THIS WAS THE COMMENTARY FROM THURSDAY'S SESSION THAT WAS POSTED BEFORE THE OPENING BELL ON FRIDAY FOR PAID SUBSCRIBERS:
Inflation Worries Send Stocks Lower, Closing At Their LOD, On Heavy Volume; Caution Is Best Advised Here
By MauiTrader
Dip buyers were severely punished today as stocks sold off hard after bonds fell and yields rose. During the trading day, bond yields on the 10 and 30 year note crossed 5% for the first time in eleven months to close at 5.12% and 5.22%. This led Bill Gross to go bearish on bonds for the first time twenty-five years. And if that wasn’t bad enough for inflation angst, crude oil rose to near $67 a barrel on a bad refinery report from the EIA. This was enough to spooks traders, all day long, and convince some traders that Ben might have to hike rates this year. That is a quick turnabout off the hopes of a rate cut later this year.
There was some good news out there, with the jobless claims coming in at its lowest level in three weeks, lower by 1,000 to 309,000. Also retailers reported a strong month of sales for May and April merchandise wholesale sells rose faster than inventories. However, obviously, this did not matter with the fears of higher inflation.
At the close, stocks fell across the board and almost all of the indexes closed at their LOD. The SP 400 led the way lower collapsing 2.1%, the SP 600 followed with a 1.9% whack, the NYSE, Nasdaq, and SP 500 fell 1.8%, and the DJIA fell 1.5%. There were two clear rough spots today: transports and leading stocks. The DJ Transportation Average, which started lagging the DJIA well before today’s fall, swooned 2.4%. The IBD 100 faired even worse, as leading stocks fell off a cliff with a 2.8% loss.
Volume was higher on the Nasdaq and much higher on the NYSE, giving these indexes another distribution day. This was the third one in-a-row for the NYSE. During the past four weeks the SP 500 and DJIA have four distribution days, the NYSE has five, and the Nasdaq has an extremely high seven. It is amazing with that many distribution days that the Nasdaq is actually still above the 50 dma.
The way the indexes look right now, it appears that they are rolling over. However, the breadth of this selling seemed climatic and panicky today. So we could find support here at the 50 dma. There were only four out of 197 industry groups that were up today–and 150 of those fell 1% or more. A similar number was put in yesterday for total breadth amongst the industry groups. Also, breadth today was extremely extreme today on the NYSE with decliners beating advancers by a 10-to-1 margin. That seems almost impossible. Breadth was better on the Nasdaq but still a tad extreme with decliners beating advancers by a 4-to-1 margin. On the DJIA decliners beat advancers by a 30-to-0 ratio. It has been a long time since I have seen every DJIA stock fall on the same day.
Another indication that the selling might have been a bit panicky was the put/call ratio rising to 1.12. If this wasn’t panic selling and people were buying the dips, this ratio would be lower. At the same time, to show you how key this point of the market is, the amount of new 52-week lows is now higher than the 52-week highs. This, to me, is near shocking. We are around 3% to 4% off the all-time highs, yet we had 143 new 52-week lows!!! and only 90 new 52-week highs. This reading here tells me that this market, when it does turn, is going to be rough for a while. That put/call might be good on the short-term but longer-term this kind of internal reading is bearish. I just wish I could remember the last time the market was doing so well but the new lows were higher than the new highs.
I think it is safe to say that this rally is under pressure now, as the rest of the world also looks to be weakening, following the lead of China. Even though the indexes are not below the 50 dma yet it is still time to get cautious with all the distribution days mounting up on top of today’s selloff.
I have been advising to keep new buys small since Friday, after maxing out my personal account after Wednesday’s market. The markets have a history of topping out after I get all of my money completely invested. The bulk of my gains are made in the beginning but near the end after selling weak stocks to strong stocks you eventually max out. And that is normally when the markets slow down. That with the poor quality of the longs since Friday (not the charts, but the fundamentals and liquidity of the stocks) and the distribution days were our tell that something was about to happen.
However, do NOT panic sell. If you have nothing wrong with your stock and your holdings or some of them are acting like everything is OK with the market, you want to hold them. This could be the end of the selling or just the start. If it is the start, you should be sitting on some nice gains that a confirmation of a pullback will not kill you. If it is not the start of a pullback you can hold your longs for more gains. Remember, you NEVER want to be scared out of a position. Sell the weak stocks that are moving lower or not acting right and keep the winners that are either still moving up or are pulling back in a normal low volume fashion. There were only 20 complete sells and out of those only two were high quality stocks. Another 40 stocks got a haircut. I have been very busy today. But it will pay off in the long-run. It always does.
After being up eight of nine weeks, the market was getting overbought and needed this pullback. I hope this isn’t a top because I would hate to sell off some of my bigger beautiful longs but anything can happen tomorrow that could change all those nice charts in one fell swoop and that is why I have to prepare myself mentally for anything and everything. I want higher prices and most of my charts are holding up very well but at the same time the market would be a lot more healthy and more rewarding for me if I could get a pullback, go to cash, and then wait for the next time to go all-in on margin to the long side (hopefully with VIX around 30 or so). Markets that rally AFTER a big pullback will always produce stocks that will move 100%-500% in short periods of time. If we bounce here, trust me, we still will not be having any of that.
Here, also, may be another key tell for a market top: the leaders of this bull as far back as 2003 are still running. GOOG, AAPL, RIMM, CROX, etc… As long as these stocks keep hitting new highs it is hard to think the market could actually top. Also none of these stocks are in climax runs which means they could have a lot of room to keep running. In fact I can’t find any climax looking charts.
There is absolutely one thing you must NOT do. Do NOT buy the dips. Do not buy stocks when the market is falling. You are only supposed to be going long stocks in top sectors in markets that are trending up. I obviously can maneuver a bit differently. But most traders should stay very disciplined and play by the rules until they are making consistent money the right way by buying top stocks moving higher in top sectors in markets moving up. I heard some subscribers and other participants in other rooms talk of buying the dip. I would wait for breakouts, if I were you. Look for charts like TTG CRNT and KHDH. Not charts like IMR.
We have the Commerce Department report on the April trade deficit and we have weakness in most Pacific/Asia markets so that will be on the minds of traders. That and of course the worry of what the market is going to do after yesterday’s selloff. But I don’t need that in my life. I have enough things to worry about. And the stock market will never be one of those things I will ever have to worry about. When you have rules, discipline, and sound strategy that you have tested and used to make a good living off of, you don’t have to.
Aloha and I will see you in the chat room!! It’s Aloha Friday, No Work Till Monday……dee dee de de de…..
top holdings up this week - purchase date
TRCR 430% - 1/12
PTT 303% - 11/16
MA 187% - 8/2
CCOI 144% - 9/27
OMTR 134% -
TTEC 130% - 8/25
ULTR 116% - 10/27
MEH 113% - 8/30
MOS 109% - 10/12
MFW 108% - 1/29
KHDH 107% - 5/30/06
DECK 97% - 9/13
CPA 97% - 9/15
CXW 91% - 5/19/06
IGLD 87% - 10/26
EVEP 86% - 11/16
MVIS 86% - 12/21
APLX 83% - 9/28
VDSI 79% - 1/4
HURN 77% - 9/13
MCZ 74% - 3/27
CLRT 73% - 11/30
CNH 72% - 11/2
TTG 63% - 11/30
TESO 60% - 2/16
LFL 57% - 12/13
NSH 57% - 12/19
AFSI 56% - 4/12
VSNT 54% - 2/5
APFC 52% - 3/5
XOMA 51% - 1/12
HURC 50% - 12/18
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
Saturday, June 09, 2007
Saturday, June 02, 2007
Leading Stocks Lead The Way As A Very Bullish Week Comes To A Close; NYSE Short Interest At Five-Year Highs
A lot of strong economic data helped stocks finish higher, on Friday, but they were off from their early morning highs. However, the closes were still impressive and the DJIA even had a very strong final hour, even with the Shanghai market falling another 2.7% (still up 50% this year). At the close the SP 600 hit an all-time high rallying .8%, the NYSE hit an all time high rallying .6%, the SP 500 hit an all-time closing high rallying .4%, the Nasdaq hit 6 1/2 year highs rallying .4%, and the DJIA rallied .3% hitting another all-time high.
The most important action, came in the form of leading stocks. The IBD 100 gained 1%, marking the fifth session in a row that the IBD 100 has outperformed the broad market. Leading stocks leading the market tells you that this rally is strong and should have some real legs behind it. It has taken a long time for these stocks to establish a dominate role in this market, since the March 2003 - May 2006 period, but now they are taking the lead from the DJIA. Let’s hope this continues.
Volume was 19% lower on the Nasdaq and 11% lower on the NYSE, which kind of puts a damper on the gains. But the figures for the week confirm the markets strength. The SP 600 was the strongest performer with a 2.8% gain, the Nasdaq followed with a 2.2% gain, the NYSE gained 1.7%, the SP 500 rallied 1.4%, and the DJIA gained 1.2%. The IBD 100 blew away the competition, with a 3.9% gain. This is what you want to see. This is something we really have not seen since the bottom last July/August. Welcome back leading stocks!
There were two advancers for every stock that declined on the NYSE and there were three winners for every two losers on the Nasdaq. New highs finally picked up, with an impressive 799 new 52-week highs. This kind of expansion should give the doubters of this rally some reason to turn a bit more bullish. If that doesn’t work, they have the put/call ratio still up there around the .75 area. That is not high but it is not low either. The most important and telling internal is the amount of short sellers out there.
The NYSE short interest ratio is at its highest level in more than five years at 7.74. This shows major pessimism amongst short sellers and this should keep the market bullish. It is not a given but the high short interest ratio with a higher put/call ratio shows that the crowd is still on the wrong side, despite some surveys.
The AAII survey has come out with 45% bears and only 33% bulls, confirming that the retail crowd is shorting the upticks. One of the most dangerous, arrogant, and ego-driven trade you can possibly make in such a strong tape. Most of these traders are trying to “outsmart” the market. A play that has a very low success rate.
Other surveys, however, show the opposite. The Investors Intelligence survey still shows a very high amount of bulls and the realmoney.com most recent weekend poll is showing 57% of the readers bullish. However, by looking at the post on Rev Shark’s blog, it doesn’t seem that many are bullish on this tape. A lot of the realmoney.com readers leave much to the imagination, anyways. I don’t see too much talent around there.
The other clear fact that the actual trading is not bullish for the retail crowd is the fact that equity ETF’s saw outflows this week. You don’t see that at tops. You see extreme inflows into mutual funds and ETF’s. This shows that the crowd is skeptical on the current rise. Being emotional in the market and betting against the trend is an even worse double whammy that is sure to keep you from beating the market in the long run. If I wasn’t on margin I wouldn’t be beating the market this year. That tells me exactly how rough the current uptrend really is. It is not as easy as it looks–unless you are a daytrader, then I assume it is safe to say “it is easy.” Let’s see how long that last.
What does seem to not be lasting is the weak economy. On one of the busiest weeks I can remember this year, economic data came rolling in confirming what I have been saying all year long–this economy is on FIRE!!! Yes, GDP did come in at its lowest level in five years but it appears to be a short-term thing as the numbers this week confirmed that everything appears to be fine with the economy. That is confirmed by the banks finally getting a bid this week.
The strong economic data on Friday came from the payroll figures as jobs grew 157,000 in May above expectations. The core inflation reading came in at only .1% which was below expectations also. Overall a good report. Then the ISM manufacturing index climbed to 55 in May, showing expansion from April. A reading over 50 is bullish. These kind of economic numbers is why this market never goes down. The DJIA and SP 500 are now up 8 out of the last 9 weeks. An unbelievable run, to say the least.
This unbelievable run is allowing for a TON TON TON of breakouts. Everywhere I scan, I can find breakouts. So that confirms in my mind that this bull still has room to run. If we do reverse now, I can tell you it would be very significant because this many stocks breaking out of fresh bases should mean that the market is going to run. A reversal would be a fakeout breakout and would trap many longs. If I could, and if I was a billionaire or even a millionaire (I am still young and live on Maui, don’t forget that), I would be long 500 stocks right now. There are just that many nice charts. They are not all green and pretty but they are still there. Stocks like TLVT are easily passed with all the nice charts out there. However, a gain of 15% in three days shows that every breakout seems to be working here.
This market does require a lot of work to keep up with the gains in the NYSE, compared to other bull markets. This is in direct correlation with the VIX. Remember, a low VIX, means lower volatility and when stocks rise they will not go up as much when the VIX is at 12 than if the VIX was at 32. All the stocks you see up 100% would be up 300%, if this rally came right after a horrible bear market like the March 2003 was. Even though the gains aren’t as much, the duration is a lot longer. This makes it hard work and can really put a drain on you. I know it is me. I really want a pullback, I really need a pullback, and I just want some time to relax. I doubt I am going to get that.
What also confirms that I doubt I am going to get that? Well after eight out of nine weeks of gains, why should I expect anything else. And the 10-year yield is now confirming what I have been saying all year. The 10-year is now at its highest level in nine months, at 4.94%. The odds of a Fed cut this year fell to 16% from 100% a month ago. Remember, in the world of stocks it is the opposite of what you would think would work. A Fed raising rates tells us that the economy is on fire and they need to slow it down. A Fed cutting rates tells us the economy is in trouble and they need to fill it with cash. With the odds increasing of no rate cut, you can rest assure that this economy is doing just fine. This should be bullish for stocks.
To finish this weekends analysis off I want to state that I don’t think the USA is in a bubble AT ALL. China may be in a bubble but if anyone has IBD and can remember the chart comparing the seven year run-up to the DJIA 29 and Nassy 00 top, you can clearly see China could have a long way to run. Especially since the Nasdaq had a P/E over 200. I believe China is around 45-50.
I did see some bubble action in a lot of stocks last month. But they have either fallen and that money moved into other leaders or they are still holding up. Two personal longs that I saw go into OBVIOUS climax runs (TNH and ONT) were both sold and since then the move has looked like the correct one. TNH is still holding but ONT looks done. Either way those charts had climax runs. There aren’t too many out there like that. Heck, I can’t even find stocks to sell. I only had two partial sales and zero complete sells out of 240 longs (70 are major holdings, the rest are for rent money and fun). The day before there were also no complete sales. Stunning. Normally, even in bull markets, there is always one or two that needs to be cut. Not in this market.
Enjoy the rest of your weekend. Go Anaheim!!! Go Cleveland!!! Aloha and I will see you in the chat room.
http://mauitrader.blogspot.com
top holdings up this week - purchase date
KNOL 365% - 1/12/06
TRCR 350% - 1/12
PTT 240% - 11/16
MA 202% - 8/2
CCOI 152% - 9/27
TTEC 146% - 8/25
ULTR 122% - 10/27
HRZ 115% - 9/27
MFW 115% - 1/29
MEH 113% - 8/30
KHDH 108% - 5/30/06
IHS 106% - 12/21/05
CPA 104% - 9/15
MOS 104% - 10/12
CRY 103% - 1/10
NEXC 101% - 10/25
PRGX 96% - 1/12
CXW 92% - 5/19/06
IGLD 91% - 10/26
DECK 86% - 9/13
EVEP 83% - 11/16
JSDA 80% - 12/20
CNH 79% - 11/2
VDSI 78% - 1/4
APLX 77% - 9/28
HURN 77% - 9/13
MVIS 76% - 12/21
MCZ 74% - 3/27
IMMU 73% - 12/19
FTEK 67% - 10/6
TTG 64% - 11/30
NSH 61% - 12/19
LFL 61% - 12/13
BMA 56% - 10/24
TESO 54% - 2/16
NTL 50% - 4/13
SCI 50% - 10/10
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
The most important action, came in the form of leading stocks. The IBD 100 gained 1%, marking the fifth session in a row that the IBD 100 has outperformed the broad market. Leading stocks leading the market tells you that this rally is strong and should have some real legs behind it. It has taken a long time for these stocks to establish a dominate role in this market, since the March 2003 - May 2006 period, but now they are taking the lead from the DJIA. Let’s hope this continues.
Volume was 19% lower on the Nasdaq and 11% lower on the NYSE, which kind of puts a damper on the gains. But the figures for the week confirm the markets strength. The SP 600 was the strongest performer with a 2.8% gain, the Nasdaq followed with a 2.2% gain, the NYSE gained 1.7%, the SP 500 rallied 1.4%, and the DJIA gained 1.2%. The IBD 100 blew away the competition, with a 3.9% gain. This is what you want to see. This is something we really have not seen since the bottom last July/August. Welcome back leading stocks!
There were two advancers for every stock that declined on the NYSE and there were three winners for every two losers on the Nasdaq. New highs finally picked up, with an impressive 799 new 52-week highs. This kind of expansion should give the doubters of this rally some reason to turn a bit more bullish. If that doesn’t work, they have the put/call ratio still up there around the .75 area. That is not high but it is not low either. The most important and telling internal is the amount of short sellers out there.
The NYSE short interest ratio is at its highest level in more than five years at 7.74. This shows major pessimism amongst short sellers and this should keep the market bullish. It is not a given but the high short interest ratio with a higher put/call ratio shows that the crowd is still on the wrong side, despite some surveys.
The AAII survey has come out with 45% bears and only 33% bulls, confirming that the retail crowd is shorting the upticks. One of the most dangerous, arrogant, and ego-driven trade you can possibly make in such a strong tape. Most of these traders are trying to “outsmart” the market. A play that has a very low success rate.
Other surveys, however, show the opposite. The Investors Intelligence survey still shows a very high amount of bulls and the realmoney.com most recent weekend poll is showing 57% of the readers bullish. However, by looking at the post on Rev Shark’s blog, it doesn’t seem that many are bullish on this tape. A lot of the realmoney.com readers leave much to the imagination, anyways. I don’t see too much talent around there.
The other clear fact that the actual trading is not bullish for the retail crowd is the fact that equity ETF’s saw outflows this week. You don’t see that at tops. You see extreme inflows into mutual funds and ETF’s. This shows that the crowd is skeptical on the current rise. Being emotional in the market and betting against the trend is an even worse double whammy that is sure to keep you from beating the market in the long run. If I wasn’t on margin I wouldn’t be beating the market this year. That tells me exactly how rough the current uptrend really is. It is not as easy as it looks–unless you are a daytrader, then I assume it is safe to say “it is easy.” Let’s see how long that last.
What does seem to not be lasting is the weak economy. On one of the busiest weeks I can remember this year, economic data came rolling in confirming what I have been saying all year long–this economy is on FIRE!!! Yes, GDP did come in at its lowest level in five years but it appears to be a short-term thing as the numbers this week confirmed that everything appears to be fine with the economy. That is confirmed by the banks finally getting a bid this week.
The strong economic data on Friday came from the payroll figures as jobs grew 157,000 in May above expectations. The core inflation reading came in at only .1% which was below expectations also. Overall a good report. Then the ISM manufacturing index climbed to 55 in May, showing expansion from April. A reading over 50 is bullish. These kind of economic numbers is why this market never goes down. The DJIA and SP 500 are now up 8 out of the last 9 weeks. An unbelievable run, to say the least.
This unbelievable run is allowing for a TON TON TON of breakouts. Everywhere I scan, I can find breakouts. So that confirms in my mind that this bull still has room to run. If we do reverse now, I can tell you it would be very significant because this many stocks breaking out of fresh bases should mean that the market is going to run. A reversal would be a fakeout breakout and would trap many longs. If I could, and if I was a billionaire or even a millionaire (I am still young and live on Maui, don’t forget that), I would be long 500 stocks right now. There are just that many nice charts. They are not all green and pretty but they are still there. Stocks like TLVT are easily passed with all the nice charts out there. However, a gain of 15% in three days shows that every breakout seems to be working here.
This market does require a lot of work to keep up with the gains in the NYSE, compared to other bull markets. This is in direct correlation with the VIX. Remember, a low VIX, means lower volatility and when stocks rise they will not go up as much when the VIX is at 12 than if the VIX was at 32. All the stocks you see up 100% would be up 300%, if this rally came right after a horrible bear market like the March 2003 was. Even though the gains aren’t as much, the duration is a lot longer. This makes it hard work and can really put a drain on you. I know it is me. I really want a pullback, I really need a pullback, and I just want some time to relax. I doubt I am going to get that.
What also confirms that I doubt I am going to get that? Well after eight out of nine weeks of gains, why should I expect anything else. And the 10-year yield is now confirming what I have been saying all year. The 10-year is now at its highest level in nine months, at 4.94%. The odds of a Fed cut this year fell to 16% from 100% a month ago. Remember, in the world of stocks it is the opposite of what you would think would work. A Fed raising rates tells us that the economy is on fire and they need to slow it down. A Fed cutting rates tells us the economy is in trouble and they need to fill it with cash. With the odds increasing of no rate cut, you can rest assure that this economy is doing just fine. This should be bullish for stocks.
To finish this weekends analysis off I want to state that I don’t think the USA is in a bubble AT ALL. China may be in a bubble but if anyone has IBD and can remember the chart comparing the seven year run-up to the DJIA 29 and Nassy 00 top, you can clearly see China could have a long way to run. Especially since the Nasdaq had a P/E over 200. I believe China is around 45-50.
I did see some bubble action in a lot of stocks last month. But they have either fallen and that money moved into other leaders or they are still holding up. Two personal longs that I saw go into OBVIOUS climax runs (TNH and ONT) were both sold and since then the move has looked like the correct one. TNH is still holding but ONT looks done. Either way those charts had climax runs. There aren’t too many out there like that. Heck, I can’t even find stocks to sell. I only had two partial sales and zero complete sells out of 240 longs (70 are major holdings, the rest are for rent money and fun). The day before there were also no complete sales. Stunning. Normally, even in bull markets, there is always one or two that needs to be cut. Not in this market.
Enjoy the rest of your weekend. Go Anaheim!!! Go Cleveland!!! Aloha and I will see you in the chat room.
http://mauitrader.blogspot.com
top holdings up this week - purchase date
KNOL 365% - 1/12/06
TRCR 350% - 1/12
PTT 240% - 11/16
MA 202% - 8/2
CCOI 152% - 9/27
TTEC 146% - 8/25
ULTR 122% - 10/27
HRZ 115% - 9/27
MFW 115% - 1/29
MEH 113% - 8/30
KHDH 108% - 5/30/06
IHS 106% - 12/21/05
CPA 104% - 9/15
MOS 104% - 10/12
CRY 103% - 1/10
NEXC 101% - 10/25
PRGX 96% - 1/12
CXW 92% - 5/19/06
IGLD 91% - 10/26
DECK 86% - 9/13
EVEP 83% - 11/16
JSDA 80% - 12/20
CNH 79% - 11/2
VDSI 78% - 1/4
APLX 77% - 9/28
HURN 77% - 9/13
MVIS 76% - 12/21
MCZ 74% - 3/27
IMMU 73% - 12/19
FTEK 67% - 10/6
TTG 64% - 11/30
NSH 61% - 12/19
LFL 61% - 12/13
BMA 56% - 10/24
TESO 54% - 2/16
NTL 50% - 4/13
SCI 50% - 10/10
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
Sunday, May 27, 2007
Happy Memorial Day!!! Thank You and GOD Bless Our Troops Alive And Fallen!!!
Stocks ended the week on a light-volume positive note, after a pretty wild and semi-rough week that saw the Nasdaq come under two more days of distribution. However, the constant takeovers, M&A's, and LBO, continues to keep a floor on this market and give short sellers the pain they deserve when they short a rising market (a play only amateurs and ego-driven traders make).
Despite the NAR existing-home sales reporting a drop of 2.6% in April to a four-year low, below estimates, stocks still managed a pre-holiday really. At the close, the Nasdaq, Nasdaq 100, and SP 600 led the way with .8% gains, the NYSE followed with a .7% rise, the SP 500 finished with a .6% gain, and the DJIA ended the day with a .5% gain. Leading stocks, via the IBD 85-85, did even better, gaining 1.5%. For the week, the SP 600 finished .7% higher, as the only index that made gains on the week. The rest of the indexes finished lower, with the Nassy 100 losing .8%, the SP 600 losing .7%, the SP 500 losing .5%, the DJIA losing .4%, the NYSE lost .2%, and the Nasdaq finished lower by .05%. So it wasn't a great week, but by the losses it wasn't a horrible week either. It just was what it was, which looks like a little bit of consolidation of all those recent gains. There really is nothing to takeaway from this week's action.
The only one real obvious week spot Friday and for the week was in the Utilities sector. The top stocks that I was long in that sector (NU EE ETR AYE ITC) took some big hits, causing me to sell some down or out completely, and the DJUA fell 3.9%. The cause of this was due to the rising rates in the bond market. Many of these stocks look toppy, like PNW. The rising rates also put a kibosh on the possibility of a Fed Fund rate cut as the odds fell to less than 50% that rates would be cut this year.
Volume was lower by about 33%, on both the NYSE and the Nasdaq, advancers beat decliners by a 9 to 5 margin on the Nasdaq and by a 12 to 5 margin on the NYSE, new highs came in with only 134 new 52-week highs. This is yet another disturbing trend of new highs coming much lower despite the indexes being near another all-time high. This divergence has been happening since November. However, the put/call ratio is still very high at .93. The high put/call shows people are still shorting stocks and buying puts on the rally. The most interesting internal data I saw on Friday was that the NYSE short interest is at a near five-year high of 7.46%. That along with the put/call ratio indicates a lot of people are making bets this market goes lower. The crowd is normally always wrong.
The lack of losses by the major market indexes can be thanked to all the activity in the buyout markets. The leveraged buyout of AL by AA has been rejected, Kerkorian made a bid for MGM assets, BOL and TOPP received buyout offers, NDAQ buys Nordic exchange OMX, ASN announces it is in buyout talks, and KO bought Glaceau's Energy Brands for its vitamin water. This kind of action is indicative of a market that is in a very bullish stage still. Markets do not bottom with this type of action, but they do top on this action. However, we will have to see a lot more outrageous deals like the one we saw with MSFT buying AQNT for an unbelievable price over the actual revenue.
There have been some distribution days that have made this rally a bit nervous recently but a lot of leading stocks continue to hold well or make good price gains with these indexes near their recent highs. With the indexes still over the 50 dma, it is just too early to jump the gun and call a market top. It didn't serve me well on Feb. 27th and it hasn't done anyone any good since then. It is very hard to me to be a "hater" on this market, even with seven year resistance lining up on the SP 500. That seven year resistance, even though a lot of commentators are talking about it, just is not important for me at all. If there are bagholders in the SPY from 2000, trust me, they are not going to sell and breakeven when the SPY finally hits that mark. This is simply a number I have NO interest in. However, CNBC will, so you can enjoy that if you waste your time on that non-sense.
The only thing I wish I could see change is the financials. It would be nice if the banking indexes were rallying along with the market indexes. Actually, what I have noticed also is that the DJTA is also not making a new high with the index. So now the index is rallying without the DJTA DJUA and the BKX hitting new highs. Just something to be aware of. Until the market's trend changes, it is still just semantics.
It is clearly obvious to me that the wall-of-worry is still alive and well, despite what the II, AAII, and realmoney.com polls suggest. The Investors Intelligence survey came in with bulls rising to 54.3% which is a 2007 high and bears falling to 20.7% a 2007 low. The AAII bulls have increased to 37% and the bears have fallen to 38.5%. The realmoney.com poll shows 47% are bullish and 25% are bearish. However, their money is NOT where their mouth is.
The put/call, as I mentioned, is at .93, NYSE short interest is near 5-yr highs, mutual fund inflows keep slowing to a trickle, and margin debt (normally used for bearish bets) is at an all-time high at $319 billion. That is a YOY gain of 67%. So obviously the bets are being made against the bulls, despite the crowd insisting they are bullish. Very odd indeed, if that is what you were thinking. So basically what I am seeing is that people would rather be long than short but are still shorting the market. Seems to me only the smart money is buying stocks here. The dumb money is selling/shorting.
Another possible scenario for the shorting is that a lot of market particants are making a big deal over gas prices and how it is going to wreck the economy. I have been hearing this damn argument for years now. I am still waiting for it to come to fruition. It is true that gas prices are getting a bit crazy but our net wealth is higher than ever and if our SPOILED BRAT American consumer ways are any indication--we can afford it. So no matter how much they say the gas prices are going to hurt the economy, the fact of the matter is this just creates another wall-of-worry for the markets to climb as traders short the market waiting for this magical correction caused by the consumers pockets drying up. Until it actually dries up, why short the market and lose money?
This uptrend is still not to be messed with. Next week will show us if the distribution days in the Nasdaq are anything that is going to turn into some real selling. If the action in leading stocks is any indication, we are not going to get too much selling off of those distro days. The indexes and leading stocks continue to hold that key 50 day moving average and have good to great accumulation/distribution ratings. Right now the right play seems to be to buy the dips. That is not a method I endorse, unless the dip is on low volume and followed by a heavy volume bounce around a key moving average or support.
The market is getting a little bit oversold according to the 10-week moving average of the advance/decline line oscillator and the index put/call 21-day moving avg. is getting near the 2.00 level where the markets like to try to top out. But there is still room left with it at 1.80. So that along with the former oscillator mentioned tells us that there is more room to rally before we become overbought or have the extreme index put buying that signals a real top. A high put/call is bullish until it stays high for too long and gets to extreme levels. When that happens it actually confirms the market, if a selloff happens.
As it stands, right now, however, there is no selloff, so the only right thing to do now is to follow that trend, until that trend changes. Next week we have non-farm payroll numbers, the second reading of Q1 GDP, consumer confidence numbers, and the FOMC minutes. Along with the economic numbers, we have earnings from DELL COST HNZ HOV SHLD DBRN RL PSS JAS JCG that should create some minor excitement as earnings season comes to a close.
Enjoy your Memorial Day!!! Never forget the sacrifices that our troops make to allow you to read this blog. This blog and all the money making ideas would not be possible without the brave men and women who sacrifice their lives defending this country and making this world a better place to live in for EVERYONE. Not just Americans. EVERYONE deserves freedom. If you lived under a dictatorship, only then could you appreciate how well off we have it. I have a feeling there are many that read this blog that take YOUR freedom for granted. If that is the case, you should really take a minute and think about how the world would be if the USA did not exist. Do you really think you would be trading stocks? Do you really think you would be free?
Aloha and I will see you in the chat room!!!!
top holdings up this week - purchase date
TRCR 306% - 1/12
MA 181% - 8/2
TTEC 140% - 8/25
OMTR 137% - 9/15
SVNT 131% - 8/24
MEH 119% - 8/30
CPA 118% - 9/15
KHDH 108% - 5/30
JSDA 106% - 12/20
HRZ 104% - 9/27
MFW 104% - 1/29
ULTR 101% - 10/27
CRY 94% - 1/10
EVEP 90% - 11/16
CXW 87% - 5/19
IGLD 79% - 10/26
DECK 76% - 9/13
MCZ 74% - 3/27
HURN 70% - 9/13
CNH 65% - 11/2
BMA 64% - 10/24
APLX 62% - 9/28
VDSI 61% - 1/4
ZNH 59% - 12/26
NXST 59% - 3/28
LFL 57% - 12/13
TESO 56% - 2/16
VCLK 55% - 11/14
APFC 55% - 3/5
TTG 52% - 11/30
NSH 52% - 12/19
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
Despite the NAR existing-home sales reporting a drop of 2.6% in April to a four-year low, below estimates, stocks still managed a pre-holiday really. At the close, the Nasdaq, Nasdaq 100, and SP 600 led the way with .8% gains, the NYSE followed with a .7% rise, the SP 500 finished with a .6% gain, and the DJIA ended the day with a .5% gain. Leading stocks, via the IBD 85-85, did even better, gaining 1.5%. For the week, the SP 600 finished .7% higher, as the only index that made gains on the week. The rest of the indexes finished lower, with the Nassy 100 losing .8%, the SP 600 losing .7%, the SP 500 losing .5%, the DJIA losing .4%, the NYSE lost .2%, and the Nasdaq finished lower by .05%. So it wasn't a great week, but by the losses it wasn't a horrible week either. It just was what it was, which looks like a little bit of consolidation of all those recent gains. There really is nothing to takeaway from this week's action.
The only one real obvious week spot Friday and for the week was in the Utilities sector. The top stocks that I was long in that sector (NU EE ETR AYE ITC) took some big hits, causing me to sell some down or out completely, and the DJUA fell 3.9%. The cause of this was due to the rising rates in the bond market. Many of these stocks look toppy, like PNW. The rising rates also put a kibosh on the possibility of a Fed Fund rate cut as the odds fell to less than 50% that rates would be cut this year.
Volume was lower by about 33%, on both the NYSE and the Nasdaq, advancers beat decliners by a 9 to 5 margin on the Nasdaq and by a 12 to 5 margin on the NYSE, new highs came in with only 134 new 52-week highs. This is yet another disturbing trend of new highs coming much lower despite the indexes being near another all-time high. This divergence has been happening since November. However, the put/call ratio is still very high at .93. The high put/call shows people are still shorting stocks and buying puts on the rally. The most interesting internal data I saw on Friday was that the NYSE short interest is at a near five-year high of 7.46%. That along with the put/call ratio indicates a lot of people are making bets this market goes lower. The crowd is normally always wrong.
The lack of losses by the major market indexes can be thanked to all the activity in the buyout markets. The leveraged buyout of AL by AA has been rejected, Kerkorian made a bid for MGM assets, BOL and TOPP received buyout offers, NDAQ buys Nordic exchange OMX, ASN announces it is in buyout talks, and KO bought Glaceau's Energy Brands for its vitamin water. This kind of action is indicative of a market that is in a very bullish stage still. Markets do not bottom with this type of action, but they do top on this action. However, we will have to see a lot more outrageous deals like the one we saw with MSFT buying AQNT for an unbelievable price over the actual revenue.
There have been some distribution days that have made this rally a bit nervous recently but a lot of leading stocks continue to hold well or make good price gains with these indexes near their recent highs. With the indexes still over the 50 dma, it is just too early to jump the gun and call a market top. It didn't serve me well on Feb. 27th and it hasn't done anyone any good since then. It is very hard to me to be a "hater" on this market, even with seven year resistance lining up on the SP 500. That seven year resistance, even though a lot of commentators are talking about it, just is not important for me at all. If there are bagholders in the SPY from 2000, trust me, they are not going to sell and breakeven when the SPY finally hits that mark. This is simply a number I have NO interest in. However, CNBC will, so you can enjoy that if you waste your time on that non-sense.
The only thing I wish I could see change is the financials. It would be nice if the banking indexes were rallying along with the market indexes. Actually, what I have noticed also is that the DJTA is also not making a new high with the index. So now the index is rallying without the DJTA DJUA and the BKX hitting new highs. Just something to be aware of. Until the market's trend changes, it is still just semantics.
It is clearly obvious to me that the wall-of-worry is still alive and well, despite what the II, AAII, and realmoney.com polls suggest. The Investors Intelligence survey came in with bulls rising to 54.3% which is a 2007 high and bears falling to 20.7% a 2007 low. The AAII bulls have increased to 37% and the bears have fallen to 38.5%. The realmoney.com poll shows 47% are bullish and 25% are bearish. However, their money is NOT where their mouth is.
The put/call, as I mentioned, is at .93, NYSE short interest is near 5-yr highs, mutual fund inflows keep slowing to a trickle, and margin debt (normally used for bearish bets) is at an all-time high at $319 billion. That is a YOY gain of 67%. So obviously the bets are being made against the bulls, despite the crowd insisting they are bullish. Very odd indeed, if that is what you were thinking. So basically what I am seeing is that people would rather be long than short but are still shorting the market. Seems to me only the smart money is buying stocks here. The dumb money is selling/shorting.
Another possible scenario for the shorting is that a lot of market particants are making a big deal over gas prices and how it is going to wreck the economy. I have been hearing this damn argument for years now. I am still waiting for it to come to fruition. It is true that gas prices are getting a bit crazy but our net wealth is higher than ever and if our SPOILED BRAT American consumer ways are any indication--we can afford it. So no matter how much they say the gas prices are going to hurt the economy, the fact of the matter is this just creates another wall-of-worry for the markets to climb as traders short the market waiting for this magical correction caused by the consumers pockets drying up. Until it actually dries up, why short the market and lose money?
This uptrend is still not to be messed with. Next week will show us if the distribution days in the Nasdaq are anything that is going to turn into some real selling. If the action in leading stocks is any indication, we are not going to get too much selling off of those distro days. The indexes and leading stocks continue to hold that key 50 day moving average and have good to great accumulation/distribution ratings. Right now the right play seems to be to buy the dips. That is not a method I endorse, unless the dip is on low volume and followed by a heavy volume bounce around a key moving average or support.
The market is getting a little bit oversold according to the 10-week moving average of the advance/decline line oscillator and the index put/call 21-day moving avg. is getting near the 2.00 level where the markets like to try to top out. But there is still room left with it at 1.80. So that along with the former oscillator mentioned tells us that there is more room to rally before we become overbought or have the extreme index put buying that signals a real top. A high put/call is bullish until it stays high for too long and gets to extreme levels. When that happens it actually confirms the market, if a selloff happens.
As it stands, right now, however, there is no selloff, so the only right thing to do now is to follow that trend, until that trend changes. Next week we have non-farm payroll numbers, the second reading of Q1 GDP, consumer confidence numbers, and the FOMC minutes. Along with the economic numbers, we have earnings from DELL COST HNZ HOV SHLD DBRN RL PSS JAS JCG that should create some minor excitement as earnings season comes to a close.
Enjoy your Memorial Day!!! Never forget the sacrifices that our troops make to allow you to read this blog. This blog and all the money making ideas would not be possible without the brave men and women who sacrifice their lives defending this country and making this world a better place to live in for EVERYONE. Not just Americans. EVERYONE deserves freedom. If you lived under a dictatorship, only then could you appreciate how well off we have it. I have a feeling there are many that read this blog that take YOUR freedom for granted. If that is the case, you should really take a minute and think about how the world would be if the USA did not exist. Do you really think you would be trading stocks? Do you really think you would be free?
Aloha and I will see you in the chat room!!!!
top holdings up this week - purchase date
TRCR 306% - 1/12
MA 181% - 8/2
TTEC 140% - 8/25
OMTR 137% - 9/15
SVNT 131% - 8/24
MEH 119% - 8/30
CPA 118% - 9/15
KHDH 108% - 5/30
JSDA 106% - 12/20
HRZ 104% - 9/27
MFW 104% - 1/29
ULTR 101% - 10/27
CRY 94% - 1/10
EVEP 90% - 11/16
CXW 87% - 5/19
IGLD 79% - 10/26
DECK 76% - 9/13
MCZ 74% - 3/27
HURN 70% - 9/13
CNH 65% - 11/2
BMA 64% - 10/24
APLX 62% - 9/28
VDSI 61% - 1/4
ZNH 59% - 12/26
NXST 59% - 3/28
LFL 57% - 12/13
TESO 56% - 2/16
VCLK 55% - 11/14
APFC 55% - 3/5
TTG 52% - 11/30
NSH 52% - 12/19
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
Saturday, May 19, 2007
M&A Deals Keep The Market Moving As The NYSE and DJIA Hit All-Time Highs On Heavier Volume
It was another M&A filled rally on wall street as the news of mergers and buyouts keep on coming. The SP 600, Nassy, and the NYSE all gained .8%, the SP 500 was up .7%, and the DJIA rallied .6% hitting an all-time high with the NYSE. All indexes closed near their HOD. The best gain came from the IBD 100. The IBD 100 gained 1.2% today, well outpacing the broad market. It is always bullish when leading stocks lead.
All of these gains can be thanked on a series of deals that came about or the rumors that were stirred up on Friday. The big one was MSFT buying AQNT for an insane amount of money–we have heard enough about that. But there were other mergers that helped also. A private equity buyout by Blackstone Group for ADS, GE announcing that it is selling off its plastic division, and Thursday’s WPPGY buy of TFSM show that the market is full of liquidity.
With all of these M&A deals and with Friday being options expiration, volume came in much higher on both the NYSE and the Nasdaq. This gives the markets a clear accumulation day and with the markets hitting new highs that is very bullish. And if you think the higher volume is no good because it was options expiration, you are wrong. It wouldn’t matter if prices did not change much. But the fact that prices were up almost 1% across the board is good enough for me to see today as accumulation. The fact that it was options expiration is just not that important to me when prices are higher or lower by .5%.
The same thing happened this week that happened last week. The Nasdaq underperformed the DJIA by a wide margin again. This week the DJIA was up 1.7% but the Nasdaq was down .1%. That is the second week in a row that the Nasdaq has fallen. For the DJIA, the opposite is true, as that index put in its seventh straight week of gains. The DJIA just will not stop, for now.
The DJIA action is getting a bit crazy but as long as this trend remains there is nothing to do but ride it higher. This is a bullish tape and fighting this is only going to hurt down the road. That is why the greatest traders of all-time never made any trades against the market. I still see some people buying puts on some DJIA stocks. PURE SUICIDE!!
It might be foolish to buy stocks this far extended but it is even more foolish to make bearish bets when the momentum train is at full speed ahead. The smart active investor is riding this trend making sure he buys close to a correct pivot point. If you are doing that you should be making money in this market. Granted, it is not automatic money but it is still a good stock pickers market.
There are a lot of negatives out there, despite these highs, but until these things are confirmed by lower prices these are just noise. Some of that noise though is quite interesting.
We keep having lower volume rallies that are followed by distribution. However, Friday’s gains on higher volume kind of dampens that argument. Since November the amount of stocks making 52-week highs keep contracting on every new all-time high by the NYSE. This is really negative divergence and portends to a very weak market when the market decides to rollover. The other problem is that new 52-week lows keep expanding on every new all-time high by the NYSE. This just confirms the negative divergence with the new highs. This is not bullish in the long-term. But in the short-term it doesn’t matter.
Breadth is also weakening as the markets now hit new highs and the DJ Transportation average is not confirming the DJIA with all-time highs. The fact that the Nasdaq is also lagging so badly is yet another ugly development. But with the weakening breadth you can also make a bullish case as the 10-day adv/dec moving average overbought/oversold oscillator is moving to oversold levels. If the market keeps rising, while we move to oversold, it could produce a very powerful rally as breadth comes back in. On Friday breadth was positive with the gains, something the gains couldn’t accomplish recently.
This market is much more difficult than normal bull markets due to the fact that we are having this run after four years of gains. The rally in 2003, came after two years of non-stop selling. The charts that setup in green pretty bases that then broke out to new highs followed-through immediately and most gave quick 20% plus gains. Nowadays you are lucky if your stock moves higher immediately and we are also very lucky if we can get a 50% gain out of the stock. That is what a lower VIX environment produces with no 10% pullback on the DJIA since 2003.
This market is starting to feel invincible but trust me the gains that it is offering now WILL BE NOTHING compared to the gains that will come after the ensuing bear market happens. If the VIX can get up to near 30, our TRCR 300% gains will be 900% gains. Your 100% gains will be 300% gains. This is what is normal in bull markets. So this market may be a bull market but trust me it is no bull market for active growth investors. This is a slowly dying market. The trend still offers plenty of chances to make money. But I am not going to get filthy rich at this point in the game.
Stocks like TESO AFSI HRZ can make you very wealthy. These are three stocks that I was very adamant about going long. If you went long these you are doing very well. So I am not sure why we complain. But maybe that is the nature of our greedy ways.
Speaking of greedy. Anyone following TNH. That is what a top looks like. Arithmetic daily chart going back to 2001. Take a look at that chart. Study that price and volume action. Notice the extremely wild reversal on the price graph along with a GIANT spike in volume. That is what tops look like. This is the best stock, in the best sector, in the current bull market. Now that this stock has topped it could be hinting at what is in store for the market. We shall see.
One thing we do know is that last year I nailed the ERS top after producing 550% gains in it. I went long ERS took a 500% plus gain and sold it at the top. I have to admit i held on to a little as it came down. But if you go review my commentary from April-May 206, you will see I nailed that top in that leading stock, in the leading sector, in the bull market. If TNH was last years ERS, the top should be soon. I was long TNH for a 250% gain, before this top. So I have sold all in anticipation of this being the top. Just like ERS last year. Study both of those charts. Study the climb, study the volume, and study the ensuing selloff. Same thing, so far.
This is the greatest economic story NEVER told. And it never will be. If Bill Clinton was in office, the biased media wouldn’t shut up over this great market. Instead we get silence and actually get negative spin. What a disgrace the media has become. Disgusting and irresponsible. What a great market!!!!!!! But nobody cares and the media is still bashing it….so there is still plenty of reasons to go higher, even if TNH topped. :)
Aloha and I will see you in the chat room. Where we always are making new all-time highs!!
top holdings - purchase date
TRCR 297% - 1/12
ONT 205% - 12/21
MA 178% - 8/2
OMTR 143% - 9/15
TTEC 137% - 8/25
MEH 120% - 8/30
ULTR 120% - 10/27
CPA 119% - 9/15
SVNT 117% - 8/24
BAM 107% - 11/17/05
KHDH 106% - 5/30
HRZ 99% - 9/27
IGLD 96% - 10/26
EVEP 93% - 11/16
JSDA 93% - 12/20
PRGX 91% - 1/12
HMSY 90% - 6/23
MFW 88% - 1/29
PAE 83% - 3/22
CRY 80% - 1/10
CXW 78% - 5/19
CLRT 77% - 11/30
DECK 72% - 9/13
HURN 70% - 9/13
CNH 69% - 11/2
VDSI 66% - 1/4
TESO 64% - 2/16
LFL 63% - 12/13
APLX 62% - 9/28
IMKTA 50% - 8/28
ETR 50% - 9/27
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
All of these gains can be thanked on a series of deals that came about or the rumors that were stirred up on Friday. The big one was MSFT buying AQNT for an insane amount of money–we have heard enough about that. But there were other mergers that helped also. A private equity buyout by Blackstone Group for ADS, GE announcing that it is selling off its plastic division, and Thursday’s WPPGY buy of TFSM show that the market is full of liquidity.
With all of these M&A deals and with Friday being options expiration, volume came in much higher on both the NYSE and the Nasdaq. This gives the markets a clear accumulation day and with the markets hitting new highs that is very bullish. And if you think the higher volume is no good because it was options expiration, you are wrong. It wouldn’t matter if prices did not change much. But the fact that prices were up almost 1% across the board is good enough for me to see today as accumulation. The fact that it was options expiration is just not that important to me when prices are higher or lower by .5%.
The same thing happened this week that happened last week. The Nasdaq underperformed the DJIA by a wide margin again. This week the DJIA was up 1.7% but the Nasdaq was down .1%. That is the second week in a row that the Nasdaq has fallen. For the DJIA, the opposite is true, as that index put in its seventh straight week of gains. The DJIA just will not stop, for now.
The DJIA action is getting a bit crazy but as long as this trend remains there is nothing to do but ride it higher. This is a bullish tape and fighting this is only going to hurt down the road. That is why the greatest traders of all-time never made any trades against the market. I still see some people buying puts on some DJIA stocks. PURE SUICIDE!!
It might be foolish to buy stocks this far extended but it is even more foolish to make bearish bets when the momentum train is at full speed ahead. The smart active investor is riding this trend making sure he buys close to a correct pivot point. If you are doing that you should be making money in this market. Granted, it is not automatic money but it is still a good stock pickers market.
There are a lot of negatives out there, despite these highs, but until these things are confirmed by lower prices these are just noise. Some of that noise though is quite interesting.
We keep having lower volume rallies that are followed by distribution. However, Friday’s gains on higher volume kind of dampens that argument. Since November the amount of stocks making 52-week highs keep contracting on every new all-time high by the NYSE. This is really negative divergence and portends to a very weak market when the market decides to rollover. The other problem is that new 52-week lows keep expanding on every new all-time high by the NYSE. This just confirms the negative divergence with the new highs. This is not bullish in the long-term. But in the short-term it doesn’t matter.
Breadth is also weakening as the markets now hit new highs and the DJ Transportation average is not confirming the DJIA with all-time highs. The fact that the Nasdaq is also lagging so badly is yet another ugly development. But with the weakening breadth you can also make a bullish case as the 10-day adv/dec moving average overbought/oversold oscillator is moving to oversold levels. If the market keeps rising, while we move to oversold, it could produce a very powerful rally as breadth comes back in. On Friday breadth was positive with the gains, something the gains couldn’t accomplish recently.
This market is much more difficult than normal bull markets due to the fact that we are having this run after four years of gains. The rally in 2003, came after two years of non-stop selling. The charts that setup in green pretty bases that then broke out to new highs followed-through immediately and most gave quick 20% plus gains. Nowadays you are lucky if your stock moves higher immediately and we are also very lucky if we can get a 50% gain out of the stock. That is what a lower VIX environment produces with no 10% pullback on the DJIA since 2003.
This market is starting to feel invincible but trust me the gains that it is offering now WILL BE NOTHING compared to the gains that will come after the ensuing bear market happens. If the VIX can get up to near 30, our TRCR 300% gains will be 900% gains. Your 100% gains will be 300% gains. This is what is normal in bull markets. So this market may be a bull market but trust me it is no bull market for active growth investors. This is a slowly dying market. The trend still offers plenty of chances to make money. But I am not going to get filthy rich at this point in the game.
Stocks like TESO AFSI HRZ can make you very wealthy. These are three stocks that I was very adamant about going long. If you went long these you are doing very well. So I am not sure why we complain. But maybe that is the nature of our greedy ways.
Speaking of greedy. Anyone following TNH. That is what a top looks like. Arithmetic daily chart going back to 2001. Take a look at that chart. Study that price and volume action. Notice the extremely wild reversal on the price graph along with a GIANT spike in volume. That is what tops look like. This is the best stock, in the best sector, in the current bull market. Now that this stock has topped it could be hinting at what is in store for the market. We shall see.
One thing we do know is that last year I nailed the ERS top after producing 550% gains in it. I went long ERS took a 500% plus gain and sold it at the top. I have to admit i held on to a little as it came down. But if you go review my commentary from April-May 206, you will see I nailed that top in that leading stock, in the leading sector, in the bull market. If TNH was last years ERS, the top should be soon. I was long TNH for a 250% gain, before this top. So I have sold all in anticipation of this being the top. Just like ERS last year. Study both of those charts. Study the climb, study the volume, and study the ensuing selloff. Same thing, so far.
This is the greatest economic story NEVER told. And it never will be. If Bill Clinton was in office, the biased media wouldn’t shut up over this great market. Instead we get silence and actually get negative spin. What a disgrace the media has become. Disgusting and irresponsible. What a great market!!!!!!! But nobody cares and the media is still bashing it….so there is still plenty of reasons to go higher, even if TNH topped. :)
Aloha and I will see you in the chat room. Where we always are making new all-time highs!!
top holdings - purchase date
TRCR 297% - 1/12
ONT 205% - 12/21
MA 178% - 8/2
OMTR 143% - 9/15
TTEC 137% - 8/25
MEH 120% - 8/30
ULTR 120% - 10/27
CPA 119% - 9/15
SVNT 117% - 8/24
BAM 107% - 11/17/05
KHDH 106% - 5/30
HRZ 99% - 9/27
IGLD 96% - 10/26
EVEP 93% - 11/16
JSDA 93% - 12/20
PRGX 91% - 1/12
HMSY 90% - 6/23
MFW 88% - 1/29
PAE 83% - 3/22
CRY 80% - 1/10
CXW 78% - 5/19
CLRT 77% - 11/30
DECK 72% - 9/13
HURN 70% - 9/13
CNH 69% - 11/2
VDSI 66% - 1/4
TESO 64% - 2/16
LFL 63% - 12/13
APLX 62% - 9/28
IMKTA 50% - 8/28
ETR 50% - 9/27
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
Saturday, May 12, 2007
Stocks End The Week On A Bullish Note, Despite The Lower Volume
Stocks gapped higher on the back of economic data that was taken as more positive than negative and on some more M&A talk. The Labor Department said the wholesale PPI came in with a .7% increase in April. This was in line with estimates and showed that growth in prices at the producer level were flat except gas. Gas cost rose 8.2%.
April retail sales came in .2% lower but was much better than the numbers the same-store sales delivered on Thursday when they reported a 1.8% fall on the back of some of the worst declines WMT has seen in over 20 years.
The last bit of excitement that helped send stocks higher early on came on the announcement that CME has raised its offer for BOT. There is no news of what ICE is going to do but they are reviewing their options.
The markets took this news in stride and managed a nice rally that saw dip buyers come in and buy the “bargains” Thursday’s selloff had left them. After a mid-day low, bulls went to work sending the indexes to their HOD, however on lower volume.
At the close, the SP 600 and the NYSE led the way with 1.2% gains, the Nasdaq followed with a 1.1% gain, the SP 500 gained 1%, and the DJIA rallied .8%. Leading stocks took back control, on Friday, as the IBD 100 rallied 1.7%, well outpacing the broad market. That is just the kind of action you want to see after a day of selling in the markets.
Volume, like I stated, however, was lower, across the board. Volume fell 23% on the Nasdaq and fell 10% on the NYSE, mitigating the power of the gains. But despite the lower volume, the breadth was very good. Advancers beat decliners by a 13-to-4 margin on the NYSE and by a 3-to-1 margin on the Nasdaq. So that was very impressive.
What was not impressive in the breadth department was the new highs. Despite reversing almost all of yesterday’s losses, new highs did not expand at all on the market. New 52-week highs came in at 257 and new 52-week lows came in at 82.
For the week, the DJIA rallied .5% making it the sixth week in a row of gains, the SP 500 followed with a .02% gain, the NYSE lost .06%, the SP 600 lost .3%, and the Nasdaq led to the downside with a .4% loss. The top index, this week, was the IBD 100 with a 1.4% gain. It was very good to see the IBD 100 lead again. This is much better than the DJIA leading.
Some of the best stocks on Friday came from China as China announced they were lifting restrictions on some refined products. GSH CHL SNP and LFC all saw significant gains as most of these blasted out of bases that were not the most perfect bases to be blasting out of. But a breakout is a breakout and they did breakout.
The selloff on Thursday with the Nasdaq having slightly higher volume and the volume on the NYSE lower had only a slight impact on my top stocks in my portfolio and left me only fully selling a bunch of speculative longs. All of my complete sells on Thursday were from the pure speculative arena. The leaders didn’t do so bad and the pullbacks did not have the feel of panic in them. Hence today’s price gains.
The Thursday selloff allowed me to dump those losers or weak stocks so that I can now have more money to put in to better charts that have much better technical patterns. And that is exactly what has now happened. After Friday’s trading, more than a handful of very beautiful and green charts have setup into perfect buy areas. There are a lot of charts bouncing right off the 50 dma or breaking out of longer bases on very strong volume with green charts. The complete sells obviously did not look like these.
This is why pullbacks are good. I can get rid of the crap that is not working and buy pure quality with better charts. If you are a silver or gold member you can see those beautiful charts and then compare them to the sells I made on Thursday and see I have moved money from stocks with broken patterns to stocks that are ready to move. In fact, Friday’s scan has revealed the most what I would consider “near perfect” charts in one day for more speculative stocks since 2007 began. If Thursday’s selloff had not happened, I would have had less money to put into these pretty charts. Instead I now have more money to use on margin in the prettier charts that should do MUCH better than what I have. This is why pullbacks are good: you can sell laggards and move money into cash (which would be better than losing money) or move the money into stocks with better chart patterns.
Without a pullback, you instead hold the laggards and have less money to work in the better patterns. Turnover is good; not bad. Another positive about smaller selloffs are that you don’t have 4% pullbacks like you do in February. Those kind of vicious pullbacks are the result of non-stop markets that never have 1% pullbacks in the DJIA or 2% pullbacks in the Nasdaq. When you don’t have normal pullbacks, you get one day crashes. So these things are good not bad.
The dip buyers are still working and even after the dip buyers are done the retail and sometimes institutional crowd is right there putting money to work. Right now people do not want to be left behind and the best thing to do is stay out of there way, not fight the trend, and to just ride the trend. Right now it is a completely bullish market, despite some complacency (the put/call fell below .7), and doing anything but going long here is the wrong play.
Whatever you do, do NOT chase performance. Demand the stock is bouncing off a key moving average or is breaking out of a base at least five weeks long. If you do this you put yourself in a much better position of avoiding severe one day losses that happen to a lot of stocks during earnings season. But, thankfully, we are out of that crazy season and back to our normal trading pattern off of news and economic events.
I am not sure where the sell in May and go away crowd is. But maybe they will show up this week. However, I truly doubt that is going to happen just yet. We have the CPI on Monday and I hope everyone is having a great weekend. 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 - purchase date
KNOL 366% - 1/12/06
TRCR 323% - 1/12
PTT 280% - 11/16
TNH 246% - 10/26
MA 180% - 8/2
TTEC 159% - 8/25
ANO 150% - 2/14
IGLD 127% - 10/26
JSDA 125% - 12/20
ULTR 109% - 10/27
MEH 108% - 8/30
HRZ 106% - 9/27
BAM 106% - 11/17/05
CPA 105% - 9/15
SVNT 100% - 8/24
MFW 94% - 1/29
EVEP 93% - 11/16
NEXC 91% - 10/25
CRY 82% - 1/10
KHDH 80% - 5/30
CXW 78% - 5/19
PAE 73% - 3/22
DECK 71% - 9/13
HURN 69% - 9/13
VDSI 67% - 1/4
LFL 65% - 12/13
CNH 64% - 11/2
NSH 62% - 12/19
APLX 61% - 9/28
TESO 57% - 2/16
BMA 57% - 10/24
KALU 55% - 12/6
April retail sales came in .2% lower but was much better than the numbers the same-store sales delivered on Thursday when they reported a 1.8% fall on the back of some of the worst declines WMT has seen in over 20 years.
The last bit of excitement that helped send stocks higher early on came on the announcement that CME has raised its offer for BOT. There is no news of what ICE is going to do but they are reviewing their options.
The markets took this news in stride and managed a nice rally that saw dip buyers come in and buy the “bargains” Thursday’s selloff had left them. After a mid-day low, bulls went to work sending the indexes to their HOD, however on lower volume.
At the close, the SP 600 and the NYSE led the way with 1.2% gains, the Nasdaq followed with a 1.1% gain, the SP 500 gained 1%, and the DJIA rallied .8%. Leading stocks took back control, on Friday, as the IBD 100 rallied 1.7%, well outpacing the broad market. That is just the kind of action you want to see after a day of selling in the markets.
Volume, like I stated, however, was lower, across the board. Volume fell 23% on the Nasdaq and fell 10% on the NYSE, mitigating the power of the gains. But despite the lower volume, the breadth was very good. Advancers beat decliners by a 13-to-4 margin on the NYSE and by a 3-to-1 margin on the Nasdaq. So that was very impressive.
What was not impressive in the breadth department was the new highs. Despite reversing almost all of yesterday’s losses, new highs did not expand at all on the market. New 52-week highs came in at 257 and new 52-week lows came in at 82.
For the week, the DJIA rallied .5% making it the sixth week in a row of gains, the SP 500 followed with a .02% gain, the NYSE lost .06%, the SP 600 lost .3%, and the Nasdaq led to the downside with a .4% loss. The top index, this week, was the IBD 100 with a 1.4% gain. It was very good to see the IBD 100 lead again. This is much better than the DJIA leading.
Some of the best stocks on Friday came from China as China announced they were lifting restrictions on some refined products. GSH CHL SNP and LFC all saw significant gains as most of these blasted out of bases that were not the most perfect bases to be blasting out of. But a breakout is a breakout and they did breakout.
The selloff on Thursday with the Nasdaq having slightly higher volume and the volume on the NYSE lower had only a slight impact on my top stocks in my portfolio and left me only fully selling a bunch of speculative longs. All of my complete sells on Thursday were from the pure speculative arena. The leaders didn’t do so bad and the pullbacks did not have the feel of panic in them. Hence today’s price gains.
The Thursday selloff allowed me to dump those losers or weak stocks so that I can now have more money to put in to better charts that have much better technical patterns. And that is exactly what has now happened. After Friday’s trading, more than a handful of very beautiful and green charts have setup into perfect buy areas. There are a lot of charts bouncing right off the 50 dma or breaking out of longer bases on very strong volume with green charts. The complete sells obviously did not look like these.
This is why pullbacks are good. I can get rid of the crap that is not working and buy pure quality with better charts. If you are a silver or gold member you can see those beautiful charts and then compare them to the sells I made on Thursday and see I have moved money from stocks with broken patterns to stocks that are ready to move. In fact, Friday’s scan has revealed the most what I would consider “near perfect” charts in one day for more speculative stocks since 2007 began. If Thursday’s selloff had not happened, I would have had less money to put into these pretty charts. Instead I now have more money to use on margin in the prettier charts that should do MUCH better than what I have. This is why pullbacks are good: you can sell laggards and move money into cash (which would be better than losing money) or move the money into stocks with better chart patterns.
Without a pullback, you instead hold the laggards and have less money to work in the better patterns. Turnover is good; not bad. Another positive about smaller selloffs are that you don’t have 4% pullbacks like you do in February. Those kind of vicious pullbacks are the result of non-stop markets that never have 1% pullbacks in the DJIA or 2% pullbacks in the Nasdaq. When you don’t have normal pullbacks, you get one day crashes. So these things are good not bad.
The dip buyers are still working and even after the dip buyers are done the retail and sometimes institutional crowd is right there putting money to work. Right now people do not want to be left behind and the best thing to do is stay out of there way, not fight the trend, and to just ride the trend. Right now it is a completely bullish market, despite some complacency (the put/call fell below .7), and doing anything but going long here is the wrong play.
Whatever you do, do NOT chase performance. Demand the stock is bouncing off a key moving average or is breaking out of a base at least five weeks long. If you do this you put yourself in a much better position of avoiding severe one day losses that happen to a lot of stocks during earnings season. But, thankfully, we are out of that crazy season and back to our normal trading pattern off of news and economic events.
I am not sure where the sell in May and go away crowd is. But maybe they will show up this week. However, I truly doubt that is going to happen just yet. We have the CPI on Monday and I hope everyone is having a great weekend. 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 - purchase date
KNOL 366% - 1/12/06
TRCR 323% - 1/12
PTT 280% - 11/16
TNH 246% - 10/26
MA 180% - 8/2
TTEC 159% - 8/25
ANO 150% - 2/14
IGLD 127% - 10/26
JSDA 125% - 12/20
ULTR 109% - 10/27
MEH 108% - 8/30
HRZ 106% - 9/27
BAM 106% - 11/17/05
CPA 105% - 9/15
SVNT 100% - 8/24
MFW 94% - 1/29
EVEP 93% - 11/16
NEXC 91% - 10/25
CRY 82% - 1/10
KHDH 80% - 5/30
CXW 78% - 5/19
PAE 73% - 3/22
DECK 71% - 9/13
HURN 69% - 9/13
VDSI 67% - 1/4
LFL 65% - 12/13
CNH 64% - 11/2
NSH 62% - 12/19
APLX 61% - 9/28
TESO 57% - 2/16
BMA 57% - 10/24
KALU 55% - 12/6
Saturday, May 05, 2007
A Very Eventful And Green Week Comes To A Close With Stocks Up Across The Board On Mixed Volume
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
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
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
Saturday, April 14, 2007
Bulls Fight Off The Bears, Once Again, As Stocks Rally On Lower Volume To Close At Their HOD
Bulls Fight Off The Bears, Once Again, As Stocks Rally On Lower Volume To Close At Their HOD
By MauiTrader
The recent theme of this market has been that all economic news is moving the market. This may be due to the fact that less institutional investors are around to make bets on stocks (the low volume confirms this) but still the fact that the market is so easily moved around shows just how uneasy and unsure investors are. Today was no different.
Early in the morning we received the latest PPI report that showed a 1% jump in March after February’s 1.3% gain. It was the core PPI, however, that had the positive impact on stocks as the core remained flat compared to expectations of a .2% increase. This, along with the earnings from GE, helped get stocks off to a positive start. But those gains were soon eliminated after the University of Michigan’s consumer sentiment survey fell to 85.3 in April from 88.4 in March, below expectations of 87.5, echoing the IBD/TIPP poll released earlier this month.
Proving, though, that the dip-buyers are still in complete control, right after that selloff, stocks found a bottom. Stocks then rallied for the rest of the session closing near or at their intraday highs. The rally picked up steam after comments from Dallas Fed President Richard Fisher made comments about how globalization is helping raise world productivity that in-effect has positive pricing pressure consequences for the USA. That was good enough to bring in the retail crowd. The rally was well along, when a little before 3pm EST the Chief Development/Operating Officer of CSCO said that Cisco’s customers were at the early stages of a new upgrade cycle. That helped give the Nasdaq a huge jolt sending it to its HOD.
At the close, bulls were in control, once again, with the DJIA, Nasdaq, SP 600, and NYSE all up .5%. The SP 500 lagged with a .4% gain. The DJIA got a big boost thanks to an 8% rise in MRK off the back of a positive ruling over Vioxx. Once again, for the fourth session in-a-row, the IBD 100 lagged the broad market with a .4% gain. I hate to tell you this, folks, the best bull markets that have long term staying power ALWAYS have these high quality stocks leading. The fact that they are still lagging this current rally and the overall rally since the July and August lows last year signals that we are on or near the last leg of this bull market that has been going on since March of 2003 without a 10% decline in the DJIA.
Volume was lower by about 5% on both the NYSE and the Nasdaq and once again neither average traded enough shares to even equal its 50 day volume average. Institutional investors are still on the sidelines except when they decide to sell stocks. Then they show up. That is why we have two distribution days with higher volume than the two accumulation days since we followed-through. The good news, today, on the volume, is that the volume picked up as we rallied late-in-the-day off the back of the CSCO news.
Underneath the price gains, the market showed that it is doing well and is not signaling anything drastic after Friday’s session. Breadth was positive on both exchanges, with advancers beating decliners by a 10-to-7 margin on the NYSE and by a 3-to-2 margin on the Nasdaq. There were 459 new 52-week highs and 50 new 52-week lows, with the Chemical-Fertilizer group having 36% of their components hitting that mark. The put/call ratio is still a bit high at .9, which indicates that options traders are still making enough bearish bets that fuel for more price gains.
For the week, the market did very well, with the NYSE leading the way with a 1% gain, the Nasdaq followed with a .8% gain, the SP 600 came in with a .7% increase, the SP 500 was next with a .6% gain, and the DJIA was the laggard with only a .4% gain. Overall it appeared to be a very bullish week but without volume it is hard to definitively say that this market deserves an all-clear signal. My defenses are still up and armed ready for a sudden change should it develop.
My problem is that this light volume rally still gives me the feeling that the retail crowd (dumb money), shorts that are forced to cover their shorts, and daytraders are the ones moving this market. There is a quick visual way to describe what I see: Look at a daily chart of the Nasdaq; now count how many big red bars you see this year compared to big green bars. Do the same thing for the NYSE. Now do this on a weekly chart of both indexes. You will clearly see that the big red bars (distribution) are more frequent than the green bars (distribution). Even though most indexes are overall doing fine in the acc/dist rating, the NYSE has a C and the SP 500 has a D. This despite both being at or very near their all-time highs. This is a bearish development. Now this can be worked off if a ton of accumulation rushes in but for right now that is not happening.
What appears to be happening is that after February 27 the big boys sold stocks, the dumb money came in and starting to buy the dip-since all dips are buys since 2003. When they started to buy the dip, the traders who were for sure the market had topped then started shorting stocks. As the dumb money keeps buying stocks and as the daytraders stay active in bidding up the hot momo stocks (bio and solar), the shorts are then forced to cover their poor trade. This then sends stocks higher and then the big boys dump on them creating another distribution day (April 11) and then we start the whole process all over again. That is why we keep having low volume rallies and we have two distribution days since the market followed-through on March 21st. It is a very smart game the best of the best play. I know this game well. They did it before the 20th century and they will be doing this in the 22nd century.
To go along with what I see in the indexes, I see classic situations of a market near its end. Daytraders are back and are moving stocks, once again. This time the solar stocks, as I have been saying for months now, are the momo monsters. However, another group has joined them after the DNDN announcement: biotech. Biotech stocks are now moving all over the place, with many making very large price gains. I am willing to play these momo monsters but they still must breakout from sound chart patterns. They have to setup like ASTI. Stocks like JASO, TSL, and SPWR are breaking out of sloppy ugly bases. If I was daytrading these bad boys, I am sure I would be doing OK. However, I like to position trade now for the big gains. If the base is ugly, I pass. It is a simple as that. However, the game right now is to daytrade the biotechs, golds, and solar.
Take that speculation now in this market along with all of these low-priced POS that I have flying everywhere and it becomes quite clear to me we are entering a very speculative stage of this market. So, if we are getting a lot of momo stocks in the low-priced, solar, gold, and bio area to prove that it is not speculative all the high priced stocks are moving too right? Wrong. The real leaders in these groups have already made their runs (besides solar) and now the sub-$5 stocks are cooking. Is that a problem? Not at all. In fact at this point this is where we can make a TON of money as long as this trend last. Even if it doesn’t last that long, that is why we cut losses. But if this is the last hurrah, many of the stocks I have recently gone long should produce some big gains.
What else makes me think we are near the end? The fact that the old leaders from the 2003-2006 bull are back again. Oil&Gas, Gold, Steel, Metals, Transports and Commodities are all moving again. This time the leaders are making moves in some and not in others. The old leaders that are not leading again are setting up bases so there could be a lot more upside left in these. But along with these stocks, we don’t have financials, tech, and housing. We have Utilities, Defense, Food, and Medical stocks. The rotation has been out of leading high-tech and high-growth stocks into defensive and safety issues.
Even though I am cautious as can be on this market and have outlined everything I find wrong with this market that I did not find wrong with the market AT ALL in 2003 and 2004, it doesn’t effect my trading. I am long 230 stocks and most are very speculative so are very small. The fact that few CANSLIM quality stocks are breaking out is the reason I am not 200% invested. This market is obviously not acting right to not have me fully invested with it at all-time highs. Trust me, if this market was a rip-roaring raging bull market full of CANSLIM quality charts breaking out left and right, I would be 200% invested. However, since it is all crap I am not looking to become a wealthy rich individual here. I am simple trying to make sure I make a comfortable living so I can pay all my bills on Maui. That is all I want right here. If these stocks FLY!!! then I will get very wealthy. If they don’t, they are breaking out of patterns that should provide some nice gains.
It should be a busy upcoming week, with earnings announcements everywhere and the CPI being released on Tuesday. The CPI is sure to be market moving news but the earnings are sure to make anything off of that meaningless by the end of the week. We have announcements from such tech companies as IBM INTC EMC STX YHOO GOOG. So far the earnings have not been that great and as I have said before Analyst are expecting gains of 3.7% in YOY earnings this quarter. That is down from 8.7% estimates, earlier this year (not a good sign). Also, the expected 3.7% YOY gain will be the first gain in 14 quarters of non-double digit growth. As earnings go, so goes the market. Historically you can watch the trend of the GDP growth and earnings growth of an economy and see that they are the best predictor of what direction the stock market will take. GDP and earnings lead the market.
Take that along with what I see in the indexes and in my charts and it just becomes clear to me that there is not a whole lot left in this rally. Maybe a month to three months. But I can’t imagine by next quarter we will be higher with all the bad numbers, old leaders, and speculative situations I see. We will know it is ending when we get more distribution days in the market. Right now, we have two since the rally followed-through on March 21. Two more next week would raise caution flags everywhere and would definitely make me think about cutting losses much shorter than I normally allow low-priced junk POS stocks. But until I see that distribution, I will continue to ride the trend of the cocky bullish daytraders. Those daytraders are a brazen bunch.
The only other interesting piece of information I saw this weekend was that the Bradley stock market model sees a significant turn date (bearish) on Friday April 20. This is a stock market timing model based off of astrology and has been quite impressive at calling turns. However, sometimes the turn it calls for happens…in the opposite direction. So this model is shaky but it did get the March 13, 2003 bottom right on the money. However, it has a spotty record of tops. But with all the bearish situations I see in a bullish rising market, along with all my longs being so speculative, this is something for me to keep in the back of my mind as we continue on with our overbought speculative low volume old-leader filled bull market.
Aloha and I will see you in the chat room. Have a great Saturday and Sunday!!!
Sidenote: DEATHS DOWN 45% FROM FEB 14 - APR 14 (1586) COMPARED TO TWO PRIOR MONTHS DEC 14 - FEB 14 (2871) IN BAGHDAD. I hate our liberal media. Thank God I know how to read and find information on my own.
Market Commentary At Big Wave Trading Bronze Level One.
Top Holdings Up This Week - Signal Date
KNOL 332% - 1/12/06
AKAM 230% - 9/30/05
TRCR 191% - 1/12
CVO 189% - 8/18/05
TTEC 175% - 8/25
JSDA 164% - 12/20
TNH 141% - 10/26
OMTR 134% - 9/15
CCOI 130% - 9/27
MEH 109% - 8/30
HRZ 105% - 9/27
NEXC 101% - 10/25
CLRT 100% - 11/30
EVEP 97% - 11/16
SLP 94% - 2/5
CPA 91% - 9/15
MFW 89% - 1/29
ONT 85% - 12/21
CHINA 82% - 8/16
IMMU 79% - 12/19
IGLD 77% - 10/26
ULTR 74% - 10/27
MOS 73% - 10/12
ANO 71% - 2/14
PRGX 69% - 1/12
IMKTA 69% - 8/28
HURN 69% - 9/13
IIVI 66% - 8/30
DA 64% - 1/25/06
PERY 64% - 10/4
KHDH 59% - 5/30
CXW 59% - 5/19
EPHC 59% - 12/20
BAM 56% - 11/17/05
DECK 51% - 9/13
ECGI 50% - 10/20
APLX 50% - 9/28
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
By MauiTrader
The recent theme of this market has been that all economic news is moving the market. This may be due to the fact that less institutional investors are around to make bets on stocks (the low volume confirms this) but still the fact that the market is so easily moved around shows just how uneasy and unsure investors are. Today was no different.
Early in the morning we received the latest PPI report that showed a 1% jump in March after February’s 1.3% gain. It was the core PPI, however, that had the positive impact on stocks as the core remained flat compared to expectations of a .2% increase. This, along with the earnings from GE, helped get stocks off to a positive start. But those gains were soon eliminated after the University of Michigan’s consumer sentiment survey fell to 85.3 in April from 88.4 in March, below expectations of 87.5, echoing the IBD/TIPP poll released earlier this month.
Proving, though, that the dip-buyers are still in complete control, right after that selloff, stocks found a bottom. Stocks then rallied for the rest of the session closing near or at their intraday highs. The rally picked up steam after comments from Dallas Fed President Richard Fisher made comments about how globalization is helping raise world productivity that in-effect has positive pricing pressure consequences for the USA. That was good enough to bring in the retail crowd. The rally was well along, when a little before 3pm EST the Chief Development/Operating Officer of CSCO said that Cisco’s customers were at the early stages of a new upgrade cycle. That helped give the Nasdaq a huge jolt sending it to its HOD.
At the close, bulls were in control, once again, with the DJIA, Nasdaq, SP 600, and NYSE all up .5%. The SP 500 lagged with a .4% gain. The DJIA got a big boost thanks to an 8% rise in MRK off the back of a positive ruling over Vioxx. Once again, for the fourth session in-a-row, the IBD 100 lagged the broad market with a .4% gain. I hate to tell you this, folks, the best bull markets that have long term staying power ALWAYS have these high quality stocks leading. The fact that they are still lagging this current rally and the overall rally since the July and August lows last year signals that we are on or near the last leg of this bull market that has been going on since March of 2003 without a 10% decline in the DJIA.
Volume was lower by about 5% on both the NYSE and the Nasdaq and once again neither average traded enough shares to even equal its 50 day volume average. Institutional investors are still on the sidelines except when they decide to sell stocks. Then they show up. That is why we have two distribution days with higher volume than the two accumulation days since we followed-through. The good news, today, on the volume, is that the volume picked up as we rallied late-in-the-day off the back of the CSCO news.
Underneath the price gains, the market showed that it is doing well and is not signaling anything drastic after Friday’s session. Breadth was positive on both exchanges, with advancers beating decliners by a 10-to-7 margin on the NYSE and by a 3-to-2 margin on the Nasdaq. There were 459 new 52-week highs and 50 new 52-week lows, with the Chemical-Fertilizer group having 36% of their components hitting that mark. The put/call ratio is still a bit high at .9, which indicates that options traders are still making enough bearish bets that fuel for more price gains.
For the week, the market did very well, with the NYSE leading the way with a 1% gain, the Nasdaq followed with a .8% gain, the SP 600 came in with a .7% increase, the SP 500 was next with a .6% gain, and the DJIA was the laggard with only a .4% gain. Overall it appeared to be a very bullish week but without volume it is hard to definitively say that this market deserves an all-clear signal. My defenses are still up and armed ready for a sudden change should it develop.
My problem is that this light volume rally still gives me the feeling that the retail crowd (dumb money), shorts that are forced to cover their shorts, and daytraders are the ones moving this market. There is a quick visual way to describe what I see: Look at a daily chart of the Nasdaq; now count how many big red bars you see this year compared to big green bars. Do the same thing for the NYSE. Now do this on a weekly chart of both indexes. You will clearly see that the big red bars (distribution) are more frequent than the green bars (distribution). Even though most indexes are overall doing fine in the acc/dist rating, the NYSE has a C and the SP 500 has a D. This despite both being at or very near their all-time highs. This is a bearish development. Now this can be worked off if a ton of accumulation rushes in but for right now that is not happening.
What appears to be happening is that after February 27 the big boys sold stocks, the dumb money came in and starting to buy the dip-since all dips are buys since 2003. When they started to buy the dip, the traders who were for sure the market had topped then started shorting stocks. As the dumb money keeps buying stocks and as the daytraders stay active in bidding up the hot momo stocks (bio and solar), the shorts are then forced to cover their poor trade. This then sends stocks higher and then the big boys dump on them creating another distribution day (April 11) and then we start the whole process all over again. That is why we keep having low volume rallies and we have two distribution days since the market followed-through on March 21st. It is a very smart game the best of the best play. I know this game well. They did it before the 20th century and they will be doing this in the 22nd century.
To go along with what I see in the indexes, I see classic situations of a market near its end. Daytraders are back and are moving stocks, once again. This time the solar stocks, as I have been saying for months now, are the momo monsters. However, another group has joined them after the DNDN announcement: biotech. Biotech stocks are now moving all over the place, with many making very large price gains. I am willing to play these momo monsters but they still must breakout from sound chart patterns. They have to setup like ASTI. Stocks like JASO, TSL, and SPWR are breaking out of sloppy ugly bases. If I was daytrading these bad boys, I am sure I would be doing OK. However, I like to position trade now for the big gains. If the base is ugly, I pass. It is a simple as that. However, the game right now is to daytrade the biotechs, golds, and solar.
Take that speculation now in this market along with all of these low-priced POS that I have flying everywhere and it becomes quite clear to me we are entering a very speculative stage of this market. So, if we are getting a lot of momo stocks in the low-priced, solar, gold, and bio area to prove that it is not speculative all the high priced stocks are moving too right? Wrong. The real leaders in these groups have already made their runs (besides solar) and now the sub-$5 stocks are cooking. Is that a problem? Not at all. In fact at this point this is where we can make a TON of money as long as this trend last. Even if it doesn’t last that long, that is why we cut losses. But if this is the last hurrah, many of the stocks I have recently gone long should produce some big gains.
What else makes me think we are near the end? The fact that the old leaders from the 2003-2006 bull are back again. Oil&Gas, Gold, Steel, Metals, Transports and Commodities are all moving again. This time the leaders are making moves in some and not in others. The old leaders that are not leading again are setting up bases so there could be a lot more upside left in these. But along with these stocks, we don’t have financials, tech, and housing. We have Utilities, Defense, Food, and Medical stocks. The rotation has been out of leading high-tech and high-growth stocks into defensive and safety issues.
Even though I am cautious as can be on this market and have outlined everything I find wrong with this market that I did not find wrong with the market AT ALL in 2003 and 2004, it doesn’t effect my trading. I am long 230 stocks and most are very speculative so are very small. The fact that few CANSLIM quality stocks are breaking out is the reason I am not 200% invested. This market is obviously not acting right to not have me fully invested with it at all-time highs. Trust me, if this market was a rip-roaring raging bull market full of CANSLIM quality charts breaking out left and right, I would be 200% invested. However, since it is all crap I am not looking to become a wealthy rich individual here. I am simple trying to make sure I make a comfortable living so I can pay all my bills on Maui. That is all I want right here. If these stocks FLY!!! then I will get very wealthy. If they don’t, they are breaking out of patterns that should provide some nice gains.
It should be a busy upcoming week, with earnings announcements everywhere and the CPI being released on Tuesday. The CPI is sure to be market moving news but the earnings are sure to make anything off of that meaningless by the end of the week. We have announcements from such tech companies as IBM INTC EMC STX YHOO GOOG. So far the earnings have not been that great and as I have said before Analyst are expecting gains of 3.7% in YOY earnings this quarter. That is down from 8.7% estimates, earlier this year (not a good sign). Also, the expected 3.7% YOY gain will be the first gain in 14 quarters of non-double digit growth. As earnings go, so goes the market. Historically you can watch the trend of the GDP growth and earnings growth of an economy and see that they are the best predictor of what direction the stock market will take. GDP and earnings lead the market.
Take that along with what I see in the indexes and in my charts and it just becomes clear to me that there is not a whole lot left in this rally. Maybe a month to three months. But I can’t imagine by next quarter we will be higher with all the bad numbers, old leaders, and speculative situations I see. We will know it is ending when we get more distribution days in the market. Right now, we have two since the rally followed-through on March 21. Two more next week would raise caution flags everywhere and would definitely make me think about cutting losses much shorter than I normally allow low-priced junk POS stocks. But until I see that distribution, I will continue to ride the trend of the cocky bullish daytraders. Those daytraders are a brazen bunch.
The only other interesting piece of information I saw this weekend was that the Bradley stock market model sees a significant turn date (bearish) on Friday April 20. This is a stock market timing model based off of astrology and has been quite impressive at calling turns. However, sometimes the turn it calls for happens…in the opposite direction. So this model is shaky but it did get the March 13, 2003 bottom right on the money. However, it has a spotty record of tops. But with all the bearish situations I see in a bullish rising market, along with all my longs being so speculative, this is something for me to keep in the back of my mind as we continue on with our overbought speculative low volume old-leader filled bull market.
Aloha and I will see you in the chat room. Have a great Saturday and Sunday!!!
Sidenote: DEATHS DOWN 45% FROM FEB 14 - APR 14 (1586) COMPARED TO TWO PRIOR MONTHS DEC 14 - FEB 14 (2871) IN BAGHDAD. I hate our liberal media. Thank God I know how to read and find information on my own.
Market Commentary At Big Wave Trading Bronze Level One.
Top Holdings Up This Week - Signal Date
KNOL 332% - 1/12/06
AKAM 230% - 9/30/05
TRCR 191% - 1/12
CVO 189% - 8/18/05
TTEC 175% - 8/25
JSDA 164% - 12/20
TNH 141% - 10/26
OMTR 134% - 9/15
CCOI 130% - 9/27
MEH 109% - 8/30
HRZ 105% - 9/27
NEXC 101% - 10/25
CLRT 100% - 11/30
EVEP 97% - 11/16
SLP 94% - 2/5
CPA 91% - 9/15
MFW 89% - 1/29
ONT 85% - 12/21
CHINA 82% - 8/16
IMMU 79% - 12/19
IGLD 77% - 10/26
ULTR 74% - 10/27
MOS 73% - 10/12
ANO 71% - 2/14
PRGX 69% - 1/12
IMKTA 69% - 8/28
HURN 69% - 9/13
IIVI 66% - 8/30
DA 64% - 1/25/06
PERY 64% - 10/4
KHDH 59% - 5/30
CXW 59% - 5/19
EPHC 59% - 12/20
BAM 56% - 11/17/05
DECK 51% - 9/13
ECGI 50% - 10/20
APLX 50% - 9/28
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
Saturday, April 07, 2007
HAPPY EASTER!!!, HAPPY GOOD FRIDAY!!!, AND HAPPY PESACH!!!; Stocks End Short Week With More Gains On Light Trade
HAPPY EASTER!!!, HAPPY GOOD FRIDAY!!!, AND HAPPY PESACH (PASSOVER)!!!; Stocks End Short Week With More Gains On Light Trade
By MauiTrader
Stocks started the morning off with a gap lower on the back of a currency tightening measures in China. But after the gap lower, stocks steadily climbed higher on very quiet trade for the rest of the day. That reversal off the gap lower was caused by the Labor Department announcing that jobless claims this week fell within forecast. Those jobless claims this week rose by 11,000 to 321,000.
Also helping to lift stocks was a couple of merger and acquisition related announcements. Kirk Kerkorian has made a $4.5 billion bid for DCX and WEBM agreed to be acquired by Software AG. WEBM rose 27% on the announcement. This now puts the 1Q M&A deals up 27% over this time last year. $1.1 trillion worth of M&A deals this year has us on pace to beat last years record. More amazing is private equity deals. Those have risen 47%, year-over-year in 2007 so far.
Combine the positive jobless claims with the M&A deals, and with most traders taking Thursday off to have a very long weekend, and you had a recipe perfect for higher stock prices, despite oil climbing back over $64 on the news that the EIA saying that oil inventories declined for the eight-week in a row.
At the closing bell, the Nasdaq led the way with a .5% gain, the NYSE and the SP 500 followed with .3% gains, and the SP 600 and the DJIA lagged with .2% gains. A tad more troublesome is the IBD 100. That index only managed a .2% gain, well lagging the Nasdaq on the session.
Volume was lower on both the NYSE and the Nasdaq by about 10%. The lower volume was well below the 50 day volume average and was the lowest total of the year. Advancers beat decliners by a 5-to-3 margin on the NYSE and by an 8-to-7 margin on the Nasdaq. There were 413 new highs to 53 new lows–and on the NYSE there were 234 new highs to only 13 new lows.
Today was another day of a low volume rally that saw the indexes barely move higher but once again shake off early weakness to do so. This is not a great trend we have developing, since the follow-through day on March 21st. Since that follow through day the market was been higher in seven sessions. All seven sessions have failed to have volume over the 50 day volume average and only two of the up sessions have come with volume heavier than the day before. This is a low volume rally that will not last much longer unless we get some clear accumulation days in here by big institutional traders. Until we have volume come in over the 50 day volume average on the upside, we are open to a severe sell-off still. Bottom line is that I would not take much away from this week’s holiday shortened trading.
For the week it was very positive with all indexes closing higher. The Nasdaq led the way with a 2.1% gain, the NYSE followed with a 1.8% gain, the DJIA was right behind with a 1.7% gain, the SP 500 rose 1.6%, and the SP 600 gained 1.5%. I could go into more detail about this weeks action but it would be silly to do so. All you need to know is that it was a holiday short week. The bulls almost always have control of these weeks. This week was no exception.
There is no doubt that we are still in rally mode but everything in my gut tells me we are not going far from here. Now I will change my stance in seconds, if I start to see CANSLIM stocks with consistent great EPS and sales growth breakout from fresh bases and the markets start moving higher on HUGE volume. However, all I keep seeing is the old leaders breakout from choppy bases, defensive and utility issues climbing, and little small sub-$10 momo stocks moving. This does not make a safe big bull market. If we start seeing some more buying here on a lot of volume I will be much happier. However, unless we see it soon, we are increasing our chances of failure each day that passes that volume on the up days remain under the 50 day volume average.
Can we make money here? Of course! If you are a subscriber at least on the silver level you can see for yourself that almost EVERYTHING that I have touched since the February 27th sell-off is either higher or has not violated a complete cut loss area. However, there is nothing over $10 breaking out from bases seven weeks long that have perfect accumulation/distribution and max green BOP. In March 2003, October 2004, and November 2005 there were plenty of beautiful charts. Even after the move in August 2006 there were a few SWEET gems. However, since March 21st there has been very few. The stocks that do have perfect charts are just not CANSLIM quality. If this market takes a turn for the worse, these stocks will not fall 8%–they will fall 20% or more before violating a key cut loss level. So I can not recommend them for newbies.
Give me a sell-off of 20% or more and a VIX near 20-30 and the next follow-through we get you will see the power of this strategy. Right now, very few people are making a killing. Remember back in March 2003 when the VIX was at 33? I had many stocks make 300-500% gains. So what can we compare it to now. How about KNOL. KNOL is up 301% for me since I purchased it. If the VIX was three times higher than now and around 36, KNOL would be up 900%. So basically you can take a look at my returns below this commentary and then double or triple them and then you will see the potential gains in a “REAL” bull market. Not a low volume snooze-fest higher.
Speaking of the VIX: The VIX fell 10.2% this week. LOL. With the VIX that low, you can forget about many MFW or TRCR type of stocks showing up. Normally I can find 10-20 MFW and TRCR type of stocks. Not in this market. However, the drop in VIX puts complacency in the market and that is bearish for stock prices. Another bearish item is the put/call ratio. That ratio after falling below .7 yesterday is still low at .74. Also, early on in the realmoney.com polls, bulls are beating bears 60% to 19%. The crowd appears to bullish again….for now. And we all know how quick this can change. More choppiness? Probably.
So remember, until we get more quality CANSLIM type stocks, keep your buys small in this speculative crap that is getting action. Also if you are brand new and are still inexperienced (you know who you are) and you buy a stock and it goes against you the next day, think about selling 25% to 33%. Also in these speculative stocks, don’t be afraid to take some gains at 25% or so. These things like to reverse in the kind of market environment we are in so you need to stay on your toes. Breakouts should work right away! Especially in rough markets. If they don’t move up right away, newbies, think of selling some down.
Before I move on to wishing everyone a Happy Easter, I want to talk about the March employment numbers. Expectations for 135,000 was well taken care of when headlines produced a gain of 180,000. Along with that nice gain, the previous two months employment figures were revised up. But more amazing, despite this “horrible-evil-economy-that-GWB-has-created,” unemployment came in at five-year lows at 4.4%, beating expectations of a tick up to 4.6% from 4.5% . That is simply incredible. This also comes with average hourly earnings rising .3%. That is a 4% gain year-over-year. Even though the economy is showing signs of slowing, these numbers show just how great this economy still is despite the slowdown.
Wall-street took the news quite well with the SP futures rising 5.75 and the NQ futures rising 10.75. Stocks were closed today, obviously, but futures still traded for a little while.
Earnings season officially starts next week when AA reports on Tuesday. Analyst are expecting gains of 3.7% in YOY earnings this quarter. That is down from 8.7% estimates, earlier this year (not a good sign). Don’t you find that a bit scary how far they have come down?? Also, the expected 3.7% YOY gain will be the first gain in 14 quarters of non-double digit growth. As earnings go, so goes the market. Historically you can watch the trend of the GDP growth and earnings growth of an economy and see that they are the best predictor of what direction the stock market will take. GDP and earnings lead the market.
With that I wish everyone a Happy Easter and Passover. Enjoy the time with loved ones. Aloha and I will see you in the chat room.
Market Commentary At Big Wave Trading Bronze Level One.
Top Holdings Up This Week - Signal Date
KNOL 301% - 1/12/06
AKAM 220% - 9/30/05
TRCR 188% - 1/12
TTEC 172% - 8/25
JSDA 139% - 12/20
TNH 132% - 10/26
OMTR 125% - 9/15
CCOI 107% - 9/27
MEH 105% - 8/30
HRZ 104% - 9/27
CLRT 98% - 11/30
PRGX 97% - 1/12
AOI 94% - 11/19
EVEP 93% - 11/16
MFW 91% - 1/29
BONT 87% - 10/3
NEXC 81% - 10/25
CPA 79% - 9/15
CHINA 78% - 8/16
IMKTA 74% - 8/28
SLP 73% - 2/5
BAM 73% - 11/17/05
DA 67% - 1/25/06
MOS 65% - 10/12
EPHC 64% - 12/20
ULTR 64% - 10/27
HURN 63% - 9/13
IIVI 63% - 8/30
PERY 61% - 10/4
ANO 58% - 2/14
CXW 58% - 5/19
XIDE 56% - 1/29
KHDH 55% - 5/30
APLX 53% - 9/28
BMTI 52% - 10/25
IMMU 52% - 12/19
ONT 52% - 12/21
BMA 52% - 10/24
DECK 51% - 9/13
OEH 48% - 11/20
VDSI 48% - 1/4
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
By MauiTrader
Stocks started the morning off with a gap lower on the back of a currency tightening measures in China. But after the gap lower, stocks steadily climbed higher on very quiet trade for the rest of the day. That reversal off the gap lower was caused by the Labor Department announcing that jobless claims this week fell within forecast. Those jobless claims this week rose by 11,000 to 321,000.
Also helping to lift stocks was a couple of merger and acquisition related announcements. Kirk Kerkorian has made a $4.5 billion bid for DCX and WEBM agreed to be acquired by Software AG. WEBM rose 27% on the announcement. This now puts the 1Q M&A deals up 27% over this time last year. $1.1 trillion worth of M&A deals this year has us on pace to beat last years record. More amazing is private equity deals. Those have risen 47%, year-over-year in 2007 so far.
Combine the positive jobless claims with the M&A deals, and with most traders taking Thursday off to have a very long weekend, and you had a recipe perfect for higher stock prices, despite oil climbing back over $64 on the news that the EIA saying that oil inventories declined for the eight-week in a row.
At the closing bell, the Nasdaq led the way with a .5% gain, the NYSE and the SP 500 followed with .3% gains, and the SP 600 and the DJIA lagged with .2% gains. A tad more troublesome is the IBD 100. That index only managed a .2% gain, well lagging the Nasdaq on the session.
Volume was lower on both the NYSE and the Nasdaq by about 10%. The lower volume was well below the 50 day volume average and was the lowest total of the year. Advancers beat decliners by a 5-to-3 margin on the NYSE and by an 8-to-7 margin on the Nasdaq. There were 413 new highs to 53 new lows–and on the NYSE there were 234 new highs to only 13 new lows.
Today was another day of a low volume rally that saw the indexes barely move higher but once again shake off early weakness to do so. This is not a great trend we have developing, since the follow-through day on March 21st. Since that follow through day the market was been higher in seven sessions. All seven sessions have failed to have volume over the 50 day volume average and only two of the up sessions have come with volume heavier than the day before. This is a low volume rally that will not last much longer unless we get some clear accumulation days in here by big institutional traders. Until we have volume come in over the 50 day volume average on the upside, we are open to a severe sell-off still. Bottom line is that I would not take much away from this week’s holiday shortened trading.
For the week it was very positive with all indexes closing higher. The Nasdaq led the way with a 2.1% gain, the NYSE followed with a 1.8% gain, the DJIA was right behind with a 1.7% gain, the SP 500 rose 1.6%, and the SP 600 gained 1.5%. I could go into more detail about this weeks action but it would be silly to do so. All you need to know is that it was a holiday short week. The bulls almost always have control of these weeks. This week was no exception.
There is no doubt that we are still in rally mode but everything in my gut tells me we are not going far from here. Now I will change my stance in seconds, if I start to see CANSLIM stocks with consistent great EPS and sales growth breakout from fresh bases and the markets start moving higher on HUGE volume. However, all I keep seeing is the old leaders breakout from choppy bases, defensive and utility issues climbing, and little small sub-$10 momo stocks moving. This does not make a safe big bull market. If we start seeing some more buying here on a lot of volume I will be much happier. However, unless we see it soon, we are increasing our chances of failure each day that passes that volume on the up days remain under the 50 day volume average.
Can we make money here? Of course! If you are a subscriber at least on the silver level you can see for yourself that almost EVERYTHING that I have touched since the February 27th sell-off is either higher or has not violated a complete cut loss area. However, there is nothing over $10 breaking out from bases seven weeks long that have perfect accumulation/distribution and max green BOP. In March 2003, October 2004, and November 2005 there were plenty of beautiful charts. Even after the move in August 2006 there were a few SWEET gems. However, since March 21st there has been very few. The stocks that do have perfect charts are just not CANSLIM quality. If this market takes a turn for the worse, these stocks will not fall 8%–they will fall 20% or more before violating a key cut loss level. So I can not recommend them for newbies.
Give me a sell-off of 20% or more and a VIX near 20-30 and the next follow-through we get you will see the power of this strategy. Right now, very few people are making a killing. Remember back in March 2003 when the VIX was at 33? I had many stocks make 300-500% gains. So what can we compare it to now. How about KNOL. KNOL is up 301% for me since I purchased it. If the VIX was three times higher than now and around 36, KNOL would be up 900%. So basically you can take a look at my returns below this commentary and then double or triple them and then you will see the potential gains in a “REAL” bull market. Not a low volume snooze-fest higher.
Speaking of the VIX: The VIX fell 10.2% this week. LOL. With the VIX that low, you can forget about many MFW or TRCR type of stocks showing up. Normally I can find 10-20 MFW and TRCR type of stocks. Not in this market. However, the drop in VIX puts complacency in the market and that is bearish for stock prices. Another bearish item is the put/call ratio. That ratio after falling below .7 yesterday is still low at .74. Also, early on in the realmoney.com polls, bulls are beating bears 60% to 19%. The crowd appears to bullish again….for now. And we all know how quick this can change. More choppiness? Probably.
So remember, until we get more quality CANSLIM type stocks, keep your buys small in this speculative crap that is getting action. Also if you are brand new and are still inexperienced (you know who you are) and you buy a stock and it goes against you the next day, think about selling 25% to 33%. Also in these speculative stocks, don’t be afraid to take some gains at 25% or so. These things like to reverse in the kind of market environment we are in so you need to stay on your toes. Breakouts should work right away! Especially in rough markets. If they don’t move up right away, newbies, think of selling some down.
Before I move on to wishing everyone a Happy Easter, I want to talk about the March employment numbers. Expectations for 135,000 was well taken care of when headlines produced a gain of 180,000. Along with that nice gain, the previous two months employment figures were revised up. But more amazing, despite this “horrible-evil-economy-that-GWB-has-created,” unemployment came in at five-year lows at 4.4%, beating expectations of a tick up to 4.6% from 4.5% . That is simply incredible. This also comes with average hourly earnings rising .3%. That is a 4% gain year-over-year. Even though the economy is showing signs of slowing, these numbers show just how great this economy still is despite the slowdown.
Wall-street took the news quite well with the SP futures rising 5.75 and the NQ futures rising 10.75. Stocks were closed today, obviously, but futures still traded for a little while.
Earnings season officially starts next week when AA reports on Tuesday. Analyst are expecting gains of 3.7% in YOY earnings this quarter. That is down from 8.7% estimates, earlier this year (not a good sign). Don’t you find that a bit scary how far they have come down?? Also, the expected 3.7% YOY gain will be the first gain in 14 quarters of non-double digit growth. As earnings go, so goes the market. Historically you can watch the trend of the GDP growth and earnings growth of an economy and see that they are the best predictor of what direction the stock market will take. GDP and earnings lead the market.
With that I wish everyone a Happy Easter and Passover. Enjoy the time with loved ones. Aloha and I will see you in the chat room.
Market Commentary At Big Wave Trading Bronze Level One.
Top Holdings Up This Week - Signal Date
KNOL 301% - 1/12/06
AKAM 220% - 9/30/05
TRCR 188% - 1/12
TTEC 172% - 8/25
JSDA 139% - 12/20
TNH 132% - 10/26
OMTR 125% - 9/15
CCOI 107% - 9/27
MEH 105% - 8/30
HRZ 104% - 9/27
CLRT 98% - 11/30
PRGX 97% - 1/12
AOI 94% - 11/19
EVEP 93% - 11/16
MFW 91% - 1/29
BONT 87% - 10/3
NEXC 81% - 10/25
CPA 79% - 9/15
CHINA 78% - 8/16
IMKTA 74% - 8/28
SLP 73% - 2/5
BAM 73% - 11/17/05
DA 67% - 1/25/06
MOS 65% - 10/12
EPHC 64% - 12/20
ULTR 64% - 10/27
HURN 63% - 9/13
IIVI 63% - 8/30
PERY 61% - 10/4
ANO 58% - 2/14
CXW 58% - 5/19
XIDE 56% - 1/29
KHDH 55% - 5/30
APLX 53% - 9/28
BMTI 52% - 10/25
IMMU 52% - 12/19
ONT 52% - 12/21
BMA 52% - 10/24
DECK 51% - 9/13
OEH 48% - 11/20
VDSI 48% - 1/4
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
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