCREDIBLE to say the least.
There can be no doubt about it, last week was an eventful wild week. What a week it was with all the M&A announcements and speculations, great earnings reports, record high closes, and economic data. Of course the big story of the week was the NWS bid for DJ. That clearly showed the bears that this market is for bulls only. Anyone short any stock should take a look at a giant stock like DJ, see how it acted on the news, and then reevaluate why you are short.
A pullback would be very nice here to help setup some nice proper green bases so that stocks can blast out of them when the rally starts again. But if there is no pullback, still demand that you buy stocks coming out of great bases or are bouncing right off of the 50 dma on big volume. The longer we go without a pullback the harder it is to find a lot of perfect stocks setting up in perfect bases.
The one thing you must not do here, unless you are very experienced, is to chase momentum. That game is for the daytraders who can use leverage and get in and out of positions at lightning speed and still make a ton of money. Unless you have mastered the smooth style of a CANSLIM based system, I doubt it is worthwhile for you to try daytrading the highflyers. And the absolute thing you MUST NOT do is short the market or go short stocks in uptrends. AMZN, DNDN, DJ, and RTRSY are all good reason to not short this market.
Have a great weekend. Let’s hope that next week isn’t as jam packed with so much market moving news. I need a break. Aloha and enjoy your weekend! I will see you in the chat room. Aloha!!
Market Commentary At Big Wave Trading Bronze Level One
New Swing Longs: Silver Level Two
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
Top Holdings - Date Of Purchase
KNOL 393% - 1/12/06
TRCR 282% - 1/12
PTT 282% - 11/16
TNH 178% - 10/26
MA 171% - 8/2
TTEC 167% - 8/25
JSDA 136% - 12/20
IGLD 123% - 10/26
ANO 116% - 2/14
ULTR 111% - 10/27
HRZ 108% - 9/27
CPA 104% - 9/15
MFW 103% - 1/29
ONT 102% - 12/21
PAE 101% - 3/22
EVEP 99% - 11/16
BAM 99% - 11/17/05
HURN 79% - 9/13
KHDH 77% - 5/30
CXW 77% - 5/19
DECK 71% - 9/13
IMMU 69% - 12/19
VDSI 66% - 1/4
CNH 64% - 11/2
IMKTA 54% - 8/28
CLRT 54% - 11/30
NSH 54% - 12/19
CKSW 53% - 10/11
MNTG 52% - 11/9
LFL 52% - 12/13
Showing posts with label returns. Show all posts
Showing posts with label returns. Show all posts
Saturday, May 05, 2007
Saturday, April 28, 2007
Stock Indexes Close Mixed And With Little Change, On Lower Volume; DJIA Up 19 Out Of Past 21 Sessions
Despite amazing earnings reports from BIDU, MSFT, VSEA, MFW, DV, TEX, MTD, NOV, VLCM, NTGR, and DRIV, stock indexes decided to focus on the early morning GDP report and opened flat to slightly lower. GDP growth came in at 1.3% in the most recent quarter, down from economist 1.8% expectations and a four-year low. The poor GDP reading and the fact that YOY inflation is running at 2.2% definitely had a slightly negative impact. This poor reading helped the Euro hit a record high against the US dollar. The poor numbers were enough to keep the market choppy most of the day but the DJIA still hit another all-time high.
At the close the DJIA and the Nasdaq led the way higher with .1% gains, the SP 500 finished flat, the NYSE fell .1%, the SP 600 fell .3%, and the SP 400 led the way lower with a .4% drop. Leading stocks, in the form of the IBD 100, did not lead to the upside but they did not lead to the downside either, falling .2%. A respectable showing.
The most impressive index out of the group continues to be the DJIA. The DJIA is now up 11 of the past 12 days and up 19 of the past 21 days. This is only the third time in the past 110 years that this index has closed up 19 of the past 21 days. The other two times? 1927 and 1929. How did that turn out? I think if you have done any research on your own, you know how it ends.
Volume was lower across the board, with volume coming in lower on the NYSE by about 12% and lower on the Nasdaq by about 14%. The most troubling of today’s action was breadth. Breadth was negative across the board and negative by a fair amount, despite the small gains and losses. Decliners beat advancers by a 4-to-3 margin on the NYSE and by an 8-to-5 margin on the Nasdaq. This negative divergence in breadth has been a constant theme all week long. New 52-week highs came in at only 388 but new 52-week lows were only at 68. So at least the new lows did not expand.
For the week, the DJIA and the Nasdaq led with 1.2% gains, the SP 500 and SP 400 followed with .7% gains, the SP 600 rallied .4%, and the NYSE gained .1%. The best news came from leading stocks. The IBD 100 gained 1.6% on the week, finally outpacing the broad market. This impressive week gave the indexes their fifth up week in the past six weeks and the fourth up week in-a-row. This market is clearly starting to enter a semi-crazy phase.
Despite the market not making much headways the past two days, there have been an insane amount of action in individual stocks during that time. Many stocks are gapping up and continuing to rally afterwards after reporting great earnings. Other stocks are going into climax runs which is starting to produce some substantial gains in a lot of the old leaders in metals and other steel related stocks. You can see a list of these climax runs on the Gold forums, if you are a subscriber. It is best to look at the stocks listed on an arithmetic chart going back to 2002. There you can clearly see that a lot of stocks are going on climax runs after years of strong gains. These kind of moves happen when too many people are shorting rising stocks. With the put/call still at .84 it is clear people are still betting against stocks even as they rally.
Another clear sign of out-of-control momentum can be found in China’s Shanghai index and the stocks in that index. A gold subscriber Randyy has posted an index chart and three charts of stocks clearly in parabolic rises. His charts are just as pretty as the charts in TC2007. I definitely recommend taking a look if and when you have a chance. You can clearly see it is getting down-right scary the mania that is going on in China.
The other thing about this insane rally is that the DJIA is clearly the leader now. The fact that after four plus years of gains that the DJIA is now leading clearly shows that we are near the end of this great bull market. The only positive to come with the DJIA gains is the fact that small cap stocks are still moving higher. As long as small caps and leading stocks can keep pace with the DJIA I doubt the top is going to happen tomorrow or very shortly. There is probably still plenty of time left for stocks to rally, even with the crowd getting more bullish and less bearish.
Since I go with the trend (ALWAYS) of the market, this market has been treating me very well recently as many of my top holdings representing significant portions of my account make substantial gains at this point in the rally. Still, back in 2003 when this rally started, people were bearish everywhere and I had charts breaking out of beautiful patterns on strong volume that made gains immediately. Despite being very long still, the recent buys simply don’t explode like they did when this whole thing started. The other clear thing about that rally was that everything was clicking on ALL cylinders. The only thing that was constant was the bearishness as stocks rose.
This time the crowd is very bullish and there are many warning signs that are starting to show up underneath the recent price gains. Some clear negative divergences that I am worried about are the relative strength of the Nasdaq and IBD 100 lagging well behind the SP 500, the moneystreams (technical indicator in tc2007) in the indexes are making lower highs with prices making higher highs, the amount of new 52-week highs keep decreasing on every new high in the markets (Nov-Jan-April), breadth is starting to be negative everyday even during the days when stocks rise, sentiment indicators are all bullish (realmoney, marketvane, investors intelligence, and AAII), GDP is trending down, and earnings growth is below 10% for the first time in four years. This is all troublesome. None of this existed during 2003 when this rally started.
The positive are few but still very important. The fact that the put/call is at .84 shows that the traders are still shorting this rally and the VIX is still not at new lows, despite the markets being at higher highs. There is more volatility in stocks right now which are producing better gains than the gains from August to late February. This is a positive but is typical of markets in speculative stages. This divergence however positive right now is actually bearish in the long-term as it shows the market is setting itself up for a dramatic move; that move would probably be lower, since the VIX is trending higher.
So to sum things up, this market is still trending higher and we must continue to be long here for some potential huge gains. But the fact that the DJIA is up 19 out of 21 and that hasn’t happened since 1929 is just showing you how insane this market has gotten. We are clearly in a very speculative stage and with all the breakouts I am still getting there should be more upside, but we must be ready for the eventual sell-off. When that happens it is probably going to be very ugly.
It is going to get ugly because everyone I know is long the stock market now and all the perma-bears that used to be around in all the chat rooms that I monitor are now virtually gone. There is also very few people talking about the possibility of the bubble popping. Instead I am starting to hear those famous words: it is different this time. Sure it is! Sure it is!
The one thing I want to make sure is that people that are thinking of going long DJIA stocks here should NOT move their portfolio into these stocks just because they are outperforming on the short term. Over the long-term it is clear that top stocks that breakout from sound chart patterns and that have great fundamentals via earnings, sales, ROE, and profit margin clearly outperform these stocks in the long run. Don’t forget, despite the DJIA beating the IBD 100 the past three months, since May 2, 2003 the IBD 100 index is up 164.5% compared to the SP 500’s 59.6% gain. It is clear where the big money is made: in top stocks.
There are more earnings and a lot of economic numbers coming up this week so traders are sure to have plenty of reasons to move stocks all over the place. Even though I don’t like all the negative divergences I have, as long as the trend is up I will keep riding it. Maybe the old axiom of sell in May and go away will come to fruition but until it the actual selling shows up it remains foolish to sell now. There is still a very high wall-of-worry out there for stocks to climb.
Aloha and I will see you in the chat room!!!
Market Commentary At Big Wave Trading Bronze Level One
New Swing Longs: Silver Level Two
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
Top Holdings Up This Week - Date Of Purchase
KNOL 353% - 1/12/06
TRCR 265% - 1/12
AKAM 191% - 9/30/05
TTEC 171% - 8/25
TNH 156% - 10/26
JSDA 155% - 12/20
MA 128% - 8/2
HRZ 115% - 9/27
MFW 109% - 1/29
ONT 105% - 12/21
MEH 102% - 8/30
IGLD 101% - 10/26
CPA 101% - 9/15
EVEP 98% - 11/16
ULTR 97% - 10/27
HMSY 94% - 6/23
ANO 94% - 2/14
PAE 90% - 3/22
CLRT 86% - 11/30
EPHC 85% - 12/20
LTS 85% - 1/11
BAM 83% - 11/17/05
MOS 82% - 10/12
KHDH 78% - 5/30
VDSI 72% - 1/4
CXW 71% - 5/19
PERY 65% - 10/4
CNH 64% - 11/2
DECK 62% - 9/13
IMKTA 61% - 8/28
XOMA 60% - 1/12
SLP 58% - 2/5
RKT 55% - 12/4
MNTG 55% - 11/9
TESO 51% - 2/16
At the close the DJIA and the Nasdaq led the way higher with .1% gains, the SP 500 finished flat, the NYSE fell .1%, the SP 600 fell .3%, and the SP 400 led the way lower with a .4% drop. Leading stocks, in the form of the IBD 100, did not lead to the upside but they did not lead to the downside either, falling .2%. A respectable showing.
The most impressive index out of the group continues to be the DJIA. The DJIA is now up 11 of the past 12 days and up 19 of the past 21 days. This is only the third time in the past 110 years that this index has closed up 19 of the past 21 days. The other two times? 1927 and 1929. How did that turn out? I think if you have done any research on your own, you know how it ends.
Volume was lower across the board, with volume coming in lower on the NYSE by about 12% and lower on the Nasdaq by about 14%. The most troubling of today’s action was breadth. Breadth was negative across the board and negative by a fair amount, despite the small gains and losses. Decliners beat advancers by a 4-to-3 margin on the NYSE and by an 8-to-5 margin on the Nasdaq. This negative divergence in breadth has been a constant theme all week long. New 52-week highs came in at only 388 but new 52-week lows were only at 68. So at least the new lows did not expand.
For the week, the DJIA and the Nasdaq led with 1.2% gains, the SP 500 and SP 400 followed with .7% gains, the SP 600 rallied .4%, and the NYSE gained .1%. The best news came from leading stocks. The IBD 100 gained 1.6% on the week, finally outpacing the broad market. This impressive week gave the indexes their fifth up week in the past six weeks and the fourth up week in-a-row. This market is clearly starting to enter a semi-crazy phase.
Despite the market not making much headways the past two days, there have been an insane amount of action in individual stocks during that time. Many stocks are gapping up and continuing to rally afterwards after reporting great earnings. Other stocks are going into climax runs which is starting to produce some substantial gains in a lot of the old leaders in metals and other steel related stocks. You can see a list of these climax runs on the Gold forums, if you are a subscriber. It is best to look at the stocks listed on an arithmetic chart going back to 2002. There you can clearly see that a lot of stocks are going on climax runs after years of strong gains. These kind of moves happen when too many people are shorting rising stocks. With the put/call still at .84 it is clear people are still betting against stocks even as they rally.
Another clear sign of out-of-control momentum can be found in China’s Shanghai index and the stocks in that index. A gold subscriber Randyy has posted an index chart and three charts of stocks clearly in parabolic rises. His charts are just as pretty as the charts in TC2007. I definitely recommend taking a look if and when you have a chance. You can clearly see it is getting down-right scary the mania that is going on in China.
The other thing about this insane rally is that the DJIA is clearly the leader now. The fact that after four plus years of gains that the DJIA is now leading clearly shows that we are near the end of this great bull market. The only positive to come with the DJIA gains is the fact that small cap stocks are still moving higher. As long as small caps and leading stocks can keep pace with the DJIA I doubt the top is going to happen tomorrow or very shortly. There is probably still plenty of time left for stocks to rally, even with the crowd getting more bullish and less bearish.
Since I go with the trend (ALWAYS) of the market, this market has been treating me very well recently as many of my top holdings representing significant portions of my account make substantial gains at this point in the rally. Still, back in 2003 when this rally started, people were bearish everywhere and I had charts breaking out of beautiful patterns on strong volume that made gains immediately. Despite being very long still, the recent buys simply don’t explode like they did when this whole thing started. The other clear thing about that rally was that everything was clicking on ALL cylinders. The only thing that was constant was the bearishness as stocks rose.
This time the crowd is very bullish and there are many warning signs that are starting to show up underneath the recent price gains. Some clear negative divergences that I am worried about are the relative strength of the Nasdaq and IBD 100 lagging well behind the SP 500, the moneystreams (technical indicator in tc2007) in the indexes are making lower highs with prices making higher highs, the amount of new 52-week highs keep decreasing on every new high in the markets (Nov-Jan-April), breadth is starting to be negative everyday even during the days when stocks rise, sentiment indicators are all bullish (realmoney, marketvane, investors intelligence, and AAII), GDP is trending down, and earnings growth is below 10% for the first time in four years. This is all troublesome. None of this existed during 2003 when this rally started.
The positive are few but still very important. The fact that the put/call is at .84 shows that the traders are still shorting this rally and the VIX is still not at new lows, despite the markets being at higher highs. There is more volatility in stocks right now which are producing better gains than the gains from August to late February. This is a positive but is typical of markets in speculative stages. This divergence however positive right now is actually bearish in the long-term as it shows the market is setting itself up for a dramatic move; that move would probably be lower, since the VIX is trending higher.
So to sum things up, this market is still trending higher and we must continue to be long here for some potential huge gains. But the fact that the DJIA is up 19 out of 21 and that hasn’t happened since 1929 is just showing you how insane this market has gotten. We are clearly in a very speculative stage and with all the breakouts I am still getting there should be more upside, but we must be ready for the eventual sell-off. When that happens it is probably going to be very ugly.
It is going to get ugly because everyone I know is long the stock market now and all the perma-bears that used to be around in all the chat rooms that I monitor are now virtually gone. There is also very few people talking about the possibility of the bubble popping. Instead I am starting to hear those famous words: it is different this time. Sure it is! Sure it is!
The one thing I want to make sure is that people that are thinking of going long DJIA stocks here should NOT move their portfolio into these stocks just because they are outperforming on the short term. Over the long-term it is clear that top stocks that breakout from sound chart patterns and that have great fundamentals via earnings, sales, ROE, and profit margin clearly outperform these stocks in the long run. Don’t forget, despite the DJIA beating the IBD 100 the past three months, since May 2, 2003 the IBD 100 index is up 164.5% compared to the SP 500’s 59.6% gain. It is clear where the big money is made: in top stocks.
There are more earnings and a lot of economic numbers coming up this week so traders are sure to have plenty of reasons to move stocks all over the place. Even though I don’t like all the negative divergences I have, as long as the trend is up I will keep riding it. Maybe the old axiom of sell in May and go away will come to fruition but until it the actual selling shows up it remains foolish to sell now. There is still a very high wall-of-worry out there for stocks to climb.
Aloha and I will see you in the chat room!!!
Market Commentary At Big Wave Trading Bronze Level One
New Swing Longs: Silver Level Two
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
Top Holdings Up This Week - Date Of Purchase
KNOL 353% - 1/12/06
TRCR 265% - 1/12
AKAM 191% - 9/30/05
TTEC 171% - 8/25
TNH 156% - 10/26
JSDA 155% - 12/20
MA 128% - 8/2
HRZ 115% - 9/27
MFW 109% - 1/29
ONT 105% - 12/21
MEH 102% - 8/30
IGLD 101% - 10/26
CPA 101% - 9/15
EVEP 98% - 11/16
ULTR 97% - 10/27
HMSY 94% - 6/23
ANO 94% - 2/14
PAE 90% - 3/22
CLRT 86% - 11/30
EPHC 85% - 12/20
LTS 85% - 1/11
BAM 83% - 11/17/05
MOS 82% - 10/12
KHDH 78% - 5/30
VDSI 72% - 1/4
CXW 71% - 5/19
PERY 65% - 10/4
CNH 64% - 11/2
DECK 62% - 9/13
IMKTA 61% - 8/28
XOMA 60% - 1/12
SLP 58% - 2/5
RKT 55% - 12/4
MNTG 55% - 11/9
TESO 51% - 2/16
Saturday, April 21, 2007
Stocks End A Very Powerful Week With More Gains; Volume Picks Up On Options Expiration Day
By MauiTrader
On Friday, stocks did what they have been doing all week, finding dip buyers that send the indexes higher into the close or at least higher than the open. A rash of good earnings from some big players like SLB GOOG AXP CAT and HON sent stocks higher at the open. But right after that very powerful gap higher, stocks started pulling back, as investors were quick to take some profits. However, once again, dip buyers came in and smart market makers did their best job to make shorting and put buying as painful as possible for the bears and sent stocks higher into the close. It was a very bullish options expiration.
At the close, the DJIA led the way with 28 out of 30 components up and hit all-time highs for the third day in-a-row, with a 1.2% gain. That makes it seven straight days and 15 out of the last 16 days this index has been higher. If that isn’t excessive, I am not sure what is. The SP 600 followed with a 1.1% gain, the NYSE was behind it with a 1% gain, the SP 500 rallied .9%, and the Nasdaq lagged with a .8% gain. It was another all-time high for the NYSE and six-and-a-half year highs for the SP 500 and Nasdaq. Other indexes hitting all-time territory include the Russell 2000, DJ Transportation Average, DJ Utility Average, and the SP 400. The SP 600 is a fraction away from all-time highs.
The good news from Friday, out of the world of leading stocks, was that the IBD 100 finally stopped its streak of underperformance, rallying 1.3%. It was a very nice change after eight of nine days of clear underperformance. Does that mean that growth investing is back in style? Probably not. We are four-plus years into a bull market. The small-caps have moved on to the big-caps. Your last leaders of secular bull markets.
Volume was higher on both exchanges, with volume rising 1% on the Nasdaq and by 18% on the NYSE. The higher volume finally gives the market a good accumulation day but the volume was driven higher, without a doubt, by all the options expiration activity. Without that activity, it is doubtful that the gains would have come on higher volume, especially on the Nasdaq.
Internals were very bullish, for a change this week, with advancers beating decliners for the first time in three sessions. Advancing stocks beat declining issues by a 3-to-1 margin on the NYSE and by a 2-to-1 margin on the Nasdaq. New highs finally expanded, with 602 showing up on the 52-week high list and 62 stocks showing up on the new 52-week low list.
For the week, the DJIA led the way with a 2.8% gain, the SP 500 was next with a 2.2% rise, the NYSE gained 1.8%, the Nasdaq rallied 1.4%, and the SP 600 lagged with a 1.3% gain. Proving that big-caps is where it is at, the IBD 100 lagged all indexes hardcore, with a .5% gain. This was, without a doubt, one of the best weeks of the year.
It was a very good week that finally saw volume start to show up. That higher volume started out badly, with the markets suffering a distribution day or two. But after Friday, those distribution days have been forgotten. Like I said it was good to see volume show up. However, the best rallies have volume show up immediately as the market is following-through. That high volume is best when it is preceded by a low volume sell-off. But as this market has shown since July and August, where the indexes started rallying on lower volume, you don’t always need a ton of volume to have a rally. All you need are some big-cap stocks to move and volume becomes obsolete.
This market is, obviously, being led by big-cap stocks, as the DJIA hits highs day after day after day. This is not a great market for CANSLIM growth investors but there is still plenty of action in the big-cap markets and the smaller low-priced junk stocks. These may not be growth stocks, but they are moving like they are at this stage of the game. If you check out the chart, in IBD, of value funds vs. growth funds, you will see that the big caps are in favor. Big-caps and value stocks is what is moving. Growth stocks have been lagging but are finally starting to get some life after Friday. However, since this is not the start of a fresh bull market and we do not have growth stocks leading, I still advise against going all-in with margin at this stage of the game.
The strength of this market has been quite impressive, recently, as there are simply no pullbacks and every small intraday dip is being bought up quickly. I simply don’t like that action as it sends many great stocks past proper pivot points and then as they don’t pullback that leaves us with no option to jump on the great stock. Instead do to proper risk/reward analysis we just have to watch them keep moving higher. Luckily, I still am having no problem finding stocks that are bouncing off the 50 dma or breaking out without gonig too far too fast. But I am missing a few stocks that I really wanted due to this.
In my opinion, the retail crowd seems very giddy and exuberant-especially CNBC. But AMTD and ETFC earnings reports show that traders are not participating in this current move higher like they were earlier. Still the traders that are trading this move are very bullish. The MarketVane survey has 75% of futures traders bullish, the realmoney.com poll shows 61% are bullish, the Investors Intelligence survey shows newsletter writers bullish by 52%, and the AAII poll has 46% of participants bullish. That along with the put/call being down to the .68 area clearly shows that investors are getting more and more bullish. That is giving this market a bit of a frothy feel but overall this frothiness feels NOTHING like the froth we had in early 2000. I have a lot of amateurs that I know telling me stocks are going higher. But they aren’t telling me they are going to the moon and they are not telling me that “there is no way this market is going lower.” Most still see the possibility of lower prices. That shows that the current madness that is starting is just that: starting.
The speculative momentum that is picking up pace now in the Chinese solar stocks is getting evident in the charts as these stocks are moving higher in a quite dramatic expansion as volume picks up the higher it goes. That is normally good. But when you are so far away from a proper breakout pivot point and volume is this heavy it is potentially bearish. For now it is not bearish but in the future if prices start not moving very much, you will know you have churning. Until the churning happens, though, might as well ride the trend higher. I never fight the trend and you should not either. Ride the speculative momo in these higher until the train derails. Momentum is a strange beast as it will ALWAYS last longer than you think it can.
There are many reasons for this market to go lower. The weak dollar hitting 26-year lows against the British pound, the low volume rallies, big caps leading small caps, speculative crap moving, record short interest levels on the NYSE, and poor numbers from stock trading firms are all reasons to worry about with this market. But as long as market keeps going up I am not going to worry about these.
I am worried about some internal data.The number of new highs shrinks every day. And if you look at a long-term trend of new highs since November, you can see that the trend of new highs is lower despite the market going higher. Another nasty divergence showing up is in the Relative Strength line of the Nasdaq. If you look at the highs in November, you will see that each rally after a selloff brings the Nasdaq higher and higher. Now if you look at the RS line, you will see the opposite. As the Nasdaq hit a new high in January, the RS line lagged. When it hit a new high late February, the RS line lagged even more, and now with the Nasdaq hitting new highs again, the RS line is once again lower. Lower highs and lower lows in the RS and higher highs in the Nasdaq is a very negative divergence. On top of that divergence is the negative divergence in the moneystream (proprietary indicator of tcnet). If you look at the peak in MS in February you can see now that even with the Nasdaq in higher ground (or around the same area) the MS line is well off the highs. Higher highs in price, with lower volume and negative divergences in the MS and RS line, is not bullish for the near future.
But like I keep saying over and over and over, these are just things we need to keep in the back of our head. As long as the trend is up that is where we should be investing. These things just let us know that we probably do not have a lot of upside left and when the market does turn we should be ready for some real selling.
It seems that since the February 27th market sell-off, all the previous big worries over the sub-prime market leading to a broader sell-off in financials have past. The market looks like it is expecting a soft landing, instead of a hard landing.
Showing support of that thesis is the fact that earnings are coming in much higher than what was expected by the Thomson Financial combined estimates. Those estimates were looking for a 3.3% rise in earnings, instead of the usual 10% plus earnings growth we have seen for the past 14 quarters. So far earnings have come in averaging 5.2% growth and 66% of the companies that have reported have posted better than expected results. This is much better than those low estimates but still the trend in earnings is clear. They are down. As earnings and the GDP goes, so goes your stock market.
Speaking of GDP, next week we have the release of Q1 GDP. Estimates are for 1.8% but economist are telling us to not focus on that number and instead should wait for the final revision as there will be some data problem due to automobiles. This growth, as per earnings, is slowing and below the usual 3% we have seen since the Bush tax cuts. Other items on tap include the March durable good numbers, existing-home sales, and new-home sales. Besides that we have earnings from powerhouses such as F MMM BSX HAS TXN XOM LMT COH and MSFT. This will surely cause the market some excitement as traders continue to weigh the positives and negatives of this market.
Are we setting ourselves up for the proverbial “sell in May and go away” or will earnings keep us moving higher? We will know by the end of next week. Aloha and I will see you in the chat room!!
Market Commentary At Big Wave Trading Bronze Level One
New Swing Longs: Silver Level Two
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
Top Holdings Up This Week - Date Of Purchase
KNOL 332% - 1/12/06
PTT 317% - 11/16
AKAM 236% - 9/30/05
CVO 197% - 8/18/05
TTEC 169% - 8/25
TRCR 163% - 1/12
JSDA 153% - 12/20
TNH 144% - 10/26
OMTR 140% - 9/15
ANO 120% - 2/14
CCOI 117% - 9/27
HRZ 107% - 9/27
NEXC 102% - 10/25
CLRT 101% - 11/30
CPA 100% - 9/15
ULTR 95% - 10/27
ONT 94% - 12/21
EVEP 94% - 11/16
IGLD 91% - 10/26
MFW 86% - 1/29
IMMU 85% - 12/19
LTS 82% - 1/11
BAM 81% - 11/17/05
MOS 78% - 10/12
BONT 75% - 10/03
BMTI 74% - 10/25
IIVI 71% - 8/30
EPHC 69% - 12/20
HURN 66% - 9/13
XIDE 66% - 1/29
IMKTA 65% - 8/28
KHDH 63% - 5/30
DA 63% - 1/25/06
CXW 62% - 5/19
BMA 61% - 10/24
DECK 55% - 9/13
MNTG 52% - 11/9
TESO 50% - 2/16
On Friday, stocks did what they have been doing all week, finding dip buyers that send the indexes higher into the close or at least higher than the open. A rash of good earnings from some big players like SLB GOOG AXP CAT and HON sent stocks higher at the open. But right after that very powerful gap higher, stocks started pulling back, as investors were quick to take some profits. However, once again, dip buyers came in and smart market makers did their best job to make shorting and put buying as painful as possible for the bears and sent stocks higher into the close. It was a very bullish options expiration.
At the close, the DJIA led the way with 28 out of 30 components up and hit all-time highs for the third day in-a-row, with a 1.2% gain. That makes it seven straight days and 15 out of the last 16 days this index has been higher. If that isn’t excessive, I am not sure what is. The SP 600 followed with a 1.1% gain, the NYSE was behind it with a 1% gain, the SP 500 rallied .9%, and the Nasdaq lagged with a .8% gain. It was another all-time high for the NYSE and six-and-a-half year highs for the SP 500 and Nasdaq. Other indexes hitting all-time territory include the Russell 2000, DJ Transportation Average, DJ Utility Average, and the SP 400. The SP 600 is a fraction away from all-time highs.
The good news from Friday, out of the world of leading stocks, was that the IBD 100 finally stopped its streak of underperformance, rallying 1.3%. It was a very nice change after eight of nine days of clear underperformance. Does that mean that growth investing is back in style? Probably not. We are four-plus years into a bull market. The small-caps have moved on to the big-caps. Your last leaders of secular bull markets.
Volume was higher on both exchanges, with volume rising 1% on the Nasdaq and by 18% on the NYSE. The higher volume finally gives the market a good accumulation day but the volume was driven higher, without a doubt, by all the options expiration activity. Without that activity, it is doubtful that the gains would have come on higher volume, especially on the Nasdaq.
Internals were very bullish, for a change this week, with advancers beating decliners for the first time in three sessions. Advancing stocks beat declining issues by a 3-to-1 margin on the NYSE and by a 2-to-1 margin on the Nasdaq. New highs finally expanded, with 602 showing up on the 52-week high list and 62 stocks showing up on the new 52-week low list.
For the week, the DJIA led the way with a 2.8% gain, the SP 500 was next with a 2.2% rise, the NYSE gained 1.8%, the Nasdaq rallied 1.4%, and the SP 600 lagged with a 1.3% gain. Proving that big-caps is where it is at, the IBD 100 lagged all indexes hardcore, with a .5% gain. This was, without a doubt, one of the best weeks of the year.
It was a very good week that finally saw volume start to show up. That higher volume started out badly, with the markets suffering a distribution day or two. But after Friday, those distribution days have been forgotten. Like I said it was good to see volume show up. However, the best rallies have volume show up immediately as the market is following-through. That high volume is best when it is preceded by a low volume sell-off. But as this market has shown since July and August, where the indexes started rallying on lower volume, you don’t always need a ton of volume to have a rally. All you need are some big-cap stocks to move and volume becomes obsolete.
This market is, obviously, being led by big-cap stocks, as the DJIA hits highs day after day after day. This is not a great market for CANSLIM growth investors but there is still plenty of action in the big-cap markets and the smaller low-priced junk stocks. These may not be growth stocks, but they are moving like they are at this stage of the game. If you check out the chart, in IBD, of value funds vs. growth funds, you will see that the big caps are in favor. Big-caps and value stocks is what is moving. Growth stocks have been lagging but are finally starting to get some life after Friday. However, since this is not the start of a fresh bull market and we do not have growth stocks leading, I still advise against going all-in with margin at this stage of the game.
The strength of this market has been quite impressive, recently, as there are simply no pullbacks and every small intraday dip is being bought up quickly. I simply don’t like that action as it sends many great stocks past proper pivot points and then as they don’t pullback that leaves us with no option to jump on the great stock. Instead do to proper risk/reward analysis we just have to watch them keep moving higher. Luckily, I still am having no problem finding stocks that are bouncing off the 50 dma or breaking out without gonig too far too fast. But I am missing a few stocks that I really wanted due to this.
In my opinion, the retail crowd seems very giddy and exuberant-especially CNBC. But AMTD and ETFC earnings reports show that traders are not participating in this current move higher like they were earlier. Still the traders that are trading this move are very bullish. The MarketVane survey has 75% of futures traders bullish, the realmoney.com poll shows 61% are bullish, the Investors Intelligence survey shows newsletter writers bullish by 52%, and the AAII poll has 46% of participants bullish. That along with the put/call being down to the .68 area clearly shows that investors are getting more and more bullish. That is giving this market a bit of a frothy feel but overall this frothiness feels NOTHING like the froth we had in early 2000. I have a lot of amateurs that I know telling me stocks are going higher. But they aren’t telling me they are going to the moon and they are not telling me that “there is no way this market is going lower.” Most still see the possibility of lower prices. That shows that the current madness that is starting is just that: starting.
The speculative momentum that is picking up pace now in the Chinese solar stocks is getting evident in the charts as these stocks are moving higher in a quite dramatic expansion as volume picks up the higher it goes. That is normally good. But when you are so far away from a proper breakout pivot point and volume is this heavy it is potentially bearish. For now it is not bearish but in the future if prices start not moving very much, you will know you have churning. Until the churning happens, though, might as well ride the trend higher. I never fight the trend and you should not either. Ride the speculative momo in these higher until the train derails. Momentum is a strange beast as it will ALWAYS last longer than you think it can.
There are many reasons for this market to go lower. The weak dollar hitting 26-year lows against the British pound, the low volume rallies, big caps leading small caps, speculative crap moving, record short interest levels on the NYSE, and poor numbers from stock trading firms are all reasons to worry about with this market. But as long as market keeps going up I am not going to worry about these.
I am worried about some internal data.The number of new highs shrinks every day. And if you look at a long-term trend of new highs since November, you can see that the trend of new highs is lower despite the market going higher. Another nasty divergence showing up is in the Relative Strength line of the Nasdaq. If you look at the highs in November, you will see that each rally after a selloff brings the Nasdaq higher and higher. Now if you look at the RS line, you will see the opposite. As the Nasdaq hit a new high in January, the RS line lagged. When it hit a new high late February, the RS line lagged even more, and now with the Nasdaq hitting new highs again, the RS line is once again lower. Lower highs and lower lows in the RS and higher highs in the Nasdaq is a very negative divergence. On top of that divergence is the negative divergence in the moneystream (proprietary indicator of tcnet). If you look at the peak in MS in February you can see now that even with the Nasdaq in higher ground (or around the same area) the MS line is well off the highs. Higher highs in price, with lower volume and negative divergences in the MS and RS line, is not bullish for the near future.
But like I keep saying over and over and over, these are just things we need to keep in the back of our head. As long as the trend is up that is where we should be investing. These things just let us know that we probably do not have a lot of upside left and when the market does turn we should be ready for some real selling.
It seems that since the February 27th market sell-off, all the previous big worries over the sub-prime market leading to a broader sell-off in financials have past. The market looks like it is expecting a soft landing, instead of a hard landing.
Showing support of that thesis is the fact that earnings are coming in much higher than what was expected by the Thomson Financial combined estimates. Those estimates were looking for a 3.3% rise in earnings, instead of the usual 10% plus earnings growth we have seen for the past 14 quarters. So far earnings have come in averaging 5.2% growth and 66% of the companies that have reported have posted better than expected results. This is much better than those low estimates but still the trend in earnings is clear. They are down. As earnings and the GDP goes, so goes your stock market.
Speaking of GDP, next week we have the release of Q1 GDP. Estimates are for 1.8% but economist are telling us to not focus on that number and instead should wait for the final revision as there will be some data problem due to automobiles. This growth, as per earnings, is slowing and below the usual 3% we have seen since the Bush tax cuts. Other items on tap include the March durable good numbers, existing-home sales, and new-home sales. Besides that we have earnings from powerhouses such as F MMM BSX HAS TXN XOM LMT COH and MSFT. This will surely cause the market some excitement as traders continue to weigh the positives and negatives of this market.
Are we setting ourselves up for the proverbial “sell in May and go away” or will earnings keep us moving higher? We will know by the end of next week. Aloha and I will see you in the chat room!!
Market Commentary At Big Wave Trading Bronze Level One
New Swing Longs: Silver Level Two
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
Top Holdings Up This Week - Date Of Purchase
KNOL 332% - 1/12/06
PTT 317% - 11/16
AKAM 236% - 9/30/05
CVO 197% - 8/18/05
TTEC 169% - 8/25
TRCR 163% - 1/12
JSDA 153% - 12/20
TNH 144% - 10/26
OMTR 140% - 9/15
ANO 120% - 2/14
CCOI 117% - 9/27
HRZ 107% - 9/27
NEXC 102% - 10/25
CLRT 101% - 11/30
CPA 100% - 9/15
ULTR 95% - 10/27
ONT 94% - 12/21
EVEP 94% - 11/16
IGLD 91% - 10/26
MFW 86% - 1/29
IMMU 85% - 12/19
LTS 82% - 1/11
BAM 81% - 11/17/05
MOS 78% - 10/12
BONT 75% - 10/03
BMTI 74% - 10/25
IIVI 71% - 8/30
EPHC 69% - 12/20
HURN 66% - 9/13
XIDE 66% - 1/29
IMKTA 65% - 8/28
KHDH 63% - 5/30
DA 63% - 1/25/06
CXW 62% - 5/19
BMA 61% - 10/24
DECK 55% - 9/13
MNTG 52% - 11/9
TESO 50% - 2/16
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