Despite amazing earnings reports from BIDU, MSFT, VSEA, MFW, DV, TEX, MTD, NOV, VLCM, NTGR, and DRIV, stock indexes decided to focus on the early morning GDP report and opened flat to slightly lower. GDP growth came in at 1.3% in the most recent quarter, down from economist 1.8% expectations and a four-year low. The poor GDP reading and the fact that YOY inflation is running at 2.2% definitely had a slightly negative impact. This poor reading helped the Euro hit a record high against the US dollar. The poor numbers were enough to keep the market choppy most of the day but the DJIA still hit another all-time high.
At the close the DJIA and the Nasdaq led the way higher with .1% gains, the SP 500 finished flat, the NYSE fell .1%, the SP 600 fell .3%, and the SP 400 led the way lower with a .4% drop. Leading stocks, in the form of the IBD 100, did not lead to the upside but they did not lead to the downside either, falling .2%. A respectable showing.
The most impressive index out of the group continues to be the DJIA. The DJIA is now up 11 of the past 12 days and up 19 of the past 21 days. This is only the third time in the past 110 years that this index has closed up 19 of the past 21 days. The other two times? 1927 and 1929. How did that turn out? I think if you have done any research on your own, you know how it ends.
Volume was lower across the board, with volume coming in lower on the NYSE by about 12% and lower on the Nasdaq by about 14%. The most troubling of today’s action was breadth. Breadth was negative across the board and negative by a fair amount, despite the small gains and losses. Decliners beat advancers by a 4-to-3 margin on the NYSE and by an 8-to-5 margin on the Nasdaq. This negative divergence in breadth has been a constant theme all week long. New 52-week highs came in at only 388 but new 52-week lows were only at 68. So at least the new lows did not expand.
For the week, the DJIA and the Nasdaq led with 1.2% gains, the SP 500 and SP 400 followed with .7% gains, the SP 600 rallied .4%, and the NYSE gained .1%. The best news came from leading stocks. The IBD 100 gained 1.6% on the week, finally outpacing the broad market. This impressive week gave the indexes their fifth up week in the past six weeks and the fourth up week in-a-row. This market is clearly starting to enter a semi-crazy phase.
Despite the market not making much headways the past two days, there have been an insane amount of action in individual stocks during that time. Many stocks are gapping up and continuing to rally afterwards after reporting great earnings. Other stocks are going into climax runs which is starting to produce some substantial gains in a lot of the old leaders in metals and other steel related stocks. You can see a list of these climax runs on the Gold forums, if you are a subscriber. It is best to look at the stocks listed on an arithmetic chart going back to 2002. There you can clearly see that a lot of stocks are going on climax runs after years of strong gains. These kind of moves happen when too many people are shorting rising stocks. With the put/call still at .84 it is clear people are still betting against stocks even as they rally.
Another clear sign of out-of-control momentum can be found in China’s Shanghai index and the stocks in that index. A gold subscriber Randyy has posted an index chart and three charts of stocks clearly in parabolic rises. His charts are just as pretty as the charts in TC2007. I definitely recommend taking a look if and when you have a chance. You can clearly see it is getting down-right scary the mania that is going on in China.
The other thing about this insane rally is that the DJIA is clearly the leader now. The fact that after four plus years of gains that the DJIA is now leading clearly shows that we are near the end of this great bull market. The only positive to come with the DJIA gains is the fact that small cap stocks are still moving higher. As long as small caps and leading stocks can keep pace with the DJIA I doubt the top is going to happen tomorrow or very shortly. There is probably still plenty of time left for stocks to rally, even with the crowd getting more bullish and less bearish.
Since I go with the trend (ALWAYS) of the market, this market has been treating me very well recently as many of my top holdings representing significant portions of my account make substantial gains at this point in the rally. Still, back in 2003 when this rally started, people were bearish everywhere and I had charts breaking out of beautiful patterns on strong volume that made gains immediately. Despite being very long still, the recent buys simply don’t explode like they did when this whole thing started. The other clear thing about that rally was that everything was clicking on ALL cylinders. The only thing that was constant was the bearishness as stocks rose.
This time the crowd is very bullish and there are many warning signs that are starting to show up underneath the recent price gains. Some clear negative divergences that I am worried about are the relative strength of the Nasdaq and IBD 100 lagging well behind the SP 500, the moneystreams (technical indicator in tc2007) in the indexes are making lower highs with prices making higher highs, the amount of new 52-week highs keep decreasing on every new high in the markets (Nov-Jan-April), breadth is starting to be negative everyday even during the days when stocks rise, sentiment indicators are all bullish (realmoney, marketvane, investors intelligence, and AAII), GDP is trending down, and earnings growth is below 10% for the first time in four years. This is all troublesome. None of this existed during 2003 when this rally started.
The positive are few but still very important. The fact that the put/call is at .84 shows that the traders are still shorting this rally and the VIX is still not at new lows, despite the markets being at higher highs. There is more volatility in stocks right now which are producing better gains than the gains from August to late February. This is a positive but is typical of markets in speculative stages. This divergence however positive right now is actually bearish in the long-term as it shows the market is setting itself up for a dramatic move; that move would probably be lower, since the VIX is trending higher.
So to sum things up, this market is still trending higher and we must continue to be long here for some potential huge gains. But the fact that the DJIA is up 19 out of 21 and that hasn’t happened since 1929 is just showing you how insane this market has gotten. We are clearly in a very speculative stage and with all the breakouts I am still getting there should be more upside, but we must be ready for the eventual sell-off. When that happens it is probably going to be very ugly.
It is going to get ugly because everyone I know is long the stock market now and all the perma-bears that used to be around in all the chat rooms that I monitor are now virtually gone. There is also very few people talking about the possibility of the bubble popping. Instead I am starting to hear those famous words: it is different this time. Sure it is! Sure it is!
The one thing I want to make sure is that people that are thinking of going long DJIA stocks here should NOT move their portfolio into these stocks just because they are outperforming on the short term. Over the long-term it is clear that top stocks that breakout from sound chart patterns and that have great fundamentals via earnings, sales, ROE, and profit margin clearly outperform these stocks in the long run. Don’t forget, despite the DJIA beating the IBD 100 the past three months, since May 2, 2003 the IBD 100 index is up 164.5% compared to the SP 500’s 59.6% gain. It is clear where the big money is made: in top stocks.
There are more earnings and a lot of economic numbers coming up this week so traders are sure to have plenty of reasons to move stocks all over the place. Even though I don’t like all the negative divergences I have, as long as the trend is up I will keep riding it. Maybe the old axiom of sell in May and go away will come to fruition but until it the actual selling shows up it remains foolish to sell now. There is still a very high wall-of-worry out there for stocks to climb.
Aloha and I will see you in the chat room!!!
Market Commentary At Big Wave Trading Bronze Level One
New Swing Longs: Silver Level Two
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
Top Holdings Up This Week - Date Of Purchase
KNOL 353% - 1/12/06
TRCR 265% - 1/12
AKAM 191% - 9/30/05
TTEC 171% - 8/25
TNH 156% - 10/26
JSDA 155% - 12/20
MA 128% - 8/2
HRZ 115% - 9/27
MFW 109% - 1/29
ONT 105% - 12/21
MEH 102% - 8/30
IGLD 101% - 10/26
CPA 101% - 9/15
EVEP 98% - 11/16
ULTR 97% - 10/27
HMSY 94% - 6/23
ANO 94% - 2/14
PAE 90% - 3/22
CLRT 86% - 11/30
EPHC 85% - 12/20
LTS 85% - 1/11
BAM 83% - 11/17/05
MOS 82% - 10/12
KHDH 78% - 5/30
VDSI 72% - 1/4
CXW 71% - 5/19
PERY 65% - 10/4
CNH 64% - 11/2
DECK 62% - 9/13
IMKTA 61% - 8/28
XOMA 60% - 1/12
SLP 58% - 2/5
RKT 55% - 12/4
MNTG 55% - 11/9
TESO 51% - 2/16
Saturday, April 28, 2007
Saturday, April 21, 2007
Stocks End A Very Powerful Week With More Gains; Volume Picks Up On Options Expiration Day
By MauiTrader
On Friday, stocks did what they have been doing all week, finding dip buyers that send the indexes higher into the close or at least higher than the open. A rash of good earnings from some big players like SLB GOOG AXP CAT and HON sent stocks higher at the open. But right after that very powerful gap higher, stocks started pulling back, as investors were quick to take some profits. However, once again, dip buyers came in and smart market makers did their best job to make shorting and put buying as painful as possible for the bears and sent stocks higher into the close. It was a very bullish options expiration.
At the close, the DJIA led the way with 28 out of 30 components up and hit all-time highs for the third day in-a-row, with a 1.2% gain. That makes it seven straight days and 15 out of the last 16 days this index has been higher. If that isn’t excessive, I am not sure what is. The SP 600 followed with a 1.1% gain, the NYSE was behind it with a 1% gain, the SP 500 rallied .9%, and the Nasdaq lagged with a .8% gain. It was another all-time high for the NYSE and six-and-a-half year highs for the SP 500 and Nasdaq. Other indexes hitting all-time territory include the Russell 2000, DJ Transportation Average, DJ Utility Average, and the SP 400. The SP 600 is a fraction away from all-time highs.
The good news from Friday, out of the world of leading stocks, was that the IBD 100 finally stopped its streak of underperformance, rallying 1.3%. It was a very nice change after eight of nine days of clear underperformance. Does that mean that growth investing is back in style? Probably not. We are four-plus years into a bull market. The small-caps have moved on to the big-caps. Your last leaders of secular bull markets.
Volume was higher on both exchanges, with volume rising 1% on the Nasdaq and by 18% on the NYSE. The higher volume finally gives the market a good accumulation day but the volume was driven higher, without a doubt, by all the options expiration activity. Without that activity, it is doubtful that the gains would have come on higher volume, especially on the Nasdaq.
Internals were very bullish, for a change this week, with advancers beating decliners for the first time in three sessions. Advancing stocks beat declining issues by a 3-to-1 margin on the NYSE and by a 2-to-1 margin on the Nasdaq. New highs finally expanded, with 602 showing up on the 52-week high list and 62 stocks showing up on the new 52-week low list.
For the week, the DJIA led the way with a 2.8% gain, the SP 500 was next with a 2.2% rise, the NYSE gained 1.8%, the Nasdaq rallied 1.4%, and the SP 600 lagged with a 1.3% gain. Proving that big-caps is where it is at, the IBD 100 lagged all indexes hardcore, with a .5% gain. This was, without a doubt, one of the best weeks of the year.
It was a very good week that finally saw volume start to show up. That higher volume started out badly, with the markets suffering a distribution day or two. But after Friday, those distribution days have been forgotten. Like I said it was good to see volume show up. However, the best rallies have volume show up immediately as the market is following-through. That high volume is best when it is preceded by a low volume sell-off. But as this market has shown since July and August, where the indexes started rallying on lower volume, you don’t always need a ton of volume to have a rally. All you need are some big-cap stocks to move and volume becomes obsolete.
This market is, obviously, being led by big-cap stocks, as the DJIA hits highs day after day after day. This is not a great market for CANSLIM growth investors but there is still plenty of action in the big-cap markets and the smaller low-priced junk stocks. These may not be growth stocks, but they are moving like they are at this stage of the game. If you check out the chart, in IBD, of value funds vs. growth funds, you will see that the big caps are in favor. Big-caps and value stocks is what is moving. Growth stocks have been lagging but are finally starting to get some life after Friday. However, since this is not the start of a fresh bull market and we do not have growth stocks leading, I still advise against going all-in with margin at this stage of the game.
The strength of this market has been quite impressive, recently, as there are simply no pullbacks and every small intraday dip is being bought up quickly. I simply don’t like that action as it sends many great stocks past proper pivot points and then as they don’t pullback that leaves us with no option to jump on the great stock. Instead do to proper risk/reward analysis we just have to watch them keep moving higher. Luckily, I still am having no problem finding stocks that are bouncing off the 50 dma or breaking out without gonig too far too fast. But I am missing a few stocks that I really wanted due to this.
In my opinion, the retail crowd seems very giddy and exuberant-especially CNBC. But AMTD and ETFC earnings reports show that traders are not participating in this current move higher like they were earlier. Still the traders that are trading this move are very bullish. The MarketVane survey has 75% of futures traders bullish, the realmoney.com poll shows 61% are bullish, the Investors Intelligence survey shows newsletter writers bullish by 52%, and the AAII poll has 46% of participants bullish. That along with the put/call being down to the .68 area clearly shows that investors are getting more and more bullish. That is giving this market a bit of a frothy feel but overall this frothiness feels NOTHING like the froth we had in early 2000. I have a lot of amateurs that I know telling me stocks are going higher. But they aren’t telling me they are going to the moon and they are not telling me that “there is no way this market is going lower.” Most still see the possibility of lower prices. That shows that the current madness that is starting is just that: starting.
The speculative momentum that is picking up pace now in the Chinese solar stocks is getting evident in the charts as these stocks are moving higher in a quite dramatic expansion as volume picks up the higher it goes. That is normally good. But when you are so far away from a proper breakout pivot point and volume is this heavy it is potentially bearish. For now it is not bearish but in the future if prices start not moving very much, you will know you have churning. Until the churning happens, though, might as well ride the trend higher. I never fight the trend and you should not either. Ride the speculative momo in these higher until the train derails. Momentum is a strange beast as it will ALWAYS last longer than you think it can.
There are many reasons for this market to go lower. The weak dollar hitting 26-year lows against the British pound, the low volume rallies, big caps leading small caps, speculative crap moving, record short interest levels on the NYSE, and poor numbers from stock trading firms are all reasons to worry about with this market. But as long as market keeps going up I am not going to worry about these.
I am worried about some internal data.The number of new highs shrinks every day. And if you look at a long-term trend of new highs since November, you can see that the trend of new highs is lower despite the market going higher. Another nasty divergence showing up is in the Relative Strength line of the Nasdaq. If you look at the highs in November, you will see that each rally after a selloff brings the Nasdaq higher and higher. Now if you look at the RS line, you will see the opposite. As the Nasdaq hit a new high in January, the RS line lagged. When it hit a new high late February, the RS line lagged even more, and now with the Nasdaq hitting new highs again, the RS line is once again lower. Lower highs and lower lows in the RS and higher highs in the Nasdaq is a very negative divergence. On top of that divergence is the negative divergence in the moneystream (proprietary indicator of tcnet). If you look at the peak in MS in February you can see now that even with the Nasdaq in higher ground (or around the same area) the MS line is well off the highs. Higher highs in price, with lower volume and negative divergences in the MS and RS line, is not bullish for the near future.
But like I keep saying over and over and over, these are just things we need to keep in the back of our head. As long as the trend is up that is where we should be investing. These things just let us know that we probably do not have a lot of upside left and when the market does turn we should be ready for some real selling.
It seems that since the February 27th market sell-off, all the previous big worries over the sub-prime market leading to a broader sell-off in financials have past. The market looks like it is expecting a soft landing, instead of a hard landing.
Showing support of that thesis is the fact that earnings are coming in much higher than what was expected by the Thomson Financial combined estimates. Those estimates were looking for a 3.3% rise in earnings, instead of the usual 10% plus earnings growth we have seen for the past 14 quarters. So far earnings have come in averaging 5.2% growth and 66% of the companies that have reported have posted better than expected results. This is much better than those low estimates but still the trend in earnings is clear. They are down. As earnings and the GDP goes, so goes your stock market.
Speaking of GDP, next week we have the release of Q1 GDP. Estimates are for 1.8% but economist are telling us to not focus on that number and instead should wait for the final revision as there will be some data problem due to automobiles. This growth, as per earnings, is slowing and below the usual 3% we have seen since the Bush tax cuts. Other items on tap include the March durable good numbers, existing-home sales, and new-home sales. Besides that we have earnings from powerhouses such as F MMM BSX HAS TXN XOM LMT COH and MSFT. This will surely cause the market some excitement as traders continue to weigh the positives and negatives of this market.
Are we setting ourselves up for the proverbial “sell in May and go away” or will earnings keep us moving higher? We will know by the end of next week. Aloha and I will see you in the chat room!!
Market Commentary At Big Wave Trading Bronze Level One
New Swing Longs: Silver Level Two
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
Top Holdings Up This Week - Date Of Purchase
KNOL 332% - 1/12/06
PTT 317% - 11/16
AKAM 236% - 9/30/05
CVO 197% - 8/18/05
TTEC 169% - 8/25
TRCR 163% - 1/12
JSDA 153% - 12/20
TNH 144% - 10/26
OMTR 140% - 9/15
ANO 120% - 2/14
CCOI 117% - 9/27
HRZ 107% - 9/27
NEXC 102% - 10/25
CLRT 101% - 11/30
CPA 100% - 9/15
ULTR 95% - 10/27
ONT 94% - 12/21
EVEP 94% - 11/16
IGLD 91% - 10/26
MFW 86% - 1/29
IMMU 85% - 12/19
LTS 82% - 1/11
BAM 81% - 11/17/05
MOS 78% - 10/12
BONT 75% - 10/03
BMTI 74% - 10/25
IIVI 71% - 8/30
EPHC 69% - 12/20
HURN 66% - 9/13
XIDE 66% - 1/29
IMKTA 65% - 8/28
KHDH 63% - 5/30
DA 63% - 1/25/06
CXW 62% - 5/19
BMA 61% - 10/24
DECK 55% - 9/13
MNTG 52% - 11/9
TESO 50% - 2/16
On Friday, stocks did what they have been doing all week, finding dip buyers that send the indexes higher into the close or at least higher than the open. A rash of good earnings from some big players like SLB GOOG AXP CAT and HON sent stocks higher at the open. But right after that very powerful gap higher, stocks started pulling back, as investors were quick to take some profits. However, once again, dip buyers came in and smart market makers did their best job to make shorting and put buying as painful as possible for the bears and sent stocks higher into the close. It was a very bullish options expiration.
At the close, the DJIA led the way with 28 out of 30 components up and hit all-time highs for the third day in-a-row, with a 1.2% gain. That makes it seven straight days and 15 out of the last 16 days this index has been higher. If that isn’t excessive, I am not sure what is. The SP 600 followed with a 1.1% gain, the NYSE was behind it with a 1% gain, the SP 500 rallied .9%, and the Nasdaq lagged with a .8% gain. It was another all-time high for the NYSE and six-and-a-half year highs for the SP 500 and Nasdaq. Other indexes hitting all-time territory include the Russell 2000, DJ Transportation Average, DJ Utility Average, and the SP 400. The SP 600 is a fraction away from all-time highs.
The good news from Friday, out of the world of leading stocks, was that the IBD 100 finally stopped its streak of underperformance, rallying 1.3%. It was a very nice change after eight of nine days of clear underperformance. Does that mean that growth investing is back in style? Probably not. We are four-plus years into a bull market. The small-caps have moved on to the big-caps. Your last leaders of secular bull markets.
Volume was higher on both exchanges, with volume rising 1% on the Nasdaq and by 18% on the NYSE. The higher volume finally gives the market a good accumulation day but the volume was driven higher, without a doubt, by all the options expiration activity. Without that activity, it is doubtful that the gains would have come on higher volume, especially on the Nasdaq.
Internals were very bullish, for a change this week, with advancers beating decliners for the first time in three sessions. Advancing stocks beat declining issues by a 3-to-1 margin on the NYSE and by a 2-to-1 margin on the Nasdaq. New highs finally expanded, with 602 showing up on the 52-week high list and 62 stocks showing up on the new 52-week low list.
For the week, the DJIA led the way with a 2.8% gain, the SP 500 was next with a 2.2% rise, the NYSE gained 1.8%, the Nasdaq rallied 1.4%, and the SP 600 lagged with a 1.3% gain. Proving that big-caps is where it is at, the IBD 100 lagged all indexes hardcore, with a .5% gain. This was, without a doubt, one of the best weeks of the year.
It was a very good week that finally saw volume start to show up. That higher volume started out badly, with the markets suffering a distribution day or two. But after Friday, those distribution days have been forgotten. Like I said it was good to see volume show up. However, the best rallies have volume show up immediately as the market is following-through. That high volume is best when it is preceded by a low volume sell-off. But as this market has shown since July and August, where the indexes started rallying on lower volume, you don’t always need a ton of volume to have a rally. All you need are some big-cap stocks to move and volume becomes obsolete.
This market is, obviously, being led by big-cap stocks, as the DJIA hits highs day after day after day. This is not a great market for CANSLIM growth investors but there is still plenty of action in the big-cap markets and the smaller low-priced junk stocks. These may not be growth stocks, but they are moving like they are at this stage of the game. If you check out the chart, in IBD, of value funds vs. growth funds, you will see that the big caps are in favor. Big-caps and value stocks is what is moving. Growth stocks have been lagging but are finally starting to get some life after Friday. However, since this is not the start of a fresh bull market and we do not have growth stocks leading, I still advise against going all-in with margin at this stage of the game.
The strength of this market has been quite impressive, recently, as there are simply no pullbacks and every small intraday dip is being bought up quickly. I simply don’t like that action as it sends many great stocks past proper pivot points and then as they don’t pullback that leaves us with no option to jump on the great stock. Instead do to proper risk/reward analysis we just have to watch them keep moving higher. Luckily, I still am having no problem finding stocks that are bouncing off the 50 dma or breaking out without gonig too far too fast. But I am missing a few stocks that I really wanted due to this.
In my opinion, the retail crowd seems very giddy and exuberant-especially CNBC. But AMTD and ETFC earnings reports show that traders are not participating in this current move higher like they were earlier. Still the traders that are trading this move are very bullish. The MarketVane survey has 75% of futures traders bullish, the realmoney.com poll shows 61% are bullish, the Investors Intelligence survey shows newsletter writers bullish by 52%, and the AAII poll has 46% of participants bullish. That along with the put/call being down to the .68 area clearly shows that investors are getting more and more bullish. That is giving this market a bit of a frothy feel but overall this frothiness feels NOTHING like the froth we had in early 2000. I have a lot of amateurs that I know telling me stocks are going higher. But they aren’t telling me they are going to the moon and they are not telling me that “there is no way this market is going lower.” Most still see the possibility of lower prices. That shows that the current madness that is starting is just that: starting.
The speculative momentum that is picking up pace now in the Chinese solar stocks is getting evident in the charts as these stocks are moving higher in a quite dramatic expansion as volume picks up the higher it goes. That is normally good. But when you are so far away from a proper breakout pivot point and volume is this heavy it is potentially bearish. For now it is not bearish but in the future if prices start not moving very much, you will know you have churning. Until the churning happens, though, might as well ride the trend higher. I never fight the trend and you should not either. Ride the speculative momo in these higher until the train derails. Momentum is a strange beast as it will ALWAYS last longer than you think it can.
There are many reasons for this market to go lower. The weak dollar hitting 26-year lows against the British pound, the low volume rallies, big caps leading small caps, speculative crap moving, record short interest levels on the NYSE, and poor numbers from stock trading firms are all reasons to worry about with this market. But as long as market keeps going up I am not going to worry about these.
I am worried about some internal data.The number of new highs shrinks every day. And if you look at a long-term trend of new highs since November, you can see that the trend of new highs is lower despite the market going higher. Another nasty divergence showing up is in the Relative Strength line of the Nasdaq. If you look at the highs in November, you will see that each rally after a selloff brings the Nasdaq higher and higher. Now if you look at the RS line, you will see the opposite. As the Nasdaq hit a new high in January, the RS line lagged. When it hit a new high late February, the RS line lagged even more, and now with the Nasdaq hitting new highs again, the RS line is once again lower. Lower highs and lower lows in the RS and higher highs in the Nasdaq is a very negative divergence. On top of that divergence is the negative divergence in the moneystream (proprietary indicator of tcnet). If you look at the peak in MS in February you can see now that even with the Nasdaq in higher ground (or around the same area) the MS line is well off the highs. Higher highs in price, with lower volume and negative divergences in the MS and RS line, is not bullish for the near future.
But like I keep saying over and over and over, these are just things we need to keep in the back of our head. As long as the trend is up that is where we should be investing. These things just let us know that we probably do not have a lot of upside left and when the market does turn we should be ready for some real selling.
It seems that since the February 27th market sell-off, all the previous big worries over the sub-prime market leading to a broader sell-off in financials have past. The market looks like it is expecting a soft landing, instead of a hard landing.
Showing support of that thesis is the fact that earnings are coming in much higher than what was expected by the Thomson Financial combined estimates. Those estimates were looking for a 3.3% rise in earnings, instead of the usual 10% plus earnings growth we have seen for the past 14 quarters. So far earnings have come in averaging 5.2% growth and 66% of the companies that have reported have posted better than expected results. This is much better than those low estimates but still the trend in earnings is clear. They are down. As earnings and the GDP goes, so goes your stock market.
Speaking of GDP, next week we have the release of Q1 GDP. Estimates are for 1.8% but economist are telling us to not focus on that number and instead should wait for the final revision as there will be some data problem due to automobiles. This growth, as per earnings, is slowing and below the usual 3% we have seen since the Bush tax cuts. Other items on tap include the March durable good numbers, existing-home sales, and new-home sales. Besides that we have earnings from powerhouses such as F MMM BSX HAS TXN XOM LMT COH and MSFT. This will surely cause the market some excitement as traders continue to weigh the positives and negatives of this market.
Are we setting ourselves up for the proverbial “sell in May and go away” or will earnings keep us moving higher? We will know by the end of next week. Aloha and I will see you in the chat room!!
Market Commentary At Big Wave Trading Bronze Level One
New Swing Longs: Silver Level Two
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
Top Holdings Up This Week - Date Of Purchase
KNOL 332% - 1/12/06
PTT 317% - 11/16
AKAM 236% - 9/30/05
CVO 197% - 8/18/05
TTEC 169% - 8/25
TRCR 163% - 1/12
JSDA 153% - 12/20
TNH 144% - 10/26
OMTR 140% - 9/15
ANO 120% - 2/14
CCOI 117% - 9/27
HRZ 107% - 9/27
NEXC 102% - 10/25
CLRT 101% - 11/30
CPA 100% - 9/15
ULTR 95% - 10/27
ONT 94% - 12/21
EVEP 94% - 11/16
IGLD 91% - 10/26
MFW 86% - 1/29
IMMU 85% - 12/19
LTS 82% - 1/11
BAM 81% - 11/17/05
MOS 78% - 10/12
BONT 75% - 10/03
BMTI 74% - 10/25
IIVI 71% - 8/30
EPHC 69% - 12/20
HURN 66% - 9/13
XIDE 66% - 1/29
IMKTA 65% - 8/28
KHDH 63% - 5/30
DA 63% - 1/25/06
CXW 62% - 5/19
BMA 61% - 10/24
DECK 55% - 9/13
MNTG 52% - 11/9
TESO 50% - 2/16
Saturday, April 14, 2007
Bulls Fight Off The Bears, Once Again, As Stocks Rally On Lower Volume To Close At Their HOD
Bulls Fight Off The Bears, Once Again, As Stocks Rally On Lower Volume To Close At Their HOD
By MauiTrader
The recent theme of this market has been that all economic news is moving the market. This may be due to the fact that less institutional investors are around to make bets on stocks (the low volume confirms this) but still the fact that the market is so easily moved around shows just how uneasy and unsure investors are. Today was no different.
Early in the morning we received the latest PPI report that showed a 1% jump in March after February’s 1.3% gain. It was the core PPI, however, that had the positive impact on stocks as the core remained flat compared to expectations of a .2% increase. This, along with the earnings from GE, helped get stocks off to a positive start. But those gains were soon eliminated after the University of Michigan’s consumer sentiment survey fell to 85.3 in April from 88.4 in March, below expectations of 87.5, echoing the IBD/TIPP poll released earlier this month.
Proving, though, that the dip-buyers are still in complete control, right after that selloff, stocks found a bottom. Stocks then rallied for the rest of the session closing near or at their intraday highs. The rally picked up steam after comments from Dallas Fed President Richard Fisher made comments about how globalization is helping raise world productivity that in-effect has positive pricing pressure consequences for the USA. That was good enough to bring in the retail crowd. The rally was well along, when a little before 3pm EST the Chief Development/Operating Officer of CSCO said that Cisco’s customers were at the early stages of a new upgrade cycle. That helped give the Nasdaq a huge jolt sending it to its HOD.
At the close, bulls were in control, once again, with the DJIA, Nasdaq, SP 600, and NYSE all up .5%. The SP 500 lagged with a .4% gain. The DJIA got a big boost thanks to an 8% rise in MRK off the back of a positive ruling over Vioxx. Once again, for the fourth session in-a-row, the IBD 100 lagged the broad market with a .4% gain. I hate to tell you this, folks, the best bull markets that have long term staying power ALWAYS have these high quality stocks leading. The fact that they are still lagging this current rally and the overall rally since the July and August lows last year signals that we are on or near the last leg of this bull market that has been going on since March of 2003 without a 10% decline in the DJIA.
Volume was lower by about 5% on both the NYSE and the Nasdaq and once again neither average traded enough shares to even equal its 50 day volume average. Institutional investors are still on the sidelines except when they decide to sell stocks. Then they show up. That is why we have two distribution days with higher volume than the two accumulation days since we followed-through. The good news, today, on the volume, is that the volume picked up as we rallied late-in-the-day off the back of the CSCO news.
Underneath the price gains, the market showed that it is doing well and is not signaling anything drastic after Friday’s session. Breadth was positive on both exchanges, with advancers beating decliners by a 10-to-7 margin on the NYSE and by a 3-to-2 margin on the Nasdaq. There were 459 new 52-week highs and 50 new 52-week lows, with the Chemical-Fertilizer group having 36% of their components hitting that mark. The put/call ratio is still a bit high at .9, which indicates that options traders are still making enough bearish bets that fuel for more price gains.
For the week, the market did very well, with the NYSE leading the way with a 1% gain, the Nasdaq followed with a .8% gain, the SP 600 came in with a .7% increase, the SP 500 was next with a .6% gain, and the DJIA was the laggard with only a .4% gain. Overall it appeared to be a very bullish week but without volume it is hard to definitively say that this market deserves an all-clear signal. My defenses are still up and armed ready for a sudden change should it develop.
My problem is that this light volume rally still gives me the feeling that the retail crowd (dumb money), shorts that are forced to cover their shorts, and daytraders are the ones moving this market. There is a quick visual way to describe what I see: Look at a daily chart of the Nasdaq; now count how many big red bars you see this year compared to big green bars. Do the same thing for the NYSE. Now do this on a weekly chart of both indexes. You will clearly see that the big red bars (distribution) are more frequent than the green bars (distribution). Even though most indexes are overall doing fine in the acc/dist rating, the NYSE has a C and the SP 500 has a D. This despite both being at or very near their all-time highs. This is a bearish development. Now this can be worked off if a ton of accumulation rushes in but for right now that is not happening.
What appears to be happening is that after February 27 the big boys sold stocks, the dumb money came in and starting to buy the dip-since all dips are buys since 2003. When they started to buy the dip, the traders who were for sure the market had topped then started shorting stocks. As the dumb money keeps buying stocks and as the daytraders stay active in bidding up the hot momo stocks (bio and solar), the shorts are then forced to cover their poor trade. This then sends stocks higher and then the big boys dump on them creating another distribution day (April 11) and then we start the whole process all over again. That is why we keep having low volume rallies and we have two distribution days since the market followed-through on March 21st. It is a very smart game the best of the best play. I know this game well. They did it before the 20th century and they will be doing this in the 22nd century.
To go along with what I see in the indexes, I see classic situations of a market near its end. Daytraders are back and are moving stocks, once again. This time the solar stocks, as I have been saying for months now, are the momo monsters. However, another group has joined them after the DNDN announcement: biotech. Biotech stocks are now moving all over the place, with many making very large price gains. I am willing to play these momo monsters but they still must breakout from sound chart patterns. They have to setup like ASTI. Stocks like JASO, TSL, and SPWR are breaking out of sloppy ugly bases. If I was daytrading these bad boys, I am sure I would be doing OK. However, I like to position trade now for the big gains. If the base is ugly, I pass. It is a simple as that. However, the game right now is to daytrade the biotechs, golds, and solar.
Take that speculation now in this market along with all of these low-priced POS that I have flying everywhere and it becomes quite clear to me we are entering a very speculative stage of this market. So, if we are getting a lot of momo stocks in the low-priced, solar, gold, and bio area to prove that it is not speculative all the high priced stocks are moving too right? Wrong. The real leaders in these groups have already made their runs (besides solar) and now the sub-$5 stocks are cooking. Is that a problem? Not at all. In fact at this point this is where we can make a TON of money as long as this trend last. Even if it doesn’t last that long, that is why we cut losses. But if this is the last hurrah, many of the stocks I have recently gone long should produce some big gains.
What else makes me think we are near the end? The fact that the old leaders from the 2003-2006 bull are back again. Oil&Gas, Gold, Steel, Metals, Transports and Commodities are all moving again. This time the leaders are making moves in some and not in others. The old leaders that are not leading again are setting up bases so there could be a lot more upside left in these. But along with these stocks, we don’t have financials, tech, and housing. We have Utilities, Defense, Food, and Medical stocks. The rotation has been out of leading high-tech and high-growth stocks into defensive and safety issues.
Even though I am cautious as can be on this market and have outlined everything I find wrong with this market that I did not find wrong with the market AT ALL in 2003 and 2004, it doesn’t effect my trading. I am long 230 stocks and most are very speculative so are very small. The fact that few CANSLIM quality stocks are breaking out is the reason I am not 200% invested. This market is obviously not acting right to not have me fully invested with it at all-time highs. Trust me, if this market was a rip-roaring raging bull market full of CANSLIM quality charts breaking out left and right, I would be 200% invested. However, since it is all crap I am not looking to become a wealthy rich individual here. I am simple trying to make sure I make a comfortable living so I can pay all my bills on Maui. That is all I want right here. If these stocks FLY!!! then I will get very wealthy. If they don’t, they are breaking out of patterns that should provide some nice gains.
It should be a busy upcoming week, with earnings announcements everywhere and the CPI being released on Tuesday. The CPI is sure to be market moving news but the earnings are sure to make anything off of that meaningless by the end of the week. We have announcements from such tech companies as IBM INTC EMC STX YHOO GOOG. So far the earnings have not been that great and as I have said before Analyst are expecting gains of 3.7% in YOY earnings this quarter. That is down from 8.7% estimates, earlier this year (not a good sign). Also, the expected 3.7% YOY gain will be the first gain in 14 quarters of non-double digit growth. As earnings go, so goes the market. Historically you can watch the trend of the GDP growth and earnings growth of an economy and see that they are the best predictor of what direction the stock market will take. GDP and earnings lead the market.
Take that along with what I see in the indexes and in my charts and it just becomes clear to me that there is not a whole lot left in this rally. Maybe a month to three months. But I can’t imagine by next quarter we will be higher with all the bad numbers, old leaders, and speculative situations I see. We will know it is ending when we get more distribution days in the market. Right now, we have two since the rally followed-through on March 21. Two more next week would raise caution flags everywhere and would definitely make me think about cutting losses much shorter than I normally allow low-priced junk POS stocks. But until I see that distribution, I will continue to ride the trend of the cocky bullish daytraders. Those daytraders are a brazen bunch.
The only other interesting piece of information I saw this weekend was that the Bradley stock market model sees a significant turn date (bearish) on Friday April 20. This is a stock market timing model based off of astrology and has been quite impressive at calling turns. However, sometimes the turn it calls for happens…in the opposite direction. So this model is shaky but it did get the March 13, 2003 bottom right on the money. However, it has a spotty record of tops. But with all the bearish situations I see in a bullish rising market, along with all my longs being so speculative, this is something for me to keep in the back of my mind as we continue on with our overbought speculative low volume old-leader filled bull market.
Aloha and I will see you in the chat room. Have a great Saturday and Sunday!!!
Sidenote: DEATHS DOWN 45% FROM FEB 14 - APR 14 (1586) COMPARED TO TWO PRIOR MONTHS DEC 14 - FEB 14 (2871) IN BAGHDAD. I hate our liberal media. Thank God I know how to read and find information on my own.
Market Commentary At Big Wave Trading Bronze Level One.
Top Holdings Up This Week - Signal Date
KNOL 332% - 1/12/06
AKAM 230% - 9/30/05
TRCR 191% - 1/12
CVO 189% - 8/18/05
TTEC 175% - 8/25
JSDA 164% - 12/20
TNH 141% - 10/26
OMTR 134% - 9/15
CCOI 130% - 9/27
MEH 109% - 8/30
HRZ 105% - 9/27
NEXC 101% - 10/25
CLRT 100% - 11/30
EVEP 97% - 11/16
SLP 94% - 2/5
CPA 91% - 9/15
MFW 89% - 1/29
ONT 85% - 12/21
CHINA 82% - 8/16
IMMU 79% - 12/19
IGLD 77% - 10/26
ULTR 74% - 10/27
MOS 73% - 10/12
ANO 71% - 2/14
PRGX 69% - 1/12
IMKTA 69% - 8/28
HURN 69% - 9/13
IIVI 66% - 8/30
DA 64% - 1/25/06
PERY 64% - 10/4
KHDH 59% - 5/30
CXW 59% - 5/19
EPHC 59% - 12/20
BAM 56% - 11/17/05
DECK 51% - 9/13
ECGI 50% - 10/20
APLX 50% - 9/28
New Swing Longs: Silver Level Two
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
By MauiTrader
The recent theme of this market has been that all economic news is moving the market. This may be due to the fact that less institutional investors are around to make bets on stocks (the low volume confirms this) but still the fact that the market is so easily moved around shows just how uneasy and unsure investors are. Today was no different.
Early in the morning we received the latest PPI report that showed a 1% jump in March after February’s 1.3% gain. It was the core PPI, however, that had the positive impact on stocks as the core remained flat compared to expectations of a .2% increase. This, along with the earnings from GE, helped get stocks off to a positive start. But those gains were soon eliminated after the University of Michigan’s consumer sentiment survey fell to 85.3 in April from 88.4 in March, below expectations of 87.5, echoing the IBD/TIPP poll released earlier this month.
Proving, though, that the dip-buyers are still in complete control, right after that selloff, stocks found a bottom. Stocks then rallied for the rest of the session closing near or at their intraday highs. The rally picked up steam after comments from Dallas Fed President Richard Fisher made comments about how globalization is helping raise world productivity that in-effect has positive pricing pressure consequences for the USA. That was good enough to bring in the retail crowd. The rally was well along, when a little before 3pm EST the Chief Development/Operating Officer of CSCO said that Cisco’s customers were at the early stages of a new upgrade cycle. That helped give the Nasdaq a huge jolt sending it to its HOD.
At the close, bulls were in control, once again, with the DJIA, Nasdaq, SP 600, and NYSE all up .5%. The SP 500 lagged with a .4% gain. The DJIA got a big boost thanks to an 8% rise in MRK off the back of a positive ruling over Vioxx. Once again, for the fourth session in-a-row, the IBD 100 lagged the broad market with a .4% gain. I hate to tell you this, folks, the best bull markets that have long term staying power ALWAYS have these high quality stocks leading. The fact that they are still lagging this current rally and the overall rally since the July and August lows last year signals that we are on or near the last leg of this bull market that has been going on since March of 2003 without a 10% decline in the DJIA.
Volume was lower by about 5% on both the NYSE and the Nasdaq and once again neither average traded enough shares to even equal its 50 day volume average. Institutional investors are still on the sidelines except when they decide to sell stocks. Then they show up. That is why we have two distribution days with higher volume than the two accumulation days since we followed-through. The good news, today, on the volume, is that the volume picked up as we rallied late-in-the-day off the back of the CSCO news.
Underneath the price gains, the market showed that it is doing well and is not signaling anything drastic after Friday’s session. Breadth was positive on both exchanges, with advancers beating decliners by a 10-to-7 margin on the NYSE and by a 3-to-2 margin on the Nasdaq. There were 459 new 52-week highs and 50 new 52-week lows, with the Chemical-Fertilizer group having 36% of their components hitting that mark. The put/call ratio is still a bit high at .9, which indicates that options traders are still making enough bearish bets that fuel for more price gains.
For the week, the market did very well, with the NYSE leading the way with a 1% gain, the Nasdaq followed with a .8% gain, the SP 600 came in with a .7% increase, the SP 500 was next with a .6% gain, and the DJIA was the laggard with only a .4% gain. Overall it appeared to be a very bullish week but without volume it is hard to definitively say that this market deserves an all-clear signal. My defenses are still up and armed ready for a sudden change should it develop.
My problem is that this light volume rally still gives me the feeling that the retail crowd (dumb money), shorts that are forced to cover their shorts, and daytraders are the ones moving this market. There is a quick visual way to describe what I see: Look at a daily chart of the Nasdaq; now count how many big red bars you see this year compared to big green bars. Do the same thing for the NYSE. Now do this on a weekly chart of both indexes. You will clearly see that the big red bars (distribution) are more frequent than the green bars (distribution). Even though most indexes are overall doing fine in the acc/dist rating, the NYSE has a C and the SP 500 has a D. This despite both being at or very near their all-time highs. This is a bearish development. Now this can be worked off if a ton of accumulation rushes in but for right now that is not happening.
What appears to be happening is that after February 27 the big boys sold stocks, the dumb money came in and starting to buy the dip-since all dips are buys since 2003. When they started to buy the dip, the traders who were for sure the market had topped then started shorting stocks. As the dumb money keeps buying stocks and as the daytraders stay active in bidding up the hot momo stocks (bio and solar), the shorts are then forced to cover their poor trade. This then sends stocks higher and then the big boys dump on them creating another distribution day (April 11) and then we start the whole process all over again. That is why we keep having low volume rallies and we have two distribution days since the market followed-through on March 21st. It is a very smart game the best of the best play. I know this game well. They did it before the 20th century and they will be doing this in the 22nd century.
To go along with what I see in the indexes, I see classic situations of a market near its end. Daytraders are back and are moving stocks, once again. This time the solar stocks, as I have been saying for months now, are the momo monsters. However, another group has joined them after the DNDN announcement: biotech. Biotech stocks are now moving all over the place, with many making very large price gains. I am willing to play these momo monsters but they still must breakout from sound chart patterns. They have to setup like ASTI. Stocks like JASO, TSL, and SPWR are breaking out of sloppy ugly bases. If I was daytrading these bad boys, I am sure I would be doing OK. However, I like to position trade now for the big gains. If the base is ugly, I pass. It is a simple as that. However, the game right now is to daytrade the biotechs, golds, and solar.
Take that speculation now in this market along with all of these low-priced POS that I have flying everywhere and it becomes quite clear to me we are entering a very speculative stage of this market. So, if we are getting a lot of momo stocks in the low-priced, solar, gold, and bio area to prove that it is not speculative all the high priced stocks are moving too right? Wrong. The real leaders in these groups have already made their runs (besides solar) and now the sub-$5 stocks are cooking. Is that a problem? Not at all. In fact at this point this is where we can make a TON of money as long as this trend last. Even if it doesn’t last that long, that is why we cut losses. But if this is the last hurrah, many of the stocks I have recently gone long should produce some big gains.
What else makes me think we are near the end? The fact that the old leaders from the 2003-2006 bull are back again. Oil&Gas, Gold, Steel, Metals, Transports and Commodities are all moving again. This time the leaders are making moves in some and not in others. The old leaders that are not leading again are setting up bases so there could be a lot more upside left in these. But along with these stocks, we don’t have financials, tech, and housing. We have Utilities, Defense, Food, and Medical stocks. The rotation has been out of leading high-tech and high-growth stocks into defensive and safety issues.
Even though I am cautious as can be on this market and have outlined everything I find wrong with this market that I did not find wrong with the market AT ALL in 2003 and 2004, it doesn’t effect my trading. I am long 230 stocks and most are very speculative so are very small. The fact that few CANSLIM quality stocks are breaking out is the reason I am not 200% invested. This market is obviously not acting right to not have me fully invested with it at all-time highs. Trust me, if this market was a rip-roaring raging bull market full of CANSLIM quality charts breaking out left and right, I would be 200% invested. However, since it is all crap I am not looking to become a wealthy rich individual here. I am simple trying to make sure I make a comfortable living so I can pay all my bills on Maui. That is all I want right here. If these stocks FLY!!! then I will get very wealthy. If they don’t, they are breaking out of patterns that should provide some nice gains.
It should be a busy upcoming week, with earnings announcements everywhere and the CPI being released on Tuesday. The CPI is sure to be market moving news but the earnings are sure to make anything off of that meaningless by the end of the week. We have announcements from such tech companies as IBM INTC EMC STX YHOO GOOG. So far the earnings have not been that great and as I have said before Analyst are expecting gains of 3.7% in YOY earnings this quarter. That is down from 8.7% estimates, earlier this year (not a good sign). Also, the expected 3.7% YOY gain will be the first gain in 14 quarters of non-double digit growth. As earnings go, so goes the market. Historically you can watch the trend of the GDP growth and earnings growth of an economy and see that they are the best predictor of what direction the stock market will take. GDP and earnings lead the market.
Take that along with what I see in the indexes and in my charts and it just becomes clear to me that there is not a whole lot left in this rally. Maybe a month to three months. But I can’t imagine by next quarter we will be higher with all the bad numbers, old leaders, and speculative situations I see. We will know it is ending when we get more distribution days in the market. Right now, we have two since the rally followed-through on March 21. Two more next week would raise caution flags everywhere and would definitely make me think about cutting losses much shorter than I normally allow low-priced junk POS stocks. But until I see that distribution, I will continue to ride the trend of the cocky bullish daytraders. Those daytraders are a brazen bunch.
The only other interesting piece of information I saw this weekend was that the Bradley stock market model sees a significant turn date (bearish) on Friday April 20. This is a stock market timing model based off of astrology and has been quite impressive at calling turns. However, sometimes the turn it calls for happens…in the opposite direction. So this model is shaky but it did get the March 13, 2003 bottom right on the money. However, it has a spotty record of tops. But with all the bearish situations I see in a bullish rising market, along with all my longs being so speculative, this is something for me to keep in the back of my mind as we continue on with our overbought speculative low volume old-leader filled bull market.
Aloha and I will see you in the chat room. Have a great Saturday and Sunday!!!
Sidenote: DEATHS DOWN 45% FROM FEB 14 - APR 14 (1586) COMPARED TO TWO PRIOR MONTHS DEC 14 - FEB 14 (2871) IN BAGHDAD. I hate our liberal media. Thank God I know how to read and find information on my own.
Market Commentary At Big Wave Trading Bronze Level One.
Top Holdings Up This Week - Signal Date
KNOL 332% - 1/12/06
AKAM 230% - 9/30/05
TRCR 191% - 1/12
CVO 189% - 8/18/05
TTEC 175% - 8/25
JSDA 164% - 12/20
TNH 141% - 10/26
OMTR 134% - 9/15
CCOI 130% - 9/27
MEH 109% - 8/30
HRZ 105% - 9/27
NEXC 101% - 10/25
CLRT 100% - 11/30
EVEP 97% - 11/16
SLP 94% - 2/5
CPA 91% - 9/15
MFW 89% - 1/29
ONT 85% - 12/21
CHINA 82% - 8/16
IMMU 79% - 12/19
IGLD 77% - 10/26
ULTR 74% - 10/27
MOS 73% - 10/12
ANO 71% - 2/14
PRGX 69% - 1/12
IMKTA 69% - 8/28
HURN 69% - 9/13
IIVI 66% - 8/30
DA 64% - 1/25/06
PERY 64% - 10/4
KHDH 59% - 5/30
CXW 59% - 5/19
EPHC 59% - 12/20
BAM 56% - 11/17/05
DECK 51% - 9/13
ECGI 50% - 10/20
APLX 50% - 9/28
New Swing Longs: Silver Level Two
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
Saturday, April 07, 2007
HAPPY EASTER!!!, HAPPY GOOD FRIDAY!!!, AND HAPPY PESACH!!!; Stocks End Short Week With More Gains On Light Trade
HAPPY EASTER!!!, HAPPY GOOD FRIDAY!!!, AND HAPPY PESACH (PASSOVER)!!!; Stocks End Short Week With More Gains On Light Trade
By MauiTrader
Stocks started the morning off with a gap lower on the back of a currency tightening measures in China. But after the gap lower, stocks steadily climbed higher on very quiet trade for the rest of the day. That reversal off the gap lower was caused by the Labor Department announcing that jobless claims this week fell within forecast. Those jobless claims this week rose by 11,000 to 321,000.
Also helping to lift stocks was a couple of merger and acquisition related announcements. Kirk Kerkorian has made a $4.5 billion bid for DCX and WEBM agreed to be acquired by Software AG. WEBM rose 27% on the announcement. This now puts the 1Q M&A deals up 27% over this time last year. $1.1 trillion worth of M&A deals this year has us on pace to beat last years record. More amazing is private equity deals. Those have risen 47%, year-over-year in 2007 so far.
Combine the positive jobless claims with the M&A deals, and with most traders taking Thursday off to have a very long weekend, and you had a recipe perfect for higher stock prices, despite oil climbing back over $64 on the news that the EIA saying that oil inventories declined for the eight-week in a row.
At the closing bell, the Nasdaq led the way with a .5% gain, the NYSE and the SP 500 followed with .3% gains, and the SP 600 and the DJIA lagged with .2% gains. A tad more troublesome is the IBD 100. That index only managed a .2% gain, well lagging the Nasdaq on the session.
Volume was lower on both the NYSE and the Nasdaq by about 10%. The lower volume was well below the 50 day volume average and was the lowest total of the year. Advancers beat decliners by a 5-to-3 margin on the NYSE and by an 8-to-7 margin on the Nasdaq. There were 413 new highs to 53 new lows–and on the NYSE there were 234 new highs to only 13 new lows.
Today was another day of a low volume rally that saw the indexes barely move higher but once again shake off early weakness to do so. This is not a great trend we have developing, since the follow-through day on March 21st. Since that follow through day the market was been higher in seven sessions. All seven sessions have failed to have volume over the 50 day volume average and only two of the up sessions have come with volume heavier than the day before. This is a low volume rally that will not last much longer unless we get some clear accumulation days in here by big institutional traders. Until we have volume come in over the 50 day volume average on the upside, we are open to a severe sell-off still. Bottom line is that I would not take much away from this week’s holiday shortened trading.
For the week it was very positive with all indexes closing higher. The Nasdaq led the way with a 2.1% gain, the NYSE followed with a 1.8% gain, the DJIA was right behind with a 1.7% gain, the SP 500 rose 1.6%, and the SP 600 gained 1.5%. I could go into more detail about this weeks action but it would be silly to do so. All you need to know is that it was a holiday short week. The bulls almost always have control of these weeks. This week was no exception.
There is no doubt that we are still in rally mode but everything in my gut tells me we are not going far from here. Now I will change my stance in seconds, if I start to see CANSLIM stocks with consistent great EPS and sales growth breakout from fresh bases and the markets start moving higher on HUGE volume. However, all I keep seeing is the old leaders breakout from choppy bases, defensive and utility issues climbing, and little small sub-$10 momo stocks moving. This does not make a safe big bull market. If we start seeing some more buying here on a lot of volume I will be much happier. However, unless we see it soon, we are increasing our chances of failure each day that passes that volume on the up days remain under the 50 day volume average.
Can we make money here? Of course! If you are a subscriber at least on the silver level you can see for yourself that almost EVERYTHING that I have touched since the February 27th sell-off is either higher or has not violated a complete cut loss area. However, there is nothing over $10 breaking out from bases seven weeks long that have perfect accumulation/distribution and max green BOP. In March 2003, October 2004, and November 2005 there were plenty of beautiful charts. Even after the move in August 2006 there were a few SWEET gems. However, since March 21st there has been very few. The stocks that do have perfect charts are just not CANSLIM quality. If this market takes a turn for the worse, these stocks will not fall 8%–they will fall 20% or more before violating a key cut loss level. So I can not recommend them for newbies.
Give me a sell-off of 20% or more and a VIX near 20-30 and the next follow-through we get you will see the power of this strategy. Right now, very few people are making a killing. Remember back in March 2003 when the VIX was at 33? I had many stocks make 300-500% gains. So what can we compare it to now. How about KNOL. KNOL is up 301% for me since I purchased it. If the VIX was three times higher than now and around 36, KNOL would be up 900%. So basically you can take a look at my returns below this commentary and then double or triple them and then you will see the potential gains in a “REAL” bull market. Not a low volume snooze-fest higher.
Speaking of the VIX: The VIX fell 10.2% this week. LOL. With the VIX that low, you can forget about many MFW or TRCR type of stocks showing up. Normally I can find 10-20 MFW and TRCR type of stocks. Not in this market. However, the drop in VIX puts complacency in the market and that is bearish for stock prices. Another bearish item is the put/call ratio. That ratio after falling below .7 yesterday is still low at .74. Also, early on in the realmoney.com polls, bulls are beating bears 60% to 19%. The crowd appears to bullish again….for now. And we all know how quick this can change. More choppiness? Probably.
So remember, until we get more quality CANSLIM type stocks, keep your buys small in this speculative crap that is getting action. Also if you are brand new and are still inexperienced (you know who you are) and you buy a stock and it goes against you the next day, think about selling 25% to 33%. Also in these speculative stocks, don’t be afraid to take some gains at 25% or so. These things like to reverse in the kind of market environment we are in so you need to stay on your toes. Breakouts should work right away! Especially in rough markets. If they don’t move up right away, newbies, think of selling some down.
Before I move on to wishing everyone a Happy Easter, I want to talk about the March employment numbers. Expectations for 135,000 was well taken care of when headlines produced a gain of 180,000. Along with that nice gain, the previous two months employment figures were revised up. But more amazing, despite this “horrible-evil-economy-that-GWB-has-created,” unemployment came in at five-year lows at 4.4%, beating expectations of a tick up to 4.6% from 4.5% . That is simply incredible. This also comes with average hourly earnings rising .3%. That is a 4% gain year-over-year. Even though the economy is showing signs of slowing, these numbers show just how great this economy still is despite the slowdown.
Wall-street took the news quite well with the SP futures rising 5.75 and the NQ futures rising 10.75. Stocks were closed today, obviously, but futures still traded for a little while.
Earnings season officially starts next week when AA reports on Tuesday. Analyst are expecting gains of 3.7% in YOY earnings this quarter. That is down from 8.7% estimates, earlier this year (not a good sign). Don’t you find that a bit scary how far they have come down?? Also, the expected 3.7% YOY gain will be the first gain in 14 quarters of non-double digit growth. As earnings go, so goes the market. Historically you can watch the trend of the GDP growth and earnings growth of an economy and see that they are the best predictor of what direction the stock market will take. GDP and earnings lead the market.
With that I wish everyone a Happy Easter and Passover. Enjoy the time with loved ones. Aloha and I will see you in the chat room.
Market Commentary At Big Wave Trading Bronze Level One.
Top Holdings Up This Week - Signal Date
KNOL 301% - 1/12/06
AKAM 220% - 9/30/05
TRCR 188% - 1/12
TTEC 172% - 8/25
JSDA 139% - 12/20
TNH 132% - 10/26
OMTR 125% - 9/15
CCOI 107% - 9/27
MEH 105% - 8/30
HRZ 104% - 9/27
CLRT 98% - 11/30
PRGX 97% - 1/12
AOI 94% - 11/19
EVEP 93% - 11/16
MFW 91% - 1/29
BONT 87% - 10/3
NEXC 81% - 10/25
CPA 79% - 9/15
CHINA 78% - 8/16
IMKTA 74% - 8/28
SLP 73% - 2/5
BAM 73% - 11/17/05
DA 67% - 1/25/06
MOS 65% - 10/12
EPHC 64% - 12/20
ULTR 64% - 10/27
HURN 63% - 9/13
IIVI 63% - 8/30
PERY 61% - 10/4
ANO 58% - 2/14
CXW 58% - 5/19
XIDE 56% - 1/29
KHDH 55% - 5/30
APLX 53% - 9/28
BMTI 52% - 10/25
IMMU 52% - 12/19
ONT 52% - 12/21
BMA 52% - 10/24
DECK 51% - 9/13
OEH 48% - 11/20
VDSI 48% - 1/4
New Swing Longs: Silver Level Two
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
By MauiTrader
Stocks started the morning off with a gap lower on the back of a currency tightening measures in China. But after the gap lower, stocks steadily climbed higher on very quiet trade for the rest of the day. That reversal off the gap lower was caused by the Labor Department announcing that jobless claims this week fell within forecast. Those jobless claims this week rose by 11,000 to 321,000.
Also helping to lift stocks was a couple of merger and acquisition related announcements. Kirk Kerkorian has made a $4.5 billion bid for DCX and WEBM agreed to be acquired by Software AG. WEBM rose 27% on the announcement. This now puts the 1Q M&A deals up 27% over this time last year. $1.1 trillion worth of M&A deals this year has us on pace to beat last years record. More amazing is private equity deals. Those have risen 47%, year-over-year in 2007 so far.
Combine the positive jobless claims with the M&A deals, and with most traders taking Thursday off to have a very long weekend, and you had a recipe perfect for higher stock prices, despite oil climbing back over $64 on the news that the EIA saying that oil inventories declined for the eight-week in a row.
At the closing bell, the Nasdaq led the way with a .5% gain, the NYSE and the SP 500 followed with .3% gains, and the SP 600 and the DJIA lagged with .2% gains. A tad more troublesome is the IBD 100. That index only managed a .2% gain, well lagging the Nasdaq on the session.
Volume was lower on both the NYSE and the Nasdaq by about 10%. The lower volume was well below the 50 day volume average and was the lowest total of the year. Advancers beat decliners by a 5-to-3 margin on the NYSE and by an 8-to-7 margin on the Nasdaq. There were 413 new highs to 53 new lows–and on the NYSE there were 234 new highs to only 13 new lows.
Today was another day of a low volume rally that saw the indexes barely move higher but once again shake off early weakness to do so. This is not a great trend we have developing, since the follow-through day on March 21st. Since that follow through day the market was been higher in seven sessions. All seven sessions have failed to have volume over the 50 day volume average and only two of the up sessions have come with volume heavier than the day before. This is a low volume rally that will not last much longer unless we get some clear accumulation days in here by big institutional traders. Until we have volume come in over the 50 day volume average on the upside, we are open to a severe sell-off still. Bottom line is that I would not take much away from this week’s holiday shortened trading.
For the week it was very positive with all indexes closing higher. The Nasdaq led the way with a 2.1% gain, the NYSE followed with a 1.8% gain, the DJIA was right behind with a 1.7% gain, the SP 500 rose 1.6%, and the SP 600 gained 1.5%. I could go into more detail about this weeks action but it would be silly to do so. All you need to know is that it was a holiday short week. The bulls almost always have control of these weeks. This week was no exception.
There is no doubt that we are still in rally mode but everything in my gut tells me we are not going far from here. Now I will change my stance in seconds, if I start to see CANSLIM stocks with consistent great EPS and sales growth breakout from fresh bases and the markets start moving higher on HUGE volume. However, all I keep seeing is the old leaders breakout from choppy bases, defensive and utility issues climbing, and little small sub-$10 momo stocks moving. This does not make a safe big bull market. If we start seeing some more buying here on a lot of volume I will be much happier. However, unless we see it soon, we are increasing our chances of failure each day that passes that volume on the up days remain under the 50 day volume average.
Can we make money here? Of course! If you are a subscriber at least on the silver level you can see for yourself that almost EVERYTHING that I have touched since the February 27th sell-off is either higher or has not violated a complete cut loss area. However, there is nothing over $10 breaking out from bases seven weeks long that have perfect accumulation/distribution and max green BOP. In March 2003, October 2004, and November 2005 there were plenty of beautiful charts. Even after the move in August 2006 there were a few SWEET gems. However, since March 21st there has been very few. The stocks that do have perfect charts are just not CANSLIM quality. If this market takes a turn for the worse, these stocks will not fall 8%–they will fall 20% or more before violating a key cut loss level. So I can not recommend them for newbies.
Give me a sell-off of 20% or more and a VIX near 20-30 and the next follow-through we get you will see the power of this strategy. Right now, very few people are making a killing. Remember back in March 2003 when the VIX was at 33? I had many stocks make 300-500% gains. So what can we compare it to now. How about KNOL. KNOL is up 301% for me since I purchased it. If the VIX was three times higher than now and around 36, KNOL would be up 900%. So basically you can take a look at my returns below this commentary and then double or triple them and then you will see the potential gains in a “REAL” bull market. Not a low volume snooze-fest higher.
Speaking of the VIX: The VIX fell 10.2% this week. LOL. With the VIX that low, you can forget about many MFW or TRCR type of stocks showing up. Normally I can find 10-20 MFW and TRCR type of stocks. Not in this market. However, the drop in VIX puts complacency in the market and that is bearish for stock prices. Another bearish item is the put/call ratio. That ratio after falling below .7 yesterday is still low at .74. Also, early on in the realmoney.com polls, bulls are beating bears 60% to 19%. The crowd appears to bullish again….for now. And we all know how quick this can change. More choppiness? Probably.
So remember, until we get more quality CANSLIM type stocks, keep your buys small in this speculative crap that is getting action. Also if you are brand new and are still inexperienced (you know who you are) and you buy a stock and it goes against you the next day, think about selling 25% to 33%. Also in these speculative stocks, don’t be afraid to take some gains at 25% or so. These things like to reverse in the kind of market environment we are in so you need to stay on your toes. Breakouts should work right away! Especially in rough markets. If they don’t move up right away, newbies, think of selling some down.
Before I move on to wishing everyone a Happy Easter, I want to talk about the March employment numbers. Expectations for 135,000 was well taken care of when headlines produced a gain of 180,000. Along with that nice gain, the previous two months employment figures were revised up. But more amazing, despite this “horrible-evil-economy-that-GWB-has-created,” unemployment came in at five-year lows at 4.4%, beating expectations of a tick up to 4.6% from 4.5% . That is simply incredible. This also comes with average hourly earnings rising .3%. That is a 4% gain year-over-year. Even though the economy is showing signs of slowing, these numbers show just how great this economy still is despite the slowdown.
Wall-street took the news quite well with the SP futures rising 5.75 and the NQ futures rising 10.75. Stocks were closed today, obviously, but futures still traded for a little while.
Earnings season officially starts next week when AA reports on Tuesday. Analyst are expecting gains of 3.7% in YOY earnings this quarter. That is down from 8.7% estimates, earlier this year (not a good sign). Don’t you find that a bit scary how far they have come down?? Also, the expected 3.7% YOY gain will be the first gain in 14 quarters of non-double digit growth. As earnings go, so goes the market. Historically you can watch the trend of the GDP growth and earnings growth of an economy and see that they are the best predictor of what direction the stock market will take. GDP and earnings lead the market.
With that I wish everyone a Happy Easter and Passover. Enjoy the time with loved ones. Aloha and I will see you in the chat room.
Market Commentary At Big Wave Trading Bronze Level One.
Top Holdings Up This Week - Signal Date
KNOL 301% - 1/12/06
AKAM 220% - 9/30/05
TRCR 188% - 1/12
TTEC 172% - 8/25
JSDA 139% - 12/20
TNH 132% - 10/26
OMTR 125% - 9/15
CCOI 107% - 9/27
MEH 105% - 8/30
HRZ 104% - 9/27
CLRT 98% - 11/30
PRGX 97% - 1/12
AOI 94% - 11/19
EVEP 93% - 11/16
MFW 91% - 1/29
BONT 87% - 10/3
NEXC 81% - 10/25
CPA 79% - 9/15
CHINA 78% - 8/16
IMKTA 74% - 8/28
SLP 73% - 2/5
BAM 73% - 11/17/05
DA 67% - 1/25/06
MOS 65% - 10/12
EPHC 64% - 12/20
ULTR 64% - 10/27
HURN 63% - 9/13
IIVI 63% - 8/30
PERY 61% - 10/4
ANO 58% - 2/14
CXW 58% - 5/19
XIDE 56% - 1/29
KHDH 55% - 5/30
APLX 53% - 9/28
BMTI 52% - 10/25
IMMU 52% - 12/19
ONT 52% - 12/21
BMA 52% - 10/24
DECK 51% - 9/13
OEH 48% - 11/20
VDSI 48% - 1/4
New Swing Longs: Silver Level Two
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
Saturday, March 31, 2007
Stressed Out And Tired; Stocks End The Week With A Boring Session, Leaving The Indexes Mixed And Flat
Stressed Out And Tired; Stocks End The Week With A Boring Session, Leaving The Indexes Mixed And Flat
By MauiTrader
Another wild-yet-boring intraday session came to an end, with stocks going nowhere. The lack of action today is a bit of a surprise, considering all the news items we had to digest. First, we got off to a positive start and continued higher early on, on the back of a bunch of macro news. The core personal consumption index rose .3% in Feb (biggest jump since August) and personal income and spending rose .6%, contributing to the fact that core inflation is now at 2.4% which is outside the Fed comfort zone of 1%-2%. This data should make it clear that the Fed will not be cutting interest rates anytime soon.
There were two more headlines of interest: The University of Michigan consumer confidence survey was revised down to 88.4 from 88.8 and the Chicago Purchasing Managers index rose to 61.7 in March from 47.9 in February. Anything over 50 on the CPMI indicates expansion.
However, news that the Bush administration via the Commerce Department are going to put economic sanctions/tariffs on China to protect the US paper producers from unfair subsidies. That sent stocks and the dollar lower. I hate ANY kind of economic sanction but we will see how this turns out.
It turned out, for the day, stocks weren’t that worried over it and they managed to recoup almost all of the losses that were sustained from the intraday highs. This was the second day in a row stocks have reversed after selling off hard in early hours of trading.
When the closing bell rang, stocks ended up mixed all over the board. The Nasdaq led the way with a .2% gain, the SP 400 gained .1%, and the DJIA ticked higher by .05%. On the downside, the NYSE led the way with a .2% loss, the SP 500 followed with a .1% loss, and the SP 600 ticked slightly lower by .03% basically closing flat. Leading stocks, via the IBD 100, closed flat with a 0.0% move. Like I said, boring. If you fell asleep before the market opened and woke up after the bell, you might question if it really opened.
The Nasdaq, SP 500, and DJIA are all below their 50 day moving averages and the NYSE, SP 400, and SP 600 are above their 50 day moving averages, showing you exactly how mixed this market really is, not only today but the past week.
Volume ticked higher today on both the NYSE and the Nasdaq. However, volume does not really matter today. What does matter is knowing this was not churning because volume was below the 50 day volume average; signaling the big boys were not interested in pushing the market around today.
Advancers beat decliners by a 6-to-5 margin on the NYSE and by an 8-to-7 margin on the Nasdaq. The fact that the NYSE was down today but breadth was up is very positive and shows you which index is leading. Speaking of leading, just look at the 52-week new highs. There were 132 NH on the NYSE and only 11 NL. On the Nasdaq it was 85 NH to 45 NL. Obviously, the strength, is clearly in the NYSE. Metals, Steel, Oil, and Food stocks; the NYSE is their home.
If you still don’t believe me that this market is boring and trendless, check out these numbers. For the week, the Nasdaq and the SP 500 lost 1.1%, the DJIA and SP 600 lost 1%, and the NYSE lost .8%. For the quarter (A FULL THREE MONTHS), the SP 600 showed some action with a 3% gain (that is very impressive). But the rest of the indexes spent the last three months going nowhere. The NYSE gained 1.3%, the DJIA rose .9%, the Nasdaq gained .3%, and the SP 500 gained .2%. You have to give the SP-600 some credit, because a 12% annual gain is very nice, but the rest of the indexes show you why Jesse Livermore and many of the greatest traders only traded when the indexes were in clear trends. I hope you made money but if you did not make any money…how much did you trade this year? Was it worth it? Or was “sitting” the right play?
There was one pocket of action, on Friday. The Homebuilder-Residential/Commercial group tanked another 3% today. This sector continues to show you why you should NEVER buy stocks that are a “bargain,” are “cheap,” are “values,” and that you think have “bottomed.” How many dip buyers keep getting killed here? I know quite a few people buying these stocks thinking they are picking up bargains. Good luck fighting through all that resistance.
Oh my, so after a week and a half, since the follow-through day, here we are still waiting for another day of substantial gains on a surge in volume that will help produce many stocks breaking out of sound bases. Well, you may be waiting, but I really don’t care anymore. LOL. Bu the fact that we have not had an accumulation day since the follow-through is troublesome. Remember just because we are holding above the lows and have had only one distribution day–that, yes, can be taken as bullish–we still need more gains on higher volume if this is going to hold.
This market has some real problems. If we are going to be going higher, trust me, I will play it. Hell, I am already playing it with 200 stocks. But the fact that the CANSLIM select group of stocks is still only 58% invested a week and a half since the follow-through day is very very very troublesome. You want another troublesome fact? The Nasdaq is below the close of the follow-through day and since then has seen no accumulation days and one distribution day.
I am 100% sure that by now, if this market was really ready to blast-off, we would have the CANSLIM select at 100% invested, I would not be long 200 stocks with 130 of them being pure speculative to half-way-speculative issues (stocks not of CANSLIM quality), I would not continue to find only speculative stocks to go long, there would be more CANSLIM quality stocks breaking out of bases, and there would be more CANSLIM quality stocks setting up in bases. We do NOT have this happening. This is not a market for growth/momentum investors. If you are looking to hit a home run, you probably need to adjust your stance and swing. Because this market has a powerful pitching rotation that is on fire right now. Single, double, and MAYBE a triple, if you are lucky is all that growth investors can expect, with the VIX still below 20.
I guess with so many people expecting the worse and the put/call still over 1 at 1.05 shows that there is a lot of bearishness out there. However the AAII poll this week showed bears come way down and bulls go over 50%. Also, this weekend, the realmoney.com poll shows 54% bulls, only 19% bearish, and 26% neutral (or confused, whatever you want to call it). So to me it seems the crowd is now bullish. How confusing can it get????? But really the smart trader knows not to really care or give a damn. Until you get pretty green charts in stocks with excellent fundamentals we know it is just noise.
The dip buyers can continue to step in here and believe nothing is wrong and can continue to buy stocks thinking they will go to the moon. But the fact that we have the government stepping in with sanctions, poor economic numbers, lower GDP growth, inflation, and a new Congress that is about to raise taxes by not extending the Bush tax cuts and you have a disaster waiting to happen. What is wrong here? You retail money that is NOW just buying stocks (I can see this data via mutual fund inflows–January and February inflows were HUGE) are buying at the top AGAIN. These inflows always happen right at the end or near the end of a trend. What is wrong? You are four years too late! Where were you in October 2002? Where were you in March 2003? If you are just now buying stocks, you should look in the mirror and ask yourself who is really buying your stocks; you or the media that convinced you the evil George W. Bush’s economy was doomed to fail? Since the tax cuts the Nasdaq is up 90% and the SP 600 is up 137%. Yeah, tax cuts don’t work, do they?
Next week is a short week, with Good Friday occurring on…Friday. And we are also coming upon earnings season. We start to get numbers this week but the real action officially kicks off on the 10th when AA reports. There might be one minor problem this time, which you can add to the list of problems I have already mentioned, as wall street is looking for earnings to come in 4% to 6% higher YOY. Not bad you say? Yes, you are right. But the problem lies in the fact that earnings have come in over double digits for the past 14 quarters.
If earnings do not come in at double digits, this will be the first time since 2003 that we have not seen this. If you don’t think that is potential bearish, you really don’t understand the stock market. GDP growth and EPS growth is the two clear leading indicators for stock markets. Not just the US stock market, ALL MARKETS ALL OVER THE WORLD GOING BACK YEARS AND YEARS AND YEARS. Find a country check out the GDP growth and then watch the stock market follow. How is the USA GDP growth looking? I am a question asking fool tonight!!!
Expect more choppy and meaningless trading this week. I am only predicting this so that we actually get a follow-through to the downside or upside here. Normally, whatever I think will happen does not happen. So I predict the market will flatline and be choppy intraday every day next week.
This market is still in a very weak bullish phase. But it is still in a bullish trend so there is no reason to bet against it. I am sure the safe time to short will be soon; but with all these beautiful green charts in these tiny small cheap crap stocks I have to take them. They are working (80% of them) and some are producing some nice gains and have chart patterns for potential big gains. However, if the market weakens expect them to go with it. But that is why I am only 56% invested. Which is AMAZINGLY (not really, just showing you how discipline works) similar to the CANSLIM select only being 58% invested. CASH IS STILL KING!!! KING, I TELL YOU!!
Aloha and I will see you in the chat room. I am tired and stressed out (not from the market; from socialized medicine…the only medicine on Maui).
Market Commentary At Big Wave Trading Bronze Level One.
Top Holdings Up This Week - Signal Date
KNOL 295% - 1/12/06
AKAM 230% - 9/30/05
TRCR 161% - 1/12
TTEC 157% - 8/25
OMTR 131% - 9/15
JSDA 108% - 12/20
TNH 107% - 10/26
CCOI 107% - 9/27
HRZ 103% - 9/27
PRGX 97% - 1/12
BONT 87% - 10/3
MEH 83% - 8/30
EVEP 80% - 11/16
AOI 76% - 11/19
CLRT 75% - 11/30
CHINA 74% - 8/16
IMKTA 72% - 8/28
CPA 66% - 9/15
EPHC 66% - 12/20
DA 65% - 1/25/06
IIVI 61% - 8/30
PERY 59% - 10/4
ULTR 58% - 10/27
CXW 57% - 5/19
HURN 57% - 9/13
XIDE 56% - 1/29
APLX 54% - 9/28
BMTI 52% - 10/25
MFW 50% - 1/29
DECK 50% - 9/13
KHDH 49% - 5/30
OEH 48% - 11/20
New Swing Longs: Silver Level Two
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
By MauiTrader
Another wild-yet-boring intraday session came to an end, with stocks going nowhere. The lack of action today is a bit of a surprise, considering all the news items we had to digest. First, we got off to a positive start and continued higher early on, on the back of a bunch of macro news. The core personal consumption index rose .3% in Feb (biggest jump since August) and personal income and spending rose .6%, contributing to the fact that core inflation is now at 2.4% which is outside the Fed comfort zone of 1%-2%. This data should make it clear that the Fed will not be cutting interest rates anytime soon.
There were two more headlines of interest: The University of Michigan consumer confidence survey was revised down to 88.4 from 88.8 and the Chicago Purchasing Managers index rose to 61.7 in March from 47.9 in February. Anything over 50 on the CPMI indicates expansion.
However, news that the Bush administration via the Commerce Department are going to put economic sanctions/tariffs on China to protect the US paper producers from unfair subsidies. That sent stocks and the dollar lower. I hate ANY kind of economic sanction but we will see how this turns out.
It turned out, for the day, stocks weren’t that worried over it and they managed to recoup almost all of the losses that were sustained from the intraday highs. This was the second day in a row stocks have reversed after selling off hard in early hours of trading.
When the closing bell rang, stocks ended up mixed all over the board. The Nasdaq led the way with a .2% gain, the SP 400 gained .1%, and the DJIA ticked higher by .05%. On the downside, the NYSE led the way with a .2% loss, the SP 500 followed with a .1% loss, and the SP 600 ticked slightly lower by .03% basically closing flat. Leading stocks, via the IBD 100, closed flat with a 0.0% move. Like I said, boring. If you fell asleep before the market opened and woke up after the bell, you might question if it really opened.
The Nasdaq, SP 500, and DJIA are all below their 50 day moving averages and the NYSE, SP 400, and SP 600 are above their 50 day moving averages, showing you exactly how mixed this market really is, not only today but the past week.
Volume ticked higher today on both the NYSE and the Nasdaq. However, volume does not really matter today. What does matter is knowing this was not churning because volume was below the 50 day volume average; signaling the big boys were not interested in pushing the market around today.
Advancers beat decliners by a 6-to-5 margin on the NYSE and by an 8-to-7 margin on the Nasdaq. The fact that the NYSE was down today but breadth was up is very positive and shows you which index is leading. Speaking of leading, just look at the 52-week new highs. There were 132 NH on the NYSE and only 11 NL. On the Nasdaq it was 85 NH to 45 NL. Obviously, the strength, is clearly in the NYSE. Metals, Steel, Oil, and Food stocks; the NYSE is their home.
If you still don’t believe me that this market is boring and trendless, check out these numbers. For the week, the Nasdaq and the SP 500 lost 1.1%, the DJIA and SP 600 lost 1%, and the NYSE lost .8%. For the quarter (A FULL THREE MONTHS), the SP 600 showed some action with a 3% gain (that is very impressive). But the rest of the indexes spent the last three months going nowhere. The NYSE gained 1.3%, the DJIA rose .9%, the Nasdaq gained .3%, and the SP 500 gained .2%. You have to give the SP-600 some credit, because a 12% annual gain is very nice, but the rest of the indexes show you why Jesse Livermore and many of the greatest traders only traded when the indexes were in clear trends. I hope you made money but if you did not make any money…how much did you trade this year? Was it worth it? Or was “sitting” the right play?
There was one pocket of action, on Friday. The Homebuilder-Residential/Commercial group tanked another 3% today. This sector continues to show you why you should NEVER buy stocks that are a “bargain,” are “cheap,” are “values,” and that you think have “bottomed.” How many dip buyers keep getting killed here? I know quite a few people buying these stocks thinking they are picking up bargains. Good luck fighting through all that resistance.
Oh my, so after a week and a half, since the follow-through day, here we are still waiting for another day of substantial gains on a surge in volume that will help produce many stocks breaking out of sound bases. Well, you may be waiting, but I really don’t care anymore. LOL. Bu the fact that we have not had an accumulation day since the follow-through is troublesome. Remember just because we are holding above the lows and have had only one distribution day–that, yes, can be taken as bullish–we still need more gains on higher volume if this is going to hold.
This market has some real problems. If we are going to be going higher, trust me, I will play it. Hell, I am already playing it with 200 stocks. But the fact that the CANSLIM select group of stocks is still only 58% invested a week and a half since the follow-through day is very very very troublesome. You want another troublesome fact? The Nasdaq is below the close of the follow-through day and since then has seen no accumulation days and one distribution day.
I am 100% sure that by now, if this market was really ready to blast-off, we would have the CANSLIM select at 100% invested, I would not be long 200 stocks with 130 of them being pure speculative to half-way-speculative issues (stocks not of CANSLIM quality), I would not continue to find only speculative stocks to go long, there would be more CANSLIM quality stocks breaking out of bases, and there would be more CANSLIM quality stocks setting up in bases. We do NOT have this happening. This is not a market for growth/momentum investors. If you are looking to hit a home run, you probably need to adjust your stance and swing. Because this market has a powerful pitching rotation that is on fire right now. Single, double, and MAYBE a triple, if you are lucky is all that growth investors can expect, with the VIX still below 20.
I guess with so many people expecting the worse and the put/call still over 1 at 1.05 shows that there is a lot of bearishness out there. However the AAII poll this week showed bears come way down and bulls go over 50%. Also, this weekend, the realmoney.com poll shows 54% bulls, only 19% bearish, and 26% neutral (or confused, whatever you want to call it). So to me it seems the crowd is now bullish. How confusing can it get????? But really the smart trader knows not to really care or give a damn. Until you get pretty green charts in stocks with excellent fundamentals we know it is just noise.
The dip buyers can continue to step in here and believe nothing is wrong and can continue to buy stocks thinking they will go to the moon. But the fact that we have the government stepping in with sanctions, poor economic numbers, lower GDP growth, inflation, and a new Congress that is about to raise taxes by not extending the Bush tax cuts and you have a disaster waiting to happen. What is wrong here? You retail money that is NOW just buying stocks (I can see this data via mutual fund inflows–January and February inflows were HUGE) are buying at the top AGAIN. These inflows always happen right at the end or near the end of a trend. What is wrong? You are four years too late! Where were you in October 2002? Where were you in March 2003? If you are just now buying stocks, you should look in the mirror and ask yourself who is really buying your stocks; you or the media that convinced you the evil George W. Bush’s economy was doomed to fail? Since the tax cuts the Nasdaq is up 90% and the SP 600 is up 137%. Yeah, tax cuts don’t work, do they?
Next week is a short week, with Good Friday occurring on…Friday. And we are also coming upon earnings season. We start to get numbers this week but the real action officially kicks off on the 10th when AA reports. There might be one minor problem this time, which you can add to the list of problems I have already mentioned, as wall street is looking for earnings to come in 4% to 6% higher YOY. Not bad you say? Yes, you are right. But the problem lies in the fact that earnings have come in over double digits for the past 14 quarters.
If earnings do not come in at double digits, this will be the first time since 2003 that we have not seen this. If you don’t think that is potential bearish, you really don’t understand the stock market. GDP growth and EPS growth is the two clear leading indicators for stock markets. Not just the US stock market, ALL MARKETS ALL OVER THE WORLD GOING BACK YEARS AND YEARS AND YEARS. Find a country check out the GDP growth and then watch the stock market follow. How is the USA GDP growth looking? I am a question asking fool tonight!!!
Expect more choppy and meaningless trading this week. I am only predicting this so that we actually get a follow-through to the downside or upside here. Normally, whatever I think will happen does not happen. So I predict the market will flatline and be choppy intraday every day next week.
This market is still in a very weak bullish phase. But it is still in a bullish trend so there is no reason to bet against it. I am sure the safe time to short will be soon; but with all these beautiful green charts in these tiny small cheap crap stocks I have to take them. They are working (80% of them) and some are producing some nice gains and have chart patterns for potential big gains. However, if the market weakens expect them to go with it. But that is why I am only 56% invested. Which is AMAZINGLY (not really, just showing you how discipline works) similar to the CANSLIM select only being 58% invested. CASH IS STILL KING!!! KING, I TELL YOU!!
Aloha and I will see you in the chat room. I am tired and stressed out (not from the market; from socialized medicine…the only medicine on Maui).
Market Commentary At Big Wave Trading Bronze Level One.
Top Holdings Up This Week - Signal Date
KNOL 295% - 1/12/06
AKAM 230% - 9/30/05
TRCR 161% - 1/12
TTEC 157% - 8/25
OMTR 131% - 9/15
JSDA 108% - 12/20
TNH 107% - 10/26
CCOI 107% - 9/27
HRZ 103% - 9/27
PRGX 97% - 1/12
BONT 87% - 10/3
MEH 83% - 8/30
EVEP 80% - 11/16
AOI 76% - 11/19
CLRT 75% - 11/30
CHINA 74% - 8/16
IMKTA 72% - 8/28
CPA 66% - 9/15
EPHC 66% - 12/20
DA 65% - 1/25/06
IIVI 61% - 8/30
PERY 59% - 10/4
ULTR 58% - 10/27
CXW 57% - 5/19
HURN 57% - 9/13
XIDE 56% - 1/29
APLX 54% - 9/28
BMTI 52% - 10/25
MFW 50% - 1/29
DECK 50% - 9/13
KHDH 49% - 5/30
OEH 48% - 11/20
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, March 24, 2007
A Boring Day Of Trading Ends With Stocks Mixed On Lower Volume; Best Week For Stocks In Six Months
Market Commentary At Big Wave Trading Bronze Level One.
TOP CURRENT HOLDINGS UP THIS WEEK LISTED AFTER MARKET COMMENTARY BELOW
Preview of current "Daily Market Analysis" Posting:
A Boring Day Of Trading Ends With Stocks Mixed On Lower Volume; Best Week For Stocks In Six Months
By MauiTrader
A boring, erratic, and overall lame session came to end Friday, after a week of surprises on many fronts. The only thing not boring today was the post-1pm EST action in the Nasdaq; up, wedge up, down, wedge down, and up. Still, that only led to a flat close. Today’s headlines were much more subdued than the previous four days, but we still had some important numbers to digest. Existing-home sales were up 3.9% in February to an annualized 6.69 million. That was the fastest growth since April and above economist estimates. This was a welcome report, after all the thrashing we received last month. The other news item making its way around was the 15 British sailors and marines that were captured by Iranian kidnappers. However, as expected, this was not market moving news.
At the close, the SP 600 was the daily winner with a .4% gain, the NYSE followed with a .3% gain, the DJIA gained .2% finishing higher for the fifth straight day, the SP 500 finished .1% higher, and the Nasdaq bucked the trend falling .1%. Leading stocks did not do anything special today, with the IBD 100 gaining only .1%. The lack of ability to keep up with the top performing indexes is a subtle sign of weakness and may indicate that the rally is running out of steam, already, in the short-term. It is still too early to conclude for a fact that is what we have happening here.
Volume was much lower on both the NYSE and the Nasdaq. Volume was running about even with yesterday’s total. But around 1pm EST, traders took off early, starting the weekend early. The lower volume is just what you see after such strong gains on Wednesday. The volume on the NYSE was the lowest total since late February, showing that big funds were not interested in buying or selling stocks here. Breadth was positive on both exchanges, with advancers beating decliners by a 9-to-7 margin on the NYSE and by an 8-to-7 margin on the Nasdaq. New highs continue to trounce new lows, by 301-31. This action shows that despite the big boys being absent, breadth is still strong and there are many stocks still making gains, despite the low volume rally after the Feb 27 selling.
The biggest gains are mainly coming from the old leaders in the Oil & Gas industry. These stocks continue to dominate the new highs list and continue to work there way back to the top of the industry group tables in IBD. Part of this is due to the fact that oil has stopped moving down. Today, oil rallied to over $62 a barrel, closing at $62.28. The gains in crude oil were given credit to the Iranians capturing the 15 British soldiers.
Overall, it was a great week, for the major market indexes. All of them produced significant gains, helping traders quickly forget about the pain from February 27. For the week, the SP 600 led the way with a 4.1% gain, the NYSE followed with a 4% gain, the SP 400 came in with a 3.9% gain, the SP 500 rallied 3.5%, the Nasdaq gained 3.2%, and the DJIA came in with a 3.1% gain. It was a very good week, for investors who wanted the market to recapture the losses. In fact it was the best week for stocks in six months.
I do have to admit that this market is holding up very well, considering the amount of quick damage off the February highs. My new buys are doing very well, since then. Most are going up and there have been very few that have not gone up and have reversed. In fact, I can not think of any complete sells out of any new buys the past month. Every long I have taken is up. The only problem is none of these longs are breaking out of sound long-term bases. And the ones that are breaking out of long bases are not CANSLIM quality stocks. The CANSLIM quality stocks are breaking out of shorter bases and/or are bouncing off key moving average lines indicating that it is only a resumption of an advance and not part of a fresh new bull market.
The volume on the way up is also well below the volume figures on the sell-off last month. This rally still looks like an oversold bounce off a very pessimistic tape. That bounce has simply come too soon. We have not done enough damage on the downside and we have not based long enough to get a real correction that could set us up for a powerful new bull market. Without this long correction, you do not have enough time go by for a change in leadership to develop. The new leadership usually comes out of longer drawn-out corrections. Not from quick collapses followed by a lower volume bounce. You simply can not create enough momentum to the upside without creating nice long green bases. And you can’t create those bases without the market taking a breather for more than a couple of weeks.
Instead this uptrend appears to just be a continuation of the longer bull market that started in October 2002. However, like I have been saying, this pullback is and was much different than the rest, with many charts breaking down on heavy volume. However, not all charts did break down. By not panicking and using sound discipline, I was still long 170 stocks in clear uptrends. The fact that so many stocks remained in uptrends, after the sell-off, was the tip-off that this breakdown was not necessarily going to lead to a crash. By doing that, I am still long many stocks that have now made strong gains while the market recovers. And by having cash ready for the new buys, I was able to move dead money into stocks that have turned out very well. Therefore, my account, is much higher than where it was the day after the sell-off.
So, there are some signs that this rally might work out for a while. However, the rally off the April 2000 lows lasted until August 2000, after a significant sell-off. How did that work out for the perma-bulls? But before I start getting all bullish again I am going to have to see more hot stocks with hot fundamentals break out of round, sound, and green bases. I don’t know how I am going to get these this far into a bull market with VIX this ridiculously low. But that is what I am looking for. However, without a big sell-off that causes a jump in the VIX, it sure is going to be hard to find these beautiful long bases.
So, without this pullback, the gains that we will get will not be the variety that produces many 100%-500% winners in six months. Instead you are going to have to be happy with all the 20%-150% gainers that I find. With the VIX and fear this low, it is impossible to get any real movement in stocks; impossible! This market is best for paying the bills and maybe putting a little bit of money away. This market is not for those of us who are looking to become wealthy and make a killing. Markets like 1999 and 2003 had so much fear in them when they launched there bull markets that making a killing and getting rich was not a problem. Right now, if you are looking to get rich, you have a problem: it is called the stock market.
Since this is not the market to be making a mint in, it must also be said that the most important play right now is to keep cash on hand. Without massive gains in the indexes on huge volume with tons of CANSLIM stocks breaking out, you can be sure that the odds are high for this rally to fail. So since the indexes are not perfect, there is no reason to go all-in on margin here (200% long). And there will not be a time to go all-in, until you start seeing this action. Normally, like I keep saying, to burn the point in, you need a long drawn-out correction. That creates the proper environment that launch great bull markets.
The one important thing to remember here, also, is to not chase stocks. If you sold all of your longs, when you panicked after the Feb 27th selloff, you should step back and think about the situation. How often and how many times do you have to hear that it is never smart to panic? Then why do you still do it? I know many traders who did the right thing and sold stocks breaking down, after the Feb sell-off. However, those same traders I know dumped stocks that were still going up or consolidating. Why? Why would you sell a stock if it is going up? Especially if it was going up before the sell-off and DURING THE sell-off. If your stock rose before the sell-off and after the sell-off, yet you sold, you must recognize that you are still trading very scared and NO great investor or trader has ever become a great investor or trader by trading scared. That is a sign of personal weakness. Something I am not familiar with at all.
If you are still sitting in cash, that is great! Stay patient and wait for those HOT charts with HOT fundamentals. Then, if everything is perfect and the market is right, go all-in. You can make everything back and more that you might have lost if you tried to buy stocks now based on the fact that you messed up and sold them when you were not supposed to sell them. There is always a bull market somewhere, and even if there is not, there will be one soon somewhere.
We can even take a personal lesson by me during the recent selloff: ROCM. I sold that stock after a nasty breakdown below key support on 3/5. This breakdown came after what appeared to be, in hindsight, an early February top. Thankfully, I took 20% off there. But after the Feb selling, the stock held up well so I remained long. Then, however, going with the trend of the market, ROCM fell. And fell hard on heavier volume. After 3/5, it clearly looked like ROCM had topped with the market. But that turned out to be the low. Since then the stock has gone straight up and my 9% gain that I took on 3/5 is now a 75% gain. Do I feel stupid? Yes. But did I follow my rules? Yes. So, therefore, I do not feel like I made a severe mistake.
What if ROCM did not break the February lows and would have held the 50 dma? Would I still be long? OF COURSE! YES! If that is the case no profit taking rules would have been hit and I would be sitting pretty in ROCM with a 75% gain on my remaining position. Instead I stand alone. No big deal.
Folks, we are very late in this rally. There is clear economic slowing out there in the subprime, home, jobs, and manufacturing markets. There are more breakdowns on heavy volume with low volume rallies in individual stocks than I have seen since 2002. And everywhere I turn people are asking me about stocks because they have just recently purchased stocks, after selling their real estate holdings or getting out of real estate. They believe every dip should be bought and who is to blame them? CNBC keeps telling them that they should buy this dip as this is just a normal correction. If it is so normal, why are so many charts ugly this time. If it is so normal, why are all the talking heads on CNBC telling everyone to buy. They don’t do that at market bottoms. They only do that at or near market tops. After four years of gains without a 10% correction in the DJIA, I would err on the side of caution and still conclude that there is more risk to the downside here than the upside. If we were down for four straight years, do you think I would be saying the same thing? Of course not. This is history. And history tells us there shouldn’t be much more to go.
We shall see how correct history is. Aloha and I will see you in the chat room. Have a great weekend!!!
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
Top performing holdings - date of signal (entry next morning)
CVO 180% - 8/17/05
TTEC 144% - 8/25
OMTR 134% - 9/15
MA 124% - 8/2
IHS 122% - 12/21/05
CCOI 111% - 9/27
HRZ 108% - 9/27
TNH 102% - 10/26
ACP 96% - 11/13
PRGX 94% - 1/12
CPA 89% - 9/15
BONT 87% - 10/3
CHINA 83% - 8/16
JSDA 88% - 12/20
SOFO 79% - 9/29
LTS 75% - 1/11
HURN 74% - 9/13
AOI 73% - 11/19
EVEP 71% - 11/16
BAM 71% - 11/17/05
IMKTA 73% - 8/28
DA 62% - 1/25/06
CLRT 61% - 11/30
PERY 61% - 10/4
EPHC 60% - 12/20
ULTR 58% - 10/27
IIVI 57% - 8/30
DECK 55% - 9/13
CXW 54% - 5/19
IMMU 52% - 12/19
TRBN 51% - 10/31
APLX 49% - 9/28
CNH 48% - 11/2
LFL 47% - 12/13
XIDE 47% - 1/29
OEH 45% - 11/20
TATTF 45% - 12/13
TOP CURRENT HOLDINGS UP THIS WEEK LISTED AFTER MARKET COMMENTARY BELOW
Preview of current "Daily Market Analysis" Posting:
A Boring Day Of Trading Ends With Stocks Mixed On Lower Volume; Best Week For Stocks In Six Months
By MauiTrader
A boring, erratic, and overall lame session came to end Friday, after a week of surprises on many fronts. The only thing not boring today was the post-1pm EST action in the Nasdaq; up, wedge up, down, wedge down, and up. Still, that only led to a flat close. Today’s headlines were much more subdued than the previous four days, but we still had some important numbers to digest. Existing-home sales were up 3.9% in February to an annualized 6.69 million. That was the fastest growth since April and above economist estimates. This was a welcome report, after all the thrashing we received last month. The other news item making its way around was the 15 British sailors and marines that were captured by Iranian kidnappers. However, as expected, this was not market moving news.
At the close, the SP 600 was the daily winner with a .4% gain, the NYSE followed with a .3% gain, the DJIA gained .2% finishing higher for the fifth straight day, the SP 500 finished .1% higher, and the Nasdaq bucked the trend falling .1%. Leading stocks did not do anything special today, with the IBD 100 gaining only .1%. The lack of ability to keep up with the top performing indexes is a subtle sign of weakness and may indicate that the rally is running out of steam, already, in the short-term. It is still too early to conclude for a fact that is what we have happening here.
Volume was much lower on both the NYSE and the Nasdaq. Volume was running about even with yesterday’s total. But around 1pm EST, traders took off early, starting the weekend early. The lower volume is just what you see after such strong gains on Wednesday. The volume on the NYSE was the lowest total since late February, showing that big funds were not interested in buying or selling stocks here. Breadth was positive on both exchanges, with advancers beating decliners by a 9-to-7 margin on the NYSE and by an 8-to-7 margin on the Nasdaq. New highs continue to trounce new lows, by 301-31. This action shows that despite the big boys being absent, breadth is still strong and there are many stocks still making gains, despite the low volume rally after the Feb 27 selling.
The biggest gains are mainly coming from the old leaders in the Oil & Gas industry. These stocks continue to dominate the new highs list and continue to work there way back to the top of the industry group tables in IBD. Part of this is due to the fact that oil has stopped moving down. Today, oil rallied to over $62 a barrel, closing at $62.28. The gains in crude oil were given credit to the Iranians capturing the 15 British soldiers.
Overall, it was a great week, for the major market indexes. All of them produced significant gains, helping traders quickly forget about the pain from February 27. For the week, the SP 600 led the way with a 4.1% gain, the NYSE followed with a 4% gain, the SP 400 came in with a 3.9% gain, the SP 500 rallied 3.5%, the Nasdaq gained 3.2%, and the DJIA came in with a 3.1% gain. It was a very good week, for investors who wanted the market to recapture the losses. In fact it was the best week for stocks in six months.
I do have to admit that this market is holding up very well, considering the amount of quick damage off the February highs. My new buys are doing very well, since then. Most are going up and there have been very few that have not gone up and have reversed. In fact, I can not think of any complete sells out of any new buys the past month. Every long I have taken is up. The only problem is none of these longs are breaking out of sound long-term bases. And the ones that are breaking out of long bases are not CANSLIM quality stocks. The CANSLIM quality stocks are breaking out of shorter bases and/or are bouncing off key moving average lines indicating that it is only a resumption of an advance and not part of a fresh new bull market.
The volume on the way up is also well below the volume figures on the sell-off last month. This rally still looks like an oversold bounce off a very pessimistic tape. That bounce has simply come too soon. We have not done enough damage on the downside and we have not based long enough to get a real correction that could set us up for a powerful new bull market. Without this long correction, you do not have enough time go by for a change in leadership to develop. The new leadership usually comes out of longer drawn-out corrections. Not from quick collapses followed by a lower volume bounce. You simply can not create enough momentum to the upside without creating nice long green bases. And you can’t create those bases without the market taking a breather for more than a couple of weeks.
Instead this uptrend appears to just be a continuation of the longer bull market that started in October 2002. However, like I have been saying, this pullback is and was much different than the rest, with many charts breaking down on heavy volume. However, not all charts did break down. By not panicking and using sound discipline, I was still long 170 stocks in clear uptrends. The fact that so many stocks remained in uptrends, after the sell-off, was the tip-off that this breakdown was not necessarily going to lead to a crash. By doing that, I am still long many stocks that have now made strong gains while the market recovers. And by having cash ready for the new buys, I was able to move dead money into stocks that have turned out very well. Therefore, my account, is much higher than where it was the day after the sell-off.
So, there are some signs that this rally might work out for a while. However, the rally off the April 2000 lows lasted until August 2000, after a significant sell-off. How did that work out for the perma-bulls? But before I start getting all bullish again I am going to have to see more hot stocks with hot fundamentals break out of round, sound, and green bases. I don’t know how I am going to get these this far into a bull market with VIX this ridiculously low. But that is what I am looking for. However, without a big sell-off that causes a jump in the VIX, it sure is going to be hard to find these beautiful long bases.
So, without this pullback, the gains that we will get will not be the variety that produces many 100%-500% winners in six months. Instead you are going to have to be happy with all the 20%-150% gainers that I find. With the VIX and fear this low, it is impossible to get any real movement in stocks; impossible! This market is best for paying the bills and maybe putting a little bit of money away. This market is not for those of us who are looking to become wealthy and make a killing. Markets like 1999 and 2003 had so much fear in them when they launched there bull markets that making a killing and getting rich was not a problem. Right now, if you are looking to get rich, you have a problem: it is called the stock market.
Since this is not the market to be making a mint in, it must also be said that the most important play right now is to keep cash on hand. Without massive gains in the indexes on huge volume with tons of CANSLIM stocks breaking out, you can be sure that the odds are high for this rally to fail. So since the indexes are not perfect, there is no reason to go all-in on margin here (200% long). And there will not be a time to go all-in, until you start seeing this action. Normally, like I keep saying, to burn the point in, you need a long drawn-out correction. That creates the proper environment that launch great bull markets.
The one important thing to remember here, also, is to not chase stocks. If you sold all of your longs, when you panicked after the Feb 27th selloff, you should step back and think about the situation. How often and how many times do you have to hear that it is never smart to panic? Then why do you still do it? I know many traders who did the right thing and sold stocks breaking down, after the Feb sell-off. However, those same traders I know dumped stocks that were still going up or consolidating. Why? Why would you sell a stock if it is going up? Especially if it was going up before the sell-off and DURING THE sell-off. If your stock rose before the sell-off and after the sell-off, yet you sold, you must recognize that you are still trading very scared and NO great investor or trader has ever become a great investor or trader by trading scared. That is a sign of personal weakness. Something I am not familiar with at all.
If you are still sitting in cash, that is great! Stay patient and wait for those HOT charts with HOT fundamentals. Then, if everything is perfect and the market is right, go all-in. You can make everything back and more that you might have lost if you tried to buy stocks now based on the fact that you messed up and sold them when you were not supposed to sell them. There is always a bull market somewhere, and even if there is not, there will be one soon somewhere.
We can even take a personal lesson by me during the recent selloff: ROCM. I sold that stock after a nasty breakdown below key support on 3/5. This breakdown came after what appeared to be, in hindsight, an early February top. Thankfully, I took 20% off there. But after the Feb selling, the stock held up well so I remained long. Then, however, going with the trend of the market, ROCM fell. And fell hard on heavier volume. After 3/5, it clearly looked like ROCM had topped with the market. But that turned out to be the low. Since then the stock has gone straight up and my 9% gain that I took on 3/5 is now a 75% gain. Do I feel stupid? Yes. But did I follow my rules? Yes. So, therefore, I do not feel like I made a severe mistake.
What if ROCM did not break the February lows and would have held the 50 dma? Would I still be long? OF COURSE! YES! If that is the case no profit taking rules would have been hit and I would be sitting pretty in ROCM with a 75% gain on my remaining position. Instead I stand alone. No big deal.
Folks, we are very late in this rally. There is clear economic slowing out there in the subprime, home, jobs, and manufacturing markets. There are more breakdowns on heavy volume with low volume rallies in individual stocks than I have seen since 2002. And everywhere I turn people are asking me about stocks because they have just recently purchased stocks, after selling their real estate holdings or getting out of real estate. They believe every dip should be bought and who is to blame them? CNBC keeps telling them that they should buy this dip as this is just a normal correction. If it is so normal, why are so many charts ugly this time. If it is so normal, why are all the talking heads on CNBC telling everyone to buy. They don’t do that at market bottoms. They only do that at or near market tops. After four years of gains without a 10% correction in the DJIA, I would err on the side of caution and still conclude that there is more risk to the downside here than the upside. If we were down for four straight years, do you think I would be saying the same thing? Of course not. This is history. And history tells us there shouldn’t be much more to go.
We shall see how correct history is. Aloha and I will see you in the chat room. Have a great weekend!!!
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
Top performing holdings - date of signal (entry next morning)
CVO 180% - 8/17/05
TTEC 144% - 8/25
OMTR 134% - 9/15
MA 124% - 8/2
IHS 122% - 12/21/05
CCOI 111% - 9/27
HRZ 108% - 9/27
TNH 102% - 10/26
ACP 96% - 11/13
PRGX 94% - 1/12
CPA 89% - 9/15
BONT 87% - 10/3
CHINA 83% - 8/16
JSDA 88% - 12/20
SOFO 79% - 9/29
LTS 75% - 1/11
HURN 74% - 9/13
AOI 73% - 11/19
EVEP 71% - 11/16
BAM 71% - 11/17/05
IMKTA 73% - 8/28
DA 62% - 1/25/06
CLRT 61% - 11/30
PERY 61% - 10/4
EPHC 60% - 12/20
ULTR 58% - 10/27
IIVI 57% - 8/30
DECK 55% - 9/13
CXW 54% - 5/19
IMMU 52% - 12/19
TRBN 51% - 10/31
APLX 49% - 9/28
CNH 48% - 11/2
LFL 47% - 12/13
XIDE 47% - 1/29
OEH 45% - 11/20
TATTF 45% - 12/13
Saturday, March 17, 2007
A Choppy Day With A Downside Bias Ends With Stocks Slightly Lower; Quadruple Witching = Quadruple Boring
Market Commentary At Big Wave Trading Bronze Level One.
To view the market commentary from the top on 2/27 top, click here.
Preview of current "Daily Market Analysis" Posting:
It was a weird sluggish session, today, but in the end it was another typical quadruple-witching Friday. However, there was plenty of data for Wall Street to go through, despite this once a month event. The CPI rose a little over .4%, a bit higher than the .3% estimate. But the core prices came in line rising .2% for a year over year change of 2.7%. Industrial production jumped 1% in February, over the readings for a .3% increase and its largest increase since November. Michigan consumer confidence fell (are you surprised there?) to 88.8. Add the fact that oil fell below $58 and might have thought it would have been a more exciting day. Nope. Quadruple-witching ruled the day.
At the close, the SP 400 led to the downside with a .55% loss, the DJIA, SP 500 and SP 600 closed .4% lower, the Nasdaq fell .3%, and the NYSE held up the best only falling .2%. The IBD 100 fell .6%, leading all the indexes lower. There is really nothing to read of that, however, as this was just that kind of day where you really can not draw any conclusions about underlying weakness or strength amongst the indexes.
Volume was higher on the NYSE by about 35% and higher on the Nasdaq by 20%. Breadth was negative on the NYSE, with decliners over advancers by a 5-to-3 margin. On the Nasdaq, losers beat winners by a 3-to-2 margin. New highs beat new lows by a 114 to 96. But the Nasdaq still has more lows to new highs; 64 new lows - 34 new highs.
All of the increase in the volume can be directed completely to the quadruple-witching action. The higher volume, with the price declines over .2% would normally be a clear distribution day. That would send a warning signal up that this rally has a much higher chance of failing. But I find it hard to draw conclusions on days like today so I will continue to watch for further selling on much heavier volume.
Don’t forget, right now, we are now looking for a follow-through day within the next seven days (ten is OK too) of a gain of 1.7% on higher volume. To be honest, I wouldn’t be looking too hard for this to happen. I am pretty sure….like by 100%….that there would be a ton of more stocks setting up in beautiful green sound chart patterns in sectors moving up the list. Guess what? That is not happening.
For the week, the DJIA led to the downside with a 1.4% haircut, the NYSE fell 1.2%, the SP 500 fell 1.1%, and the Nasdaq and SP 600 held up well only losing .6%. The IBD 100 managed to not swoon either, only falling .8%, in what was a wild and confusing week overall for the majority of market players. To me, the week, can be wrapped up in one word: failure. A failure for the market to produce a follow-through and a failure on the markets part to show me that it really wants to resume its four year bull market.
All the talk this week was of the subprime market. And who can blame everyone? The fact that stocks like AHM NDE NEW LEND and many many other stocks with subprime problems got killed is just stunning. But what I find more stunning is the action in LEND. That must of have been a daytraders dream (too bad that is all it normally is for that sub-group) as the stock fell 80% in seven days and then rallied 170% the next three days. Obviously, the intraday players, did not nail all these gains. But the few smart swift traders out there that were able to play these moves correctly made a mint. And when I mean a few, I mean a few. I monitor over 30 chat rooms and I saw the majority of the trades. They were not winning trades. I am still stunned that newbies try to play this stuff without the basic rudimentary knowledge of this stupid game.
The only good part about all of this is the fact that TA worked well, once again, in saving your behind from huge losses. The only way not to lose 99% (like in NEW) is to cut your losses short. Cutting a loss with a 5% to 10% loss is the ONLY insurance you have against stocks like NEW AHM NDE and the bunch. The even more wonderful ability of TA comes in the form of Homebuilding stocks. These stocks topped last year at the beginning of 2006 and ALL rolled over on heavy volume during the summer of 2006. Now we have all this horrible news in the homebuilding market with the DHI CEO going so far as to say his business is going to “suck.” TA, you are the greatest thing EVER for the individual investor in the stock market; thank you (yes that was rhetorical and a bit nutty).
The trend is still in place, after this week. The pattern of higher volume sell-offs and lower volume rallies continued this week and that pattern has created a very negative picture. To look at it this way, just think, the Nasdaq is the only index with a Acc/Dist rating of D+ or better, with a C-. All other indexes are in the D range. Real strong powerful market bottoms do not occur when this grade is a D in so many indexes. It appears more time is still needed before anything exciting is to happen. This market is still ugly.
The ugliness comes in the form of all the red on my charts, the nasty acc/dist patterns in the index and stocks, the few new longs that appear on my scan, the NO new CANSLIM longs on my scans, the increase in shorts in my short scan, the nasty breakdowns in all of the old leaders, and the fact that one of the top two indexes the past three months has been the US Defense index. This is the best chart out there and it has gained 4.81% the past three months. This leadership shows that the market is in clear defensive mode and that this is not the time to be looking to go 200% all-in.
But I must say the possibility that a bottom could occur still exist. I am still long around 170 stocks and even though I am not finding much new that often there are still gems out there like FALC and TESOF that are as pretty as can be. I would think that if this market was about ready to really breakdown and crash that I would not still be long 170 stocks. The number would be under 100. Maybe the number will fall under 100 soon. But for now the fact that I am long 170 stocks means that I am long 170 stocks in clear uptrends that have NOT violated my complete cut loss or complete profit taking rules. So we must be ready for anything. However, I am leaning heavily, very heavily, for lower prices. I expect to be selling off more longs in the near term. But if we rally, I will be ready to make more money.
Especially with the FOMC meeting coming up. I am sure this will be market moving news, as it typically is, but everyone is pretty much for sure that rates will be left the same at 5.25%. The one fact I am sure of is that we will not see the Fed lower rates. The inflation number and worries are still too prevalent in this market for them to be taking such action. The CPI is still growing too fast for the Fed to make that decision. But hopefully, after Wednesday, we can get a better trend going and actually get some real follow-through to the downside or upside. The choppy action is not the best market for me to make money in.
The most important thing to remember, this weekend, when you are getting wasted, is that ALL bear and consolidating markets eventually turn into bull markets. Even in severe bear markets, there will be many rallies of 10-20% on the indexes where you can get some handful of stocks that produce 50%-100% gains. This is because the VIX will be up and every downtrend always overshoots itself.
Patience and hard work = success. Patience and a little bit of hand sitting in this market = success. Trust me, the majority of people will flip and burn their account here. The best and most sound advice right now is to be cash heavy. CASH IS KING!!!
Aloha, enjoy your St. Patrick’s Day, and I will see you in the chat room.
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
Top performing holdings - date of signal (entry next morning)
PTT 405% - 11/16
KNOL 273% - 1/12/06
SVNT 142% - 8/24
TTEC 131% - 8/25
AOB 123% - 9/12
LTS 119% - 1/11
CCOI 117% - 9/27
ICE 115% - 9/21
CPA 110% - 9/15
CHINA 105% - 8/16
HMSY 103% - 6/23
IHS 103% - 12/21/05
CLEC 99% - 9/25
OMTR 96% - 9/15
ACP 92% - 11/13
IGLD 90% - 10/26
GVP 79% - 11/20
BAM 78% - 11/17/05
ULTR 77% - 10/27
IMKTA 76% - 8/28
HRT 76% - 10/23
NEXC 72% - 10/25
ACY 70% - 2/5
JST 70% - 10/13
TNH 69% - 10/26
BMA 68% - 10/24
HURN 68% - 9/13
FTEK 67% - 10/6
BONT 66% - 10/3
AOI 65% - 11/19
DA 64% - 1/25/06
XIDE 60% - 1/29
CXW 59% - 5/19
IIVI 59% - 8/30
MEMY 59% - 12/21
AMAG 49% - 11/7
CCBL 46% - 10/26
GLDN 45% - 11/21
ORBC 47% - 1/4
SNCR 50% - 12/13
BMTI 56% - 10/25
FTGX 52% - 12/4
PSPT 49% - 8/14
PCCC 60% - 10/26
MOS 48% - 10/12
IMMU 51% - 12/19
TYL 49% - 2/1/06
ECGI 50% - 10/20
To view the market commentary from the top on 2/27 top, click here.
Preview of current "Daily Market Analysis" Posting:
It was a weird sluggish session, today, but in the end it was another typical quadruple-witching Friday. However, there was plenty of data for Wall Street to go through, despite this once a month event. The CPI rose a little over .4%, a bit higher than the .3% estimate. But the core prices came in line rising .2% for a year over year change of 2.7%. Industrial production jumped 1% in February, over the readings for a .3% increase and its largest increase since November. Michigan consumer confidence fell (are you surprised there?) to 88.8. Add the fact that oil fell below $58 and might have thought it would have been a more exciting day. Nope. Quadruple-witching ruled the day.
At the close, the SP 400 led to the downside with a .55% loss, the DJIA, SP 500 and SP 600 closed .4% lower, the Nasdaq fell .3%, and the NYSE held up the best only falling .2%. The IBD 100 fell .6%, leading all the indexes lower. There is really nothing to read of that, however, as this was just that kind of day where you really can not draw any conclusions about underlying weakness or strength amongst the indexes.
Volume was higher on the NYSE by about 35% and higher on the Nasdaq by 20%. Breadth was negative on the NYSE, with decliners over advancers by a 5-to-3 margin. On the Nasdaq, losers beat winners by a 3-to-2 margin. New highs beat new lows by a 114 to 96. But the Nasdaq still has more lows to new highs; 64 new lows - 34 new highs.
All of the increase in the volume can be directed completely to the quadruple-witching action. The higher volume, with the price declines over .2% would normally be a clear distribution day. That would send a warning signal up that this rally has a much higher chance of failing. But I find it hard to draw conclusions on days like today so I will continue to watch for further selling on much heavier volume.
Don’t forget, right now, we are now looking for a follow-through day within the next seven days (ten is OK too) of a gain of 1.7% on higher volume. To be honest, I wouldn’t be looking too hard for this to happen. I am pretty sure….like by 100%….that there would be a ton of more stocks setting up in beautiful green sound chart patterns in sectors moving up the list. Guess what? That is not happening.
For the week, the DJIA led to the downside with a 1.4% haircut, the NYSE fell 1.2%, the SP 500 fell 1.1%, and the Nasdaq and SP 600 held up well only losing .6%. The IBD 100 managed to not swoon either, only falling .8%, in what was a wild and confusing week overall for the majority of market players. To me, the week, can be wrapped up in one word: failure. A failure for the market to produce a follow-through and a failure on the markets part to show me that it really wants to resume its four year bull market.
All the talk this week was of the subprime market. And who can blame everyone? The fact that stocks like AHM NDE NEW LEND and many many other stocks with subprime problems got killed is just stunning. But what I find more stunning is the action in LEND. That must of have been a daytraders dream (too bad that is all it normally is for that sub-group) as the stock fell 80% in seven days and then rallied 170% the next three days. Obviously, the intraday players, did not nail all these gains. But the few smart swift traders out there that were able to play these moves correctly made a mint. And when I mean a few, I mean a few. I monitor over 30 chat rooms and I saw the majority of the trades. They were not winning trades. I am still stunned that newbies try to play this stuff without the basic rudimentary knowledge of this stupid game.
The only good part about all of this is the fact that TA worked well, once again, in saving your behind from huge losses. The only way not to lose 99% (like in NEW) is to cut your losses short. Cutting a loss with a 5% to 10% loss is the ONLY insurance you have against stocks like NEW AHM NDE and the bunch. The even more wonderful ability of TA comes in the form of Homebuilding stocks. These stocks topped last year at the beginning of 2006 and ALL rolled over on heavy volume during the summer of 2006. Now we have all this horrible news in the homebuilding market with the DHI CEO going so far as to say his business is going to “suck.” TA, you are the greatest thing EVER for the individual investor in the stock market; thank you (yes that was rhetorical and a bit nutty).
The trend is still in place, after this week. The pattern of higher volume sell-offs and lower volume rallies continued this week and that pattern has created a very negative picture. To look at it this way, just think, the Nasdaq is the only index with a Acc/Dist rating of D+ or better, with a C-. All other indexes are in the D range. Real strong powerful market bottoms do not occur when this grade is a D in so many indexes. It appears more time is still needed before anything exciting is to happen. This market is still ugly.
The ugliness comes in the form of all the red on my charts, the nasty acc/dist patterns in the index and stocks, the few new longs that appear on my scan, the NO new CANSLIM longs on my scans, the increase in shorts in my short scan, the nasty breakdowns in all of the old leaders, and the fact that one of the top two indexes the past three months has been the US Defense index. This is the best chart out there and it has gained 4.81% the past three months. This leadership shows that the market is in clear defensive mode and that this is not the time to be looking to go 200% all-in.
But I must say the possibility that a bottom could occur still exist. I am still long around 170 stocks and even though I am not finding much new that often there are still gems out there like FALC and TESOF that are as pretty as can be. I would think that if this market was about ready to really breakdown and crash that I would not still be long 170 stocks. The number would be under 100. Maybe the number will fall under 100 soon. But for now the fact that I am long 170 stocks means that I am long 170 stocks in clear uptrends that have NOT violated my complete cut loss or complete profit taking rules. So we must be ready for anything. However, I am leaning heavily, very heavily, for lower prices. I expect to be selling off more longs in the near term. But if we rally, I will be ready to make more money.
Especially with the FOMC meeting coming up. I am sure this will be market moving news, as it typically is, but everyone is pretty much for sure that rates will be left the same at 5.25%. The one fact I am sure of is that we will not see the Fed lower rates. The inflation number and worries are still too prevalent in this market for them to be taking such action. The CPI is still growing too fast for the Fed to make that decision. But hopefully, after Wednesday, we can get a better trend going and actually get some real follow-through to the downside or upside. The choppy action is not the best market for me to make money in.
The most important thing to remember, this weekend, when you are getting wasted, is that ALL bear and consolidating markets eventually turn into bull markets. Even in severe bear markets, there will be many rallies of 10-20% on the indexes where you can get some handful of stocks that produce 50%-100% gains. This is because the VIX will be up and every downtrend always overshoots itself.
Patience and hard work = success. Patience and a little bit of hand sitting in this market = success. Trust me, the majority of people will flip and burn their account here. The best and most sound advice right now is to be cash heavy. CASH IS KING!!!
Aloha, enjoy your St. Patrick’s Day, and I will see you in the chat room.
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
Top performing holdings - date of signal (entry next morning)
PTT 405% - 11/16
KNOL 273% - 1/12/06
SVNT 142% - 8/24
TTEC 131% - 8/25
AOB 123% - 9/12
LTS 119% - 1/11
CCOI 117% - 9/27
ICE 115% - 9/21
CPA 110% - 9/15
CHINA 105% - 8/16
HMSY 103% - 6/23
IHS 103% - 12/21/05
CLEC 99% - 9/25
OMTR 96% - 9/15
ACP 92% - 11/13
IGLD 90% - 10/26
GVP 79% - 11/20
BAM 78% - 11/17/05
ULTR 77% - 10/27
IMKTA 76% - 8/28
HRT 76% - 10/23
NEXC 72% - 10/25
ACY 70% - 2/5
JST 70% - 10/13
TNH 69% - 10/26
BMA 68% - 10/24
HURN 68% - 9/13
FTEK 67% - 10/6
BONT 66% - 10/3
AOI 65% - 11/19
DA 64% - 1/25/06
XIDE 60% - 1/29
CXW 59% - 5/19
IIVI 59% - 8/30
MEMY 59% - 12/21
AMAG 49% - 11/7
CCBL 46% - 10/26
GLDN 45% - 11/21
ORBC 47% - 1/4
SNCR 50% - 12/13
BMTI 56% - 10/25
FTGX 52% - 12/4
PSPT 49% - 8/14
PCCC 60% - 10/26
MOS 48% - 10/12
IMMU 51% - 12/19
TYL 49% - 2/1/06
ECGI 50% - 10/20
Saturday, March 10, 2007
Stocks Close Slightly Higher, Ending A Week Of Low Volume Gains; Beautiful Charts Still Do Not Exist
Market Commentary At Big Wave Trading Bronze Level One.
Preview of current "Daily Market Analysis" Posting:
Stocks gapped higher off a mixed jobs report. Total jobs for the month came in at the lowest level in two years but the unemployment data dipped to 4.5% from 4.6% and last months numbers were revised up continuing a recent pattern, possibly giving market players a bit of buying power. The gap higher then led to an immediate selloff, followed by a weak rally, that led to even more lows. However, at the end stocks actually caught a late bid, helping them close off the lows. A pattern that did not exist the rest of the week. The prevailing pattern, before Friday’s close was to rally until the final hour then either selloff or flatline. This is bearish action and combining that with the low volume rally puts and end to a dead-cat bounce week.
**THIS WAS POSTED ON TUESDAY, AFTER THE MARKET STARTED ITS CORRECTION. I AM NOT SURE HOW MANY OF YOU READING THIS KNOW THAT THIS IS A TOP. BUT IT IS. ONCE AGAIN, I HAVE NAILED A SIGNIFICANT TURN IN THE MARKET (FOR THE 8TH YEAR IN A ROW). TO SEE SOME OF MY TOP PERFORMING STOCKS SCROLL FURTHER DOWN**
New Swing Longs: Silver Level Two
Look below to see the kind of returns you can expect with my service. These returns are constant. I have been making money every year, in every market condition, since 1996. Bull or bear? It doesn't matter when you have a sound game plan with history on your side.
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
Top Holdings - Date of signal (purchase the next morning)
PTT 356% - 11/16
CVO 180% - 8/17/05
TRCR 161% - 1/12
TTEC 151% - 8/25
OMTR 121% - 9/15
CCOI 111% - 9/27
ACY 111% - 2/5
MA 108% - 8/2
ACP 95% - 11/13
TNH 90% - 10/26
BONT 83% - 10/3
HMSY 75% - 10/6
CHINA 74% - 8/16
HRZ 73% - 9/27
CPA 72% - 9/15
AOI 72% - 11/19
HURN 71% - 9/13
ULTR 68% - 10/27
IGLD 65% - 10/26
JSDA 60% - 12/20
IMKTA 59% - 8/28
FTEK 56% - 10/6
NEXC 56% - 10/25
PRGX 56% - 1/12
CXW 54% - 5/19
EVEP 53% - 11/06
IIVI 49% - 8/30
BMA 49% - 10/24
KHDH 45% - 5/30
DECK 47% - 9/13
Preview of current "Daily Market Analysis" Posting:
Stocks gapped higher off a mixed jobs report. Total jobs for the month came in at the lowest level in two years but the unemployment data dipped to 4.5% from 4.6% and last months numbers were revised up continuing a recent pattern, possibly giving market players a bit of buying power. The gap higher then led to an immediate selloff, followed by a weak rally, that led to even more lows. However, at the end stocks actually caught a late bid, helping them close off the lows. A pattern that did not exist the rest of the week. The prevailing pattern, before Friday’s close was to rally until the final hour then either selloff or flatline. This is bearish action and combining that with the low volume rally puts and end to a dead-cat bounce week.
At the close, the SP 600 led the way with a .4% gain, the SP 400 followed recapturing its 50 dma with a .35% gain, the NYSE picked up .2%, the SP 500 was higher by .1%, and the Nasdaq diverged to the downside with a very tiny .01% loss. The IBD 100 failed to lead to the upside, with a .3% gain. This index should be outpacing all the indexes by a fair margin on rallies. The fact that it is not is not bullish for this bounce. The top sector on the day was the Computer Software-Security group (VDSI, BCSI, DMRC, SFNT, MFE, DBTK) with a 6.6% gain.
Volume was lower on the NYSE and higher on the Nasdaq (IBD says volume was lower on the Nassy). The lower volume with the gains, on the NYSE, show that institutions have no interest in buying a market that just went through such a severe selloff; at least they don’t yet. The volume on the Nasdaq really doesn’t matter if it was higher or lower. The small price changes basically leave this day as a draw for both bulls and bears.
Breadth was slightly positive on both exchanges. Advancers beat decliners by a 3-to-2 margin on the NYSE and by a 8-to-7 margin on the Nasdaq. However, a small sign of weakness can be found in the breadth of the DJIA. There were 14 advancers to 16 decliners. Maybe I am reading too much into it for a such a weak day but negative breadth with price gains are not normally bullish in the short-term. There were also 114 new highs to 80 new lows. If the market was in better shape, I would expect the difference to have been wider.
Friday was day four of the rally attempt. The best rallies almost all start on the fourth or fifth day and when they rally they make HUGE point gains on big volume. The fact that we did not get a follow-through today doesn’t mean we still can’t get one in the next six to nine days. But the fact that this one did not start early increases the odds of it either being a weaker rally if we get one or that we are setting up for more distribution. Even if we get a follow-through nothing says that it will succeed. All market rallies start with a follow-through day. But not all follow-through days guarantee a bull market. I think no matter what happens, the way the charts look, this rally either will not happen or it will fail.
I say this because I don’t have nice charts out there. I always have nice and pretty charts setting up with good fundamentals and with poor fundamentals, before a real rally takes hold. Without these charts, there is no reason for a rally to appear. Also the Accumulation/Distribution ratings on the index charts are horrible. During the rally this week, the grades fell! You don’t get that at real market bottoms. When the March 2003 rally got underway, the Acc/Dis ratings were a B+ or better on all indexes. Right now, there is a D- out there on the IBD 100 and the SP 500. The NYSE also carries a D and the Nasdaq has a C. This shows that there is still heavy selling by funds. Until the funds start buying stocks, these grades will stay low. So until the market gets some better figures, don’t count on any rally really succeeding and producing big gains. History shows that to be the case; not my personal opinions.
For the week, the DJIA and SP 600 led the way with 1.3% gains, the SP 400 and 500 rose 1.1%, and the Nasdaq gained .8% this week. This seems good after a selloff but remember the Nasdaq lost 5.9% last week. A gain of less than 1% after a 6% loss is not what I would call healthy. The IBD 100 gained 2.5% for the week, well outpacing the other indexes. But just like its Nassy brother, the 2.5% gain pales in comparison to the 9% swoon of last week. It is hard to call this weeks rally anything but an oversold dead-cat bounce. There is simply no other way for me to interpret this action. If this was a real buying opportunity, more charts would appear and volume would be much higher on the indexes. Where are the big boys? They are possibly waiting to sell at higher prices waiting for the dead-cat bounce to end.
It was a crazy week that started with a big selloff and ended with a continuation of a dead-cat bounce. The low volume gains after such a nasty week did nothing to change my opinon on this market. The current market condition I have been writing about since last Tuesday’s selloff is still in place. It doesn’t matter if the subprime mortgage loans or yen carry trade was the reason for the selling. God knows most ignorant journalist seemed to place blame on these two catalyst. What matters is the fact that this market sold off hard last week, rallied on poor volume this week, and didn’t produce squat for charts that signals to me it was a one-time selling event last week. The only real good news I can see is that oil fell back to $60 a barrel. But the stupid commodity has not fallen below that since February so I am not that stoked over that bit of data either.
This market is still not the kind of market I like to operate in. I am still taking longs whenever I can find a pretty green chart that is breaking out of a proper pattern but they are few and far between so that is naturally keeping my cash level high. As I continue to take profits and cut losses on weaker performing stocks, the cash that is raised is getting ready to be put to use in better trade opportunities. If this market rollsover on higher volume, I can start shoring all these ugly chart patterns and show you guys how to make money consistently on the short side. Or if the market rallies and charts start building green pretty bases I can have money ready to deploy into these sweet patterns. Then I can go back to making money like the good old days of normal bull markets. Remember, this last upleg from August was the weakest bull ever with only 180 stocks making 100% gains out of a universe of 8000. The norm at the start of bull markets to the first correction is around 500-1000 or more. That is where I find my handful of 200-500% winners and double fisted 100% winners. Not on rallies like we just saw. Thank God that is over!
This oversold bounce probably still has a while to go as the readings on Helene Meisler’s overbough/oversold indexes are still very oversold. That is sure to lead to continued wild and choppy intraday price action that results in poor performance from individual stocks. Daytrading is safer than holding stocks right now. This is ONLY the case in these kind of wild and choppy markets. Unitl the trend is firmly down or firmly up via a follow-through day, cash is the appropriate place for investments. When a solid trend develops, then that is where I will be. For now I am just counting my chips waiting for a good hand. 7 2 offsuit is not a good hand. And that is all I am getting right now. Fold and wait. That is the name of the game right now: waiting with cash.
Cash is king!!!! Aloha and I will see you in the chat room.
**THIS WAS POSTED ON TUESDAY, AFTER THE MARKET STARTED ITS CORRECTION. I AM NOT SURE HOW MANY OF YOU READING THIS KNOW THAT THIS IS A TOP. BUT IT IS. ONCE AGAIN, I HAVE NAILED A SIGNIFICANT TURN IN THE MARKET (FOR THE 8TH YEAR IN A ROW). TO SEE SOME OF MY TOP PERFORMING STOCKS SCROLL FURTHER DOWN**
China’s Market Crashes Sending Shockwaves Throughout World Financial Markets; 215% Run In Twenty Months Is Not Sustainable
Stocks were crushed, Tuesday, after a meltdown in Asian markets led by the Shanghai index closing lower by 8.8% and a weak durable goods number. The Shanghai index shed almost 9% offering up its worst selloff in over 10 years. This selloff in China, which has been the leading market index the past two years, spilled over to world financial markets and had a devastating effect on ours as well. That combined with durable goods coming in 7.8% lower and missing expectations of 2.2% sent our indexes lower with the worst one day loss in four years.
At the close, the Nasdaq led the way to the downside, with a 3.9% loss, the SP 500 and SP 600 both closed lower by 3.5%, and the DJIA fell 3.3%. The DJIA was down at one point today by 546 points. That was the worst one day loss since 9/17/01. So the DJIA down 416 points is really a blessing, if you compare it to what could have happened after those sell orders hit this market. The worst news came from leading stocks. The IBD 100 fell 5.8%, easily outpacing the broad market. Leading stocks leading this much to the downside is very bearish. This is horrible action and is something to pay attention to, if you refuse to take some stock in. The fact that ALL of the major indexes are ALL trending below their 50 day moving averages should also cause you some real concern. The fact that all are below this line is something you need to pay attention to. The best rallies do not happen with these indexes ALL under their 50 dma. This was the first time the SP 500 has been under the 50 dma since August 15th.
The SOX index also lost 3% today, erasing all of the previous gains it had last week. However, that was not the worst area of the market, as Steel, Metal, Solar, and Chinese stocks got drilled. The Steel-Specialty Alloy group tanked 7.8%, the Steel-Producers lost 7%, the Metal Ores lost 7%, and Energy-Other (Solar) lost 6%. The biggest hit chinese stocks were ACH (down 14%), MR and HMIN (down 13%), CHL (down 10%), and EDU (down 8%). This is where the blood was today.
All of the 197 industry groups in IBD were in the red by the end of the day, only 3 out of 500 SP 500 stocks finished in the green, only 8 out of my 282 longs (now down to 230) were green, and all 30 DJIA stocks were in the red. This was about as ugly of a day as you can get.
Volume was much higher on the NYSE and the Nasdaq. The volume on the NYSE (I can not confirm this) is supposed to be a record for the highest total ever (I got this from IBD). The extremely huge increase in volume along with the horrible losses gave a clear distribution day. In my brain, you might as well call this two distribution days, as it was that bad from my perspective. To go along with the huge distribution in the indexes, breadth was horrible. Breadth was negative on both the NYSE and the Nasdaq by a large margin. Decliners beat advancers by around an 8-to-1 margin on the NYSE and decliners beat advancers by around a 13-to-2 margin on the Nasdaq. This was some of the worst breadth and selling since 1987.
Today is the day I have been waiting for for at least a month and a half now. I have been warning everyone of all the problems with this bull market since early January and it has now come to prove to us that everything we were troubled with was in fact worth being troubled over. A 215% gain in China in 20 months is simply impossible to maintain. This was the most picture perfect bubble since the DJIA ‘28-’29 and the Nasdaq ‘99-’00 markets. After such a parabolic run this was obviously going to happen sometime soon. I had a feeling it would be soon, based on the current Shanghai chart and I was proven correct. All three charts simply looked exactly the same on the 20 month run-up leading to a selloff.
To me, this four year rally, is officially over. All of the gains for 2007 were given back in one day today. All of the climax runs in individual stocks recently, with all the poor quality new long candidates, with the bubble in China, and the low VIX with poor returns on longs in our bull market all signaled that the rally was getting near the peak. And it looks like today we have that peak, for now. Protecting profits is now the new game in town. The game was the same since July/August–try to make as much money as possible on longs that are breaking out from solid chart patterns. The game now is to not buy stocks and instead to protect the profits you already have and accrued during this run. Today’s selloff was so extreme, after such a sedated, boring, low VIX rally that the bull market has to be called off.
Tons of stocks I am holding on to that are still above their key important support lines are not as pretty as they once were. Many stocks that I own that are holding above support are doing so by only a small amount and their chart patterns look a lot more messy than they did before today. There are very few pretty charts with tons of max green BOP left out there after today. The ones that are out there may still have max green BOP but the price declines are starting to overshadow that. Price and volume action is way more important than a chart staying green. I don’t care if the chart is green, if my stock is down 20% (LMRA I am looking at you).
It may be months (at least 2 to 3) before the stock charts get pretty again. But while most people lose money trading this market, we will be in cash or getting ready to go short stocks if the trend continues to the downside. Selling stocks that are breaking down now is a lot more smart than “hoping” and “wishing” for a bounce. A bounce can be expected in a bull market. Panic selling then is very silly. However, panic selling in a bear market off the first big down day normally pays off much more than holding on and “hoping” for a rally. The one thing you should take comfort in, no matter what, is the fact that while there will be some dumb dip-buying in the coming days based on a “gamble” that the market will bounce, we will not be dumb enough to play this game and will instead be on the sidelines enjoying the upcoming extremely wild and choppy trading that is about to take hold.
There are two interesting statistics I saw today that indicate that we may have seen a peak in the selling based on levels of fear. The ARMS index hit a 10 today; those are levels that have not been seen since the 1987 crash. That shows there was some extreme panic driven selling going on today. And trust me I saw it in the chat rooms I monitor. Some people went very long stock the past couple of weeks and were handed a major whooping today. The other number that jumped at me was the IBD put/call number. The put/call ratio jumped to 1.49. I believe that is the highest level I have seen in over a year, at least. Most of the time these numbers are all very bullish. But normally you see these numbers after a major selloff. The put/call was already high coming into today and history shows that high numbers on this index work best AFTER a bear market. These contrarian numbers have a much lower reliability in bull markets. So the high ARMS and put/call numbers could just be noise. The fact is we simply do not know. But these numbers are something to keep in mind, if we see buying come into the market. However, if the market continues to selloff, don’t blame the put/call or the ARMS index; you should be paying attention to price and volume. Not these secondary indicators.
Speaking of secondary indicators, the VIX had a huge 64%!!!! jump to the 18 area. That was about the only positive I could draw on a day like today as a higher VIX will help us make more money the next time the market decides to rally. This whole rally from the June lows in the DJIA produced only 180 stocks up 100% or more. That simply makes this the worst bull market I was ever a part of. Normal bulls, I have said over and over, produce 500-1000 during a run like we saw on the indexes. A VIX around 20 or 30 when the next bull market starts would definitely give us many more 200-500% gains; instead of the 50-100% gains we got during this last bull run.
I saw today that the chances on the fed futures market of a rate decrease the next meeting rose to around 70%. I see that some see this as positive. I hate to burst your bubble people but the last thing you want to see is stocks selling off and the Fed cutting rates. Why? Because that is as clear as anything the fed could say about the economy. By cutting rates, they are telling you that the economy has slowed down and that they need to fix it. They wouldn’t need to cut rates, if the economy was on fire. So don’t take this talk as bullish, like most amateurs do. The fed KNOWS there is real weakness when they cut rates. That is why they cut them.
This market has definitely left a lot of traders confused. Some believe they should buy the dip since every buy-the-dip trade has worked since 2003. However, this dip has a totally different feel to it. I can only hope that you can see the difference, this time. There may be a bounce but off of this much selling, trust me, I would not expect it to last long. If we do recapture all-time highs, that would be extremely bullish, unless it is on lower volume. That would be really ugly divergence. Anyways, once again, even if we do rally my charts are ugly now. Ugly charts simply DO NOT make substantial gains. Pretty charts make BIG GAINS. Ugly charts reverse and go lower.
Raise cash, only hold stocks acting perfectly (like nothing is wrong with the market at all), keep new buys extremely small if you are an experienced investor, and do not go long right now if you are a newbie. If you don’t know if you are a newbie, then you are a newbie. Unless you have clear cut loss or sell signals, do not sell out your stock completely. The fact that your strong stock is showing strength in a bad market says a LOT. The one thing I am extremely sure of is that all traders should get off margin on your long positions.
We shall see what happens tomorrow. I bet on some stability but we will see what we get in China tonight.
Resistance and cash are king!! Aloha and I will see you in the chat room.
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