This was by far one of my most favorites week, since 2004, by far. The amount of emotion with fear, greed, and confusion was by far the most I have seen probably since the downturn in 2005. So, obviously, I must have been pulling my hair out. Right? Wrong.
The great thing about having discipline and game plans is that you are prepared for everything. When all of my new longs started failing and I noticed that all my short recommendations were working out better than longs, it became obvious something was starting to change.
Not only that but remember how I kept harping on the amount of 52-week lows were beating the 52-week highs BEFORE we sold off. I warned how that might be a problem. And walla it became a problem.
As the selloff started, I advised going to cash and those that did that were able to sit back and enjoy this wild action. Because, I have to be honest, neither bulls or bears made a lot of money. If you look at your charts you will clearly see how wild and choppy they are.
What is funny is that the shorts I mentioned before the selloff did very well. However, during the selloff, my short recommendations did very mixed if not not too well. Do you know what that means? It means it is not the correct time to short this market on full margin.
How do I know that? Well, considering that EVERY fast and long selloff in every bear market starts AFTER the top stocks have topped is the first and fast rule. The second is that my shorts are not working. I have been through enough bear moments and one nasty bear market to know when things are right. You know they are right by your shorts working immediately after you short them. With my current shorts a mixed batch with most going the wrong way the market is clearly telling us it is not time to be full hardcore bears just yet.
As long as RIMM, AAPL, BIDU, GOOG, and other leading stocks like TNH and MA not only hold their 200 day moving averages but stay in long term uptrends, there is no way a major top is going to happen right this moment. But my longs are also acting very poorly in this market so it must also be said it is no where near the right time to be full margin with longs at this juncture.
It is a waste land out there of red and wild charts. The biggest and best winners I have ever owned have NEVER came out of these kind of patterns. Take that along with there being 83 new 52-week highs to 236 new 52-week lows it is hard to get excited about a rally here when leadership is this weak. It was weak before the selloff and it continues to be weak.
During the market on Thursday I noticed that it was getting way too bearish out there with the put/call hitting 1.5 intraday and the members of my room excited by all of our shorts working so well (by the end of the day, there was no rejoicing). It was at that moment that I recommending covering 25% of all shorts across the board and that the market has probably seen the lows for the current trend.
Chris “Mahket/Market Speculator” Maye was even earlier in sensing it coming hours before me. The fact was that when you are in tune with the market it is pretty easy to get the feel for extreme moments. Before this selloff ever got started I was warning to all the parabolic and semi-parabolic charts out there. Well most have them have been cut down. But now they must fail this rally on higher volume before stocks like MA or TNH can even be thought of shorts.
Heck, did you see RIMM on Thursday and Friday. That is one of our “tells” (our leader). Does it look like it is topping? Of course it doesn’t. This will be one of the big boys I short when we enter a real bear market. For now, it doesn’t seem like that time. If this is 1998 again, like so many on CNBCrap have been saying, then you should know how the market acted to 2000.
Well, that really isn’t a good example because God knows we are not going to see a market like that again in my lifetime. But the facts remain until the leaders top, do not count your chickens before they are hatched and don’t “put your carriage before your horses.”
At the same time, until we see and pretty green charts with nice round shaped bases in stocks that have great fundamentals I see no reason to feel like you have missed the move, by missing the bottom on Thursday and 2% plus move Friday. I bet you wouldn’t miss it if we gave up all those gains. And also remember even though I am off margin and am only 10% short, 40% long, and 50% cash, I am still holding 98 different stocks that are holding key support areas, 50 and/or 200 day moving averages, or key uptrend lines.
That clearly tells you this is not that horrible of a market to be shorting. If this market was in serious trouble I would probably be only long 50 or so stocks. TRUST ME THEY WOULD PROBABLY BE IN THE LEADING INDUSTRIES DURING THE DOWNTREND. THEIR IS ALWAYS 1 OUT OF 4 STOCKS THAT BUCK THE TREND. OBVIOUSLY, IF I AM LONG, I AM IN ONE OF THOSE AND NOT HOLDING ON TO LOSERS AND RACKING UP LOSSES.
So the best advise I can give everyone right now is to continue to be patient and in cash for an established uptrend or downtrend. For an uptrend we will get a follow-through here in the next seven to ten days. For a downtrend we will start getting clear distribution days and failures at key moving averages and resistance areas. So that is what you must wait for and not be too overanxious to jump into this wild and nutty market that is making some people put on some stupid and ignorant trades OR START TO PRETEND LIKE YOU KNOW WHAT THE HELL IS GOING ON.
For all of those of you out there trying to figure why the market did this and why the market did that, I want you to know you are playing the game as amateurs and suckers. It doesn’t matter why the hell it does anything. All that matters is that it does. You need to make money off the move. NOT KNOW WHY IT HAPPENED. That isn’t EVER going to help you make money as NO TWO SITUATIONS ARE EVER THE SAME IN THE MARKET. EVER!!!! History repeats itself….but the outcome does NOT.
Sunday, August 19, 2007
Sunday, August 12, 2007
Why Are People Trading/Investing In This Market Environment?; Stocks Suffer Worse Week Of Volatility On The Heaviest Volume I Have Ever Seen
As this week went on and on, I started to wonder why I even returned from my vacation. I could have easily have dealt with all this volatility, small longs and shorts, and loss cuts while away from my main screens. However, I am very glad to be back and to finally be posting long post. Now with me back at home I can clearly get all my analysis done. And what I have found after going over everything this week is that most professionals that thousands of investors listen to have overanalyzed this market to death and would be much better off if they advised what they should be advising. Going to cash and letting the market play out.
These guys do not get paid to do that and that is why they are always recommending some stock here or there. However, as a professional that completely understands that there are only a few times every ten years to make HUGE money, I also know when it is best to keep your cash heavy. Times like now is definitely one of them. I hear a lot of investors and commentators advising traders to pick up their favorites at these discounted levels. What bothers me more than anything about this crap advise is that these stocks can stick around these discounted levels for a long time. Go back and see how some of the favorites of 1998-2000 are doing today. They have not come back and some never will. This is what is going to happen to many of the stocks that have come well off their highs during this pullback. Some stocks are broken bad enough that there is no hope for them any time soon.
However, there are a lot of stocks holding up during this downtrend which hints to me that things may not get too much worse from here. Too bad that is the last words of so many traders that do not cut losses, in case they are wrong. I have to admit that I will never be one of those traders. I literally feel that I am in the zone and even watching my gains of 64% fall to 47% the past two weeks did nothing to shake my confidence. Had I not cut losses and instead would have “hoped” (dangerous in the stock market) that some would have returned I believe I would be under 35% by now.
Some traders, including some subscribers, are just so upset that they have lost money and that great patterns like JDAS AFSI and ESEA failed so miserably. I hate to tell everyone this, but 3 out of 4 stocks follow the general trend of the market and no matter how nice they are the chances of them following the market are 75% in favor of them to do so. If patterns like JDAS AFSI ESEA and HUB.A would have showed up right after the March 2003 follow-through you can guarantee they would have done as well as those stocks did too. And how about two very pretty charts that are both now ugly as can be: VSR and SMTX. If those stocks would have shown up with those patterns at the start of a bull market we would have made at least 3x as much as we did. You have to understand that you can NOT just make a lot of money any time and any where. Some people can that use options. But trust me this is not easy. In case you do not remember and/or do not care to do some real work, I will tell you that over 18% of the stock market made 100% or more moves from March 2003 to January 2004. Since the July/August lows we have only 4% of all stocks up 100% or more.
If you scan through my free blog and look at all of my top stocks, you can safely say that at the start of a bull market these gains would have been much higher. So why am I talking about all of this performance in a bull market to performance in a bear market? Because, so many people are not doing well right now and some traders are losing a LOT more than they should be. They are overtrading. I know some people that are buying dips in this market like they were two months ago. The market has changed and most of these traders are going to wash out. My job, imo, is to make sure you do not get discouraged and wash out. The smartest and most prudent thing you must do right now is preserve cash. You must sell your laggards, raise cash, keep new buys or shorts small until there is a clear trend, but continue to hold your longs that show absolutely no signs of problems like HUB.A.
If you do not get discouraged and do cut your losses you are going to have more money to invest when the market does give you that “perfect moment.” Remember, you only get those 3 to 4 times every 10 years. Trust me, you can make good consistent money during the rest of the time (USUALLY NOT TIMES LIKE THE PAST TWO WEEKS). However, you can ONLY get rich with a very high reward to low risk ratio after the end of a bear market, following a follow-through day. This market has only been pulling back for three weeks and we have not even lost 10% so I find it really hard to believe that if we put in a bottom here that it will lead to a “moment.” However, if we can get more pain in this market by moving lower from here, one thing will be clearly certain: the volatility will be high enough to make those that find the next TASR very rich.
The VIX has risen to 28.30 after hitting 29.84 intraday. There is a direct correlation between market bottoms and a high VIX reading leading to some huge gains. And you can be sure of many things, when this moment happens, people will be too worried about A) a recession B) AHM and BSC or C) that you will lose more money because the market has been so bad. I seriously do not think we are at this point. There are still too many people who believe that the market is going to rise that the fear is not thick enough for a real strong bottom to occur. A tradeable bottom? Sure, that definitely can setup here. However, I sure am void of very pretty and very green charts. I just simply do not have may HUB.A type stocks out there. If we get a follow-through day and hold the recent lows, as the weeks go on, we should have more charts setting up with heavy accumulation, max green BOP, and sound chart patterns. If we don’t get these setups, you can be sure that the market probably has much longer to work on its downtrend.
I am seriously hoping that this is a start of a downtrend. I would love to see the market bottom with the VIX around 40. The stocks that setup in proper-green-accumulation-filled charts will be making us a lot of money. And we are going to need that money to get these stocks, so it is best to keep cash heavy when there is no edge. And this weeks volatility clearly shows that there is no edge for the bulls or the bears.
All of my recent short recommendations have been doing very well for the bears. But right when I decide that the uptrend is pretty much in trouble and start my small testing of the shorts the market starts getting whippy. This signals to me that it is not the best time to short then, despite the extreme weakness in the finance and bank stocks (which I got by the way, if you study my “new shorts” section on the gold site at investorsparadise.com/mauitrader/). When I start to see my favorite high priced leading stocks like RIMM AAPL CROX GOOG FWLT BIDU TNH (starting to crack; now needs to fail its upcoming rallY) and MA start to top, you can guarantee the market will be extremely weak and I will have my opportunity to short. I plan on not only shorting those eventual former-leaders when they top but I will be buying some long-term in-the-money puts. But almost NONE of these stocks, except TNH, have the appearance of them definitely topping. So right now it is PERFECTLY CLEAR to me that neither bulls (longs) or bears (shorts) have a clear smooth edge. The downtrend and uptrend will be both sloppy and choppy for a while. The extreme uptick in VIX is your proof that things have changed. The slow but steady uptrend has given way to a choppy and irrational market. These are the kind of markets professionals know to keep trades either small or none at all.
Now to go back and focus solely on the market, on Friday, there is no doubt that the fact that the Fed is injecting $38 billion after injecting $24 billion is not a bullish scenario. It makes me wonder if we are just waiting for the inevitable. But if that is the case, EVERYONE who actually listens to me should be making money by not losing money. Even if this market bottoms here, you will have PLENTY of time to get long the best stocks. The best stocks do not all show up the day of the follow-through. Some may show up that day but the next three weeks is key. That is when the best of the best should show up and breakout. However, I am not sure how you get that happening when the Fed is so nervous about the possible fallout that it injects money into the system. Something seems a bit fishy.
Another thing that happened on Friday was that the rally attempt in the DJIA failed veyr quickly and when the market flashes a distribution day within three days of a follow-through, its rally almost always fails. That happened on Thursday. When that happened IBD's Big Picture noted that when the market does in fact flash a distro day that fast, 13 out of 14 times since 1982 the rally has failed. Well you can make that 14 out of 15. And with the lack of pretty green charts I doubt that if we get another follow-through this week that that one would even work.
In this environment you must remember to keep all new longs and shorts small until a trend becomes clear. It is still not clear if this is the start of a correction or a dip before another leg of this bull starts. Even if it is another dip, there should be some good money to be made with the VIX around 30. But remember if the market can move lower, we could get the VIX to 40 and that is right around where it likes to be for a market to make a low.
Bottom line: it is up to my charts right now. All my pretty green charts are gone except for a gem like HUB.A and OMTR. I will get plenty of beautiful charts before a real rally starts. Before the March 2003 bottom, GRMN, SOHU, SINA, and SNDA all were making max green-heavy accumulation filled charts breaking out to new highs well before the March 2003 bottom occurred. And then remember, TASR then showed up four months AFTER the market bottomed. Just like market tops, the best stocks show up four to seven months AFTER a top or bottom. This works much better with tops as leading stocks breakout faster in bull markets. But many great stocks do show up three to four months after a bottom.
Remember to stay positive and even if this pullback last months and months (THIS WOULD BE A VERY VERY BULLISH DEVELOPMENT), there is always some areas to make moneys in a rough market. If you are a silver or gold member, watch and learn.
Aloha from Maui!! It is good to be home but YES I do miss Texas.
These guys do not get paid to do that and that is why they are always recommending some stock here or there. However, as a professional that completely understands that there are only a few times every ten years to make HUGE money, I also know when it is best to keep your cash heavy. Times like now is definitely one of them. I hear a lot of investors and commentators advising traders to pick up their favorites at these discounted levels. What bothers me more than anything about this crap advise is that these stocks can stick around these discounted levels for a long time. Go back and see how some of the favorites of 1998-2000 are doing today. They have not come back and some never will. This is what is going to happen to many of the stocks that have come well off their highs during this pullback. Some stocks are broken bad enough that there is no hope for them any time soon.
However, there are a lot of stocks holding up during this downtrend which hints to me that things may not get too much worse from here. Too bad that is the last words of so many traders that do not cut losses, in case they are wrong. I have to admit that I will never be one of those traders. I literally feel that I am in the zone and even watching my gains of 64% fall to 47% the past two weeks did nothing to shake my confidence. Had I not cut losses and instead would have “hoped” (dangerous in the stock market) that some would have returned I believe I would be under 35% by now.
Some traders, including some subscribers, are just so upset that they have lost money and that great patterns like JDAS AFSI and ESEA failed so miserably. I hate to tell everyone this, but 3 out of 4 stocks follow the general trend of the market and no matter how nice they are the chances of them following the market are 75% in favor of them to do so. If patterns like JDAS AFSI ESEA and HUB.A would have showed up right after the March 2003 follow-through you can guarantee they would have done as well as those stocks did too. And how about two very pretty charts that are both now ugly as can be: VSR and SMTX. If those stocks would have shown up with those patterns at the start of a bull market we would have made at least 3x as much as we did. You have to understand that you can NOT just make a lot of money any time and any where. Some people can that use options. But trust me this is not easy. In case you do not remember and/or do not care to do some real work, I will tell you that over 18% of the stock market made 100% or more moves from March 2003 to January 2004. Since the July/August lows we have only 4% of all stocks up 100% or more.
If you scan through my free blog and look at all of my top stocks, you can safely say that at the start of a bull market these gains would have been much higher. So why am I talking about all of this performance in a bull market to performance in a bear market? Because, so many people are not doing well right now and some traders are losing a LOT more than they should be. They are overtrading. I know some people that are buying dips in this market like they were two months ago. The market has changed and most of these traders are going to wash out. My job, imo, is to make sure you do not get discouraged and wash out. The smartest and most prudent thing you must do right now is preserve cash. You must sell your laggards, raise cash, keep new buys or shorts small until there is a clear trend, but continue to hold your longs that show absolutely no signs of problems like HUB.A.
If you do not get discouraged and do cut your losses you are going to have more money to invest when the market does give you that “perfect moment.” Remember, you only get those 3 to 4 times every 10 years. Trust me, you can make good consistent money during the rest of the time (USUALLY NOT TIMES LIKE THE PAST TWO WEEKS). However, you can ONLY get rich with a very high reward to low risk ratio after the end of a bear market, following a follow-through day. This market has only been pulling back for three weeks and we have not even lost 10% so I find it really hard to believe that if we put in a bottom here that it will lead to a “moment.” However, if we can get more pain in this market by moving lower from here, one thing will be clearly certain: the volatility will be high enough to make those that find the next TASR very rich.
The VIX has risen to 28.30 after hitting 29.84 intraday. There is a direct correlation between market bottoms and a high VIX reading leading to some huge gains. And you can be sure of many things, when this moment happens, people will be too worried about A) a recession B) AHM and BSC or C) that you will lose more money because the market has been so bad. I seriously do not think we are at this point. There are still too many people who believe that the market is going to rise that the fear is not thick enough for a real strong bottom to occur. A tradeable bottom? Sure, that definitely can setup here. However, I sure am void of very pretty and very green charts. I just simply do not have may HUB.A type stocks out there. If we get a follow-through day and hold the recent lows, as the weeks go on, we should have more charts setting up with heavy accumulation, max green BOP, and sound chart patterns. If we don’t get these setups, you can be sure that the market probably has much longer to work on its downtrend.
I am seriously hoping that this is a start of a downtrend. I would love to see the market bottom with the VIX around 40. The stocks that setup in proper-green-accumulation-filled charts will be making us a lot of money. And we are going to need that money to get these stocks, so it is best to keep cash heavy when there is no edge. And this weeks volatility clearly shows that there is no edge for the bulls or the bears.
All of my recent short recommendations have been doing very well for the bears. But right when I decide that the uptrend is pretty much in trouble and start my small testing of the shorts the market starts getting whippy. This signals to me that it is not the best time to short then, despite the extreme weakness in the finance and bank stocks (which I got by the way, if you study my “new shorts” section on the gold site at investorsparadise.com/mauitrader/). When I start to see my favorite high priced leading stocks like RIMM AAPL CROX GOOG FWLT BIDU TNH (starting to crack; now needs to fail its upcoming rallY) and MA start to top, you can guarantee the market will be extremely weak and I will have my opportunity to short. I plan on not only shorting those eventual former-leaders when they top but I will be buying some long-term in-the-money puts. But almost NONE of these stocks, except TNH, have the appearance of them definitely topping. So right now it is PERFECTLY CLEAR to me that neither bulls (longs) or bears (shorts) have a clear smooth edge. The downtrend and uptrend will be both sloppy and choppy for a while. The extreme uptick in VIX is your proof that things have changed. The slow but steady uptrend has given way to a choppy and irrational market. These are the kind of markets professionals know to keep trades either small or none at all.
Now to go back and focus solely on the market, on Friday, there is no doubt that the fact that the Fed is injecting $38 billion after injecting $24 billion is not a bullish scenario. It makes me wonder if we are just waiting for the inevitable. But if that is the case, EVERYONE who actually listens to me should be making money by not losing money. Even if this market bottoms here, you will have PLENTY of time to get long the best stocks. The best stocks do not all show up the day of the follow-through. Some may show up that day but the next three weeks is key. That is when the best of the best should show up and breakout. However, I am not sure how you get that happening when the Fed is so nervous about the possible fallout that it injects money into the system. Something seems a bit fishy.
Another thing that happened on Friday was that the rally attempt in the DJIA failed veyr quickly and when the market flashes a distribution day within three days of a follow-through, its rally almost always fails. That happened on Thursday. When that happened IBD's Big Picture noted that when the market does in fact flash a distro day that fast, 13 out of 14 times since 1982 the rally has failed. Well you can make that 14 out of 15. And with the lack of pretty green charts I doubt that if we get another follow-through this week that that one would even work.
In this environment you must remember to keep all new longs and shorts small until a trend becomes clear. It is still not clear if this is the start of a correction or a dip before another leg of this bull starts. Even if it is another dip, there should be some good money to be made with the VIX around 30. But remember if the market can move lower, we could get the VIX to 40 and that is right around where it likes to be for a market to make a low.
Bottom line: it is up to my charts right now. All my pretty green charts are gone except for a gem like HUB.A and OMTR. I will get plenty of beautiful charts before a real rally starts. Before the March 2003 bottom, GRMN, SOHU, SINA, and SNDA all were making max green-heavy accumulation filled charts breaking out to new highs well before the March 2003 bottom occurred. And then remember, TASR then showed up four months AFTER the market bottomed. Just like market tops, the best stocks show up four to seven months AFTER a top or bottom. This works much better with tops as leading stocks breakout faster in bull markets. But many great stocks do show up three to four months after a bottom.
Remember to stay positive and even if this pullback last months and months (THIS WOULD BE A VERY VERY BULLISH DEVELOPMENT), there is always some areas to make moneys in a rough market. If you are a silver or gold member, watch and learn.
Aloha from Maui!! It is good to be home but YES I do miss Texas.
Saturday, July 28, 2007
Nasty Last Hour Leaves Indexes Soaked In The Red, In A Week That Saw The Market Make A Major Character Change
Even though I am vacation, if I did not have work to do on this site, I can literally scan my charts and place all my orders within an hour and a half. So remember, even though I am on vacation, I am ON TOP OF THIS MARKET. This market right now should NOT be bought until AFTER we get a follow through day after an attempt at a bottom. Seriously, with the put/call ratio so high for so long, it is possible that there is too much fear in this market and that the lows have been set. However, we very well could be topping, because that is what it looks like out there in the Financial stocks and the general market. However, with the NYSE short interest and put/call so high, it just seems hard to think we could really breakaway and crash from here. So one thing I doubt is going to happen will be a black Monday.
However, I would not buy ANY market EVER that looked the way it does right now. This next week will be the key. Further selling and we definitely have some problems. If we bounce, there is not much to do other than wait for the proper breakouts from top stocks. If we do not see this happen, then we will have probably topped and I will begin my raids on the short side. As for right now, the crack in the market is too new and the bearishness according to the actual money is too extreme. So, keep that cash heavy, get off margin, sell ALL your laggards, do not buy new longs unless the chart is perfect (NAK is not what I would call a perfect chart), and if you do decide to short, please keep it small.
You definitely should be doing what I am doing, which is raising cash. I took a big hit last week. But let's say I didn't cut my laggards and did not keep my new buys small, THEN what could have happened. A 68% YTD gain falling to 54% could have been as bad as 40% had I not sold what is and did not work. The market may not always be easy, but when those bright perfect moments come, we will be there to take advantage. Unlike, all the dip buyers that tried to buy this market last week. BIG MISTAKE.
I am off to San Antonio for the next three days and will have very limited connection time. Make sure to check the forums as everything will be updated there. ALOHA FROM TEXAS!!!
However, I would not buy ANY market EVER that looked the way it does right now. This next week will be the key. Further selling and we definitely have some problems. If we bounce, there is not much to do other than wait for the proper breakouts from top stocks. If we do not see this happen, then we will have probably topped and I will begin my raids on the short side. As for right now, the crack in the market is too new and the bearishness according to the actual money is too extreme. So, keep that cash heavy, get off margin, sell ALL your laggards, do not buy new longs unless the chart is perfect (NAK is not what I would call a perfect chart), and if you do decide to short, please keep it small.
You definitely should be doing what I am doing, which is raising cash. I took a big hit last week. But let's say I didn't cut my laggards and did not keep my new buys small, THEN what could have happened. A 68% YTD gain falling to 54% could have been as bad as 40% had I not sold what is and did not work. The market may not always be easy, but when those bright perfect moments come, we will be there to take advantage. Unlike, all the dip buyers that tried to buy this market last week. BIG MISTAKE.
I am off to San Antonio for the next three days and will have very limited connection time. Make sure to check the forums as everything will be updated there. ALOHA FROM TEXAS!!!
Saturday, July 21, 2007
Nasty Selloff Hits Stocks Thanks To Misses By GOOG And CAT; Overall, There Is Not That Much Damage
Some big misses by two heavyweights weighed heavily on the indexes as the stock market suffered its second distribution day in as many days. GOOG and CAT were both nailed with 8% losses before the opening bell, after both issued poor earnings that missed estimates. However, as the day wore on neither of these issues saw much more selling and both found solid support at their 50 day moving averages, giving some comfort to the bulls. But, for the day, the damage was done.
The DJIA fell 1.1%, the SP 500, Nassy, and NYSE fell 1.2%, and the SP 600 led the way down with a 1.7% loss. The great news was that leading stocks, in the form of the IBD 100 only lost 1.3%, outperforming the SP 600. However, the losses were a bit worse during the day, so the fact that the indexes closed off the lows is a slight positive. Combine that with Wednesday’s action where the Nassy actually closed higher than the open and you can see we have two distro days that aren’t very powerful.
The higher volume in the market combined with breadth 3-to-1 negative on the NYSE, 11-to-4 negative on the Nassy, and 27-to-3 negative on the DJIA gave the impression that things were really bad out there. However, despite there being 326 new lows there were also 216 new highs which shows that there were some decent pockets of strength out there. If today was really as bad as the indexes looked, trust me, there would have been a lot less new highs. So that gives some indication that the selling was not that bad.
And to go along with the data, two things occurred that really stick out after Friday’s losses. The put/call ratio jumped and closed over 1 at 1.02. That high reading shows that as stocks fell, traders decided to buy puts betting that prices are going to continue to go lower. That in of itself is not that impressive. But when you combine that the options crowd is bearish with the fact that the NYSE short interest ratio is at ANOTHER all-time high you have some real interesting developments. The NYSE short interest ratio is now at 8.25% which is an all-time high!!! That means 8% of trading on the NYSE is done in shorts. This DESPITE THE MARKET BEING ONLY 1% TO 2% BELOW ALL-TIME AND SIX-AND-A-HALF YEAR HIGHS.
When you take all of this combined with some leading stocks like AAPL and ISRG still making new highs and it becomes clear that Friday produced some panic. Markets do NOT top with panic. They top with euphoria. Even though BIDU and GOOG dropped and some are calling for a top via those two stocks, you have to remember that BIDU is still in a solid uptrend and GOOG had a very bullish intraday reversal off its 50 dma. So you are really grabbing at straws if you are calling a top here. Unless you only look at bank stocks and GOOG, there is no way you can agree with that argument.
The rest of the market seems OK. I had only a handful of complete sells and almost all of those were in very poor issues. The partial sales I had were made based on pure discipline. But when looking at their weekly and long term daily charts it is obvious there is nothing wrong with these stocks. Hell, look at one of the best sectors out there Transport-Shipping. ESEA, TBSI, DRYS, and DSX show NO signs of topping and all are still on fire and look ready for plenty of gains. Then you have the clear leader during this current bull market: Chemicals. CF, TRA, TNH, and the other stocks in this sector show no signs of topping. Until you see those two sectors top, along with stocks like MA RIMM AAPL FWLT CME ICE and CROX, you can be sure the market top is not here. You will need to see ALL of these leaders suffer some major distribution and fail there rallies before we can even THINK of a top forming.
For the week, it seems obvious that it was not that bad, with the Nassy losing only .7% and the DJIA losing only .4%. But the SP 500 lost 1.2%, the NYSE lost 1.4%, and the SP 600 lost 1.6%. However, none of these losses were severe considering the run that they have been on this year. It was a wild week with a good Tuesday, bad Wednesday (but great close), great Thursday, and a terrible Friday. But that is what makes this market fun.
The one topic dejour this week was subprime loans. And if you don’t think it is going to get worse, I would love to bring your attention to the bank stocks. If you are an experienced chartist and you know what stocks look like when they top after multi-year runs then you are certainly taking notice at the banks. SINCE ALL OF THEM HAVE THE EXACT SAME CHART!! They are topping. Rather it is MER, C, BAC, USB, JPM, UBS, BBT, GS, LEG, LEH, BSC, WB, or SBNY it doesn’t matter. These stocks are rolling over on MASSIVE distribution that has been playing itself out ALL YEAR LONG. That is why you see ALL of those big tall red bars where volume is during 2007 in ALL of these stocks. That is why ALL of them are rolling over. Unless these stocks get a HUGE bid right here, these charts are setup for some shorts to make a lot of money. These daily or weekly charts going back to late 2002 is just what ALL classic tops look like. This is some massive distribution in the whole sector.
The best thing about this that confirms my charts is that earnings that are being reported are great. Last quarters and the few banks that have released this quarter are releasing some great fantastic learning earnings. However, as all of us experienced investors know, the fundamentals ALWAYS!!! look the best at the top. The current charts are telling us that the subprime and housing market is about ready to start to show up in the books of the financials. What even makes this better is that all of you who read me and do not subscribe to me can watch me RIGHT NOW either help you not lose money or make you money by shorting the financials.
While this is happening, all of your brilliant MBA analyst and big money traders like Joe Capone and Scott Rothbort are telling you that they are bargains on this selloff and that you must buy. Until the “smart” fundamentalist and analyst start issuing sells in this sector, you can guarantee these stock aren’t going to stop falling. When they start issuing sells, that is when you should cover. These dummies just don’t get it and they never will. Yet, you will probably give them your money since they sound oh so smart and have one of those fancy degrees on their walls. These “higher educated” fundamental morons are going to lose their clients some money on the short term. While this “dumb surfer” either helps mine make money or not lose money. If you are long ANY stock in the bank sector and it is below the 50 and 200 day moving average, get the hell out!!!! While you are losing money, you are missing out on stocks like PRGX which make 7% gains on days where the market is down 1.5%. Which stocks are you in? If you are a subscriber to my service I know which stocks you are in.
Back to the market: Despite the ugliness in the financials, I have to say that my leading stocks continue to look great. Even though the DJIA did the 14k breakout and trap (which I eluded that it was going to do that last week) it still remains a strong market in an uptrend with all indexes still above their 50 day moving averages. Earnings season is always a rough one and many stocks are either punished HARD or rewarded handsomely. But with the trend still up, even bad earnings can turn into good so it is not smart to panic if your stock sells off a little after a miss. However, if the indexes cut their 50 day moving averages, leading stock falter, all your new buys start sucking up the joint, and good earnings are treated like bad earnings, then you will have a reason to get defensive.
The possibility out there is for anything right now as it always is in earnings season. This upcoming week we have AXP KLAC MRK X MMM NFLX T DD PEP AMZN GLW and XOM set to report. As it is now we have a lot more disappointments than we are used to seeing but like I have said now 100 times, unless we start to actually selloff and fail rally attempts there is no reason to worry about anything.
Two more points I want to hit before I am finished: The amount of new lows that kept expanding while stock prices kept hitting new highs did hint that Friday was coming. On Wednesday we had a TON of new lows which clearly showed that their was weakness in the market building up to the losses on Friday. So, honestly, this selling should have caught NO ONE off guard. Especially my subscribers. And the last thing is BX. How about that scam stock. What is it now? Down 30%. Can anyone say Refco. This is why you must ALWAYS wait for a stock to trade long enough to create a base. Buying stocks before a proper breakout put you into things like Refco, BX, and IBKR. I use IBKR as my broker. I LOVE THEIR SOFTWARE!!!!! Did you see me buy the stock because of that? Did I buy it because my emotions told me to since I love the company so much? No. Do you know why? Because I am a professional.
If you buy ANY stock for ANY other reason than due to historical analysis and fundamental and technical actions, you are nothing but a gambler. And my suggestion to you is to get your act together or go find a new hobby. People like me are going to take ALL of your money. Why gamble when their is one book out there that can teach you how to fish for yourself? How To Make Money In Stocks by William J ONeil. I know one thing, I sure would not want to feel like the loser down the street that can only invest off of tips. How powerless are you when you make investment decisions off of tips? I know one thing: I LOVE BEING IN COMPLETE CONTROL. And the first step in becoming completely in control is admitting you control nothing. Especially the market. The stock market does not care about YOU or your opinions. Which is, sadly, about all I hear out there in the free chat rooms and on this island.
Aloha and I will see you in the chat room.
PS: This is the last weekend post for the free blog for two weeks. I will be on vacation. For paid subscribers you will still see plenty of me, don’t worry.
top current holdings up this week - purchase date
TRCR 536% - 1/12
MA 241% - 8/2
OMTR 192% - 9/15
IHS 155% - 12/21/05
CKSW 148% - 10/11
ULTR 147% - 10/27
KHD 140% - 5/30/06
DECK 124% - 9/13
PRGX 123% - 1/12
TTEC 120% - 8/25
HRZ 117% - 9/27
CNH 114% - 11/2
EVEP 114% - 11/16
CPA 105% - 9/15
FTEK 99% - 10/6
HURN 99% - 9/13
VDSI 98% - 1/14
IGLD 93% - 10/26
VSR 87% - 6/15
CXW 86% - 5/19/06
NAVI 79% - 12/18
APLX 77% - 9/28
INNO 74% - 6/4
HURC 73% - 12/18
FSLR 72% - 5/22
TESO 70% - 2/16
LFL 66% - 12/13
AFSI 65% - 4/12
TASR 64% - 6/6
CRNT 63% - 5/21
SNDA 55% - 12/26
NTLS 55% - 1/30
IMA 55% - 8/2
XRA 50% - 5/24
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 DJIA fell 1.1%, the SP 500, Nassy, and NYSE fell 1.2%, and the SP 600 led the way down with a 1.7% loss. The great news was that leading stocks, in the form of the IBD 100 only lost 1.3%, outperforming the SP 600. However, the losses were a bit worse during the day, so the fact that the indexes closed off the lows is a slight positive. Combine that with Wednesday’s action where the Nassy actually closed higher than the open and you can see we have two distro days that aren’t very powerful.
The higher volume in the market combined with breadth 3-to-1 negative on the NYSE, 11-to-4 negative on the Nassy, and 27-to-3 negative on the DJIA gave the impression that things were really bad out there. However, despite there being 326 new lows there were also 216 new highs which shows that there were some decent pockets of strength out there. If today was really as bad as the indexes looked, trust me, there would have been a lot less new highs. So that gives some indication that the selling was not that bad.
And to go along with the data, two things occurred that really stick out after Friday’s losses. The put/call ratio jumped and closed over 1 at 1.02. That high reading shows that as stocks fell, traders decided to buy puts betting that prices are going to continue to go lower. That in of itself is not that impressive. But when you combine that the options crowd is bearish with the fact that the NYSE short interest ratio is at ANOTHER all-time high you have some real interesting developments. The NYSE short interest ratio is now at 8.25% which is an all-time high!!! That means 8% of trading on the NYSE is done in shorts. This DESPITE THE MARKET BEING ONLY 1% TO 2% BELOW ALL-TIME AND SIX-AND-A-HALF YEAR HIGHS.
When you take all of this combined with some leading stocks like AAPL and ISRG still making new highs and it becomes clear that Friday produced some panic. Markets do NOT top with panic. They top with euphoria. Even though BIDU and GOOG dropped and some are calling for a top via those two stocks, you have to remember that BIDU is still in a solid uptrend and GOOG had a very bullish intraday reversal off its 50 dma. So you are really grabbing at straws if you are calling a top here. Unless you only look at bank stocks and GOOG, there is no way you can agree with that argument.
The rest of the market seems OK. I had only a handful of complete sells and almost all of those were in very poor issues. The partial sales I had were made based on pure discipline. But when looking at their weekly and long term daily charts it is obvious there is nothing wrong with these stocks. Hell, look at one of the best sectors out there Transport-Shipping. ESEA, TBSI, DRYS, and DSX show NO signs of topping and all are still on fire and look ready for plenty of gains. Then you have the clear leader during this current bull market: Chemicals. CF, TRA, TNH, and the other stocks in this sector show no signs of topping. Until you see those two sectors top, along with stocks like MA RIMM AAPL FWLT CME ICE and CROX, you can be sure the market top is not here. You will need to see ALL of these leaders suffer some major distribution and fail there rallies before we can even THINK of a top forming.
For the week, it seems obvious that it was not that bad, with the Nassy losing only .7% and the DJIA losing only .4%. But the SP 500 lost 1.2%, the NYSE lost 1.4%, and the SP 600 lost 1.6%. However, none of these losses were severe considering the run that they have been on this year. It was a wild week with a good Tuesday, bad Wednesday (but great close), great Thursday, and a terrible Friday. But that is what makes this market fun.
The one topic dejour this week was subprime loans. And if you don’t think it is going to get worse, I would love to bring your attention to the bank stocks. If you are an experienced chartist and you know what stocks look like when they top after multi-year runs then you are certainly taking notice at the banks. SINCE ALL OF THEM HAVE THE EXACT SAME CHART!! They are topping. Rather it is MER, C, BAC, USB, JPM, UBS, BBT, GS, LEG, LEH, BSC, WB, or SBNY it doesn’t matter. These stocks are rolling over on MASSIVE distribution that has been playing itself out ALL YEAR LONG. That is why you see ALL of those big tall red bars where volume is during 2007 in ALL of these stocks. That is why ALL of them are rolling over. Unless these stocks get a HUGE bid right here, these charts are setup for some shorts to make a lot of money. These daily or weekly charts going back to late 2002 is just what ALL classic tops look like. This is some massive distribution in the whole sector.
The best thing about this that confirms my charts is that earnings that are being reported are great. Last quarters and the few banks that have released this quarter are releasing some great fantastic learning earnings. However, as all of us experienced investors know, the fundamentals ALWAYS!!! look the best at the top. The current charts are telling us that the subprime and housing market is about ready to start to show up in the books of the financials. What even makes this better is that all of you who read me and do not subscribe to me can watch me RIGHT NOW either help you not lose money or make you money by shorting the financials.
While this is happening, all of your brilliant MBA analyst and big money traders like Joe Capone and Scott Rothbort are telling you that they are bargains on this selloff and that you must buy. Until the “smart” fundamentalist and analyst start issuing sells in this sector, you can guarantee these stock aren’t going to stop falling. When they start issuing sells, that is when you should cover. These dummies just don’t get it and they never will. Yet, you will probably give them your money since they sound oh so smart and have one of those fancy degrees on their walls. These “higher educated” fundamental morons are going to lose their clients some money on the short term. While this “dumb surfer” either helps mine make money or not lose money. If you are long ANY stock in the bank sector and it is below the 50 and 200 day moving average, get the hell out!!!! While you are losing money, you are missing out on stocks like PRGX which make 7% gains on days where the market is down 1.5%. Which stocks are you in? If you are a subscriber to my service I know which stocks you are in.
Back to the market: Despite the ugliness in the financials, I have to say that my leading stocks continue to look great. Even though the DJIA did the 14k breakout and trap (which I eluded that it was going to do that last week) it still remains a strong market in an uptrend with all indexes still above their 50 day moving averages. Earnings season is always a rough one and many stocks are either punished HARD or rewarded handsomely. But with the trend still up, even bad earnings can turn into good so it is not smart to panic if your stock sells off a little after a miss. However, if the indexes cut their 50 day moving averages, leading stock falter, all your new buys start sucking up the joint, and good earnings are treated like bad earnings, then you will have a reason to get defensive.
The possibility out there is for anything right now as it always is in earnings season. This upcoming week we have AXP KLAC MRK X MMM NFLX T DD PEP AMZN GLW and XOM set to report. As it is now we have a lot more disappointments than we are used to seeing but like I have said now 100 times, unless we start to actually selloff and fail rally attempts there is no reason to worry about anything.
Two more points I want to hit before I am finished: The amount of new lows that kept expanding while stock prices kept hitting new highs did hint that Friday was coming. On Wednesday we had a TON of new lows which clearly showed that their was weakness in the market building up to the losses on Friday. So, honestly, this selling should have caught NO ONE off guard. Especially my subscribers. And the last thing is BX. How about that scam stock. What is it now? Down 30%. Can anyone say Refco. This is why you must ALWAYS wait for a stock to trade long enough to create a base. Buying stocks before a proper breakout put you into things like Refco, BX, and IBKR. I use IBKR as my broker. I LOVE THEIR SOFTWARE!!!!! Did you see me buy the stock because of that? Did I buy it because my emotions told me to since I love the company so much? No. Do you know why? Because I am a professional.
If you buy ANY stock for ANY other reason than due to historical analysis and fundamental and technical actions, you are nothing but a gambler. And my suggestion to you is to get your act together or go find a new hobby. People like me are going to take ALL of your money. Why gamble when their is one book out there that can teach you how to fish for yourself? How To Make Money In Stocks by William J ONeil. I know one thing, I sure would not want to feel like the loser down the street that can only invest off of tips. How powerless are you when you make investment decisions off of tips? I know one thing: I LOVE BEING IN COMPLETE CONTROL. And the first step in becoming completely in control is admitting you control nothing. Especially the market. The stock market does not care about YOU or your opinions. Which is, sadly, about all I hear out there in the free chat rooms and on this island.
Aloha and I will see you in the chat room.
PS: This is the last weekend post for the free blog for two weeks. I will be on vacation. For paid subscribers you will still see plenty of me, don’t worry.
top current holdings up this week - purchase date
TRCR 536% - 1/12
MA 241% - 8/2
OMTR 192% - 9/15
IHS 155% - 12/21/05
CKSW 148% - 10/11
ULTR 147% - 10/27
KHD 140% - 5/30/06
DECK 124% - 9/13
PRGX 123% - 1/12
TTEC 120% - 8/25
HRZ 117% - 9/27
CNH 114% - 11/2
EVEP 114% - 11/16
CPA 105% - 9/15
FTEK 99% - 10/6
HURN 99% - 9/13
VDSI 98% - 1/14
IGLD 93% - 10/26
VSR 87% - 6/15
CXW 86% - 5/19/06
NAVI 79% - 12/18
APLX 77% - 9/28
INNO 74% - 6/4
HURC 73% - 12/18
FSLR 72% - 5/22
TESO 70% - 2/16
LFL 66% - 12/13
AFSI 65% - 4/12
TASR 64% - 6/6
CRNT 63% - 5/21
SNDA 55% - 12/26
NTLS 55% - 1/30
IMA 55% - 8/2
XRA 50% - 5/24
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
Friday, July 13, 2007
Leading Stocks Help Take Indexes To All-Time And Six Year Highs; The Bears Who Continue To Fight This Trend Get What They Deserve
For the second week in a row, stocks put in one impressive week of gains, with today’s gains coming in some small part to the University of Michigan consumer confidence index coming in at 92.4 above estimates of 86. However, that simply was not the reason for today’s gains, as another round after afternoon short squeezing hit the indexes sending them near the highs of the session with the Nasdaq closing just short of its HOD. The gains also came in the face of oil rising $1.43 to $73.93.
At the close, the DJIA, SP 500, and SP 600 all hit new all-time highs rallying .3% and the NYSE and Nasdaq gained .2%. The NYSE hit another all-time high and the Nasdaq hit a new 6 1/2 year high. The best part about today’s gains, of course, comes in the fact that leading stocks led the way, once again. The IBD 100 gained .7%, doing much better than the broad market.
Volume was lower today, compared to yesterday’s volume. But considering that we produced some really big gains (biggest on the DJIA since 2003) and were right before the weekend, today’s action has to be considered very bullish and constructive. We could have sold off on lower volume or even higher volume.
There were some weak points with the internals. Despite the gain in the Nasdaq, decliners beat advancers by a 7-to-6 ratio and advancers barely beat decliners on the NYSE. There were also 150 new 52-week lows, despite the markets hitting new highs. But with 683 new 52-week highs, it is not anything to worry about.
For the week, it really doesn’t get much better than what we saw. The DJIA led the way with a 2.2% gain, the Nasdaq followed with a 1.5% gain, and the NYSE and SP 500 gained 1.4%. The best new, obviously, was that leading stocks, once again, beat the broad market for the week. The IBD 100 produced a 2.5% gain, after last weeks 5.2% gain. The best news, however, comes from my own personal IB portfolio. After having a poor weak last week, I managed to return a 10.3% gain for the week. This is what happens when you are in the right stocks. The outperformance has been there every week, except for one, since the March lows. This is what proper disciplined growth momentum investing is all about. There is no doubt, this is a great short-squeezing July, full of breakout in many leading stocks.
I remember, last year, constantly referring to our market as having a potential to repeat a 1995 scenario. Not long after, I heard Kudlow and IBD also bring this up. Now recently Cramer has brought it up, refreshing my memory on that scenario. The only thing that is different is that rates are not being cut yet. If the market keeps rallying and inflation does come into a more moderate pricing zone that would be great. However, no matter what happens, it looks like the 1995 scenario has and is playing itself out. This continues to be the most amazing market that gets absolutely no credit on major media outlets. And if Cramer and history is right and this is a replay of 1995 we have a lot more room to run, especially with tech just now joining the party.
This, however, creates the perfect wall of worry that the stock market needs to climb higher. If you think there is not any fear out there and that everybody is just giddy and happy with this market, let me remind you that the put/call ratio spiked to .99 on Tuesday after the market “swooned,” according to the media. The fear and blatant top calling is, ONCE AGAIN, something you do NOT see at market tops. EVERYBODY and I mean EVERYBODY is in love with the market and everybody will be talking about these good times.
Now, if you are a subscriber to my gold service, I know it seemed like Christmas this week as a LOT of gains were made in many favorite stocks. We did have one suck it up (MTOX) but one out of every other one is not that bad. However, I am not losing my mind over the gains and understand that this is what is supposed to happen in bull markets. It is when my neighbors start celebrating their gains that I will get nervous.
As of right now, to go along with the put/call still being at .76, the NYSE short-interest ratio is still near all-time highs at 7.52. LOL, this is not the number you will see at a market top. The other thing with this bearishness and start of parabolic runs in the charts is the fact that stocks are not doing crazy splits yet. Well, I take that back. I did see RIMM announce a 3-for-1. PEOPLE THAT IS A WARNING. PARABOLIC RUNS AND EXCESSIVE STOCK SPLITS ALWAYS LEAD TO A TOP. So keep your eyes out, even though I don’t expect one for months and months. It pays to be prudent.
And when we do top I have my list of stocks to short: GOOG, AAPL, RIMM, AMZN, ICE, BIDU, FWLT, FSLR, TNH, MA, and CME. I’ll give them to you for free, knowing that most of traders will NOT be able to short these at the right moment and history shows that most will be squeezed out of their shorts many times before the real fall comes. And by that time traders are so dejected that they miss the right moment. I won’t. :)
To prove my point that most will not be able to short the market when they are supposed to, I am finding out many traders are not very good at going long stocks either. In the free chat rooms I monitor I see a lot of traders selling prematurely all the time. Many have bought stocks to sell them on the smallest uptick and now want back in. By watching this action, I can understand why more gains at this juncture will not need a lot of volume. This retail crowd buying on top of the shorts being forced to cover due to them not being able to take the squeeze anymore ensures we will keep going higher. Even thought the crowd is bullish, yet betting bearishly, it doesn’t take much to take a market up with low supply and high demand.
If you did not notice this week, GE, COP, JNJ, HD, SHLD, and AMGN all announced stock buyback. FOLKS! These are no small-fries. These are real big giant companies. This along with all the M&A’s and leaders going into exponential to parabolic moves is the reason why you have to be long here. ABN is selling its LaSalle bank to BAC, ENR is buying PYX, and RTP outbid AA for AL with a $38 billion bid, and you want to be short stocks and long puts? Yeah right! Not me! You want to be short stocks only in a bear market and this is not a bear market. This market is not yet ready to top.
The reasons I see for a top are weak. They involve us being overbought and it involves the high bullishness in the surveys. The overbought can be attributed to the McClellan, 10-DMA of Adv/Dec line, and Arms index. The McClellan is moving overbought but it is nowhere near the 80s at only 68.6. The 10-dma index is overbought but nowhere near extreme levels, and the Arms index is overbought ALL THE TIME. It is almost useless. As for the surveys: the realmoney.com poll shows 69% bulls, 11% bears, and 20% netural. The Investors Intelligence is at 69.5% bulls and 21.8% bears. The AAII is at 44% bulls and 30% bears. However, relying on these for tops is useless. It is better using the UBS euphoria index and that is NOWHERE near euphoric levels seen in 2000.
Also, with the Gold, Steel, Metal, Mining, and all the old leaders moving along with the SOX index and all the technology stocks moving up the IBD 197 industry list it is very hard for me to be worried about a top. Look at AA. It is moving like a tech stock. That is a bull market if I have ever seen a bull market. Seeing the SOX and electronic stocks help leading the market to new highs is just a beautiful thing to see. Especially, when they are joined by so many other groups.
My suggestion is to continue to stay long and strong. Don’t go out trying to chase performance and do not chase stocks way beyond logical pivot points. If you are long, continue to enjoy the gains, but make sure you take some profits along the way when the stock’s price and/or volume acts odd. When the market tops and leading stocks are rolling over, trust me, I will let you know. You will see me selling off many of my top stocks and cutting my new buys short very quickly by them failing immediately. Also the amount of longs will dry up. As they are starting to do on my scans. Most stocks are well beyond proper buy points. Right now, it is all about holding the stocks you are long and riding the gains. Going long a lot of stock here is just a little too risky.
So let the overseas money with a strong Euro continue to find a safe home in the US equity market. As long as they are buying this market, you have to stay long.
Second quarter earnings really start rolling out this week. Expect a rise in volatility, as always happens during earnings season. Remember, going long a stock before earnings is a dangerous play. But selling a long ahead of earnings is an immature amateur play that only newbie emotional inexperienced traders do. Normally, if the stock is in an uptrend, the earnings don’t matter, as the stock will rise. Vise versa, in a bad market. VSCN is a perfect example. They miss, yet their stock rises. Such is a bull market. And that is what we are in.
Aloha and I will see you in the chat room!
Sidenote: Since May 2, 2003 the IBD 100 is up 216% compared to the SP 500’s 66% gain. The greatest traders are the greatest traders for a reason: history.
top holdings up this week - purchase date
TRCR 531% - 1/12
MA 240% - 8/2
OMTR 192% - 9/15
KHD 150% - 5/30/06
IHS 146% - 12/21/05
ULTR 141% - 10/27
TTEC 129% - 8/25
CPA 128% - 9/15
DECK 117% - 9/13
IGLD 103% - 10/26
CNH 103% - 11/2
CKSW 103% - 10/11
HURN 96% - 9/13
APLX 95% - 9/28
EVEP 94% - 11/16
AFSI 89% - 4/12
CXW 89% - 5/19/06
VDSI 85% - 1/14
CTCH 83% - 1/24
INNO 83% - 6/4
FSLR 76% - 5/23
HURC 71% - 12/18
LFL 66% - 12/13
ATX 65% - 12/12
VSR 63% - 6/15
CRNT 62% - 5/21
TESO 60% - 2/16
NAVI 58% - 12/18
IMA 57% - 8/2
SNDA 55% - 12/26
SMTX 55% - 6/15
NTLS 55% - 1/30
TASR 54% - 6/6
ICOC 52% - 5/18
IMMR 50% - 6/21
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
At the close, the DJIA, SP 500, and SP 600 all hit new all-time highs rallying .3% and the NYSE and Nasdaq gained .2%. The NYSE hit another all-time high and the Nasdaq hit a new 6 1/2 year high. The best part about today’s gains, of course, comes in the fact that leading stocks led the way, once again. The IBD 100 gained .7%, doing much better than the broad market.
Volume was lower today, compared to yesterday’s volume. But considering that we produced some really big gains (biggest on the DJIA since 2003) and were right before the weekend, today’s action has to be considered very bullish and constructive. We could have sold off on lower volume or even higher volume.
There were some weak points with the internals. Despite the gain in the Nasdaq, decliners beat advancers by a 7-to-6 ratio and advancers barely beat decliners on the NYSE. There were also 150 new 52-week lows, despite the markets hitting new highs. But with 683 new 52-week highs, it is not anything to worry about.
For the week, it really doesn’t get much better than what we saw. The DJIA led the way with a 2.2% gain, the Nasdaq followed with a 1.5% gain, and the NYSE and SP 500 gained 1.4%. The best new, obviously, was that leading stocks, once again, beat the broad market for the week. The IBD 100 produced a 2.5% gain, after last weeks 5.2% gain. The best news, however, comes from my own personal IB portfolio. After having a poor weak last week, I managed to return a 10.3% gain for the week. This is what happens when you are in the right stocks. The outperformance has been there every week, except for one, since the March lows. This is what proper disciplined growth momentum investing is all about. There is no doubt, this is a great short-squeezing July, full of breakout in many leading stocks.
I remember, last year, constantly referring to our market as having a potential to repeat a 1995 scenario. Not long after, I heard Kudlow and IBD also bring this up. Now recently Cramer has brought it up, refreshing my memory on that scenario. The only thing that is different is that rates are not being cut yet. If the market keeps rallying and inflation does come into a more moderate pricing zone that would be great. However, no matter what happens, it looks like the 1995 scenario has and is playing itself out. This continues to be the most amazing market that gets absolutely no credit on major media outlets. And if Cramer and history is right and this is a replay of 1995 we have a lot more room to run, especially with tech just now joining the party.
This, however, creates the perfect wall of worry that the stock market needs to climb higher. If you think there is not any fear out there and that everybody is just giddy and happy with this market, let me remind you that the put/call ratio spiked to .99 on Tuesday after the market “swooned,” according to the media. The fear and blatant top calling is, ONCE AGAIN, something you do NOT see at market tops. EVERYBODY and I mean EVERYBODY is in love with the market and everybody will be talking about these good times.
Now, if you are a subscriber to my gold service, I know it seemed like Christmas this week as a LOT of gains were made in many favorite stocks. We did have one suck it up (MTOX) but one out of every other one is not that bad. However, I am not losing my mind over the gains and understand that this is what is supposed to happen in bull markets. It is when my neighbors start celebrating their gains that I will get nervous.
As of right now, to go along with the put/call still being at .76, the NYSE short-interest ratio is still near all-time highs at 7.52. LOL, this is not the number you will see at a market top. The other thing with this bearishness and start of parabolic runs in the charts is the fact that stocks are not doing crazy splits yet. Well, I take that back. I did see RIMM announce a 3-for-1. PEOPLE THAT IS A WARNING. PARABOLIC RUNS AND EXCESSIVE STOCK SPLITS ALWAYS LEAD TO A TOP. So keep your eyes out, even though I don’t expect one for months and months. It pays to be prudent.
And when we do top I have my list of stocks to short: GOOG, AAPL, RIMM, AMZN, ICE, BIDU, FWLT, FSLR, TNH, MA, and CME. I’ll give them to you for free, knowing that most of traders will NOT be able to short these at the right moment and history shows that most will be squeezed out of their shorts many times before the real fall comes. And by that time traders are so dejected that they miss the right moment. I won’t. :)
To prove my point that most will not be able to short the market when they are supposed to, I am finding out many traders are not very good at going long stocks either. In the free chat rooms I monitor I see a lot of traders selling prematurely all the time. Many have bought stocks to sell them on the smallest uptick and now want back in. By watching this action, I can understand why more gains at this juncture will not need a lot of volume. This retail crowd buying on top of the shorts being forced to cover due to them not being able to take the squeeze anymore ensures we will keep going higher. Even thought the crowd is bullish, yet betting bearishly, it doesn’t take much to take a market up with low supply and high demand.
If you did not notice this week, GE, COP, JNJ, HD, SHLD, and AMGN all announced stock buyback. FOLKS! These are no small-fries. These are real big giant companies. This along with all the M&A’s and leaders going into exponential to parabolic moves is the reason why you have to be long here. ABN is selling its LaSalle bank to BAC, ENR is buying PYX, and RTP outbid AA for AL with a $38 billion bid, and you want to be short stocks and long puts? Yeah right! Not me! You want to be short stocks only in a bear market and this is not a bear market. This market is not yet ready to top.
The reasons I see for a top are weak. They involve us being overbought and it involves the high bullishness in the surveys. The overbought can be attributed to the McClellan, 10-DMA of Adv/Dec line, and Arms index. The McClellan is moving overbought but it is nowhere near the 80s at only 68.6. The 10-dma index is overbought but nowhere near extreme levels, and the Arms index is overbought ALL THE TIME. It is almost useless. As for the surveys: the realmoney.com poll shows 69% bulls, 11% bears, and 20% netural. The Investors Intelligence is at 69.5% bulls and 21.8% bears. The AAII is at 44% bulls and 30% bears. However, relying on these for tops is useless. It is better using the UBS euphoria index and that is NOWHERE near euphoric levels seen in 2000.
Also, with the Gold, Steel, Metal, Mining, and all the old leaders moving along with the SOX index and all the technology stocks moving up the IBD 197 industry list it is very hard for me to be worried about a top. Look at AA. It is moving like a tech stock. That is a bull market if I have ever seen a bull market. Seeing the SOX and electronic stocks help leading the market to new highs is just a beautiful thing to see. Especially, when they are joined by so many other groups.
My suggestion is to continue to stay long and strong. Don’t go out trying to chase performance and do not chase stocks way beyond logical pivot points. If you are long, continue to enjoy the gains, but make sure you take some profits along the way when the stock’s price and/or volume acts odd. When the market tops and leading stocks are rolling over, trust me, I will let you know. You will see me selling off many of my top stocks and cutting my new buys short very quickly by them failing immediately. Also the amount of longs will dry up. As they are starting to do on my scans. Most stocks are well beyond proper buy points. Right now, it is all about holding the stocks you are long and riding the gains. Going long a lot of stock here is just a little too risky.
So let the overseas money with a strong Euro continue to find a safe home in the US equity market. As long as they are buying this market, you have to stay long.
Second quarter earnings really start rolling out this week. Expect a rise in volatility, as always happens during earnings season. Remember, going long a stock before earnings is a dangerous play. But selling a long ahead of earnings is an immature amateur play that only newbie emotional inexperienced traders do. Normally, if the stock is in an uptrend, the earnings don’t matter, as the stock will rise. Vise versa, in a bad market. VSCN is a perfect example. They miss, yet their stock rises. Such is a bull market. And that is what we are in.
Aloha and I will see you in the chat room!
Sidenote: Since May 2, 2003 the IBD 100 is up 216% compared to the SP 500’s 66% gain. The greatest traders are the greatest traders for a reason: history.
top holdings up this week - purchase date
TRCR 531% - 1/12
MA 240% - 8/2
OMTR 192% - 9/15
KHD 150% - 5/30/06
IHS 146% - 12/21/05
ULTR 141% - 10/27
TTEC 129% - 8/25
CPA 128% - 9/15
DECK 117% - 9/13
IGLD 103% - 10/26
CNH 103% - 11/2
CKSW 103% - 10/11
HURN 96% - 9/13
APLX 95% - 9/28
EVEP 94% - 11/16
AFSI 89% - 4/12
CXW 89% - 5/19/06
VDSI 85% - 1/14
CTCH 83% - 1/24
INNO 83% - 6/4
FSLR 76% - 5/23
HURC 71% - 12/18
LFL 66% - 12/13
ATX 65% - 12/12
VSR 63% - 6/15
CRNT 62% - 5/21
TESO 60% - 2/16
NAVI 58% - 12/18
IMA 57% - 8/2
SNDA 55% - 12/26
SMTX 55% - 6/15
NTLS 55% - 1/30
TASR 54% - 6/6
ICOC 52% - 5/18
IMMR 50% - 6/21
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, July 07, 2007
Fourth Of July Holiday-Shortened Week Goes Out With A Bang; Shorts Continue To Feel The Squeezing Pain Of The Bulls
A positive employment report, positive revisions to past reports along with the unemployment rate holding steady at 4.5%, and acquisition news that EYE raised the offer from a previous company to buy BOL for $75 a share helped stock indexes rise steadily higher all day long in a nice stair step fashion. By the closing bell, all indexes ended in the green, with big-cap tech leading. All of this came despite another increase in oil to $72.81 a barrel-highest close since September. This market continues to move higher despite the highs in oil, confirming that this is the greatest market story never told. (this refers to the severely biased media that REFUSES to acknowledge how INCREDIBLE this rally from October 2002 is).
The NYSE led the way, closing at an all-time high, with a .5% gain and the Nasdaq and Nasdaq 100 gained .4%, hitting 6 1/2 year highs. The DJIA and SP 500 closed slightly higher with a .3% gain and the SP 600 gain was even smaller with a .1% gain. The great news, once again, was that leading stocks trumped the general market indexes, with a 1.2% gain. This is the picture perfect action that you want to see in a bull market. When leading stocks are leading the general indexes, there are much larger gains being made in top growth stocks than value stocks.
Volume was lower than the day before, as it appeared traders started the weekend and/or their vacations early. The lower volume does help alleviate fears that if volume on the downside shows up soon that it will not be that heavy. As it stands now, the NYSE has five distribution days (many weak distro days) and the Nasdaq only has one, signaling that the market is still very healthy up here hitting new highs despite the lower volume.
With the lower volume, however, we did get good breadth confirming the gains today. The other positive is that the breadth improved as the rally continued throughout the day. Advancers beat decliners by a 5-to-3 margin on the NYSE and by a 3-to-2 margin on the Nasdaq. New 52-week highs beat new 52-week lows by 527 to 83, clearly showing the strength of this market after four days of strong price action.
For the week, the Nasdaq led the way with a 2.4% gain, the NYSE followed with an impressive 2%, the SP 500 and SP 600 rallied 1.8%, and the DJIA gained a solid 1.5%. The clear obvious winner this week was the IBD 100 index and my account. The IBD 100 rallied 5.2% and my account rallied 7.3%. This week reversed my poor showing from last week and continued the trend of my account well outperforming the market for the past sixteen weeks (the length of this rally from the March lows).
It has been a powerful four days of low volume gains for the market but I would not be surprised if we get a pullback here as it seems we have worked off the oversold condition and turned some bears into bulls the past week. Some of the key numbers comes from the realmoney.com poll this weekend. It shows that those surveyed lean bullish with 70% expecting price gains for the upcoming week. There are only 13% registering as bears. This also comes with the McClellan and other overbought/oversold indicators get overbought after the past week of price gains. The VIX has also worked off its bullish higher volatility from late June, signaling that the easy money has been made.
However, despite this, the NYSE short interest ratio rose again to near all-time highs closing at 7.66 on Friday. That and the put/call ratio is still around the level it was at the beginning of the week with it closing at .76. This clearly states that despite what people say, traders did not make bullish bets and in fact continued to take the opposite side of the clear trend. The other slightly bullish sentiment news is that bullishness from the Investors Intelligence survey fell to 49.4%. But, bearishness fell also to very low levels of 18%.
The other sentiment index that I noticed giving a signal that the market might be tired here is the ISEE Options put/call index. This index hit 186% on Thursday which is a level where the market normally does not do very well in the short-term following this reading. Combine this with some of the events above, the fact that new buys are starting to get a little difficult to find in top stocks, and the new buys that do show up are in low-float small cap stocks with mixed/poor fundamentals and we just shouldn’t be surprised if we get a pullback. Now a severe pullback–that is something I just don’t see in the cards with this much negativity pouring out of our nightly news.
Another clear reason why I don’t see a top happening anytime soon is that leading stocks with top fundamentals are simply not topping. And history shows that the leaders top BEFORE the market tops. So as long as AAPL, RIMM, BIDU, GOOG, and Chemical stocks are making new highs and are not churning, putting in heavy volume selloffs, or cutting their 50 day moving averages, there is absolutely NO reason to even think of trying to call a top. Once you see these four horseman top and reverse and then can look at the major indexes and see a clear downtrend, on heavy distribution, with lower highs and closes below the 50 day moving average then, and only then, will I listen to the bears.
Until then, the bears are just filled with nothing but pure crap and lies. And their opinions are worth the equivalent of the returns you have received as a bear this year: NOTHING! Pure worthless opinions that do NOT agree with the facts on the ground. This is why trend followers will ALWAYS outperform the top and bottom callers. They will NEVER return what the greatest traders of all-time returned by simply following and listening to top stocks and the general direction of the market.
Now, like I have said before, and like I keep listing on my forums, there are a lot of charts starting parabolic runs. But that is just it: they are starting them or in the middle of them. Very few appear to be in the late stages of runs seen in other parabolic runs in stocks like ERS in 2006 and tech stocks in the 2000 market. Even RevShark sees this, confirming what I have been seeing for weeks and weeks now. Still, until they top, there is no reason to predict when the run will end.
There is even evidence, in the Semiconductor index, that many large big-cap tech stocks are ready to run there. Many are at new 52-week highs and a lot of the sub-components of the Semiconductor/Electronics group have made big moves in the IBD 197 industry group list. It is very good to see the Semi’s join the market as this appears to be very bullish and should help turn some of those bears into the bulls camp, since they always say that it isn’t a real bull market unless the Semi’s are moving. Maybe I am stuck in years gone by, with this statement, but I still have heard plenty of people tell me that this rally (FOR THE PAST FOUR YEARS MIND YOU) is not that great of a rally because Semi stocks never led. Uhm, who said they had to lead? It is much better just seeing stocks like INTC, NVEC, NVDA, ADM, etc. making solid consistent gains. And that is what they are doing. The whole sector looks great. Of course, the best looking one recently has been SMTX. Those who subscribe at the gold level are well familiar with that very very pretty chart.
With a lot of the bullish leanings you are reading in this weekends post, you must also realize that I am no idiot. I have been partial selling many stocks that are in climax/parabolic type runs. Many, not all, of the stocks you see listed below have recently had 10-25% sold via the basic trading necessity of locking in profits. Holding your whole load as the stock continues to race up the charts in an exponential matter is not smart as sudden reversals become more and more likely. Small and smart selling based on either new highs with low volume, new highs with little price change and huge volume, or major reversals where the stock is up a lot on the day but then reverses to close lower are clear places to selloff 10%-20% of your big winners. Locking in some gains and then holding on for a possible climax run is just what the smart traders of yesteryear did and the smart traders of today do. One thing we definitely don’t do (not saying I am great, btw. Trust me I am FAR from it) is call tops. And that is one thing you will not see me do as long as we are moving higher and hitting new all-time and six-and-a-half year highs.
We have earnings season officially kicking off on Monday, with AA releasing earnings after the close. During the week we have numbers from stocks like INFY, PBG, DNA, MAR, YUM, and CTAS, and to close the week off we have GE. After that the fireworks really get going when the earnings really start pounding the table. Isn’t it funny how fast this time of the year can sneak up on you? Besides that there are, like always, economic numbers to digest. But nothing this week should impact the market like earnings will.
Aloha and I will see you in the chat room where you can guarantee we are ALWAYS on the right side of the market.
top holdings up this week - purchase date
TRCR 463% - 1/12
MA 223% - 8/2
OMTR 185% - 9/15
IHS 146% - 12/21/05
CPA 133% - 9/15
KHD 130% - 5/30/06
TTEC 128% - 8/25
ULTR 125% - 10/27
DECK 120% - 9/13
CXW 96% - 5/19/06
HURN 95% - 9/13
CNH 94% - 11/2
CRY 90% - 1/10
VDSI 89% - 1/14
EVEP 89% - 11/16
ZNH 84% - 12/26
APLX 84% - 9/28
AFSI 83% - 4/12
CKSW 69% - 10/11
LFL 68% - 12/13
HURC 66% - 12/18
VSNT 64% - 2/5
ATX 62% - 12/12
IMA 61% - 8/2
NAVI 59% - 12/19
TESO 58% - 2/16
XRA 58% - 5/24
KMGB 57% - 6/1
CRNT 54% - 5/21
TTG 54% - 11/30
CCC 53% - 3/26
FSLR 50% - 5/22
NTLS 50% - 1/30
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 NYSE led the way, closing at an all-time high, with a .5% gain and the Nasdaq and Nasdaq 100 gained .4%, hitting 6 1/2 year highs. The DJIA and SP 500 closed slightly higher with a .3% gain and the SP 600 gain was even smaller with a .1% gain. The great news, once again, was that leading stocks trumped the general market indexes, with a 1.2% gain. This is the picture perfect action that you want to see in a bull market. When leading stocks are leading the general indexes, there are much larger gains being made in top growth stocks than value stocks.
Volume was lower than the day before, as it appeared traders started the weekend and/or their vacations early. The lower volume does help alleviate fears that if volume on the downside shows up soon that it will not be that heavy. As it stands now, the NYSE has five distribution days (many weak distro days) and the Nasdaq only has one, signaling that the market is still very healthy up here hitting new highs despite the lower volume.
With the lower volume, however, we did get good breadth confirming the gains today. The other positive is that the breadth improved as the rally continued throughout the day. Advancers beat decliners by a 5-to-3 margin on the NYSE and by a 3-to-2 margin on the Nasdaq. New 52-week highs beat new 52-week lows by 527 to 83, clearly showing the strength of this market after four days of strong price action.
For the week, the Nasdaq led the way with a 2.4% gain, the NYSE followed with an impressive 2%, the SP 500 and SP 600 rallied 1.8%, and the DJIA gained a solid 1.5%. The clear obvious winner this week was the IBD 100 index and my account. The IBD 100 rallied 5.2% and my account rallied 7.3%. This week reversed my poor showing from last week and continued the trend of my account well outperforming the market for the past sixteen weeks (the length of this rally from the March lows).
It has been a powerful four days of low volume gains for the market but I would not be surprised if we get a pullback here as it seems we have worked off the oversold condition and turned some bears into bulls the past week. Some of the key numbers comes from the realmoney.com poll this weekend. It shows that those surveyed lean bullish with 70% expecting price gains for the upcoming week. There are only 13% registering as bears. This also comes with the McClellan and other overbought/oversold indicators get overbought after the past week of price gains. The VIX has also worked off its bullish higher volatility from late June, signaling that the easy money has been made.
However, despite this, the NYSE short interest ratio rose again to near all-time highs closing at 7.66 on Friday. That and the put/call ratio is still around the level it was at the beginning of the week with it closing at .76. This clearly states that despite what people say, traders did not make bullish bets and in fact continued to take the opposite side of the clear trend. The other slightly bullish sentiment news is that bullishness from the Investors Intelligence survey fell to 49.4%. But, bearishness fell also to very low levels of 18%.
The other sentiment index that I noticed giving a signal that the market might be tired here is the ISEE Options put/call index. This index hit 186% on Thursday which is a level where the market normally does not do very well in the short-term following this reading. Combine this with some of the events above, the fact that new buys are starting to get a little difficult to find in top stocks, and the new buys that do show up are in low-float small cap stocks with mixed/poor fundamentals and we just shouldn’t be surprised if we get a pullback. Now a severe pullback–that is something I just don’t see in the cards with this much negativity pouring out of our nightly news.
Another clear reason why I don’t see a top happening anytime soon is that leading stocks with top fundamentals are simply not topping. And history shows that the leaders top BEFORE the market tops. So as long as AAPL, RIMM, BIDU, GOOG, and Chemical stocks are making new highs and are not churning, putting in heavy volume selloffs, or cutting their 50 day moving averages, there is absolutely NO reason to even think of trying to call a top. Once you see these four horseman top and reverse and then can look at the major indexes and see a clear downtrend, on heavy distribution, with lower highs and closes below the 50 day moving average then, and only then, will I listen to the bears.
Until then, the bears are just filled with nothing but pure crap and lies. And their opinions are worth the equivalent of the returns you have received as a bear this year: NOTHING! Pure worthless opinions that do NOT agree with the facts on the ground. This is why trend followers will ALWAYS outperform the top and bottom callers. They will NEVER return what the greatest traders of all-time returned by simply following and listening to top stocks and the general direction of the market.
Now, like I have said before, and like I keep listing on my forums, there are a lot of charts starting parabolic runs. But that is just it: they are starting them or in the middle of them. Very few appear to be in the late stages of runs seen in other parabolic runs in stocks like ERS in 2006 and tech stocks in the 2000 market. Even RevShark sees this, confirming what I have been seeing for weeks and weeks now. Still, until they top, there is no reason to predict when the run will end.
There is even evidence, in the Semiconductor index, that many large big-cap tech stocks are ready to run there. Many are at new 52-week highs and a lot of the sub-components of the Semiconductor/Electronics group have made big moves in the IBD 197 industry group list. It is very good to see the Semi’s join the market as this appears to be very bullish and should help turn some of those bears into the bulls camp, since they always say that it isn’t a real bull market unless the Semi’s are moving. Maybe I am stuck in years gone by, with this statement, but I still have heard plenty of people tell me that this rally (FOR THE PAST FOUR YEARS MIND YOU) is not that great of a rally because Semi stocks never led. Uhm, who said they had to lead? It is much better just seeing stocks like INTC, NVEC, NVDA, ADM, etc. making solid consistent gains. And that is what they are doing. The whole sector looks great. Of course, the best looking one recently has been SMTX. Those who subscribe at the gold level are well familiar with that very very pretty chart.
With a lot of the bullish leanings you are reading in this weekends post, you must also realize that I am no idiot. I have been partial selling many stocks that are in climax/parabolic type runs. Many, not all, of the stocks you see listed below have recently had 10-25% sold via the basic trading necessity of locking in profits. Holding your whole load as the stock continues to race up the charts in an exponential matter is not smart as sudden reversals become more and more likely. Small and smart selling based on either new highs with low volume, new highs with little price change and huge volume, or major reversals where the stock is up a lot on the day but then reverses to close lower are clear places to selloff 10%-20% of your big winners. Locking in some gains and then holding on for a possible climax run is just what the smart traders of yesteryear did and the smart traders of today do. One thing we definitely don’t do (not saying I am great, btw. Trust me I am FAR from it) is call tops. And that is one thing you will not see me do as long as we are moving higher and hitting new all-time and six-and-a-half year highs.
We have earnings season officially kicking off on Monday, with AA releasing earnings after the close. During the week we have numbers from stocks like INFY, PBG, DNA, MAR, YUM, and CTAS, and to close the week off we have GE. After that the fireworks really get going when the earnings really start pounding the table. Isn’t it funny how fast this time of the year can sneak up on you? Besides that there are, like always, economic numbers to digest. But nothing this week should impact the market like earnings will.
Aloha and I will see you in the chat room where you can guarantee we are ALWAYS on the right side of the market.
top holdings up this week - purchase date
TRCR 463% - 1/12
MA 223% - 8/2
OMTR 185% - 9/15
IHS 146% - 12/21/05
CPA 133% - 9/15
KHD 130% - 5/30/06
TTEC 128% - 8/25
ULTR 125% - 10/27
DECK 120% - 9/13
CXW 96% - 5/19/06
HURN 95% - 9/13
CNH 94% - 11/2
CRY 90% - 1/10
VDSI 89% - 1/14
EVEP 89% - 11/16
ZNH 84% - 12/26
APLX 84% - 9/28
AFSI 83% - 4/12
CKSW 69% - 10/11
LFL 68% - 12/13
HURC 66% - 12/18
VSNT 64% - 2/5
ATX 62% - 12/12
IMA 61% - 8/2
NAVI 59% - 12/19
TESO 58% - 2/16
XRA 58% - 5/24
KMGB 57% - 6/1
CRNT 54% - 5/21
TTG 54% - 11/30
CCC 53% - 3/26
FSLR 50% - 5/22
NTLS 50% - 1/30
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 30, 2007
A Choppy Week Comes To A Close As Stocks Reverse Earlier Gains And Close Lower; Leaders Are Still Leading
Stocks started Friday off on a positive note thanks to the PCE deflator coming in at its lowest levels since Q4 2004. However, bomb scares in London (and this weekend in Glasgow) started stocks lower as prices put in another reversal making it 4 of the past 5 and 6 of the past 8 days where stocks have turned gains into losses. The selling really started picking up steam when more subprime worries hit the market but that was too much fear for the market and dip buyers showed up bringing the indexes off their lows into the closing bell.
At the close, the NYSE was the only index higher with a .1% gain, the DJIA was lower by .1%, the Nasdaq and SP 500 lost .2%, the SP 400 was down .3%, and the SP 600 lost .4%. Showing that it pays to be in the right place at the right time, leading stocks in the form of the IBD 100 killed the broad market with a 1.3% gain.
Volume was higher on the Nasdaq and NYSE but the mild price losses and gains doesn’t give us any clues at to how institutions played themselves on Friday with the EOQ repositioning. Friday was the last day of the 2Q and it ended up being the best quarter since Q4 2004. There were 5 advancers for every 4 decliners on the NYSE and there were 9 decliners to ever 7 winners on the Nasdaq. New highs also took care of new lows by 261 to 114. So overall it was a good day, despite the selling.
For the week, the Nasdaq led the way with a .6% gain, the DJIA was next with a .4% gain, the NYSE followed with a .2% gain, the SP 500 rose .1%, and the SP 600 went the other way closing .1% lower. The great news came in the form of leading stocks. The IBD 100 killed the broad market this week with a 1.2% gain. This is very funny because my account took a 2% plus hit this week. This goes to show you that even when the market is doing well, you are going to have bad weeks. I had one of my worst weeks from the market since the week in February when we sold off. It happens.
It appears the bears may be getting a little bit of traction out there with all of the recent intraday positive gains turning into negative closes. However, the fact that those weak reversals do not lead to some all-out horrible distribution can be taken as a slight positive, because if it was really that bad there is no way the market would be holding up this well with leading stocks leading.
RIMM, AAPL, GOOG, and AMZN still show absolutely no signs of topping. That along with those chemical stocks moving higher and higher makes it hard to play top calling here. These things still appear to have plenty of room to run. I mean, seriously, before Friday’s trading everybody was telling me that RIMM was a short. How did that turn out for them? RIMM clearly shows why it is dangerous to be short stocks here. When too many people are short and trying to call tops, you get 20% plus moves in big stocks. The fact that this stock can move 20% in one day should be a wake up call to all the bears. Instead, I doubt it will do anything.
If you want to find an area of the market that is disturbing, you can look at the bank stocks. BSC GS MER MS and C all have real ugly charts and it is normally not good for the market to be moving without them. But as long as the market is moving up, we don’t need these stocks to be involved. Also stocks in the housing and subprime are still week but they have been that way for a long time–AHM. Also there are always a few pockets of strength that disappoint. Recently it has been a ton of my favorite plays and some of my pretty charts like IDSA. It definitely is not April anymore when these stocks fail these beautiful patterns.
But the one thing that should make it clear that we are probably not topping here is that EVRYONE IS LOOKING FOR A TOP. You do NOT get tops in the market when everyone is looking for it. It is when everyone embraces the rally that you have a problem. That certainly is not the case. The put/call ratio even spiked up a bit to .9. So there are still plenty of options players betting on lower prices. They are usually wrong so we shall see how they end up. And the NYSE short-interest ratio is still at a very high 7.25. Even though it is off the all-time highs, there are still plenty of people shorting every move in this market. You do not see this at tops.
In the very short term we have a very touchy market that doesn’t know if it wants to be bullish or bearish. The realmoney.com poll this weekend sums it up: 31% bullish, 34% bearish, 34% neutral. It doesn’t get more even than that. But the 10 day moving average of the ADV/DEC line is making lower highs and lower lows signaling a bit of a bearish tone to the short term. Confirming this is the 30 day moving average of the ADV/DEC line showing that line making a new low while prices stay above new lows. This is negative divergence and indicates weakness in the short term.
So that probably means a little bit of pressure on stocks, since the VIX is also a bit higher than on its previous lows while prices in the indexes are still close to new highs. This is slightly negative divergence. But to then throw another monkey wrench in this is the calendar. We have a typical short holiday week that usually has a bullish bias. With a short week, we could see price gains.
Bottom line: this market is very choppy right now and it is best to stay in an unbiased mode. Don’t be bullish or bearish. Just play your charts. Hold your winners and get rid of your losers. It is a stock picker market. And thank God that is what I am!
Aloha and I will see you in the chat room!!! Have a great rest of the weekend.
top holdings up this week - purchase date
TRCR 393% - 1/12
MA 231% - 8/2
OMTR 206% - 9/15
IHS 134% - 12/21/05
TTEC 125% - 8/25
KHD 124% - 5/30/06
ULTR 120% - 10/27
MEH 114% - 8/30
DECK 113% - 9/13
HURN 89% - 9/13
CXW 87% - 5/19/06
CNH 87% - 11/2
EVEP 86% - 11/16
APLX 84% - 9/28
ZNH 81% - 12/26
VDSI 77% - 1/14
AFSI 74% - 4/12
IGLD 68% - 10/26
NTL 68% - 4/13
NSH 67% - 12/19
LFL 66% - 12/13
IMA 62% - 8/2
VSNT 61% - 2/5
TESO 56% - 2/16
HURC 56% - 12/18
XRA 55% - 5/24
NAVI 53% - 12/19
KMGB 53% - 6/1
ATX 52% - 12/12
NTLS 50% - 1/30
ETE 50% - 10/6
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
At the close, the NYSE was the only index higher with a .1% gain, the DJIA was lower by .1%, the Nasdaq and SP 500 lost .2%, the SP 400 was down .3%, and the SP 600 lost .4%. Showing that it pays to be in the right place at the right time, leading stocks in the form of the IBD 100 killed the broad market with a 1.3% gain.
Volume was higher on the Nasdaq and NYSE but the mild price losses and gains doesn’t give us any clues at to how institutions played themselves on Friday with the EOQ repositioning. Friday was the last day of the 2Q and it ended up being the best quarter since Q4 2004. There were 5 advancers for every 4 decliners on the NYSE and there were 9 decliners to ever 7 winners on the Nasdaq. New highs also took care of new lows by 261 to 114. So overall it was a good day, despite the selling.
For the week, the Nasdaq led the way with a .6% gain, the DJIA was next with a .4% gain, the NYSE followed with a .2% gain, the SP 500 rose .1%, and the SP 600 went the other way closing .1% lower. The great news came in the form of leading stocks. The IBD 100 killed the broad market this week with a 1.2% gain. This is very funny because my account took a 2% plus hit this week. This goes to show you that even when the market is doing well, you are going to have bad weeks. I had one of my worst weeks from the market since the week in February when we sold off. It happens.
It appears the bears may be getting a little bit of traction out there with all of the recent intraday positive gains turning into negative closes. However, the fact that those weak reversals do not lead to some all-out horrible distribution can be taken as a slight positive, because if it was really that bad there is no way the market would be holding up this well with leading stocks leading.
RIMM, AAPL, GOOG, and AMZN still show absolutely no signs of topping. That along with those chemical stocks moving higher and higher makes it hard to play top calling here. These things still appear to have plenty of room to run. I mean, seriously, before Friday’s trading everybody was telling me that RIMM was a short. How did that turn out for them? RIMM clearly shows why it is dangerous to be short stocks here. When too many people are short and trying to call tops, you get 20% plus moves in big stocks. The fact that this stock can move 20% in one day should be a wake up call to all the bears. Instead, I doubt it will do anything.
If you want to find an area of the market that is disturbing, you can look at the bank stocks. BSC GS MER MS and C all have real ugly charts and it is normally not good for the market to be moving without them. But as long as the market is moving up, we don’t need these stocks to be involved. Also stocks in the housing and subprime are still week but they have been that way for a long time–AHM. Also there are always a few pockets of strength that disappoint. Recently it has been a ton of my favorite plays and some of my pretty charts like IDSA. It definitely is not April anymore when these stocks fail these beautiful patterns.
But the one thing that should make it clear that we are probably not topping here is that EVRYONE IS LOOKING FOR A TOP. You do NOT get tops in the market when everyone is looking for it. It is when everyone embraces the rally that you have a problem. That certainly is not the case. The put/call ratio even spiked up a bit to .9. So there are still plenty of options players betting on lower prices. They are usually wrong so we shall see how they end up. And the NYSE short-interest ratio is still at a very high 7.25. Even though it is off the all-time highs, there are still plenty of people shorting every move in this market. You do not see this at tops.
In the very short term we have a very touchy market that doesn’t know if it wants to be bullish or bearish. The realmoney.com poll this weekend sums it up: 31% bullish, 34% bearish, 34% neutral. It doesn’t get more even than that. But the 10 day moving average of the ADV/DEC line is making lower highs and lower lows signaling a bit of a bearish tone to the short term. Confirming this is the 30 day moving average of the ADV/DEC line showing that line making a new low while prices stay above new lows. This is negative divergence and indicates weakness in the short term.
So that probably means a little bit of pressure on stocks, since the VIX is also a bit higher than on its previous lows while prices in the indexes are still close to new highs. This is slightly negative divergence. But to then throw another monkey wrench in this is the calendar. We have a typical short holiday week that usually has a bullish bias. With a short week, we could see price gains.
Bottom line: this market is very choppy right now and it is best to stay in an unbiased mode. Don’t be bullish or bearish. Just play your charts. Hold your winners and get rid of your losers. It is a stock picker market. And thank God that is what I am!
Aloha and I will see you in the chat room!!! Have a great rest of the weekend.
top holdings up this week - purchase date
TRCR 393% - 1/12
MA 231% - 8/2
OMTR 206% - 9/15
IHS 134% - 12/21/05
TTEC 125% - 8/25
KHD 124% - 5/30/06
ULTR 120% - 10/27
MEH 114% - 8/30
DECK 113% - 9/13
HURN 89% - 9/13
CXW 87% - 5/19/06
CNH 87% - 11/2
EVEP 86% - 11/16
APLX 84% - 9/28
ZNH 81% - 12/26
VDSI 77% - 1/14
AFSI 74% - 4/12
IGLD 68% - 10/26
NTL 68% - 4/13
NSH 67% - 12/19
LFL 66% - 12/13
IMA 62% - 8/2
VSNT 61% - 2/5
TESO 56% - 2/16
HURC 56% - 12/18
XRA 55% - 5/24
NAVI 53% - 12/19
KMGB 53% - 6/1
ATX 52% - 12/12
NTLS 50% - 1/30
ETE 50% - 10/6
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 23, 2007
Stocks End The Week Full Of Red; NYSE And SP 500 Barely Close Below Their 50 Day Moving Averages
A slow but constant selloff hit stocks on a rebalancing day for the Russell indexes, as stocks closed near their session lows, closing lower for the first Friday in sixteen sessions. The losses came despite the debut of private-equity firm Blackstone Group. At the close the DJIA led the way lower with a 1.4% loss, the SP 500 took a 1.3% haircut, the NYSE and Nasdaq lost 1.1%, and the SP 600 held up the best only losing .9%. The blame on the losses were contributed to the subprime problems announced by BSC.
Holding up, along with the small caps, leading stocks in the form of the IBD 100 also lost only .9%. This continues a trend of this index outperforming to the upside and holding up better on the selloffs over the broad market. If this index was leading to the downside on these selloffs, I would be more worried. Instead it looks like normal choppy summer action.
Volume finished over 30% higher on the NYSE and the Nasdaq, due to the Russell rebalance. The key to today’s trading was knowing the facts of the intraday volume action. Volume was trending lower all day long, signaling that institutions were not dumping stocks, until the last hour of the day. That is when volume exploded. But it wasn’t due to selling by big funds. It was due to mutual funds having to reposition their index funds for the stocks that are entering and exiting the Russell index. Therefore, the higher volume with the losses do not signal a distribution day. Investors Business Daily confirms my thinking on this subject.
Breadth was decisively negative with decliners beating advancers on the NYSE by a 3-to-1 ratio and on the Nasdaq by a 2-to-1 ratio. Another nasty number, along with breadth, is that the new lows are trying to expand again, despite the indexes only being 2% or so off of their highs. New 52-week highs only came in with 171, compared to the new 52-week lows registering 144. That is a lot of new lows for a market near new highs. I am not sure how to interpret this.
For the week, the SP 500 and the DJIA led the way lower losing 2%, the NYSE and SP 600 lost 1.7%, and the Nasdaq was lower by 1.4%. Showing investors how leading stocks are supposed to act, even in a poor market, the IBD 100 managed a .1% gain for the week. This is why leading stocks outperform in the long run. The IBD 100 is now up 19% for the year, while most indexes are up around 10%. This goes to prove, ONCE AGAIN, that the big money is made by buying leading stocks, breaking out of sound bases with top fundamentals, in a bull market.
And that brings me to my own portfolio. Most of my longs are all holding key support and are still showing excellent price and volume action. Some stocks, obviously, have been cut this past week with the week market. But that is a good thing. Rough markets give you the chance to weed out the poor performing stocks and move more money into better performing stocks. This is why downtrends are good in a bull market. Constant uptrends make it hard for me to cut stocks that are holding support but not going very far. If I cut them too early, they end up taking off. Then the new stock I buy gives me a quick cut loss. But with markets that have normal pullbacks, I am allowed to separate the weak from the strong.
The only bad part is when one of those weak end up being a large position. Usually it does not happen, but it has happened a couple times recently which indicates to me I need to be more selective and careful with which stocks I pick to load up on. Besides stocks like MTRX and TTG, everything, pretty much, is acting just like it should be acting. Stocks moving higher, holding key support, and moving higher again. As long as top stocks, my stocks, and leading sector stocks keep acting like this it is silly to be calling market tops here. Especially with the NYSE short-interest ratio hitting ANOTHER all-time high at 7.82. Wow! They keep shorting this market despite the near new highs. Brave, I must say. Stupid, I must say.
I hear some people mention that there are too many bulls in the investors intelligence survey at 53% and too few bulls at 19% so we have to be near a top. What these people must not understand is that this survey is HORRIBLE at calling tops. It is ONLY useful at bottoms where normally bulls and bears cross around the 40-45% area. This happens to be good at correlating bottom with price in the indexes. As for tops? Are you kidding me. I guess anything to help there argument.
It doesn’t matter because I can come right back and say, “have you seen the realmoney.com poll this weekend?” So far, bears have 44% of the vote and bulls have only 31%. Last time I checked that doesn’t mean the crowd is bullish. Also have you seen the UBS sentiment index? It is NO WHERE NEAR euphoria levels. That index has a good track of indicating possible tops when the line hits the euphoria zone. It is not even close. The AAII is even close with 43% bullish and 33% bearish.
I hate to tell you this, bears. This is NOT what you see at tops. You do not see pessimism in the media and polls showing 70% of the public thinking we are in a recession, with NYSE short-interest at all-time highs and euphoria levels so absent from this market. Do you know what else is not out there, besides stocks in the Chemical-Fert group? Stocks in CLEAR end stages of climax runs. I can see some stocks in the middle of runs all over the place and I can clearly see that TNH and CF have gone nuts. But calling a top in these is not smart. These stocks still do not look like they are near a top, much less ready to rollover.
The action of GOOG, AAPL, CROX, RIMM, and other leading stocks are still rocking and are not in major climax runs. So it just seems hard for me to want to call a top when the leaders are still leading and some of them are almost closing near their highs on a day like today. If anything, JDSU in 2000 should be the case study for everyone. After that stock topped, it took SIX MONTHS before the big fall. Trust me, calling tops is a game of ignorance and pure idiocy. The right play is going with the trend. Something a TON of people reading this blog probably are NOT doing. You will see a MAJOR difference if you just learn how to do what the best traders of all-time did.
Are there reasons to pullback? Yes. We are getting overbought on all the oscillators I follow: ARMS index, 10-day moving average of the advance/decline line, and the McClellan. But at the same time I see that only 62% of all stocks in the market are above their 200 day moving average. I am not sure if that is bullish and means there is a lot of stocks waiting to join the run or if this index is confirming the overbought market. But I thought I would still give that fact, considering that in February 86% of all stocks were above the 200 dma. That market was overbought. This market might be overbought short-term but the 62% may signal that there is a lot of energy waiting to join the run.
If that is the case, that would be fine with me, only because I see the VIX ticking up a little. It would be nice to back and fill here, if it causes the VIX to rally over 20. That would help me make a lot more money on my longs that decide to follow-through. A 10% drop would even be better as a chance of VIX hitting 25 would definitely give me more volatility to make more money on stocks that are moving. Remember, a higher VIX gives you more potential for gains in stocks. This persistent low VIX does not allow for many stocks to make 200%-1000% runs in six to twelve months. A low VIX like we have now makes 100% winners spectacular. This is why a choppy market or an uptrend with some more 5% pullbacks would be nice. But with all the bearishness I have mentioned, LOL, along with another number I have left out–put/call is at .94–I doubt I am ever going to get my pullback.
Chances are when this market ends, it is going to unleash a horrible bear market. That would be OK also. That would allow me to short all the old leaders like TNH that have made 1000% plus gains since the rally started. Then after making some nice cash on shorts in the bear market, we will eventually get another bull market WITH A MUCH HIGHER VIX that will then give us a real great bull market to work with. The best time to make money is in markets like March 2003-January 2004. Those bull markets, after severe bear markets are what makes some traders careers.
Before I rap this up, I want to go over one more key component of this rally: the Semiconductor Index (SOX). Everyone always says that they don’t think bull markets are real bull markets unless the Semis are moving. The theory goes is that this is where the “hot” and “speculative” money goes for big returns in a bull market; when the semis are moving, the market is moving. Well now we have the Semis hitting new highs and the only question I have to ask is that: does it mean that the market is bullish now?
This scenario, after giving more thought to it, could run a two-way street. At first all I could think about is how bullish this is and now the perma-bears will have to figure out a crafty excuse to pooh-pooh this move in the Semis. Well they gave me a great argument on Friday. I took notice of the Relative Strength line of the Semiconductor index (SOX) and notice a very negative divergence developing. As price has continued to make a stairstep pattern of higher highs and lower lows, the RS line has actually failed to make new highs during any of the important moves in the SOX this year. Since the high in November, the index hit a series of highs in Jan, Feb, April, May, and Thursday. The problem if you look at your chart is that every RS high is lower.
So we can take this in, in two ways. One is that the market will continue to rally here, and now that the lagging SOX has caught up, the market will make a real more exponential move into new high ground. Or the SOX could be the sector that convinces the bears that this market is going to move higher and we suffer a fakeout-breakout. This would turn enough bears bullish to actually put in a possible top. Somehow, I think scenario one is correct, by simply looking at all my charts and the current situation of the market and leading stocks. But scenario two could happen also. We must NEVER rule ANY scenario out. That is smart trading.
On that note, enjoy your weekend and I will see you in the chat room. ALOHA!
top holdings up this week - purchase date
TRCR 432% - 1/12
MA 239% - 8/2
OMTR 162% - 9/15
IHS 136% - 12/21/05
TTEC 125% - 8/25
FTEK 123% - 10/6
MOS 121% - 10/12
MEH 114% - 8/30
CPA 114% - 9/15
MFW 111% - 1/29
HRZ 107% - 9/27
MCZ 106% - 3/27
DECK 101% - 9/13
CXW 93% - 5/19/06
PRGX 91% - 1/12
HURN 90% - 9/13
CNH 89% - 11/2
EVEP 85% - 11/16
ZNH 84% - 12/26
NTL 83% - 4/13
APLX 82% - 9/28
MVIS 80% - 12/21
VDSI 71% - 1/4
AFSI 69% - 4/12
LFL 66% - 12/13
VSNT 63% - 2/5
LTS 61% - 1/11
TESO 59% - 2/16
BMA 52% - 10/24
ETE 50% - 10/6
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
Holding up, along with the small caps, leading stocks in the form of the IBD 100 also lost only .9%. This continues a trend of this index outperforming to the upside and holding up better on the selloffs over the broad market. If this index was leading to the downside on these selloffs, I would be more worried. Instead it looks like normal choppy summer action.
Volume finished over 30% higher on the NYSE and the Nasdaq, due to the Russell rebalance. The key to today’s trading was knowing the facts of the intraday volume action. Volume was trending lower all day long, signaling that institutions were not dumping stocks, until the last hour of the day. That is when volume exploded. But it wasn’t due to selling by big funds. It was due to mutual funds having to reposition their index funds for the stocks that are entering and exiting the Russell index. Therefore, the higher volume with the losses do not signal a distribution day. Investors Business Daily confirms my thinking on this subject.
Breadth was decisively negative with decliners beating advancers on the NYSE by a 3-to-1 ratio and on the Nasdaq by a 2-to-1 ratio. Another nasty number, along with breadth, is that the new lows are trying to expand again, despite the indexes only being 2% or so off of their highs. New 52-week highs only came in with 171, compared to the new 52-week lows registering 144. That is a lot of new lows for a market near new highs. I am not sure how to interpret this.
For the week, the SP 500 and the DJIA led the way lower losing 2%, the NYSE and SP 600 lost 1.7%, and the Nasdaq was lower by 1.4%. Showing investors how leading stocks are supposed to act, even in a poor market, the IBD 100 managed a .1% gain for the week. This is why leading stocks outperform in the long run. The IBD 100 is now up 19% for the year, while most indexes are up around 10%. This goes to prove, ONCE AGAIN, that the big money is made by buying leading stocks, breaking out of sound bases with top fundamentals, in a bull market.
And that brings me to my own portfolio. Most of my longs are all holding key support and are still showing excellent price and volume action. Some stocks, obviously, have been cut this past week with the week market. But that is a good thing. Rough markets give you the chance to weed out the poor performing stocks and move more money into better performing stocks. This is why downtrends are good in a bull market. Constant uptrends make it hard for me to cut stocks that are holding support but not going very far. If I cut them too early, they end up taking off. Then the new stock I buy gives me a quick cut loss. But with markets that have normal pullbacks, I am allowed to separate the weak from the strong.
The only bad part is when one of those weak end up being a large position. Usually it does not happen, but it has happened a couple times recently which indicates to me I need to be more selective and careful with which stocks I pick to load up on. Besides stocks like MTRX and TTG, everything, pretty much, is acting just like it should be acting. Stocks moving higher, holding key support, and moving higher again. As long as top stocks, my stocks, and leading sector stocks keep acting like this it is silly to be calling market tops here. Especially with the NYSE short-interest ratio hitting ANOTHER all-time high at 7.82. Wow! They keep shorting this market despite the near new highs. Brave, I must say. Stupid, I must say.
I hear some people mention that there are too many bulls in the investors intelligence survey at 53% and too few bulls at 19% so we have to be near a top. What these people must not understand is that this survey is HORRIBLE at calling tops. It is ONLY useful at bottoms where normally bulls and bears cross around the 40-45% area. This happens to be good at correlating bottom with price in the indexes. As for tops? Are you kidding me. I guess anything to help there argument.
It doesn’t matter because I can come right back and say, “have you seen the realmoney.com poll this weekend?” So far, bears have 44% of the vote and bulls have only 31%. Last time I checked that doesn’t mean the crowd is bullish. Also have you seen the UBS sentiment index? It is NO WHERE NEAR euphoria levels. That index has a good track of indicating possible tops when the line hits the euphoria zone. It is not even close. The AAII is even close with 43% bullish and 33% bearish.
I hate to tell you this, bears. This is NOT what you see at tops. You do not see pessimism in the media and polls showing 70% of the public thinking we are in a recession, with NYSE short-interest at all-time highs and euphoria levels so absent from this market. Do you know what else is not out there, besides stocks in the Chemical-Fert group? Stocks in CLEAR end stages of climax runs. I can see some stocks in the middle of runs all over the place and I can clearly see that TNH and CF have gone nuts. But calling a top in these is not smart. These stocks still do not look like they are near a top, much less ready to rollover.
The action of GOOG, AAPL, CROX, RIMM, and other leading stocks are still rocking and are not in major climax runs. So it just seems hard for me to want to call a top when the leaders are still leading and some of them are almost closing near their highs on a day like today. If anything, JDSU in 2000 should be the case study for everyone. After that stock topped, it took SIX MONTHS before the big fall. Trust me, calling tops is a game of ignorance and pure idiocy. The right play is going with the trend. Something a TON of people reading this blog probably are NOT doing. You will see a MAJOR difference if you just learn how to do what the best traders of all-time did.
Are there reasons to pullback? Yes. We are getting overbought on all the oscillators I follow: ARMS index, 10-day moving average of the advance/decline line, and the McClellan. But at the same time I see that only 62% of all stocks in the market are above their 200 day moving average. I am not sure if that is bullish and means there is a lot of stocks waiting to join the run or if this index is confirming the overbought market. But I thought I would still give that fact, considering that in February 86% of all stocks were above the 200 dma. That market was overbought. This market might be overbought short-term but the 62% may signal that there is a lot of energy waiting to join the run.
If that is the case, that would be fine with me, only because I see the VIX ticking up a little. It would be nice to back and fill here, if it causes the VIX to rally over 20. That would help me make a lot more money on my longs that decide to follow-through. A 10% drop would even be better as a chance of VIX hitting 25 would definitely give me more volatility to make more money on stocks that are moving. Remember, a higher VIX gives you more potential for gains in stocks. This persistent low VIX does not allow for many stocks to make 200%-1000% runs in six to twelve months. A low VIX like we have now makes 100% winners spectacular. This is why a choppy market or an uptrend with some more 5% pullbacks would be nice. But with all the bearishness I have mentioned, LOL, along with another number I have left out–put/call is at .94–I doubt I am ever going to get my pullback.
Chances are when this market ends, it is going to unleash a horrible bear market. That would be OK also. That would allow me to short all the old leaders like TNH that have made 1000% plus gains since the rally started. Then after making some nice cash on shorts in the bear market, we will eventually get another bull market WITH A MUCH HIGHER VIX that will then give us a real great bull market to work with. The best time to make money is in markets like March 2003-January 2004. Those bull markets, after severe bear markets are what makes some traders careers.
Before I rap this up, I want to go over one more key component of this rally: the Semiconductor Index (SOX). Everyone always says that they don’t think bull markets are real bull markets unless the Semis are moving. The theory goes is that this is where the “hot” and “speculative” money goes for big returns in a bull market; when the semis are moving, the market is moving. Well now we have the Semis hitting new highs and the only question I have to ask is that: does it mean that the market is bullish now?
This scenario, after giving more thought to it, could run a two-way street. At first all I could think about is how bullish this is and now the perma-bears will have to figure out a crafty excuse to pooh-pooh this move in the Semis. Well they gave me a great argument on Friday. I took notice of the Relative Strength line of the Semiconductor index (SOX) and notice a very negative divergence developing. As price has continued to make a stairstep pattern of higher highs and lower lows, the RS line has actually failed to make new highs during any of the important moves in the SOX this year. Since the high in November, the index hit a series of highs in Jan, Feb, April, May, and Thursday. The problem if you look at your chart is that every RS high is lower.
So we can take this in, in two ways. One is that the market will continue to rally here, and now that the lagging SOX has caught up, the market will make a real more exponential move into new high ground. Or the SOX could be the sector that convinces the bears that this market is going to move higher and we suffer a fakeout-breakout. This would turn enough bears bullish to actually put in a possible top. Somehow, I think scenario one is correct, by simply looking at all my charts and the current situation of the market and leading stocks. But scenario two could happen also. We must NEVER rule ANY scenario out. That is smart trading.
On that note, enjoy your weekend and I will see you in the chat room. ALOHA!
top holdings up this week - purchase date
TRCR 432% - 1/12
MA 239% - 8/2
OMTR 162% - 9/15
IHS 136% - 12/21/05
TTEC 125% - 8/25
FTEK 123% - 10/6
MOS 121% - 10/12
MEH 114% - 8/30
CPA 114% - 9/15
MFW 111% - 1/29
HRZ 107% - 9/27
MCZ 106% - 3/27
DECK 101% - 9/13
CXW 93% - 5/19/06
PRGX 91% - 1/12
HURN 90% - 9/13
CNH 89% - 11/2
EVEP 85% - 11/16
ZNH 84% - 12/26
NTL 83% - 4/13
APLX 82% - 9/28
MVIS 80% - 12/21
VDSI 71% - 1/4
AFSI 69% - 4/12
LFL 66% - 12/13
VSNT 63% - 2/5
LTS 61% - 1/11
TESO 59% - 2/16
BMA 52% - 10/24
ETE 50% - 10/6
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 16, 2007
Tame Core CPI Data Traps The Bears As Stocks Rally On Heavier Volume; The Incompetent Short Sellers Just Don't Get It
Stocks started Friday off just right as stocks gapped higher thanks to a tame core CPI. The CPI moved up .7% in May–the biggest since September 2005–but the core CPI was up only .1%. That was less than the .2% expected by economist. That also lowered the YOY core CPI to 2.2% which was the smallest in 14 months. The CPI data clearly gave investors the hope that the Fed will scrap its bias to raise rates as the recent economic numbers suggest steady economic growth with mild inflation. A sign that rates and economic growth are starting to come in-line can be seen in the yield curve. It has corrected itself and now has a very positive bullish slope to it compared to where it was just three months ago when the curve was inverted.
Other solid news from the economy came from the Labor Department’s production numbers. Industrial production was flat in May, better than the prior two readings of negative growth. Manufacturing production was up .1%, besting the recent levels. And capacity utilization was down showing a lot of capacity which has inflation easing pressure.
These reports were strong enough to get buyers hungry for stocks. And when you combine that with options expiration you had the perfect mix for big stock gains on big volume. When all was said-and-done, stocks climbed across the board, with the SP 600 up 1.2%, the Nasdaq rose 1.1% to six-year highs, the NYSE higher by .9%, the SP 500 was up .7%, and the DJIA rose .6%. This sent all stock indexes near all-time highs and gave the indexes their fifteenth straight positive Friday close. For the third day in-a-row the IBD 100 led the market, with a 1.5% gain. That can only be described as perfect action in a market making strong gains despite all the bearishness.
Volume was higher on both exchanges. On the NYSE volume was 41% higher and 27% higher on the Nasdaq. Despite the higher volume coming on the back of quadruple witching, the fact that volume was so much higher on the NYSE is a clear confirmation of the rally after last weeks and Tuesday’s selling.
As for the internals, they were rather strong, with advancers beating decliners on the NYSE by a 13-to-3 ratio and on the Nasdaq by a 2-to-1 ratio. The really strong reversal to the bullish side was the new highs and new lows. The amount of 52-week highs exploded to 609 and new 52-week lows were only 70, finally sending an end to the mixed message of this statistic.
A rough start to the week was quickly corrected as we came up to the positive retail sales report on Wednesday. For the week, the Nasdaq led the way higher with a 2.1% gain, the NYSE rose 1.9%, the SP 600, the SP 500 gained 1.7%, and the DJIA rose 1.6%. However, when comparing those gains to leading stocks, you can tell that the action was where it is supposed to be in strong markets. The IBD 100 rallied 4% for the week. When you have leading stocks leading a rally, there is NO reason to be looking for a top. I could understand the bearishness before when this index was not keeping up. But being bearish now shows just a complete lack of respect for history.
Leading stocks never really got whacked (unlike the Sopranos finally–what a load of crap) when the market pulled back. The action in those leading stocks was a clear signal that there were not real problems with this market. Granted, it could have gotten a lot worse, but those stocks normally break down well before a stock market is about to top. The fact that those current leading stocks held was proof enough to me that this was not the right time to be calling a top. AAPL and GOOG, besides the current leading stocks, are your tell. As long as these stocks are holding their 50 dma’s, there is NO reason to get bearish just because everyone else is. Crowd mentality is a disease and last time I checked you are supposed to stay away from diseases. Remember: going with the crowd (after you get out of HS) is what morons do. People that can not think for themselves go with the crowd. Those people do NOT make money in the stock market year in and year out. Stay away from this thinking.
The other clear obvious reason that nobody should have gotten full-on-bearish was that all the indexes rested right at their 50 day moving averages. After touching those averages, the indexes have done nothing but rally higher. This is exactly how you want to see strong markets act. They, seriously, don’t get much better than this.
The Nasdaq’s accumulation/distribution rating has risen to a C+ from a D- on Thursday. This is an amazing jump and also should confirm the rallies strength off the 50 dma. And when you take that with the NYSE short interest ratio being near an all-time high at 7.58, you have a clear scenario where you can see the smart money buying stocks (acc/dist rating) and the dumb money (hedge funds/retail) shorting stocks. The shorts are the ones who are wrong here. The price gains prove that. The one group of traders that have been right about this rally since it started–which happens to be where the bulls and bears crossed in the investors intelligence survey–has been the newsletter writers according to the investors intelligence survey. These guys have been bullish and continue to be bullish since they crossed in June. The current reading shows 56.7% are bulls; the five-year high is 62.9%.
What could be better? Volatility. The constant gains since March 2003 without a 10% decline on the DJIA is the reason why my top stocks only have so many up 100%. In normal bull markets, that start after a downtrend, where the VIX rises to above 25, I will be able to produce at least 5 stocks up over 300% and over 20 stocks up over 100% within six months. That clearly has not been the case with this rally as the VIX has not been over 20 since early 2004 and has not seen 30 since March 2003. This is why, in 2003, everything you touched went up 100% within months using the style I have. Right now, as you can see, 50% gains are like the 100% gains and the 100% gains are like the old 200% gains. Until this market sells off there is not going to be a “sh*t-load” of money to be made, unless you are quick with trading the China or solar stocks.
However, if you just stayed with leading stocks and have been long stocks in the Chemical-Fertilizer sector you would be sitting on a HUGE gain. These stocks have been leaders for the past six months and YTD they are up 91% blowing away another other sector when it comes to performance. This goes to show, once again, that leading stocks lead the market by a LONG shot. This compares to 10% gains in the NYSE and SP 600 or the 14% gain in the IBD 100 YTD. However, either way you look at it, investing in leading stocks is where the money is.
Where the money is not is in shorting this market. With that high NYSE short interest ratio and the market near all-time highs a further short-squeeze has to be expected at this point. The perma-bear traders like TraderTim, whom if you study about will find out is a depressed near-sadistic individual, are the perfect fuel this fire needs to keep burning. The hardest thing for most it seems is to actually believe the FACTS that are appearing right in front of your face with the indexes up near these all-time highs. Most people seem to want to believe the rants of delusional egotistical arrogant self-absorbed liars. If that is the game you want to play, be my guest. I will deal with the facts of the current market and continue to play the trend to the upside and make money.
Before I end this, there is one more thing that should be known that most traders don’t seem to understand. This market is a bit oversold with the 10-day moving average of the advance/decline line well under the zero level where this oscillator judges overbought and oversold. With that in mind, the amount of stocks above the 200-dma is only at 68% compared with 86% back in February and 84% back in April. Yet, here we are with the NYSE .5% away from an all time high and the Nasdaq already at a new 52-week high, yet the market has 20% less stocks above the 200-dma. That clearly shows that we have a lot of stocks that can join the rally, that can send the indexes even higher than they are now. Some may say that this is a sign of weakness. To that I only have to say really? Then why is the Nasdaq at a new 52-week high and why are the indexes only less than 1% away from an all-time high?
Facts are facts, folks. We have a stock market hitting new 52-week highs, on near all-time short interest, with a record setting economy, and a lot of bearish headlines on your late night biased-news networks. This can only mean one thing: stocks are going to move higher.
top holdings up this week - purchase date
TRCR 466% - 1/12
PTT 341% - 11/16
MA 218% - 8/2
OMTR 155% - 9/15
CCOI 135% - 9/27
KHDH 131% - 5/30/06
TTEC 131% - 8/25
AOI 127% - 11/9
ULTR 126% - 10/27
IHS 121% - 12/21/05
MFW 116% - 1/29
MOS 116% - 10/12
SVNT 112% - 8/24
MEH 112% - 8/30
CPA 108% - 9/15
HRZ 105% - 9/27
DECK 98% - 9/13
CRY 95% - 1/10
PRGX 92% - 1/12
CXW 92% - 5/19/06
EVEP 90% - 11/16
CNH 88% - 11/2
APLX 80% - 9/28
IGLD 80% - 10/26
HURN 78% - 9/13
VDSI 73% - 1/4
NTL 71% - 4/13
LTS 67% - 1/11
XRA 66% - 5/24
ZNH 65% - 12/26
MCZ 64% - 3/27
LFL 63% - 12/13
VSNT 61% - 2/5
NSH 58% - 12/19
TESO 56% - 2/16
AFSI 55% - 4/12
BMA 52% - 10/24
TSYS 50% - 1/26
TTG 50% - 11/30
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
Other solid news from the economy came from the Labor Department’s production numbers. Industrial production was flat in May, better than the prior two readings of negative growth. Manufacturing production was up .1%, besting the recent levels. And capacity utilization was down showing a lot of capacity which has inflation easing pressure.
These reports were strong enough to get buyers hungry for stocks. And when you combine that with options expiration you had the perfect mix for big stock gains on big volume. When all was said-and-done, stocks climbed across the board, with the SP 600 up 1.2%, the Nasdaq rose 1.1% to six-year highs, the NYSE higher by .9%, the SP 500 was up .7%, and the DJIA rose .6%. This sent all stock indexes near all-time highs and gave the indexes their fifteenth straight positive Friday close. For the third day in-a-row the IBD 100 led the market, with a 1.5% gain. That can only be described as perfect action in a market making strong gains despite all the bearishness.
Volume was higher on both exchanges. On the NYSE volume was 41% higher and 27% higher on the Nasdaq. Despite the higher volume coming on the back of quadruple witching, the fact that volume was so much higher on the NYSE is a clear confirmation of the rally after last weeks and Tuesday’s selling.
As for the internals, they were rather strong, with advancers beating decliners on the NYSE by a 13-to-3 ratio and on the Nasdaq by a 2-to-1 ratio. The really strong reversal to the bullish side was the new highs and new lows. The amount of 52-week highs exploded to 609 and new 52-week lows were only 70, finally sending an end to the mixed message of this statistic.
A rough start to the week was quickly corrected as we came up to the positive retail sales report on Wednesday. For the week, the Nasdaq led the way higher with a 2.1% gain, the NYSE rose 1.9%, the SP 600, the SP 500 gained 1.7%, and the DJIA rose 1.6%. However, when comparing those gains to leading stocks, you can tell that the action was where it is supposed to be in strong markets. The IBD 100 rallied 4% for the week. When you have leading stocks leading a rally, there is NO reason to be looking for a top. I could understand the bearishness before when this index was not keeping up. But being bearish now shows just a complete lack of respect for history.
Leading stocks never really got whacked (unlike the Sopranos finally–what a load of crap) when the market pulled back. The action in those leading stocks was a clear signal that there were not real problems with this market. Granted, it could have gotten a lot worse, but those stocks normally break down well before a stock market is about to top. The fact that those current leading stocks held was proof enough to me that this was not the right time to be calling a top. AAPL and GOOG, besides the current leading stocks, are your tell. As long as these stocks are holding their 50 dma’s, there is NO reason to get bearish just because everyone else is. Crowd mentality is a disease and last time I checked you are supposed to stay away from diseases. Remember: going with the crowd (after you get out of HS) is what morons do. People that can not think for themselves go with the crowd. Those people do NOT make money in the stock market year in and year out. Stay away from this thinking.
The other clear obvious reason that nobody should have gotten full-on-bearish was that all the indexes rested right at their 50 day moving averages. After touching those averages, the indexes have done nothing but rally higher. This is exactly how you want to see strong markets act. They, seriously, don’t get much better than this.
The Nasdaq’s accumulation/distribution rating has risen to a C+ from a D- on Thursday. This is an amazing jump and also should confirm the rallies strength off the 50 dma. And when you take that with the NYSE short interest ratio being near an all-time high at 7.58, you have a clear scenario where you can see the smart money buying stocks (acc/dist rating) and the dumb money (hedge funds/retail) shorting stocks. The shorts are the ones who are wrong here. The price gains prove that. The one group of traders that have been right about this rally since it started–which happens to be where the bulls and bears crossed in the investors intelligence survey–has been the newsletter writers according to the investors intelligence survey. These guys have been bullish and continue to be bullish since they crossed in June. The current reading shows 56.7% are bulls; the five-year high is 62.9%.
What could be better? Volatility. The constant gains since March 2003 without a 10% decline on the DJIA is the reason why my top stocks only have so many up 100%. In normal bull markets, that start after a downtrend, where the VIX rises to above 25, I will be able to produce at least 5 stocks up over 300% and over 20 stocks up over 100% within six months. That clearly has not been the case with this rally as the VIX has not been over 20 since early 2004 and has not seen 30 since March 2003. This is why, in 2003, everything you touched went up 100% within months using the style I have. Right now, as you can see, 50% gains are like the 100% gains and the 100% gains are like the old 200% gains. Until this market sells off there is not going to be a “sh*t-load” of money to be made, unless you are quick with trading the China or solar stocks.
However, if you just stayed with leading stocks and have been long stocks in the Chemical-Fertilizer sector you would be sitting on a HUGE gain. These stocks have been leaders for the past six months and YTD they are up 91% blowing away another other sector when it comes to performance. This goes to show, once again, that leading stocks lead the market by a LONG shot. This compares to 10% gains in the NYSE and SP 600 or the 14% gain in the IBD 100 YTD. However, either way you look at it, investing in leading stocks is where the money is.
Where the money is not is in shorting this market. With that high NYSE short interest ratio and the market near all-time highs a further short-squeeze has to be expected at this point. The perma-bear traders like TraderTim, whom if you study about will find out is a depressed near-sadistic individual, are the perfect fuel this fire needs to keep burning. The hardest thing for most it seems is to actually believe the FACTS that are appearing right in front of your face with the indexes up near these all-time highs. Most people seem to want to believe the rants of delusional egotistical arrogant self-absorbed liars. If that is the game you want to play, be my guest. I will deal with the facts of the current market and continue to play the trend to the upside and make money.
Before I end this, there is one more thing that should be known that most traders don’t seem to understand. This market is a bit oversold with the 10-day moving average of the advance/decline line well under the zero level where this oscillator judges overbought and oversold. With that in mind, the amount of stocks above the 200-dma is only at 68% compared with 86% back in February and 84% back in April. Yet, here we are with the NYSE .5% away from an all time high and the Nasdaq already at a new 52-week high, yet the market has 20% less stocks above the 200-dma. That clearly shows that we have a lot of stocks that can join the rally, that can send the indexes even higher than they are now. Some may say that this is a sign of weakness. To that I only have to say really? Then why is the Nasdaq at a new 52-week high and why are the indexes only less than 1% away from an all-time high?
Facts are facts, folks. We have a stock market hitting new 52-week highs, on near all-time short interest, with a record setting economy, and a lot of bearish headlines on your late night biased-news networks. This can only mean one thing: stocks are going to move higher.
top holdings up this week - purchase date
TRCR 466% - 1/12
PTT 341% - 11/16
MA 218% - 8/2
OMTR 155% - 9/15
CCOI 135% - 9/27
KHDH 131% - 5/30/06
TTEC 131% - 8/25
AOI 127% - 11/9
ULTR 126% - 10/27
IHS 121% - 12/21/05
MFW 116% - 1/29
MOS 116% - 10/12
SVNT 112% - 8/24
MEH 112% - 8/30
CPA 108% - 9/15
HRZ 105% - 9/27
DECK 98% - 9/13
CRY 95% - 1/10
PRGX 92% - 1/12
CXW 92% - 5/19/06
EVEP 90% - 11/16
CNH 88% - 11/2
APLX 80% - 9/28
IGLD 80% - 10/26
HURN 78% - 9/13
VDSI 73% - 1/4
NTL 71% - 4/13
LTS 67% - 1/11
XRA 66% - 5/24
ZNH 65% - 12/26
MCZ 64% - 3/27
LFL 63% - 12/13
VSNT 61% - 2/5
NSH 58% - 12/19
TESO 56% - 2/16
AFSI 55% - 4/12
BMA 52% - 10/24
TSYS 50% - 1/26
TTG 50% - 11/30
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
Stocks Bounce Back From Thursday's Selloff On Lower Volume; Indexes Still Holding Their 50 Day Moving Average
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
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 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
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