Stocks started Friday off on a positive note thanks to the PCE deflator coming in at its lowest levels since Q4 2004. However, bomb scares in London (and this weekend in Glasgow) started stocks lower as prices put in another reversal making it 4 of the past 5 and 6 of the past 8 days where stocks have turned gains into losses. The selling really started picking up steam when more subprime worries hit the market but that was too much fear for the market and dip buyers showed up bringing the indexes off their lows into the closing bell.
At the close, the NYSE was the only index higher with a .1% gain, the DJIA was lower by .1%, the Nasdaq and SP 500 lost .2%, the SP 400 was down .3%, and the SP 600 lost .4%. Showing that it pays to be in the right place at the right time, leading stocks in the form of the IBD 100 killed the broad market with a 1.3% gain.
Volume was higher on the Nasdaq and NYSE but the mild price losses and gains doesn’t give us any clues at to how institutions played themselves on Friday with the EOQ repositioning. Friday was the last day of the 2Q and it ended up being the best quarter since Q4 2004. There were 5 advancers for every 4 decliners on the NYSE and there were 9 decliners to ever 7 winners on the Nasdaq. New highs also took care of new lows by 261 to 114. So overall it was a good day, despite the selling.
For the week, the Nasdaq led the way with a .6% gain, the DJIA was next with a .4% gain, the NYSE followed with a .2% gain, the SP 500 rose .1%, and the SP 600 went the other way closing .1% lower. The great news came in the form of leading stocks. The IBD 100 killed the broad market this week with a 1.2% gain. This is very funny because my account took a 2% plus hit this week. This goes to show you that even when the market is doing well, you are going to have bad weeks. I had one of my worst weeks from the market since the week in February when we sold off. It happens.
It appears the bears may be getting a little bit of traction out there with all of the recent intraday positive gains turning into negative closes. However, the fact that those weak reversals do not lead to some all-out horrible distribution can be taken as a slight positive, because if it was really that bad there is no way the market would be holding up this well with leading stocks leading.
RIMM, AAPL, GOOG, and AMZN still show absolutely no signs of topping. That along with those chemical stocks moving higher and higher makes it hard to play top calling here. These things still appear to have plenty of room to run. I mean, seriously, before Friday’s trading everybody was telling me that RIMM was a short. How did that turn out for them? RIMM clearly shows why it is dangerous to be short stocks here. When too many people are short and trying to call tops, you get 20% plus moves in big stocks. The fact that this stock can move 20% in one day should be a wake up call to all the bears. Instead, I doubt it will do anything.
If you want to find an area of the market that is disturbing, you can look at the bank stocks. BSC GS MER MS and C all have real ugly charts and it is normally not good for the market to be moving without them. But as long as the market is moving up, we don’t need these stocks to be involved. Also stocks in the housing and subprime are still week but they have been that way for a long time–AHM. Also there are always a few pockets of strength that disappoint. Recently it has been a ton of my favorite plays and some of my pretty charts like IDSA. It definitely is not April anymore when these stocks fail these beautiful patterns.
But the one thing that should make it clear that we are probably not topping here is that EVRYONE IS LOOKING FOR A TOP. You do NOT get tops in the market when everyone is looking for it. It is when everyone embraces the rally that you have a problem. That certainly is not the case. The put/call ratio even spiked up a bit to .9. So there are still plenty of options players betting on lower prices. They are usually wrong so we shall see how they end up. And the NYSE short-interest ratio is still at a very high 7.25. Even though it is off the all-time highs, there are still plenty of people shorting every move in this market. You do not see this at tops.
In the very short term we have a very touchy market that doesn’t know if it wants to be bullish or bearish. The realmoney.com poll this weekend sums it up: 31% bullish, 34% bearish, 34% neutral. It doesn’t get more even than that. But the 10 day moving average of the ADV/DEC line is making lower highs and lower lows signaling a bit of a bearish tone to the short term. Confirming this is the 30 day moving average of the ADV/DEC line showing that line making a new low while prices stay above new lows. This is negative divergence and indicates weakness in the short term.
So that probably means a little bit of pressure on stocks, since the VIX is also a bit higher than on its previous lows while prices in the indexes are still close to new highs. This is slightly negative divergence. But to then throw another monkey wrench in this is the calendar. We have a typical short holiday week that usually has a bullish bias. With a short week, we could see price gains.
Bottom line: this market is very choppy right now and it is best to stay in an unbiased mode. Don’t be bullish or bearish. Just play your charts. Hold your winners and get rid of your losers. It is a stock picker market. And thank God that is what I am!
Aloha and I will see you in the chat room!!! Have a great rest of the weekend.
top holdings up this week - purchase date
TRCR 393% - 1/12
MA 231% - 8/2
OMTR 206% - 9/15
IHS 134% - 12/21/05
TTEC 125% - 8/25
KHD 124% - 5/30/06
ULTR 120% - 10/27
MEH 114% - 8/30
DECK 113% - 9/13
HURN 89% - 9/13
CXW 87% - 5/19/06
CNH 87% - 11/2
EVEP 86% - 11/16
APLX 84% - 9/28
ZNH 81% - 12/26
VDSI 77% - 1/14
AFSI 74% - 4/12
IGLD 68% - 10/26
NTL 68% - 4/13
NSH 67% - 12/19
LFL 66% - 12/13
IMA 62% - 8/2
VSNT 61% - 2/5
TESO 56% - 2/16
HURC 56% - 12/18
XRA 55% - 5/24
NAVI 53% - 12/19
KMGB 53% - 6/1
ATX 52% - 12/12
NTLS 50% - 1/30
ETE 50% - 10/6
Market Commentary At Big Wave Trading Bronze Level One
New Swing Longs: Silver Level Two
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
Saturday, June 30, 2007
Saturday, June 23, 2007
Stocks End The Week Full Of Red; NYSE And SP 500 Barely Close Below Their 50 Day Moving Averages
A slow but constant selloff hit stocks on a rebalancing day for the Russell indexes, as stocks closed near their session lows, closing lower for the first Friday in sixteen sessions. The losses came despite the debut of private-equity firm Blackstone Group. At the close the DJIA led the way lower with a 1.4% loss, the SP 500 took a 1.3% haircut, the NYSE and Nasdaq lost 1.1%, and the SP 600 held up the best only losing .9%. The blame on the losses were contributed to the subprime problems announced by BSC.
Holding up, along with the small caps, leading stocks in the form of the IBD 100 also lost only .9%. This continues a trend of this index outperforming to the upside and holding up better on the selloffs over the broad market. If this index was leading to the downside on these selloffs, I would be more worried. Instead it looks like normal choppy summer action.
Volume finished over 30% higher on the NYSE and the Nasdaq, due to the Russell rebalance. The key to today’s trading was knowing the facts of the intraday volume action. Volume was trending lower all day long, signaling that institutions were not dumping stocks, until the last hour of the day. That is when volume exploded. But it wasn’t due to selling by big funds. It was due to mutual funds having to reposition their index funds for the stocks that are entering and exiting the Russell index. Therefore, the higher volume with the losses do not signal a distribution day. Investors Business Daily confirms my thinking on this subject.
Breadth was decisively negative with decliners beating advancers on the NYSE by a 3-to-1 ratio and on the Nasdaq by a 2-to-1 ratio. Another nasty number, along with breadth, is that the new lows are trying to expand again, despite the indexes only being 2% or so off of their highs. New 52-week highs only came in with 171, compared to the new 52-week lows registering 144. That is a lot of new lows for a market near new highs. I am not sure how to interpret this.
For the week, the SP 500 and the DJIA led the way lower losing 2%, the NYSE and SP 600 lost 1.7%, and the Nasdaq was lower by 1.4%. Showing investors how leading stocks are supposed to act, even in a poor market, the IBD 100 managed a .1% gain for the week. This is why leading stocks outperform in the long run. The IBD 100 is now up 19% for the year, while most indexes are up around 10%. This goes to prove, ONCE AGAIN, that the big money is made by buying leading stocks, breaking out of sound bases with top fundamentals, in a bull market.
And that brings me to my own portfolio. Most of my longs are all holding key support and are still showing excellent price and volume action. Some stocks, obviously, have been cut this past week with the week market. But that is a good thing. Rough markets give you the chance to weed out the poor performing stocks and move more money into better performing stocks. This is why downtrends are good in a bull market. Constant uptrends make it hard for me to cut stocks that are holding support but not going very far. If I cut them too early, they end up taking off. Then the new stock I buy gives me a quick cut loss. But with markets that have normal pullbacks, I am allowed to separate the weak from the strong.
The only bad part is when one of those weak end up being a large position. Usually it does not happen, but it has happened a couple times recently which indicates to me I need to be more selective and careful with which stocks I pick to load up on. Besides stocks like MTRX and TTG, everything, pretty much, is acting just like it should be acting. Stocks moving higher, holding key support, and moving higher again. As long as top stocks, my stocks, and leading sector stocks keep acting like this it is silly to be calling market tops here. Especially with the NYSE short-interest ratio hitting ANOTHER all-time high at 7.82. Wow! They keep shorting this market despite the near new highs. Brave, I must say. Stupid, I must say.
I hear some people mention that there are too many bulls in the investors intelligence survey at 53% and too few bulls at 19% so we have to be near a top. What these people must not understand is that this survey is HORRIBLE at calling tops. It is ONLY useful at bottoms where normally bulls and bears cross around the 40-45% area. This happens to be good at correlating bottom with price in the indexes. As for tops? Are you kidding me. I guess anything to help there argument.
It doesn’t matter because I can come right back and say, “have you seen the realmoney.com poll this weekend?” So far, bears have 44% of the vote and bulls have only 31%. Last time I checked that doesn’t mean the crowd is bullish. Also have you seen the UBS sentiment index? It is NO WHERE NEAR euphoria levels. That index has a good track of indicating possible tops when the line hits the euphoria zone. It is not even close. The AAII is even close with 43% bullish and 33% bearish.
I hate to tell you this, bears. This is NOT what you see at tops. You do not see pessimism in the media and polls showing 70% of the public thinking we are in a recession, with NYSE short-interest at all-time highs and euphoria levels so absent from this market. Do you know what else is not out there, besides stocks in the Chemical-Fert group? Stocks in CLEAR end stages of climax runs. I can see some stocks in the middle of runs all over the place and I can clearly see that TNH and CF have gone nuts. But calling a top in these is not smart. These stocks still do not look like they are near a top, much less ready to rollover.
The action of GOOG, AAPL, CROX, RIMM, and other leading stocks are still rocking and are not in major climax runs. So it just seems hard for me to want to call a top when the leaders are still leading and some of them are almost closing near their highs on a day like today. If anything, JDSU in 2000 should be the case study for everyone. After that stock topped, it took SIX MONTHS before the big fall. Trust me, calling tops is a game of ignorance and pure idiocy. The right play is going with the trend. Something a TON of people reading this blog probably are NOT doing. You will see a MAJOR difference if you just learn how to do what the best traders of all-time did.
Are there reasons to pullback? Yes. We are getting overbought on all the oscillators I follow: ARMS index, 10-day moving average of the advance/decline line, and the McClellan. But at the same time I see that only 62% of all stocks in the market are above their 200 day moving average. I am not sure if that is bullish and means there is a lot of stocks waiting to join the run or if this index is confirming the overbought market. But I thought I would still give that fact, considering that in February 86% of all stocks were above the 200 dma. That market was overbought. This market might be overbought short-term but the 62% may signal that there is a lot of energy waiting to join the run.
If that is the case, that would be fine with me, only because I see the VIX ticking up a little. It would be nice to back and fill here, if it causes the VIX to rally over 20. That would help me make a lot more money on my longs that decide to follow-through. A 10% drop would even be better as a chance of VIX hitting 25 would definitely give me more volatility to make more money on stocks that are moving. Remember, a higher VIX gives you more potential for gains in stocks. This persistent low VIX does not allow for many stocks to make 200%-1000% runs in six to twelve months. A low VIX like we have now makes 100% winners spectacular. This is why a choppy market or an uptrend with some more 5% pullbacks would be nice. But with all the bearishness I have mentioned, LOL, along with another number I have left out–put/call is at .94–I doubt I am ever going to get my pullback.
Chances are when this market ends, it is going to unleash a horrible bear market. That would be OK also. That would allow me to short all the old leaders like TNH that have made 1000% plus gains since the rally started. Then after making some nice cash on shorts in the bear market, we will eventually get another bull market WITH A MUCH HIGHER VIX that will then give us a real great bull market to work with. The best time to make money is in markets like March 2003-January 2004. Those bull markets, after severe bear markets are what makes some traders careers.
Before I rap this up, I want to go over one more key component of this rally: the Semiconductor Index (SOX). Everyone always says that they don’t think bull markets are real bull markets unless the Semis are moving. The theory goes is that this is where the “hot” and “speculative” money goes for big returns in a bull market; when the semis are moving, the market is moving. Well now we have the Semis hitting new highs and the only question I have to ask is that: does it mean that the market is bullish now?
This scenario, after giving more thought to it, could run a two-way street. At first all I could think about is how bullish this is and now the perma-bears will have to figure out a crafty excuse to pooh-pooh this move in the Semis. Well they gave me a great argument on Friday. I took notice of the Relative Strength line of the Semiconductor index (SOX) and notice a very negative divergence developing. As price has continued to make a stairstep pattern of higher highs and lower lows, the RS line has actually failed to make new highs during any of the important moves in the SOX this year. Since the high in November, the index hit a series of highs in Jan, Feb, April, May, and Thursday. The problem if you look at your chart is that every RS high is lower.
So we can take this in, in two ways. One is that the market will continue to rally here, and now that the lagging SOX has caught up, the market will make a real more exponential move into new high ground. Or the SOX could be the sector that convinces the bears that this market is going to move higher and we suffer a fakeout-breakout. This would turn enough bears bullish to actually put in a possible top. Somehow, I think scenario one is correct, by simply looking at all my charts and the current situation of the market and leading stocks. But scenario two could happen also. We must NEVER rule ANY scenario out. That is smart trading.
On that note, enjoy your weekend and I will see you in the chat room. ALOHA!
top holdings up this week - purchase date
TRCR 432% - 1/12
MA 239% - 8/2
OMTR 162% - 9/15
IHS 136% - 12/21/05
TTEC 125% - 8/25
FTEK 123% - 10/6
MOS 121% - 10/12
MEH 114% - 8/30
CPA 114% - 9/15
MFW 111% - 1/29
HRZ 107% - 9/27
MCZ 106% - 3/27
DECK 101% - 9/13
CXW 93% - 5/19/06
PRGX 91% - 1/12
HURN 90% - 9/13
CNH 89% - 11/2
EVEP 85% - 11/16
ZNH 84% - 12/26
NTL 83% - 4/13
APLX 82% - 9/28
MVIS 80% - 12/21
VDSI 71% - 1/4
AFSI 69% - 4/12
LFL 66% - 12/13
VSNT 63% - 2/5
LTS 61% - 1/11
TESO 59% - 2/16
BMA 52% - 10/24
ETE 50% - 10/6
Market Commentary At Big Wave Trading Bronze Level One
New Swing Longs: Silver Level Two
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
Holding up, along with the small caps, leading stocks in the form of the IBD 100 also lost only .9%. This continues a trend of this index outperforming to the upside and holding up better on the selloffs over the broad market. If this index was leading to the downside on these selloffs, I would be more worried. Instead it looks like normal choppy summer action.
Volume finished over 30% higher on the NYSE and the Nasdaq, due to the Russell rebalance. The key to today’s trading was knowing the facts of the intraday volume action. Volume was trending lower all day long, signaling that institutions were not dumping stocks, until the last hour of the day. That is when volume exploded. But it wasn’t due to selling by big funds. It was due to mutual funds having to reposition their index funds for the stocks that are entering and exiting the Russell index. Therefore, the higher volume with the losses do not signal a distribution day. Investors Business Daily confirms my thinking on this subject.
Breadth was decisively negative with decliners beating advancers on the NYSE by a 3-to-1 ratio and on the Nasdaq by a 2-to-1 ratio. Another nasty number, along with breadth, is that the new lows are trying to expand again, despite the indexes only being 2% or so off of their highs. New 52-week highs only came in with 171, compared to the new 52-week lows registering 144. That is a lot of new lows for a market near new highs. I am not sure how to interpret this.
For the week, the SP 500 and the DJIA led the way lower losing 2%, the NYSE and SP 600 lost 1.7%, and the Nasdaq was lower by 1.4%. Showing investors how leading stocks are supposed to act, even in a poor market, the IBD 100 managed a .1% gain for the week. This is why leading stocks outperform in the long run. The IBD 100 is now up 19% for the year, while most indexes are up around 10%. This goes to prove, ONCE AGAIN, that the big money is made by buying leading stocks, breaking out of sound bases with top fundamentals, in a bull market.
And that brings me to my own portfolio. Most of my longs are all holding key support and are still showing excellent price and volume action. Some stocks, obviously, have been cut this past week with the week market. But that is a good thing. Rough markets give you the chance to weed out the poor performing stocks and move more money into better performing stocks. This is why downtrends are good in a bull market. Constant uptrends make it hard for me to cut stocks that are holding support but not going very far. If I cut them too early, they end up taking off. Then the new stock I buy gives me a quick cut loss. But with markets that have normal pullbacks, I am allowed to separate the weak from the strong.
The only bad part is when one of those weak end up being a large position. Usually it does not happen, but it has happened a couple times recently which indicates to me I need to be more selective and careful with which stocks I pick to load up on. Besides stocks like MTRX and TTG, everything, pretty much, is acting just like it should be acting. Stocks moving higher, holding key support, and moving higher again. As long as top stocks, my stocks, and leading sector stocks keep acting like this it is silly to be calling market tops here. Especially with the NYSE short-interest ratio hitting ANOTHER all-time high at 7.82. Wow! They keep shorting this market despite the near new highs. Brave, I must say. Stupid, I must say.
I hear some people mention that there are too many bulls in the investors intelligence survey at 53% and too few bulls at 19% so we have to be near a top. What these people must not understand is that this survey is HORRIBLE at calling tops. It is ONLY useful at bottoms where normally bulls and bears cross around the 40-45% area. This happens to be good at correlating bottom with price in the indexes. As for tops? Are you kidding me. I guess anything to help there argument.
It doesn’t matter because I can come right back and say, “have you seen the realmoney.com poll this weekend?” So far, bears have 44% of the vote and bulls have only 31%. Last time I checked that doesn’t mean the crowd is bullish. Also have you seen the UBS sentiment index? It is NO WHERE NEAR euphoria levels. That index has a good track of indicating possible tops when the line hits the euphoria zone. It is not even close. The AAII is even close with 43% bullish and 33% bearish.
I hate to tell you this, bears. This is NOT what you see at tops. You do not see pessimism in the media and polls showing 70% of the public thinking we are in a recession, with NYSE short-interest at all-time highs and euphoria levels so absent from this market. Do you know what else is not out there, besides stocks in the Chemical-Fert group? Stocks in CLEAR end stages of climax runs. I can see some stocks in the middle of runs all over the place and I can clearly see that TNH and CF have gone nuts. But calling a top in these is not smart. These stocks still do not look like they are near a top, much less ready to rollover.
The action of GOOG, AAPL, CROX, RIMM, and other leading stocks are still rocking and are not in major climax runs. So it just seems hard for me to want to call a top when the leaders are still leading and some of them are almost closing near their highs on a day like today. If anything, JDSU in 2000 should be the case study for everyone. After that stock topped, it took SIX MONTHS before the big fall. Trust me, calling tops is a game of ignorance and pure idiocy. The right play is going with the trend. Something a TON of people reading this blog probably are NOT doing. You will see a MAJOR difference if you just learn how to do what the best traders of all-time did.
Are there reasons to pullback? Yes. We are getting overbought on all the oscillators I follow: ARMS index, 10-day moving average of the advance/decline line, and the McClellan. But at the same time I see that only 62% of all stocks in the market are above their 200 day moving average. I am not sure if that is bullish and means there is a lot of stocks waiting to join the run or if this index is confirming the overbought market. But I thought I would still give that fact, considering that in February 86% of all stocks were above the 200 dma. That market was overbought. This market might be overbought short-term but the 62% may signal that there is a lot of energy waiting to join the run.
If that is the case, that would be fine with me, only because I see the VIX ticking up a little. It would be nice to back and fill here, if it causes the VIX to rally over 20. That would help me make a lot more money on my longs that decide to follow-through. A 10% drop would even be better as a chance of VIX hitting 25 would definitely give me more volatility to make more money on stocks that are moving. Remember, a higher VIX gives you more potential for gains in stocks. This persistent low VIX does not allow for many stocks to make 200%-1000% runs in six to twelve months. A low VIX like we have now makes 100% winners spectacular. This is why a choppy market or an uptrend with some more 5% pullbacks would be nice. But with all the bearishness I have mentioned, LOL, along with another number I have left out–put/call is at .94–I doubt I am ever going to get my pullback.
Chances are when this market ends, it is going to unleash a horrible bear market. That would be OK also. That would allow me to short all the old leaders like TNH that have made 1000% plus gains since the rally started. Then after making some nice cash on shorts in the bear market, we will eventually get another bull market WITH A MUCH HIGHER VIX that will then give us a real great bull market to work with. The best time to make money is in markets like March 2003-January 2004. Those bull markets, after severe bear markets are what makes some traders careers.
Before I rap this up, I want to go over one more key component of this rally: the Semiconductor Index (SOX). Everyone always says that they don’t think bull markets are real bull markets unless the Semis are moving. The theory goes is that this is where the “hot” and “speculative” money goes for big returns in a bull market; when the semis are moving, the market is moving. Well now we have the Semis hitting new highs and the only question I have to ask is that: does it mean that the market is bullish now?
This scenario, after giving more thought to it, could run a two-way street. At first all I could think about is how bullish this is and now the perma-bears will have to figure out a crafty excuse to pooh-pooh this move in the Semis. Well they gave me a great argument on Friday. I took notice of the Relative Strength line of the Semiconductor index (SOX) and notice a very negative divergence developing. As price has continued to make a stairstep pattern of higher highs and lower lows, the RS line has actually failed to make new highs during any of the important moves in the SOX this year. Since the high in November, the index hit a series of highs in Jan, Feb, April, May, and Thursday. The problem if you look at your chart is that every RS high is lower.
So we can take this in, in two ways. One is that the market will continue to rally here, and now that the lagging SOX has caught up, the market will make a real more exponential move into new high ground. Or the SOX could be the sector that convinces the bears that this market is going to move higher and we suffer a fakeout-breakout. This would turn enough bears bullish to actually put in a possible top. Somehow, I think scenario one is correct, by simply looking at all my charts and the current situation of the market and leading stocks. But scenario two could happen also. We must NEVER rule ANY scenario out. That is smart trading.
On that note, enjoy your weekend and I will see you in the chat room. ALOHA!
top holdings up this week - purchase date
TRCR 432% - 1/12
MA 239% - 8/2
OMTR 162% - 9/15
IHS 136% - 12/21/05
TTEC 125% - 8/25
FTEK 123% - 10/6
MOS 121% - 10/12
MEH 114% - 8/30
CPA 114% - 9/15
MFW 111% - 1/29
HRZ 107% - 9/27
MCZ 106% - 3/27
DECK 101% - 9/13
CXW 93% - 5/19/06
PRGX 91% - 1/12
HURN 90% - 9/13
CNH 89% - 11/2
EVEP 85% - 11/16
ZNH 84% - 12/26
NTL 83% - 4/13
APLX 82% - 9/28
MVIS 80% - 12/21
VDSI 71% - 1/4
AFSI 69% - 4/12
LFL 66% - 12/13
VSNT 63% - 2/5
LTS 61% - 1/11
TESO 59% - 2/16
BMA 52% - 10/24
ETE 50% - 10/6
Market Commentary At Big Wave Trading Bronze Level One
New Swing Longs: Silver Level Two
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
Saturday, June 16, 2007
Tame Core CPI Data Traps The Bears As Stocks Rally On Heavier Volume; The Incompetent Short Sellers Just Don't Get It
Stocks started Friday off just right as stocks gapped higher thanks to a tame core CPI. The CPI moved up .7% in May–the biggest since September 2005–but the core CPI was up only .1%. That was less than the .2% expected by economist. That also lowered the YOY core CPI to 2.2% which was the smallest in 14 months. The CPI data clearly gave investors the hope that the Fed will scrap its bias to raise rates as the recent economic numbers suggest steady economic growth with mild inflation. A sign that rates and economic growth are starting to come in-line can be seen in the yield curve. It has corrected itself and now has a very positive bullish slope to it compared to where it was just three months ago when the curve was inverted.
Other solid news from the economy came from the Labor Department’s production numbers. Industrial production was flat in May, better than the prior two readings of negative growth. Manufacturing production was up .1%, besting the recent levels. And capacity utilization was down showing a lot of capacity which has inflation easing pressure.
These reports were strong enough to get buyers hungry for stocks. And when you combine that with options expiration you had the perfect mix for big stock gains on big volume. When all was said-and-done, stocks climbed across the board, with the SP 600 up 1.2%, the Nasdaq rose 1.1% to six-year highs, the NYSE higher by .9%, the SP 500 was up .7%, and the DJIA rose .6%. This sent all stock indexes near all-time highs and gave the indexes their fifteenth straight positive Friday close. For the third day in-a-row the IBD 100 led the market, with a 1.5% gain. That can only be described as perfect action in a market making strong gains despite all the bearishness.
Volume was higher on both exchanges. On the NYSE volume was 41% higher and 27% higher on the Nasdaq. Despite the higher volume coming on the back of quadruple witching, the fact that volume was so much higher on the NYSE is a clear confirmation of the rally after last weeks and Tuesday’s selling.
As for the internals, they were rather strong, with advancers beating decliners on the NYSE by a 13-to-3 ratio and on the Nasdaq by a 2-to-1 ratio. The really strong reversal to the bullish side was the new highs and new lows. The amount of 52-week highs exploded to 609 and new 52-week lows were only 70, finally sending an end to the mixed message of this statistic.
A rough start to the week was quickly corrected as we came up to the positive retail sales report on Wednesday. For the week, the Nasdaq led the way higher with a 2.1% gain, the NYSE rose 1.9%, the SP 600, the SP 500 gained 1.7%, and the DJIA rose 1.6%. However, when comparing those gains to leading stocks, you can tell that the action was where it is supposed to be in strong markets. The IBD 100 rallied 4% for the week. When you have leading stocks leading a rally, there is NO reason to be looking for a top. I could understand the bearishness before when this index was not keeping up. But being bearish now shows just a complete lack of respect for history.
Leading stocks never really got whacked (unlike the Sopranos finally–what a load of crap) when the market pulled back. The action in those leading stocks was a clear signal that there were not real problems with this market. Granted, it could have gotten a lot worse, but those stocks normally break down well before a stock market is about to top. The fact that those current leading stocks held was proof enough to me that this was not the right time to be calling a top. AAPL and GOOG, besides the current leading stocks, are your tell. As long as these stocks are holding their 50 dma’s, there is NO reason to get bearish just because everyone else is. Crowd mentality is a disease and last time I checked you are supposed to stay away from diseases. Remember: going with the crowd (after you get out of HS) is what morons do. People that can not think for themselves go with the crowd. Those people do NOT make money in the stock market year in and year out. Stay away from this thinking.
The other clear obvious reason that nobody should have gotten full-on-bearish was that all the indexes rested right at their 50 day moving averages. After touching those averages, the indexes have done nothing but rally higher. This is exactly how you want to see strong markets act. They, seriously, don’t get much better than this.
The Nasdaq’s accumulation/distribution rating has risen to a C+ from a D- on Thursday. This is an amazing jump and also should confirm the rallies strength off the 50 dma. And when you take that with the NYSE short interest ratio being near an all-time high at 7.58, you have a clear scenario where you can see the smart money buying stocks (acc/dist rating) and the dumb money (hedge funds/retail) shorting stocks. The shorts are the ones who are wrong here. The price gains prove that. The one group of traders that have been right about this rally since it started–which happens to be where the bulls and bears crossed in the investors intelligence survey–has been the newsletter writers according to the investors intelligence survey. These guys have been bullish and continue to be bullish since they crossed in June. The current reading shows 56.7% are bulls; the five-year high is 62.9%.
What could be better? Volatility. The constant gains since March 2003 without a 10% decline on the DJIA is the reason why my top stocks only have so many up 100%. In normal bull markets, that start after a downtrend, where the VIX rises to above 25, I will be able to produce at least 5 stocks up over 300% and over 20 stocks up over 100% within six months. That clearly has not been the case with this rally as the VIX has not been over 20 since early 2004 and has not seen 30 since March 2003. This is why, in 2003, everything you touched went up 100% within months using the style I have. Right now, as you can see, 50% gains are like the 100% gains and the 100% gains are like the old 200% gains. Until this market sells off there is not going to be a “sh*t-load” of money to be made, unless you are quick with trading the China or solar stocks.
However, if you just stayed with leading stocks and have been long stocks in the Chemical-Fertilizer sector you would be sitting on a HUGE gain. These stocks have been leaders for the past six months and YTD they are up 91% blowing away another other sector when it comes to performance. This goes to show, once again, that leading stocks lead the market by a LONG shot. This compares to 10% gains in the NYSE and SP 600 or the 14% gain in the IBD 100 YTD. However, either way you look at it, investing in leading stocks is where the money is.
Where the money is not is in shorting this market. With that high NYSE short interest ratio and the market near all-time highs a further short-squeeze has to be expected at this point. The perma-bear traders like TraderTim, whom if you study about will find out is a depressed near-sadistic individual, are the perfect fuel this fire needs to keep burning. The hardest thing for most it seems is to actually believe the FACTS that are appearing right in front of your face with the indexes up near these all-time highs. Most people seem to want to believe the rants of delusional egotistical arrogant self-absorbed liars. If that is the game you want to play, be my guest. I will deal with the facts of the current market and continue to play the trend to the upside and make money.
Before I end this, there is one more thing that should be known that most traders don’t seem to understand. This market is a bit oversold with the 10-day moving average of the advance/decline line well under the zero level where this oscillator judges overbought and oversold. With that in mind, the amount of stocks above the 200-dma is only at 68% compared with 86% back in February and 84% back in April. Yet, here we are with the NYSE .5% away from an all time high and the Nasdaq already at a new 52-week high, yet the market has 20% less stocks above the 200-dma. That clearly shows that we have a lot of stocks that can join the rally, that can send the indexes even higher than they are now. Some may say that this is a sign of weakness. To that I only have to say really? Then why is the Nasdaq at a new 52-week high and why are the indexes only less than 1% away from an all-time high?
Facts are facts, folks. We have a stock market hitting new 52-week highs, on near all-time short interest, with a record setting economy, and a lot of bearish headlines on your late night biased-news networks. This can only mean one thing: stocks are going to move higher.
top holdings up this week - purchase date
TRCR 466% - 1/12
PTT 341% - 11/16
MA 218% - 8/2
OMTR 155% - 9/15
CCOI 135% - 9/27
KHDH 131% - 5/30/06
TTEC 131% - 8/25
AOI 127% - 11/9
ULTR 126% - 10/27
IHS 121% - 12/21/05
MFW 116% - 1/29
MOS 116% - 10/12
SVNT 112% - 8/24
MEH 112% - 8/30
CPA 108% - 9/15
HRZ 105% - 9/27
DECK 98% - 9/13
CRY 95% - 1/10
PRGX 92% - 1/12
CXW 92% - 5/19/06
EVEP 90% - 11/16
CNH 88% - 11/2
APLX 80% - 9/28
IGLD 80% - 10/26
HURN 78% - 9/13
VDSI 73% - 1/4
NTL 71% - 4/13
LTS 67% - 1/11
XRA 66% - 5/24
ZNH 65% - 12/26
MCZ 64% - 3/27
LFL 63% - 12/13
VSNT 61% - 2/5
NSH 58% - 12/19
TESO 56% - 2/16
AFSI 55% - 4/12
BMA 52% - 10/24
TSYS 50% - 1/26
TTG 50% - 11/30
Market Commentary At Big Wave Trading Bronze Level One
New Swing Longs: Silver Level Two
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
Other solid news from the economy came from the Labor Department’s production numbers. Industrial production was flat in May, better than the prior two readings of negative growth. Manufacturing production was up .1%, besting the recent levels. And capacity utilization was down showing a lot of capacity which has inflation easing pressure.
These reports were strong enough to get buyers hungry for stocks. And when you combine that with options expiration you had the perfect mix for big stock gains on big volume. When all was said-and-done, stocks climbed across the board, with the SP 600 up 1.2%, the Nasdaq rose 1.1% to six-year highs, the NYSE higher by .9%, the SP 500 was up .7%, and the DJIA rose .6%. This sent all stock indexes near all-time highs and gave the indexes their fifteenth straight positive Friday close. For the third day in-a-row the IBD 100 led the market, with a 1.5% gain. That can only be described as perfect action in a market making strong gains despite all the bearishness.
Volume was higher on both exchanges. On the NYSE volume was 41% higher and 27% higher on the Nasdaq. Despite the higher volume coming on the back of quadruple witching, the fact that volume was so much higher on the NYSE is a clear confirmation of the rally after last weeks and Tuesday’s selling.
As for the internals, they were rather strong, with advancers beating decliners on the NYSE by a 13-to-3 ratio and on the Nasdaq by a 2-to-1 ratio. The really strong reversal to the bullish side was the new highs and new lows. The amount of 52-week highs exploded to 609 and new 52-week lows were only 70, finally sending an end to the mixed message of this statistic.
A rough start to the week was quickly corrected as we came up to the positive retail sales report on Wednesday. For the week, the Nasdaq led the way higher with a 2.1% gain, the NYSE rose 1.9%, the SP 600, the SP 500 gained 1.7%, and the DJIA rose 1.6%. However, when comparing those gains to leading stocks, you can tell that the action was where it is supposed to be in strong markets. The IBD 100 rallied 4% for the week. When you have leading stocks leading a rally, there is NO reason to be looking for a top. I could understand the bearishness before when this index was not keeping up. But being bearish now shows just a complete lack of respect for history.
Leading stocks never really got whacked (unlike the Sopranos finally–what a load of crap) when the market pulled back. The action in those leading stocks was a clear signal that there were not real problems with this market. Granted, it could have gotten a lot worse, but those stocks normally break down well before a stock market is about to top. The fact that those current leading stocks held was proof enough to me that this was not the right time to be calling a top. AAPL and GOOG, besides the current leading stocks, are your tell. As long as these stocks are holding their 50 dma’s, there is NO reason to get bearish just because everyone else is. Crowd mentality is a disease and last time I checked you are supposed to stay away from diseases. Remember: going with the crowd (after you get out of HS) is what morons do. People that can not think for themselves go with the crowd. Those people do NOT make money in the stock market year in and year out. Stay away from this thinking.
The other clear obvious reason that nobody should have gotten full-on-bearish was that all the indexes rested right at their 50 day moving averages. After touching those averages, the indexes have done nothing but rally higher. This is exactly how you want to see strong markets act. They, seriously, don’t get much better than this.
The Nasdaq’s accumulation/distribution rating has risen to a C+ from a D- on Thursday. This is an amazing jump and also should confirm the rallies strength off the 50 dma. And when you take that with the NYSE short interest ratio being near an all-time high at 7.58, you have a clear scenario where you can see the smart money buying stocks (acc/dist rating) and the dumb money (hedge funds/retail) shorting stocks. The shorts are the ones who are wrong here. The price gains prove that. The one group of traders that have been right about this rally since it started–which happens to be where the bulls and bears crossed in the investors intelligence survey–has been the newsletter writers according to the investors intelligence survey. These guys have been bullish and continue to be bullish since they crossed in June. The current reading shows 56.7% are bulls; the five-year high is 62.9%.
What could be better? Volatility. The constant gains since March 2003 without a 10% decline on the DJIA is the reason why my top stocks only have so many up 100%. In normal bull markets, that start after a downtrend, where the VIX rises to above 25, I will be able to produce at least 5 stocks up over 300% and over 20 stocks up over 100% within six months. That clearly has not been the case with this rally as the VIX has not been over 20 since early 2004 and has not seen 30 since March 2003. This is why, in 2003, everything you touched went up 100% within months using the style I have. Right now, as you can see, 50% gains are like the 100% gains and the 100% gains are like the old 200% gains. Until this market sells off there is not going to be a “sh*t-load” of money to be made, unless you are quick with trading the China or solar stocks.
However, if you just stayed with leading stocks and have been long stocks in the Chemical-Fertilizer sector you would be sitting on a HUGE gain. These stocks have been leaders for the past six months and YTD they are up 91% blowing away another other sector when it comes to performance. This goes to show, once again, that leading stocks lead the market by a LONG shot. This compares to 10% gains in the NYSE and SP 600 or the 14% gain in the IBD 100 YTD. However, either way you look at it, investing in leading stocks is where the money is.
Where the money is not is in shorting this market. With that high NYSE short interest ratio and the market near all-time highs a further short-squeeze has to be expected at this point. The perma-bear traders like TraderTim, whom if you study about will find out is a depressed near-sadistic individual, are the perfect fuel this fire needs to keep burning. The hardest thing for most it seems is to actually believe the FACTS that are appearing right in front of your face with the indexes up near these all-time highs. Most people seem to want to believe the rants of delusional egotistical arrogant self-absorbed liars. If that is the game you want to play, be my guest. I will deal with the facts of the current market and continue to play the trend to the upside and make money.
Before I end this, there is one more thing that should be known that most traders don’t seem to understand. This market is a bit oversold with the 10-day moving average of the advance/decline line well under the zero level where this oscillator judges overbought and oversold. With that in mind, the amount of stocks above the 200-dma is only at 68% compared with 86% back in February and 84% back in April. Yet, here we are with the NYSE .5% away from an all time high and the Nasdaq already at a new 52-week high, yet the market has 20% less stocks above the 200-dma. That clearly shows that we have a lot of stocks that can join the rally, that can send the indexes even higher than they are now. Some may say that this is a sign of weakness. To that I only have to say really? Then why is the Nasdaq at a new 52-week high and why are the indexes only less than 1% away from an all-time high?
Facts are facts, folks. We have a stock market hitting new 52-week highs, on near all-time short interest, with a record setting economy, and a lot of bearish headlines on your late night biased-news networks. This can only mean one thing: stocks are going to move higher.
top holdings up this week - purchase date
TRCR 466% - 1/12
PTT 341% - 11/16
MA 218% - 8/2
OMTR 155% - 9/15
CCOI 135% - 9/27
KHDH 131% - 5/30/06
TTEC 131% - 8/25
AOI 127% - 11/9
ULTR 126% - 10/27
IHS 121% - 12/21/05
MFW 116% - 1/29
MOS 116% - 10/12
SVNT 112% - 8/24
MEH 112% - 8/30
CPA 108% - 9/15
HRZ 105% - 9/27
DECK 98% - 9/13
CRY 95% - 1/10
PRGX 92% - 1/12
CXW 92% - 5/19/06
EVEP 90% - 11/16
CNH 88% - 11/2
APLX 80% - 9/28
IGLD 80% - 10/26
HURN 78% - 9/13
VDSI 73% - 1/4
NTL 71% - 4/13
LTS 67% - 1/11
XRA 66% - 5/24
ZNH 65% - 12/26
MCZ 64% - 3/27
LFL 63% - 12/13
VSNT 61% - 2/5
NSH 58% - 12/19
TESO 56% - 2/16
AFSI 55% - 4/12
BMA 52% - 10/24
TSYS 50% - 1/26
TTG 50% - 11/30
Market Commentary At Big Wave Trading Bronze Level One
New Swing Longs: Silver Level Two
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
Saturday, June 09, 2007
Stocks Bounce Back From Thursday's Selloff On Lower Volume; Indexes Still Holding Their 50 Day Moving Average
THIS WAS THE COMMENTARY FROM THURSDAY'S SESSION THAT WAS POSTED BEFORE THE OPENING BELL ON FRIDAY FOR PAID SUBSCRIBERS:
Inflation Worries Send Stocks Lower, Closing At Their LOD, On Heavy Volume; Caution Is Best Advised Here
By MauiTrader
Dip buyers were severely punished today as stocks sold off hard after bonds fell and yields rose. During the trading day, bond yields on the 10 and 30 year note crossed 5% for the first time in eleven months to close at 5.12% and 5.22%. This led Bill Gross to go bearish on bonds for the first time twenty-five years. And if that wasn’t bad enough for inflation angst, crude oil rose to near $67 a barrel on a bad refinery report from the EIA. This was enough to spooks traders, all day long, and convince some traders that Ben might have to hike rates this year. That is a quick turnabout off the hopes of a rate cut later this year.
There was some good news out there, with the jobless claims coming in at its lowest level in three weeks, lower by 1,000 to 309,000. Also retailers reported a strong month of sales for May and April merchandise wholesale sells rose faster than inventories. However, obviously, this did not matter with the fears of higher inflation.
At the close, stocks fell across the board and almost all of the indexes closed at their LOD. The SP 400 led the way lower collapsing 2.1%, the SP 600 followed with a 1.9% whack, the NYSE, Nasdaq, and SP 500 fell 1.8%, and the DJIA fell 1.5%. There were two clear rough spots today: transports and leading stocks. The DJ Transportation Average, which started lagging the DJIA well before today’s fall, swooned 2.4%. The IBD 100 faired even worse, as leading stocks fell off a cliff with a 2.8% loss.
Volume was higher on the Nasdaq and much higher on the NYSE, giving these indexes another distribution day. This was the third one in-a-row for the NYSE. During the past four weeks the SP 500 and DJIA have four distribution days, the NYSE has five, and the Nasdaq has an extremely high seven. It is amazing with that many distribution days that the Nasdaq is actually still above the 50 dma.
The way the indexes look right now, it appears that they are rolling over. However, the breadth of this selling seemed climatic and panicky today. So we could find support here at the 50 dma. There were only four out of 197 industry groups that were up today–and 150 of those fell 1% or more. A similar number was put in yesterday for total breadth amongst the industry groups. Also, breadth today was extremely extreme today on the NYSE with decliners beating advancers by a 10-to-1 margin. That seems almost impossible. Breadth was better on the Nasdaq but still a tad extreme with decliners beating advancers by a 4-to-1 margin. On the DJIA decliners beat advancers by a 30-to-0 ratio. It has been a long time since I have seen every DJIA stock fall on the same day.
Another indication that the selling might have been a bit panicky was the put/call ratio rising to 1.12. If this wasn’t panic selling and people were buying the dips, this ratio would be lower. At the same time, to show you how key this point of the market is, the amount of new 52-week lows is now higher than the 52-week highs. This, to me, is near shocking. We are around 3% to 4% off the all-time highs, yet we had 143 new 52-week lows!!! and only 90 new 52-week highs. This reading here tells me that this market, when it does turn, is going to be rough for a while. That put/call might be good on the short-term but longer-term this kind of internal reading is bearish. I just wish I could remember the last time the market was doing so well but the new lows were higher than the new highs.
I think it is safe to say that this rally is under pressure now, as the rest of the world also looks to be weakening, following the lead of China. Even though the indexes are not below the 50 dma yet it is still time to get cautious with all the distribution days mounting up on top of today’s selloff.
I have been advising to keep new buys small since Friday, after maxing out my personal account after Wednesday’s market. The markets have a history of topping out after I get all of my money completely invested. The bulk of my gains are made in the beginning but near the end after selling weak stocks to strong stocks you eventually max out. And that is normally when the markets slow down. That with the poor quality of the longs since Friday (not the charts, but the fundamentals and liquidity of the stocks) and the distribution days were our tell that something was about to happen.
However, do NOT panic sell. If you have nothing wrong with your stock and your holdings or some of them are acting like everything is OK with the market, you want to hold them. This could be the end of the selling or just the start. If it is the start, you should be sitting on some nice gains that a confirmation of a pullback will not kill you. If it is not the start of a pullback you can hold your longs for more gains. Remember, you NEVER want to be scared out of a position. Sell the weak stocks that are moving lower or not acting right and keep the winners that are either still moving up or are pulling back in a normal low volume fashion. There were only 20 complete sells and out of those only two were high quality stocks. Another 40 stocks got a haircut. I have been very busy today. But it will pay off in the long-run. It always does.
After being up eight of nine weeks, the market was getting overbought and needed this pullback. I hope this isn’t a top because I would hate to sell off some of my bigger beautiful longs but anything can happen tomorrow that could change all those nice charts in one fell swoop and that is why I have to prepare myself mentally for anything and everything. I want higher prices and most of my charts are holding up very well but at the same time the market would be a lot more healthy and more rewarding for me if I could get a pullback, go to cash, and then wait for the next time to go all-in on margin to the long side (hopefully with VIX around 30 or so). Markets that rally AFTER a big pullback will always produce stocks that will move 100%-500% in short periods of time. If we bounce here, trust me, we still will not be having any of that.
Here, also, may be another key tell for a market top: the leaders of this bull as far back as 2003 are still running. GOOG, AAPL, RIMM, CROX, etc… As long as these stocks keep hitting new highs it is hard to think the market could actually top. Also none of these stocks are in climax runs which means they could have a lot of room to keep running. In fact I can’t find any climax looking charts.
There is absolutely one thing you must NOT do. Do NOT buy the dips. Do not buy stocks when the market is falling. You are only supposed to be going long stocks in top sectors in markets that are trending up. I obviously can maneuver a bit differently. But most traders should stay very disciplined and play by the rules until they are making consistent money the right way by buying top stocks moving higher in top sectors in markets moving up. I heard some subscribers and other participants in other rooms talk of buying the dip. I would wait for breakouts, if I were you. Look for charts like TTG CRNT and KHDH. Not charts like IMR.
We have the Commerce Department report on the April trade deficit and we have weakness in most Pacific/Asia markets so that will be on the minds of traders. That and of course the worry of what the market is going to do after yesterday’s selloff. But I don’t need that in my life. I have enough things to worry about. And the stock market will never be one of those things I will ever have to worry about. When you have rules, discipline, and sound strategy that you have tested and used to make a good living off of, you don’t have to.
Aloha and I will see you in the chat room!! It’s Aloha Friday, No Work Till Monday……dee dee de de de…..
top holdings up this week - purchase date
TRCR 430% - 1/12
PTT 303% - 11/16
MA 187% - 8/2
CCOI 144% - 9/27
OMTR 134% -
TTEC 130% - 8/25
ULTR 116% - 10/27
MEH 113% - 8/30
MOS 109% - 10/12
MFW 108% - 1/29
KHDH 107% - 5/30/06
DECK 97% - 9/13
CPA 97% - 9/15
CXW 91% - 5/19/06
IGLD 87% - 10/26
EVEP 86% - 11/16
MVIS 86% - 12/21
APLX 83% - 9/28
VDSI 79% - 1/4
HURN 77% - 9/13
MCZ 74% - 3/27
CLRT 73% - 11/30
CNH 72% - 11/2
TTG 63% - 11/30
TESO 60% - 2/16
LFL 57% - 12/13
NSH 57% - 12/19
AFSI 56% - 4/12
VSNT 54% - 2/5
APFC 52% - 3/5
XOMA 51% - 1/12
HURC 50% - 12/18
Market Commentary At Big Wave Trading Bronze Level One
New Swing Longs: Silver Level Two
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
Inflation Worries Send Stocks Lower, Closing At Their LOD, On Heavy Volume; Caution Is Best Advised Here
By MauiTrader
Dip buyers were severely punished today as stocks sold off hard after bonds fell and yields rose. During the trading day, bond yields on the 10 and 30 year note crossed 5% for the first time in eleven months to close at 5.12% and 5.22%. This led Bill Gross to go bearish on bonds for the first time twenty-five years. And if that wasn’t bad enough for inflation angst, crude oil rose to near $67 a barrel on a bad refinery report from the EIA. This was enough to spooks traders, all day long, and convince some traders that Ben might have to hike rates this year. That is a quick turnabout off the hopes of a rate cut later this year.
There was some good news out there, with the jobless claims coming in at its lowest level in three weeks, lower by 1,000 to 309,000. Also retailers reported a strong month of sales for May and April merchandise wholesale sells rose faster than inventories. However, obviously, this did not matter with the fears of higher inflation.
At the close, stocks fell across the board and almost all of the indexes closed at their LOD. The SP 400 led the way lower collapsing 2.1%, the SP 600 followed with a 1.9% whack, the NYSE, Nasdaq, and SP 500 fell 1.8%, and the DJIA fell 1.5%. There were two clear rough spots today: transports and leading stocks. The DJ Transportation Average, which started lagging the DJIA well before today’s fall, swooned 2.4%. The IBD 100 faired even worse, as leading stocks fell off a cliff with a 2.8% loss.
Volume was higher on the Nasdaq and much higher on the NYSE, giving these indexes another distribution day. This was the third one in-a-row for the NYSE. During the past four weeks the SP 500 and DJIA have four distribution days, the NYSE has five, and the Nasdaq has an extremely high seven. It is amazing with that many distribution days that the Nasdaq is actually still above the 50 dma.
The way the indexes look right now, it appears that they are rolling over. However, the breadth of this selling seemed climatic and panicky today. So we could find support here at the 50 dma. There were only four out of 197 industry groups that were up today–and 150 of those fell 1% or more. A similar number was put in yesterday for total breadth amongst the industry groups. Also, breadth today was extremely extreme today on the NYSE with decliners beating advancers by a 10-to-1 margin. That seems almost impossible. Breadth was better on the Nasdaq but still a tad extreme with decliners beating advancers by a 4-to-1 margin. On the DJIA decliners beat advancers by a 30-to-0 ratio. It has been a long time since I have seen every DJIA stock fall on the same day.
Another indication that the selling might have been a bit panicky was the put/call ratio rising to 1.12. If this wasn’t panic selling and people were buying the dips, this ratio would be lower. At the same time, to show you how key this point of the market is, the amount of new 52-week lows is now higher than the 52-week highs. This, to me, is near shocking. We are around 3% to 4% off the all-time highs, yet we had 143 new 52-week lows!!! and only 90 new 52-week highs. This reading here tells me that this market, when it does turn, is going to be rough for a while. That put/call might be good on the short-term but longer-term this kind of internal reading is bearish. I just wish I could remember the last time the market was doing so well but the new lows were higher than the new highs.
I think it is safe to say that this rally is under pressure now, as the rest of the world also looks to be weakening, following the lead of China. Even though the indexes are not below the 50 dma yet it is still time to get cautious with all the distribution days mounting up on top of today’s selloff.
I have been advising to keep new buys small since Friday, after maxing out my personal account after Wednesday’s market. The markets have a history of topping out after I get all of my money completely invested. The bulk of my gains are made in the beginning but near the end after selling weak stocks to strong stocks you eventually max out. And that is normally when the markets slow down. That with the poor quality of the longs since Friday (not the charts, but the fundamentals and liquidity of the stocks) and the distribution days were our tell that something was about to happen.
However, do NOT panic sell. If you have nothing wrong with your stock and your holdings or some of them are acting like everything is OK with the market, you want to hold them. This could be the end of the selling or just the start. If it is the start, you should be sitting on some nice gains that a confirmation of a pullback will not kill you. If it is not the start of a pullback you can hold your longs for more gains. Remember, you NEVER want to be scared out of a position. Sell the weak stocks that are moving lower or not acting right and keep the winners that are either still moving up or are pulling back in a normal low volume fashion. There were only 20 complete sells and out of those only two were high quality stocks. Another 40 stocks got a haircut. I have been very busy today. But it will pay off in the long-run. It always does.
After being up eight of nine weeks, the market was getting overbought and needed this pullback. I hope this isn’t a top because I would hate to sell off some of my bigger beautiful longs but anything can happen tomorrow that could change all those nice charts in one fell swoop and that is why I have to prepare myself mentally for anything and everything. I want higher prices and most of my charts are holding up very well but at the same time the market would be a lot more healthy and more rewarding for me if I could get a pullback, go to cash, and then wait for the next time to go all-in on margin to the long side (hopefully with VIX around 30 or so). Markets that rally AFTER a big pullback will always produce stocks that will move 100%-500% in short periods of time. If we bounce here, trust me, we still will not be having any of that.
Here, also, may be another key tell for a market top: the leaders of this bull as far back as 2003 are still running. GOOG, AAPL, RIMM, CROX, etc… As long as these stocks keep hitting new highs it is hard to think the market could actually top. Also none of these stocks are in climax runs which means they could have a lot of room to keep running. In fact I can’t find any climax looking charts.
There is absolutely one thing you must NOT do. Do NOT buy the dips. Do not buy stocks when the market is falling. You are only supposed to be going long stocks in top sectors in markets that are trending up. I obviously can maneuver a bit differently. But most traders should stay very disciplined and play by the rules until they are making consistent money the right way by buying top stocks moving higher in top sectors in markets moving up. I heard some subscribers and other participants in other rooms talk of buying the dip. I would wait for breakouts, if I were you. Look for charts like TTG CRNT and KHDH. Not charts like IMR.
We have the Commerce Department report on the April trade deficit and we have weakness in most Pacific/Asia markets so that will be on the minds of traders. That and of course the worry of what the market is going to do after yesterday’s selloff. But I don’t need that in my life. I have enough things to worry about. And the stock market will never be one of those things I will ever have to worry about. When you have rules, discipline, and sound strategy that you have tested and used to make a good living off of, you don’t have to.
Aloha and I will see you in the chat room!! It’s Aloha Friday, No Work Till Monday……dee dee de de de…..
top holdings up this week - purchase date
TRCR 430% - 1/12
PTT 303% - 11/16
MA 187% - 8/2
CCOI 144% - 9/27
OMTR 134% -
TTEC 130% - 8/25
ULTR 116% - 10/27
MEH 113% - 8/30
MOS 109% - 10/12
MFW 108% - 1/29
KHDH 107% - 5/30/06
DECK 97% - 9/13
CPA 97% - 9/15
CXW 91% - 5/19/06
IGLD 87% - 10/26
EVEP 86% - 11/16
MVIS 86% - 12/21
APLX 83% - 9/28
VDSI 79% - 1/4
HURN 77% - 9/13
MCZ 74% - 3/27
CLRT 73% - 11/30
CNH 72% - 11/2
TTG 63% - 11/30
TESO 60% - 2/16
LFL 57% - 12/13
NSH 57% - 12/19
AFSI 56% - 4/12
VSNT 54% - 2/5
APFC 52% - 3/5
XOMA 51% - 1/12
HURC 50% - 12/18
Market Commentary At Big Wave Trading Bronze Level One
New Swing Longs: Silver Level Two
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
Saturday, June 02, 2007
Leading Stocks Lead The Way As A Very Bullish Week Comes To A Close; NYSE Short Interest At Five-Year Highs
A lot of strong economic data helped stocks finish higher, on Friday, but they were off from their early morning highs. However, the closes were still impressive and the DJIA even had a very strong final hour, even with the Shanghai market falling another 2.7% (still up 50% this year). At the close the SP 600 hit an all-time high rallying .8%, the NYSE hit an all time high rallying .6%, the SP 500 hit an all-time closing high rallying .4%, the Nasdaq hit 6 1/2 year highs rallying .4%, and the DJIA rallied .3% hitting another all-time high.
The most important action, came in the form of leading stocks. The IBD 100 gained 1%, marking the fifth session in a row that the IBD 100 has outperformed the broad market. Leading stocks leading the market tells you that this rally is strong and should have some real legs behind it. It has taken a long time for these stocks to establish a dominate role in this market, since the March 2003 - May 2006 period, but now they are taking the lead from the DJIA. Let’s hope this continues.
Volume was 19% lower on the Nasdaq and 11% lower on the NYSE, which kind of puts a damper on the gains. But the figures for the week confirm the markets strength. The SP 600 was the strongest performer with a 2.8% gain, the Nasdaq followed with a 2.2% gain, the NYSE gained 1.7%, the SP 500 rallied 1.4%, and the DJIA gained 1.2%. The IBD 100 blew away the competition, with a 3.9% gain. This is what you want to see. This is something we really have not seen since the bottom last July/August. Welcome back leading stocks!
There were two advancers for every stock that declined on the NYSE and there were three winners for every two losers on the Nasdaq. New highs finally picked up, with an impressive 799 new 52-week highs. This kind of expansion should give the doubters of this rally some reason to turn a bit more bullish. If that doesn’t work, they have the put/call ratio still up there around the .75 area. That is not high but it is not low either. The most important and telling internal is the amount of short sellers out there.
The NYSE short interest ratio is at its highest level in more than five years at 7.74. This shows major pessimism amongst short sellers and this should keep the market bullish. It is not a given but the high short interest ratio with a higher put/call ratio shows that the crowd is still on the wrong side, despite some surveys.
The AAII survey has come out with 45% bears and only 33% bulls, confirming that the retail crowd is shorting the upticks. One of the most dangerous, arrogant, and ego-driven trade you can possibly make in such a strong tape. Most of these traders are trying to “outsmart” the market. A play that has a very low success rate.
Other surveys, however, show the opposite. The Investors Intelligence survey still shows a very high amount of bulls and the realmoney.com most recent weekend poll is showing 57% of the readers bullish. However, by looking at the post on Rev Shark’s blog, it doesn’t seem that many are bullish on this tape. A lot of the realmoney.com readers leave much to the imagination, anyways. I don’t see too much talent around there.
The other clear fact that the actual trading is not bullish for the retail crowd is the fact that equity ETF’s saw outflows this week. You don’t see that at tops. You see extreme inflows into mutual funds and ETF’s. This shows that the crowd is skeptical on the current rise. Being emotional in the market and betting against the trend is an even worse double whammy that is sure to keep you from beating the market in the long run. If I wasn’t on margin I wouldn’t be beating the market this year. That tells me exactly how rough the current uptrend really is. It is not as easy as it looks–unless you are a daytrader, then I assume it is safe to say “it is easy.” Let’s see how long that last.
What does seem to not be lasting is the weak economy. On one of the busiest weeks I can remember this year, economic data came rolling in confirming what I have been saying all year long–this economy is on FIRE!!! Yes, GDP did come in at its lowest level in five years but it appears to be a short-term thing as the numbers this week confirmed that everything appears to be fine with the economy. That is confirmed by the banks finally getting a bid this week.
The strong economic data on Friday came from the payroll figures as jobs grew 157,000 in May above expectations. The core inflation reading came in at only .1% which was below expectations also. Overall a good report. Then the ISM manufacturing index climbed to 55 in May, showing expansion from April. A reading over 50 is bullish. These kind of economic numbers is why this market never goes down. The DJIA and SP 500 are now up 8 out of the last 9 weeks. An unbelievable run, to say the least.
This unbelievable run is allowing for a TON TON TON of breakouts. Everywhere I scan, I can find breakouts. So that confirms in my mind that this bull still has room to run. If we do reverse now, I can tell you it would be very significant because this many stocks breaking out of fresh bases should mean that the market is going to run. A reversal would be a fakeout breakout and would trap many longs. If I could, and if I was a billionaire or even a millionaire (I am still young and live on Maui, don’t forget that), I would be long 500 stocks right now. There are just that many nice charts. They are not all green and pretty but they are still there. Stocks like TLVT are easily passed with all the nice charts out there. However, a gain of 15% in three days shows that every breakout seems to be working here.
This market does require a lot of work to keep up with the gains in the NYSE, compared to other bull markets. This is in direct correlation with the VIX. Remember, a low VIX, means lower volatility and when stocks rise they will not go up as much when the VIX is at 12 than if the VIX was at 32. All the stocks you see up 100% would be up 300%, if this rally came right after a horrible bear market like the March 2003 was. Even though the gains aren’t as much, the duration is a lot longer. This makes it hard work and can really put a drain on you. I know it is me. I really want a pullback, I really need a pullback, and I just want some time to relax. I doubt I am going to get that.
What also confirms that I doubt I am going to get that? Well after eight out of nine weeks of gains, why should I expect anything else. And the 10-year yield is now confirming what I have been saying all year. The 10-year is now at its highest level in nine months, at 4.94%. The odds of a Fed cut this year fell to 16% from 100% a month ago. Remember, in the world of stocks it is the opposite of what you would think would work. A Fed raising rates tells us that the economy is on fire and they need to slow it down. A Fed cutting rates tells us the economy is in trouble and they need to fill it with cash. With the odds increasing of no rate cut, you can rest assure that this economy is doing just fine. This should be bullish for stocks.
To finish this weekends analysis off I want to state that I don’t think the USA is in a bubble AT ALL. China may be in a bubble but if anyone has IBD and can remember the chart comparing the seven year run-up to the DJIA 29 and Nassy 00 top, you can clearly see China could have a long way to run. Especially since the Nasdaq had a P/E over 200. I believe China is around 45-50.
I did see some bubble action in a lot of stocks last month. But they have either fallen and that money moved into other leaders or they are still holding up. Two personal longs that I saw go into OBVIOUS climax runs (TNH and ONT) were both sold and since then the move has looked like the correct one. TNH is still holding but ONT looks done. Either way those charts had climax runs. There aren’t too many out there like that. Heck, I can’t even find stocks to sell. I only had two partial sales and zero complete sells out of 240 longs (70 are major holdings, the rest are for rent money and fun). The day before there were also no complete sales. Stunning. Normally, even in bull markets, there is always one or two that needs to be cut. Not in this market.
Enjoy the rest of your weekend. Go Anaheim!!! Go Cleveland!!! Aloha and I will see you in the chat room.
http://mauitrader.blogspot.com
top holdings up this week - purchase date
KNOL 365% - 1/12/06
TRCR 350% - 1/12
PTT 240% - 11/16
MA 202% - 8/2
CCOI 152% - 9/27
TTEC 146% - 8/25
ULTR 122% - 10/27
HRZ 115% - 9/27
MFW 115% - 1/29
MEH 113% - 8/30
KHDH 108% - 5/30/06
IHS 106% - 12/21/05
CPA 104% - 9/15
MOS 104% - 10/12
CRY 103% - 1/10
NEXC 101% - 10/25
PRGX 96% - 1/12
CXW 92% - 5/19/06
IGLD 91% - 10/26
DECK 86% - 9/13
EVEP 83% - 11/16
JSDA 80% - 12/20
CNH 79% - 11/2
VDSI 78% - 1/4
APLX 77% - 9/28
HURN 77% - 9/13
MVIS 76% - 12/21
MCZ 74% - 3/27
IMMU 73% - 12/19
FTEK 67% - 10/6
TTG 64% - 11/30
NSH 61% - 12/19
LFL 61% - 12/13
BMA 56% - 10/24
TESO 54% - 2/16
NTL 50% - 4/13
SCI 50% - 10/10
Market Commentary At Big Wave Trading Bronze Level One
New Swing Longs: Silver Level Two
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
The most important action, came in the form of leading stocks. The IBD 100 gained 1%, marking the fifth session in a row that the IBD 100 has outperformed the broad market. Leading stocks leading the market tells you that this rally is strong and should have some real legs behind it. It has taken a long time for these stocks to establish a dominate role in this market, since the March 2003 - May 2006 period, but now they are taking the lead from the DJIA. Let’s hope this continues.
Volume was 19% lower on the Nasdaq and 11% lower on the NYSE, which kind of puts a damper on the gains. But the figures for the week confirm the markets strength. The SP 600 was the strongest performer with a 2.8% gain, the Nasdaq followed with a 2.2% gain, the NYSE gained 1.7%, the SP 500 rallied 1.4%, and the DJIA gained 1.2%. The IBD 100 blew away the competition, with a 3.9% gain. This is what you want to see. This is something we really have not seen since the bottom last July/August. Welcome back leading stocks!
There were two advancers for every stock that declined on the NYSE and there were three winners for every two losers on the Nasdaq. New highs finally picked up, with an impressive 799 new 52-week highs. This kind of expansion should give the doubters of this rally some reason to turn a bit more bullish. If that doesn’t work, they have the put/call ratio still up there around the .75 area. That is not high but it is not low either. The most important and telling internal is the amount of short sellers out there.
The NYSE short interest ratio is at its highest level in more than five years at 7.74. This shows major pessimism amongst short sellers and this should keep the market bullish. It is not a given but the high short interest ratio with a higher put/call ratio shows that the crowd is still on the wrong side, despite some surveys.
The AAII survey has come out with 45% bears and only 33% bulls, confirming that the retail crowd is shorting the upticks. One of the most dangerous, arrogant, and ego-driven trade you can possibly make in such a strong tape. Most of these traders are trying to “outsmart” the market. A play that has a very low success rate.
Other surveys, however, show the opposite. The Investors Intelligence survey still shows a very high amount of bulls and the realmoney.com most recent weekend poll is showing 57% of the readers bullish. However, by looking at the post on Rev Shark’s blog, it doesn’t seem that many are bullish on this tape. A lot of the realmoney.com readers leave much to the imagination, anyways. I don’t see too much talent around there.
The other clear fact that the actual trading is not bullish for the retail crowd is the fact that equity ETF’s saw outflows this week. You don’t see that at tops. You see extreme inflows into mutual funds and ETF’s. This shows that the crowd is skeptical on the current rise. Being emotional in the market and betting against the trend is an even worse double whammy that is sure to keep you from beating the market in the long run. If I wasn’t on margin I wouldn’t be beating the market this year. That tells me exactly how rough the current uptrend really is. It is not as easy as it looks–unless you are a daytrader, then I assume it is safe to say “it is easy.” Let’s see how long that last.
What does seem to not be lasting is the weak economy. On one of the busiest weeks I can remember this year, economic data came rolling in confirming what I have been saying all year long–this economy is on FIRE!!! Yes, GDP did come in at its lowest level in five years but it appears to be a short-term thing as the numbers this week confirmed that everything appears to be fine with the economy. That is confirmed by the banks finally getting a bid this week.
The strong economic data on Friday came from the payroll figures as jobs grew 157,000 in May above expectations. The core inflation reading came in at only .1% which was below expectations also. Overall a good report. Then the ISM manufacturing index climbed to 55 in May, showing expansion from April. A reading over 50 is bullish. These kind of economic numbers is why this market never goes down. The DJIA and SP 500 are now up 8 out of the last 9 weeks. An unbelievable run, to say the least.
This unbelievable run is allowing for a TON TON TON of breakouts. Everywhere I scan, I can find breakouts. So that confirms in my mind that this bull still has room to run. If we do reverse now, I can tell you it would be very significant because this many stocks breaking out of fresh bases should mean that the market is going to run. A reversal would be a fakeout breakout and would trap many longs. If I could, and if I was a billionaire or even a millionaire (I am still young and live on Maui, don’t forget that), I would be long 500 stocks right now. There are just that many nice charts. They are not all green and pretty but they are still there. Stocks like TLVT are easily passed with all the nice charts out there. However, a gain of 15% in three days shows that every breakout seems to be working here.
This market does require a lot of work to keep up with the gains in the NYSE, compared to other bull markets. This is in direct correlation with the VIX. Remember, a low VIX, means lower volatility and when stocks rise they will not go up as much when the VIX is at 12 than if the VIX was at 32. All the stocks you see up 100% would be up 300%, if this rally came right after a horrible bear market like the March 2003 was. Even though the gains aren’t as much, the duration is a lot longer. This makes it hard work and can really put a drain on you. I know it is me. I really want a pullback, I really need a pullback, and I just want some time to relax. I doubt I am going to get that.
What also confirms that I doubt I am going to get that? Well after eight out of nine weeks of gains, why should I expect anything else. And the 10-year yield is now confirming what I have been saying all year. The 10-year is now at its highest level in nine months, at 4.94%. The odds of a Fed cut this year fell to 16% from 100% a month ago. Remember, in the world of stocks it is the opposite of what you would think would work. A Fed raising rates tells us that the economy is on fire and they need to slow it down. A Fed cutting rates tells us the economy is in trouble and they need to fill it with cash. With the odds increasing of no rate cut, you can rest assure that this economy is doing just fine. This should be bullish for stocks.
To finish this weekends analysis off I want to state that I don’t think the USA is in a bubble AT ALL. China may be in a bubble but if anyone has IBD and can remember the chart comparing the seven year run-up to the DJIA 29 and Nassy 00 top, you can clearly see China could have a long way to run. Especially since the Nasdaq had a P/E over 200. I believe China is around 45-50.
I did see some bubble action in a lot of stocks last month. But they have either fallen and that money moved into other leaders or they are still holding up. Two personal longs that I saw go into OBVIOUS climax runs (TNH and ONT) were both sold and since then the move has looked like the correct one. TNH is still holding but ONT looks done. Either way those charts had climax runs. There aren’t too many out there like that. Heck, I can’t even find stocks to sell. I only had two partial sales and zero complete sells out of 240 longs (70 are major holdings, the rest are for rent money and fun). The day before there were also no complete sales. Stunning. Normally, even in bull markets, there is always one or two that needs to be cut. Not in this market.
Enjoy the rest of your weekend. Go Anaheim!!! Go Cleveland!!! Aloha and I will see you in the chat room.
http://mauitrader.blogspot.com
top holdings up this week - purchase date
KNOL 365% - 1/12/06
TRCR 350% - 1/12
PTT 240% - 11/16
MA 202% - 8/2
CCOI 152% - 9/27
TTEC 146% - 8/25
ULTR 122% - 10/27
HRZ 115% - 9/27
MFW 115% - 1/29
MEH 113% - 8/30
KHDH 108% - 5/30/06
IHS 106% - 12/21/05
CPA 104% - 9/15
MOS 104% - 10/12
CRY 103% - 1/10
NEXC 101% - 10/25
PRGX 96% - 1/12
CXW 92% - 5/19/06
IGLD 91% - 10/26
DECK 86% - 9/13
EVEP 83% - 11/16
JSDA 80% - 12/20
CNH 79% - 11/2
VDSI 78% - 1/4
APLX 77% - 9/28
HURN 77% - 9/13
MVIS 76% - 12/21
MCZ 74% - 3/27
IMMU 73% - 12/19
FTEK 67% - 10/6
TTG 64% - 11/30
NSH 61% - 12/19
LFL 61% - 12/13
BMA 56% - 10/24
TESO 54% - 2/16
NTL 50% - 4/13
SCI 50% - 10/10
Market Commentary At Big Wave Trading Bronze Level One
New Swing Longs: Silver Level Two
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
Sunday, May 27, 2007
Happy Memorial Day!!! Thank You and GOD Bless Our Troops Alive And Fallen!!!
Stocks ended the week on a light-volume positive note, after a pretty wild and semi-rough week that saw the Nasdaq come under two more days of distribution. However, the constant takeovers, M&A's, and LBO, continues to keep a floor on this market and give short sellers the pain they deserve when they short a rising market (a play only amateurs and ego-driven traders make).
Despite the NAR existing-home sales reporting a drop of 2.6% in April to a four-year low, below estimates, stocks still managed a pre-holiday really. At the close, the Nasdaq, Nasdaq 100, and SP 600 led the way with .8% gains, the NYSE followed with a .7% rise, the SP 500 finished with a .6% gain, and the DJIA ended the day with a .5% gain. Leading stocks, via the IBD 85-85, did even better, gaining 1.5%. For the week, the SP 600 finished .7% higher, as the only index that made gains on the week. The rest of the indexes finished lower, with the Nassy 100 losing .8%, the SP 600 losing .7%, the SP 500 losing .5%, the DJIA losing .4%, the NYSE lost .2%, and the Nasdaq finished lower by .05%. So it wasn't a great week, but by the losses it wasn't a horrible week either. It just was what it was, which looks like a little bit of consolidation of all those recent gains. There really is nothing to takeaway from this week's action.
The only one real obvious week spot Friday and for the week was in the Utilities sector. The top stocks that I was long in that sector (NU EE ETR AYE ITC) took some big hits, causing me to sell some down or out completely, and the DJUA fell 3.9%. The cause of this was due to the rising rates in the bond market. Many of these stocks look toppy, like PNW. The rising rates also put a kibosh on the possibility of a Fed Fund rate cut as the odds fell to less than 50% that rates would be cut this year.
Volume was lower by about 33%, on both the NYSE and the Nasdaq, advancers beat decliners by a 9 to 5 margin on the Nasdaq and by a 12 to 5 margin on the NYSE, new highs came in with only 134 new 52-week highs. This is yet another disturbing trend of new highs coming much lower despite the indexes being near another all-time high. This divergence has been happening since November. However, the put/call ratio is still very high at .93. The high put/call shows people are still shorting stocks and buying puts on the rally. The most interesting internal data I saw on Friday was that the NYSE short interest is at a near five-year high of 7.46%. That along with the put/call ratio indicates a lot of people are making bets this market goes lower. The crowd is normally always wrong.
The lack of losses by the major market indexes can be thanked to all the activity in the buyout markets. The leveraged buyout of AL by AA has been rejected, Kerkorian made a bid for MGM assets, BOL and TOPP received buyout offers, NDAQ buys Nordic exchange OMX, ASN announces it is in buyout talks, and KO bought Glaceau's Energy Brands for its vitamin water. This kind of action is indicative of a market that is in a very bullish stage still. Markets do not bottom with this type of action, but they do top on this action. However, we will have to see a lot more outrageous deals like the one we saw with MSFT buying AQNT for an unbelievable price over the actual revenue.
There have been some distribution days that have made this rally a bit nervous recently but a lot of leading stocks continue to hold well or make good price gains with these indexes near their recent highs. With the indexes still over the 50 dma, it is just too early to jump the gun and call a market top. It didn't serve me well on Feb. 27th and it hasn't done anyone any good since then. It is very hard to me to be a "hater" on this market, even with seven year resistance lining up on the SP 500. That seven year resistance, even though a lot of commentators are talking about it, just is not important for me at all. If there are bagholders in the SPY from 2000, trust me, they are not going to sell and breakeven when the SPY finally hits that mark. This is simply a number I have NO interest in. However, CNBC will, so you can enjoy that if you waste your time on that non-sense.
The only thing I wish I could see change is the financials. It would be nice if the banking indexes were rallying along with the market indexes. Actually, what I have noticed also is that the DJTA is also not making a new high with the index. So now the index is rallying without the DJTA DJUA and the BKX hitting new highs. Just something to be aware of. Until the market's trend changes, it is still just semantics.
It is clearly obvious to me that the wall-of-worry is still alive and well, despite what the II, AAII, and realmoney.com polls suggest. The Investors Intelligence survey came in with bulls rising to 54.3% which is a 2007 high and bears falling to 20.7% a 2007 low. The AAII bulls have increased to 37% and the bears have fallen to 38.5%. The realmoney.com poll shows 47% are bullish and 25% are bearish. However, their money is NOT where their mouth is.
The put/call, as I mentioned, is at .93, NYSE short interest is near 5-yr highs, mutual fund inflows keep slowing to a trickle, and margin debt (normally used for bearish bets) is at an all-time high at $319 billion. That is a YOY gain of 67%. So obviously the bets are being made against the bulls, despite the crowd insisting they are bullish. Very odd indeed, if that is what you were thinking. So basically what I am seeing is that people would rather be long than short but are still shorting the market. Seems to me only the smart money is buying stocks here. The dumb money is selling/shorting.
Another possible scenario for the shorting is that a lot of market particants are making a big deal over gas prices and how it is going to wreck the economy. I have been hearing this damn argument for years now. I am still waiting for it to come to fruition. It is true that gas prices are getting a bit crazy but our net wealth is higher than ever and if our SPOILED BRAT American consumer ways are any indication--we can afford it. So no matter how much they say the gas prices are going to hurt the economy, the fact of the matter is this just creates another wall-of-worry for the markets to climb as traders short the market waiting for this magical correction caused by the consumers pockets drying up. Until it actually dries up, why short the market and lose money?
This uptrend is still not to be messed with. Next week will show us if the distribution days in the Nasdaq are anything that is going to turn into some real selling. If the action in leading stocks is any indication, we are not going to get too much selling off of those distro days. The indexes and leading stocks continue to hold that key 50 day moving average and have good to great accumulation/distribution ratings. Right now the right play seems to be to buy the dips. That is not a method I endorse, unless the dip is on low volume and followed by a heavy volume bounce around a key moving average or support.
The market is getting a little bit oversold according to the 10-week moving average of the advance/decline line oscillator and the index put/call 21-day moving avg. is getting near the 2.00 level where the markets like to try to top out. But there is still room left with it at 1.80. So that along with the former oscillator mentioned tells us that there is more room to rally before we become overbought or have the extreme index put buying that signals a real top. A high put/call is bullish until it stays high for too long and gets to extreme levels. When that happens it actually confirms the market, if a selloff happens.
As it stands, right now, however, there is no selloff, so the only right thing to do now is to follow that trend, until that trend changes. Next week we have non-farm payroll numbers, the second reading of Q1 GDP, consumer confidence numbers, and the FOMC minutes. Along with the economic numbers, we have earnings from DELL COST HNZ HOV SHLD DBRN RL PSS JAS JCG that should create some minor excitement as earnings season comes to a close.
Enjoy your Memorial Day!!! Never forget the sacrifices that our troops make to allow you to read this blog. This blog and all the money making ideas would not be possible without the brave men and women who sacrifice their lives defending this country and making this world a better place to live in for EVERYONE. Not just Americans. EVERYONE deserves freedom. If you lived under a dictatorship, only then could you appreciate how well off we have it. I have a feeling there are many that read this blog that take YOUR freedom for granted. If that is the case, you should really take a minute and think about how the world would be if the USA did not exist. Do you really think you would be trading stocks? Do you really think you would be free?
Aloha and I will see you in the chat room!!!!
top holdings up this week - purchase date
TRCR 306% - 1/12
MA 181% - 8/2
TTEC 140% - 8/25
OMTR 137% - 9/15
SVNT 131% - 8/24
MEH 119% - 8/30
CPA 118% - 9/15
KHDH 108% - 5/30
JSDA 106% - 12/20
HRZ 104% - 9/27
MFW 104% - 1/29
ULTR 101% - 10/27
CRY 94% - 1/10
EVEP 90% - 11/16
CXW 87% - 5/19
IGLD 79% - 10/26
DECK 76% - 9/13
MCZ 74% - 3/27
HURN 70% - 9/13
CNH 65% - 11/2
BMA 64% - 10/24
APLX 62% - 9/28
VDSI 61% - 1/4
ZNH 59% - 12/26
NXST 59% - 3/28
LFL 57% - 12/13
TESO 56% - 2/16
VCLK 55% - 11/14
APFC 55% - 3/5
TTG 52% - 11/30
NSH 52% - 12/19
Market Commentary At Big Wave Trading Bronze Level One
New Swing Longs: Silver Level Two
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
Despite the NAR existing-home sales reporting a drop of 2.6% in April to a four-year low, below estimates, stocks still managed a pre-holiday really. At the close, the Nasdaq, Nasdaq 100, and SP 600 led the way with .8% gains, the NYSE followed with a .7% rise, the SP 500 finished with a .6% gain, and the DJIA ended the day with a .5% gain. Leading stocks, via the IBD 85-85, did even better, gaining 1.5%. For the week, the SP 600 finished .7% higher, as the only index that made gains on the week. The rest of the indexes finished lower, with the Nassy 100 losing .8%, the SP 600 losing .7%, the SP 500 losing .5%, the DJIA losing .4%, the NYSE lost .2%, and the Nasdaq finished lower by .05%. So it wasn't a great week, but by the losses it wasn't a horrible week either. It just was what it was, which looks like a little bit of consolidation of all those recent gains. There really is nothing to takeaway from this week's action.
The only one real obvious week spot Friday and for the week was in the Utilities sector. The top stocks that I was long in that sector (NU EE ETR AYE ITC) took some big hits, causing me to sell some down or out completely, and the DJUA fell 3.9%. The cause of this was due to the rising rates in the bond market. Many of these stocks look toppy, like PNW. The rising rates also put a kibosh on the possibility of a Fed Fund rate cut as the odds fell to less than 50% that rates would be cut this year.
Volume was lower by about 33%, on both the NYSE and the Nasdaq, advancers beat decliners by a 9 to 5 margin on the Nasdaq and by a 12 to 5 margin on the NYSE, new highs came in with only 134 new 52-week highs. This is yet another disturbing trend of new highs coming much lower despite the indexes being near another all-time high. This divergence has been happening since November. However, the put/call ratio is still very high at .93. The high put/call shows people are still shorting stocks and buying puts on the rally. The most interesting internal data I saw on Friday was that the NYSE short interest is at a near five-year high of 7.46%. That along with the put/call ratio indicates a lot of people are making bets this market goes lower. The crowd is normally always wrong.
The lack of losses by the major market indexes can be thanked to all the activity in the buyout markets. The leveraged buyout of AL by AA has been rejected, Kerkorian made a bid for MGM assets, BOL and TOPP received buyout offers, NDAQ buys Nordic exchange OMX, ASN announces it is in buyout talks, and KO bought Glaceau's Energy Brands for its vitamin water. This kind of action is indicative of a market that is in a very bullish stage still. Markets do not bottom with this type of action, but they do top on this action. However, we will have to see a lot more outrageous deals like the one we saw with MSFT buying AQNT for an unbelievable price over the actual revenue.
There have been some distribution days that have made this rally a bit nervous recently but a lot of leading stocks continue to hold well or make good price gains with these indexes near their recent highs. With the indexes still over the 50 dma, it is just too early to jump the gun and call a market top. It didn't serve me well on Feb. 27th and it hasn't done anyone any good since then. It is very hard to me to be a "hater" on this market, even with seven year resistance lining up on the SP 500. That seven year resistance, even though a lot of commentators are talking about it, just is not important for me at all. If there are bagholders in the SPY from 2000, trust me, they are not going to sell and breakeven when the SPY finally hits that mark. This is simply a number I have NO interest in. However, CNBC will, so you can enjoy that if you waste your time on that non-sense.
The only thing I wish I could see change is the financials. It would be nice if the banking indexes were rallying along with the market indexes. Actually, what I have noticed also is that the DJTA is also not making a new high with the index. So now the index is rallying without the DJTA DJUA and the BKX hitting new highs. Just something to be aware of. Until the market's trend changes, it is still just semantics.
It is clearly obvious to me that the wall-of-worry is still alive and well, despite what the II, AAII, and realmoney.com polls suggest. The Investors Intelligence survey came in with bulls rising to 54.3% which is a 2007 high and bears falling to 20.7% a 2007 low. The AAII bulls have increased to 37% and the bears have fallen to 38.5%. The realmoney.com poll shows 47% are bullish and 25% are bearish. However, their money is NOT where their mouth is.
The put/call, as I mentioned, is at .93, NYSE short interest is near 5-yr highs, mutual fund inflows keep slowing to a trickle, and margin debt (normally used for bearish bets) is at an all-time high at $319 billion. That is a YOY gain of 67%. So obviously the bets are being made against the bulls, despite the crowd insisting they are bullish. Very odd indeed, if that is what you were thinking. So basically what I am seeing is that people would rather be long than short but are still shorting the market. Seems to me only the smart money is buying stocks here. The dumb money is selling/shorting.
Another possible scenario for the shorting is that a lot of market particants are making a big deal over gas prices and how it is going to wreck the economy. I have been hearing this damn argument for years now. I am still waiting for it to come to fruition. It is true that gas prices are getting a bit crazy but our net wealth is higher than ever and if our SPOILED BRAT American consumer ways are any indication--we can afford it. So no matter how much they say the gas prices are going to hurt the economy, the fact of the matter is this just creates another wall-of-worry for the markets to climb as traders short the market waiting for this magical correction caused by the consumers pockets drying up. Until it actually dries up, why short the market and lose money?
This uptrend is still not to be messed with. Next week will show us if the distribution days in the Nasdaq are anything that is going to turn into some real selling. If the action in leading stocks is any indication, we are not going to get too much selling off of those distro days. The indexes and leading stocks continue to hold that key 50 day moving average and have good to great accumulation/distribution ratings. Right now the right play seems to be to buy the dips. That is not a method I endorse, unless the dip is on low volume and followed by a heavy volume bounce around a key moving average or support.
The market is getting a little bit oversold according to the 10-week moving average of the advance/decline line oscillator and the index put/call 21-day moving avg. is getting near the 2.00 level where the markets like to try to top out. But there is still room left with it at 1.80. So that along with the former oscillator mentioned tells us that there is more room to rally before we become overbought or have the extreme index put buying that signals a real top. A high put/call is bullish until it stays high for too long and gets to extreme levels. When that happens it actually confirms the market, if a selloff happens.
As it stands, right now, however, there is no selloff, so the only right thing to do now is to follow that trend, until that trend changes. Next week we have non-farm payroll numbers, the second reading of Q1 GDP, consumer confidence numbers, and the FOMC minutes. Along with the economic numbers, we have earnings from DELL COST HNZ HOV SHLD DBRN RL PSS JAS JCG that should create some minor excitement as earnings season comes to a close.
Enjoy your Memorial Day!!! Never forget the sacrifices that our troops make to allow you to read this blog. This blog and all the money making ideas would not be possible without the brave men and women who sacrifice their lives defending this country and making this world a better place to live in for EVERYONE. Not just Americans. EVERYONE deserves freedom. If you lived under a dictatorship, only then could you appreciate how well off we have it. I have a feeling there are many that read this blog that take YOUR freedom for granted. If that is the case, you should really take a minute and think about how the world would be if the USA did not exist. Do you really think you would be trading stocks? Do you really think you would be free?
Aloha and I will see you in the chat room!!!!
top holdings up this week - purchase date
TRCR 306% - 1/12
MA 181% - 8/2
TTEC 140% - 8/25
OMTR 137% - 9/15
SVNT 131% - 8/24
MEH 119% - 8/30
CPA 118% - 9/15
KHDH 108% - 5/30
JSDA 106% - 12/20
HRZ 104% - 9/27
MFW 104% - 1/29
ULTR 101% - 10/27
CRY 94% - 1/10
EVEP 90% - 11/16
CXW 87% - 5/19
IGLD 79% - 10/26
DECK 76% - 9/13
MCZ 74% - 3/27
HURN 70% - 9/13
CNH 65% - 11/2
BMA 64% - 10/24
APLX 62% - 9/28
VDSI 61% - 1/4
ZNH 59% - 12/26
NXST 59% - 3/28
LFL 57% - 12/13
TESO 56% - 2/16
VCLK 55% - 11/14
APFC 55% - 3/5
TTG 52% - 11/30
NSH 52% - 12/19
Market Commentary At Big Wave Trading Bronze Level One
New Swing Longs: Silver Level Two
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
Saturday, May 19, 2007
M&A Deals Keep The Market Moving As The NYSE and DJIA Hit All-Time Highs On Heavier Volume
It was another M&A filled rally on wall street as the news of mergers and buyouts keep on coming. The SP 600, Nassy, and the NYSE all gained .8%, the SP 500 was up .7%, and the DJIA rallied .6% hitting an all-time high with the NYSE. All indexes closed near their HOD. The best gain came from the IBD 100. The IBD 100 gained 1.2% today, well outpacing the broad market. It is always bullish when leading stocks lead.
All of these gains can be thanked on a series of deals that came about or the rumors that were stirred up on Friday. The big one was MSFT buying AQNT for an insane amount of money–we have heard enough about that. But there were other mergers that helped also. A private equity buyout by Blackstone Group for ADS, GE announcing that it is selling off its plastic division, and Thursday’s WPPGY buy of TFSM show that the market is full of liquidity.
With all of these M&A deals and with Friday being options expiration, volume came in much higher on both the NYSE and the Nasdaq. This gives the markets a clear accumulation day and with the markets hitting new highs that is very bullish. And if you think the higher volume is no good because it was options expiration, you are wrong. It wouldn’t matter if prices did not change much. But the fact that prices were up almost 1% across the board is good enough for me to see today as accumulation. The fact that it was options expiration is just not that important to me when prices are higher or lower by .5%.
The same thing happened this week that happened last week. The Nasdaq underperformed the DJIA by a wide margin again. This week the DJIA was up 1.7% but the Nasdaq was down .1%. That is the second week in a row that the Nasdaq has fallen. For the DJIA, the opposite is true, as that index put in its seventh straight week of gains. The DJIA just will not stop, for now.
The DJIA action is getting a bit crazy but as long as this trend remains there is nothing to do but ride it higher. This is a bullish tape and fighting this is only going to hurt down the road. That is why the greatest traders of all-time never made any trades against the market. I still see some people buying puts on some DJIA stocks. PURE SUICIDE!!
It might be foolish to buy stocks this far extended but it is even more foolish to make bearish bets when the momentum train is at full speed ahead. The smart active investor is riding this trend making sure he buys close to a correct pivot point. If you are doing that you should be making money in this market. Granted, it is not automatic money but it is still a good stock pickers market.
There are a lot of negatives out there, despite these highs, but until these things are confirmed by lower prices these are just noise. Some of that noise though is quite interesting.
We keep having lower volume rallies that are followed by distribution. However, Friday’s gains on higher volume kind of dampens that argument. Since November the amount of stocks making 52-week highs keep contracting on every new all-time high by the NYSE. This is really negative divergence and portends to a very weak market when the market decides to rollover. The other problem is that new 52-week lows keep expanding on every new all-time high by the NYSE. This just confirms the negative divergence with the new highs. This is not bullish in the long-term. But in the short-term it doesn’t matter.
Breadth is also weakening as the markets now hit new highs and the DJ Transportation average is not confirming the DJIA with all-time highs. The fact that the Nasdaq is also lagging so badly is yet another ugly development. But with the weakening breadth you can also make a bullish case as the 10-day adv/dec moving average overbought/oversold oscillator is moving to oversold levels. If the market keeps rising, while we move to oversold, it could produce a very powerful rally as breadth comes back in. On Friday breadth was positive with the gains, something the gains couldn’t accomplish recently.
This market is much more difficult than normal bull markets due to the fact that we are having this run after four years of gains. The rally in 2003, came after two years of non-stop selling. The charts that setup in green pretty bases that then broke out to new highs followed-through immediately and most gave quick 20% plus gains. Nowadays you are lucky if your stock moves higher immediately and we are also very lucky if we can get a 50% gain out of the stock. That is what a lower VIX environment produces with no 10% pullback on the DJIA since 2003.
This market is starting to feel invincible but trust me the gains that it is offering now WILL BE NOTHING compared to the gains that will come after the ensuing bear market happens. If the VIX can get up to near 30, our TRCR 300% gains will be 900% gains. Your 100% gains will be 300% gains. This is what is normal in bull markets. So this market may be a bull market but trust me it is no bull market for active growth investors. This is a slowly dying market. The trend still offers plenty of chances to make money. But I am not going to get filthy rich at this point in the game.
Stocks like TESO AFSI HRZ can make you very wealthy. These are three stocks that I was very adamant about going long. If you went long these you are doing very well. So I am not sure why we complain. But maybe that is the nature of our greedy ways.
Speaking of greedy. Anyone following TNH. That is what a top looks like. Arithmetic daily chart going back to 2001. Take a look at that chart. Study that price and volume action. Notice the extremely wild reversal on the price graph along with a GIANT spike in volume. That is what tops look like. This is the best stock, in the best sector, in the current bull market. Now that this stock has topped it could be hinting at what is in store for the market. We shall see.
One thing we do know is that last year I nailed the ERS top after producing 550% gains in it. I went long ERS took a 500% plus gain and sold it at the top. I have to admit i held on to a little as it came down. But if you go review my commentary from April-May 206, you will see I nailed that top in that leading stock, in the leading sector, in the bull market. If TNH was last years ERS, the top should be soon. I was long TNH for a 250% gain, before this top. So I have sold all in anticipation of this being the top. Just like ERS last year. Study both of those charts. Study the climb, study the volume, and study the ensuing selloff. Same thing, so far.
This is the greatest economic story NEVER told. And it never will be. If Bill Clinton was in office, the biased media wouldn’t shut up over this great market. Instead we get silence and actually get negative spin. What a disgrace the media has become. Disgusting and irresponsible. What a great market!!!!!!! But nobody cares and the media is still bashing it….so there is still plenty of reasons to go higher, even if TNH topped. :)
Aloha and I will see you in the chat room. Where we always are making new all-time highs!!
top holdings - purchase date
TRCR 297% - 1/12
ONT 205% - 12/21
MA 178% - 8/2
OMTR 143% - 9/15
TTEC 137% - 8/25
MEH 120% - 8/30
ULTR 120% - 10/27
CPA 119% - 9/15
SVNT 117% - 8/24
BAM 107% - 11/17/05
KHDH 106% - 5/30
HRZ 99% - 9/27
IGLD 96% - 10/26
EVEP 93% - 11/16
JSDA 93% - 12/20
PRGX 91% - 1/12
HMSY 90% - 6/23
MFW 88% - 1/29
PAE 83% - 3/22
CRY 80% - 1/10
CXW 78% - 5/19
CLRT 77% - 11/30
DECK 72% - 9/13
HURN 70% - 9/13
CNH 69% - 11/2
VDSI 66% - 1/4
TESO 64% - 2/16
LFL 63% - 12/13
APLX 62% - 9/28
IMKTA 50% - 8/28
ETR 50% - 9/27
Market Commentary At Big Wave Trading Bronze Level One
New Swing Longs: Silver Level Two
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
All of these gains can be thanked on a series of deals that came about or the rumors that were stirred up on Friday. The big one was MSFT buying AQNT for an insane amount of money–we have heard enough about that. But there were other mergers that helped also. A private equity buyout by Blackstone Group for ADS, GE announcing that it is selling off its plastic division, and Thursday’s WPPGY buy of TFSM show that the market is full of liquidity.
With all of these M&A deals and with Friday being options expiration, volume came in much higher on both the NYSE and the Nasdaq. This gives the markets a clear accumulation day and with the markets hitting new highs that is very bullish. And if you think the higher volume is no good because it was options expiration, you are wrong. It wouldn’t matter if prices did not change much. But the fact that prices were up almost 1% across the board is good enough for me to see today as accumulation. The fact that it was options expiration is just not that important to me when prices are higher or lower by .5%.
The same thing happened this week that happened last week. The Nasdaq underperformed the DJIA by a wide margin again. This week the DJIA was up 1.7% but the Nasdaq was down .1%. That is the second week in a row that the Nasdaq has fallen. For the DJIA, the opposite is true, as that index put in its seventh straight week of gains. The DJIA just will not stop, for now.
The DJIA action is getting a bit crazy but as long as this trend remains there is nothing to do but ride it higher. This is a bullish tape and fighting this is only going to hurt down the road. That is why the greatest traders of all-time never made any trades against the market. I still see some people buying puts on some DJIA stocks. PURE SUICIDE!!
It might be foolish to buy stocks this far extended but it is even more foolish to make bearish bets when the momentum train is at full speed ahead. The smart active investor is riding this trend making sure he buys close to a correct pivot point. If you are doing that you should be making money in this market. Granted, it is not automatic money but it is still a good stock pickers market.
There are a lot of negatives out there, despite these highs, but until these things are confirmed by lower prices these are just noise. Some of that noise though is quite interesting.
We keep having lower volume rallies that are followed by distribution. However, Friday’s gains on higher volume kind of dampens that argument. Since November the amount of stocks making 52-week highs keep contracting on every new all-time high by the NYSE. This is really negative divergence and portends to a very weak market when the market decides to rollover. The other problem is that new 52-week lows keep expanding on every new all-time high by the NYSE. This just confirms the negative divergence with the new highs. This is not bullish in the long-term. But in the short-term it doesn’t matter.
Breadth is also weakening as the markets now hit new highs and the DJ Transportation average is not confirming the DJIA with all-time highs. The fact that the Nasdaq is also lagging so badly is yet another ugly development. But with the weakening breadth you can also make a bullish case as the 10-day adv/dec moving average overbought/oversold oscillator is moving to oversold levels. If the market keeps rising, while we move to oversold, it could produce a very powerful rally as breadth comes back in. On Friday breadth was positive with the gains, something the gains couldn’t accomplish recently.
This market is much more difficult than normal bull markets due to the fact that we are having this run after four years of gains. The rally in 2003, came after two years of non-stop selling. The charts that setup in green pretty bases that then broke out to new highs followed-through immediately and most gave quick 20% plus gains. Nowadays you are lucky if your stock moves higher immediately and we are also very lucky if we can get a 50% gain out of the stock. That is what a lower VIX environment produces with no 10% pullback on the DJIA since 2003.
This market is starting to feel invincible but trust me the gains that it is offering now WILL BE NOTHING compared to the gains that will come after the ensuing bear market happens. If the VIX can get up to near 30, our TRCR 300% gains will be 900% gains. Your 100% gains will be 300% gains. This is what is normal in bull markets. So this market may be a bull market but trust me it is no bull market for active growth investors. This is a slowly dying market. The trend still offers plenty of chances to make money. But I am not going to get filthy rich at this point in the game.
Stocks like TESO AFSI HRZ can make you very wealthy. These are three stocks that I was very adamant about going long. If you went long these you are doing very well. So I am not sure why we complain. But maybe that is the nature of our greedy ways.
Speaking of greedy. Anyone following TNH. That is what a top looks like. Arithmetic daily chart going back to 2001. Take a look at that chart. Study that price and volume action. Notice the extremely wild reversal on the price graph along with a GIANT spike in volume. That is what tops look like. This is the best stock, in the best sector, in the current bull market. Now that this stock has topped it could be hinting at what is in store for the market. We shall see.
One thing we do know is that last year I nailed the ERS top after producing 550% gains in it. I went long ERS took a 500% plus gain and sold it at the top. I have to admit i held on to a little as it came down. But if you go review my commentary from April-May 206, you will see I nailed that top in that leading stock, in the leading sector, in the bull market. If TNH was last years ERS, the top should be soon. I was long TNH for a 250% gain, before this top. So I have sold all in anticipation of this being the top. Just like ERS last year. Study both of those charts. Study the climb, study the volume, and study the ensuing selloff. Same thing, so far.
This is the greatest economic story NEVER told. And it never will be. If Bill Clinton was in office, the biased media wouldn’t shut up over this great market. Instead we get silence and actually get negative spin. What a disgrace the media has become. Disgusting and irresponsible. What a great market!!!!!!! But nobody cares and the media is still bashing it….so there is still plenty of reasons to go higher, even if TNH topped. :)
Aloha and I will see you in the chat room. Where we always are making new all-time highs!!
top holdings - purchase date
TRCR 297% - 1/12
ONT 205% - 12/21
MA 178% - 8/2
OMTR 143% - 9/15
TTEC 137% - 8/25
MEH 120% - 8/30
ULTR 120% - 10/27
CPA 119% - 9/15
SVNT 117% - 8/24
BAM 107% - 11/17/05
KHDH 106% - 5/30
HRZ 99% - 9/27
IGLD 96% - 10/26
EVEP 93% - 11/16
JSDA 93% - 12/20
PRGX 91% - 1/12
HMSY 90% - 6/23
MFW 88% - 1/29
PAE 83% - 3/22
CRY 80% - 1/10
CXW 78% - 5/19
CLRT 77% - 11/30
DECK 72% - 9/13
HURN 70% - 9/13
CNH 69% - 11/2
VDSI 66% - 1/4
TESO 64% - 2/16
LFL 63% - 12/13
APLX 62% - 9/28
IMKTA 50% - 8/28
ETR 50% - 9/27
Market Commentary At Big Wave Trading Bronze Level One
New Swing Longs: Silver Level Two
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
Saturday, May 12, 2007
Stocks End The Week On A Bullish Note, Despite The Lower Volume
Stocks gapped higher on the back of economic data that was taken as more positive than negative and on some more M&A talk. The Labor Department said the wholesale PPI came in with a .7% increase in April. This was in line with estimates and showed that growth in prices at the producer level were flat except gas. Gas cost rose 8.2%.
April retail sales came in .2% lower but was much better than the numbers the same-store sales delivered on Thursday when they reported a 1.8% fall on the back of some of the worst declines WMT has seen in over 20 years.
The last bit of excitement that helped send stocks higher early on came on the announcement that CME has raised its offer for BOT. There is no news of what ICE is going to do but they are reviewing their options.
The markets took this news in stride and managed a nice rally that saw dip buyers come in and buy the “bargains” Thursday’s selloff had left them. After a mid-day low, bulls went to work sending the indexes to their HOD, however on lower volume.
At the close, the SP 600 and the NYSE led the way with 1.2% gains, the Nasdaq followed with a 1.1% gain, the SP 500 gained 1%, and the DJIA rallied .8%. Leading stocks took back control, on Friday, as the IBD 100 rallied 1.7%, well outpacing the broad market. That is just the kind of action you want to see after a day of selling in the markets.
Volume, like I stated, however, was lower, across the board. Volume fell 23% on the Nasdaq and fell 10% on the NYSE, mitigating the power of the gains. But despite the lower volume, the breadth was very good. Advancers beat decliners by a 13-to-4 margin on the NYSE and by a 3-to-1 margin on the Nasdaq. So that was very impressive.
What was not impressive in the breadth department was the new highs. Despite reversing almost all of yesterday’s losses, new highs did not expand at all on the market. New 52-week highs came in at 257 and new 52-week lows came in at 82.
For the week, the DJIA rallied .5% making it the sixth week in a row of gains, the SP 500 followed with a .02% gain, the NYSE lost .06%, the SP 600 lost .3%, and the Nasdaq led to the downside with a .4% loss. The top index, this week, was the IBD 100 with a 1.4% gain. It was very good to see the IBD 100 lead again. This is much better than the DJIA leading.
Some of the best stocks on Friday came from China as China announced they were lifting restrictions on some refined products. GSH CHL SNP and LFC all saw significant gains as most of these blasted out of bases that were not the most perfect bases to be blasting out of. But a breakout is a breakout and they did breakout.
The selloff on Thursday with the Nasdaq having slightly higher volume and the volume on the NYSE lower had only a slight impact on my top stocks in my portfolio and left me only fully selling a bunch of speculative longs. All of my complete sells on Thursday were from the pure speculative arena. The leaders didn’t do so bad and the pullbacks did not have the feel of panic in them. Hence today’s price gains.
The Thursday selloff allowed me to dump those losers or weak stocks so that I can now have more money to put in to better charts that have much better technical patterns. And that is exactly what has now happened. After Friday’s trading, more than a handful of very beautiful and green charts have setup into perfect buy areas. There are a lot of charts bouncing right off the 50 dma or breaking out of longer bases on very strong volume with green charts. The complete sells obviously did not look like these.
This is why pullbacks are good. I can get rid of the crap that is not working and buy pure quality with better charts. If you are a silver or gold member you can see those beautiful charts and then compare them to the sells I made on Thursday and see I have moved money from stocks with broken patterns to stocks that are ready to move. In fact, Friday’s scan has revealed the most what I would consider “near perfect” charts in one day for more speculative stocks since 2007 began. If Thursday’s selloff had not happened, I would have had less money to put into these pretty charts. Instead I now have more money to use on margin in the prettier charts that should do MUCH better than what I have. This is why pullbacks are good: you can sell laggards and move money into cash (which would be better than losing money) or move the money into stocks with better chart patterns.
Without a pullback, you instead hold the laggards and have less money to work in the better patterns. Turnover is good; not bad. Another positive about smaller selloffs are that you don’t have 4% pullbacks like you do in February. Those kind of vicious pullbacks are the result of non-stop markets that never have 1% pullbacks in the DJIA or 2% pullbacks in the Nasdaq. When you don’t have normal pullbacks, you get one day crashes. So these things are good not bad.
The dip buyers are still working and even after the dip buyers are done the retail and sometimes institutional crowd is right there putting money to work. Right now people do not want to be left behind and the best thing to do is stay out of there way, not fight the trend, and to just ride the trend. Right now it is a completely bullish market, despite some complacency (the put/call fell below .7), and doing anything but going long here is the wrong play.
Whatever you do, do NOT chase performance. Demand the stock is bouncing off a key moving average or is breaking out of a base at least five weeks long. If you do this you put yourself in a much better position of avoiding severe one day losses that happen to a lot of stocks during earnings season. But, thankfully, we are out of that crazy season and back to our normal trading pattern off of news and economic events.
I am not sure where the sell in May and go away crowd is. But maybe they will show up this week. However, I truly doubt that is going to happen just yet. We have the CPI on Monday and I hope everyone is having a great weekend. Aloha and I will see you in the chat room!!
Market Commentary At Big Wave Trading Bronze Level One
New Swing Longs: Silver Level Two
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
top holdings - purchase date
KNOL 366% - 1/12/06
TRCR 323% - 1/12
PTT 280% - 11/16
TNH 246% - 10/26
MA 180% - 8/2
TTEC 159% - 8/25
ANO 150% - 2/14
IGLD 127% - 10/26
JSDA 125% - 12/20
ULTR 109% - 10/27
MEH 108% - 8/30
HRZ 106% - 9/27
BAM 106% - 11/17/05
CPA 105% - 9/15
SVNT 100% - 8/24
MFW 94% - 1/29
EVEP 93% - 11/16
NEXC 91% - 10/25
CRY 82% - 1/10
KHDH 80% - 5/30
CXW 78% - 5/19
PAE 73% - 3/22
DECK 71% - 9/13
HURN 69% - 9/13
VDSI 67% - 1/4
LFL 65% - 12/13
CNH 64% - 11/2
NSH 62% - 12/19
APLX 61% - 9/28
TESO 57% - 2/16
BMA 57% - 10/24
KALU 55% - 12/6
April retail sales came in .2% lower but was much better than the numbers the same-store sales delivered on Thursday when they reported a 1.8% fall on the back of some of the worst declines WMT has seen in over 20 years.
The last bit of excitement that helped send stocks higher early on came on the announcement that CME has raised its offer for BOT. There is no news of what ICE is going to do but they are reviewing their options.
The markets took this news in stride and managed a nice rally that saw dip buyers come in and buy the “bargains” Thursday’s selloff had left them. After a mid-day low, bulls went to work sending the indexes to their HOD, however on lower volume.
At the close, the SP 600 and the NYSE led the way with 1.2% gains, the Nasdaq followed with a 1.1% gain, the SP 500 gained 1%, and the DJIA rallied .8%. Leading stocks took back control, on Friday, as the IBD 100 rallied 1.7%, well outpacing the broad market. That is just the kind of action you want to see after a day of selling in the markets.
Volume, like I stated, however, was lower, across the board. Volume fell 23% on the Nasdaq and fell 10% on the NYSE, mitigating the power of the gains. But despite the lower volume, the breadth was very good. Advancers beat decliners by a 13-to-4 margin on the NYSE and by a 3-to-1 margin on the Nasdaq. So that was very impressive.
What was not impressive in the breadth department was the new highs. Despite reversing almost all of yesterday’s losses, new highs did not expand at all on the market. New 52-week highs came in at 257 and new 52-week lows came in at 82.
For the week, the DJIA rallied .5% making it the sixth week in a row of gains, the SP 500 followed with a .02% gain, the NYSE lost .06%, the SP 600 lost .3%, and the Nasdaq led to the downside with a .4% loss. The top index, this week, was the IBD 100 with a 1.4% gain. It was very good to see the IBD 100 lead again. This is much better than the DJIA leading.
Some of the best stocks on Friday came from China as China announced they were lifting restrictions on some refined products. GSH CHL SNP and LFC all saw significant gains as most of these blasted out of bases that were not the most perfect bases to be blasting out of. But a breakout is a breakout and they did breakout.
The selloff on Thursday with the Nasdaq having slightly higher volume and the volume on the NYSE lower had only a slight impact on my top stocks in my portfolio and left me only fully selling a bunch of speculative longs. All of my complete sells on Thursday were from the pure speculative arena. The leaders didn’t do so bad and the pullbacks did not have the feel of panic in them. Hence today’s price gains.
The Thursday selloff allowed me to dump those losers or weak stocks so that I can now have more money to put in to better charts that have much better technical patterns. And that is exactly what has now happened. After Friday’s trading, more than a handful of very beautiful and green charts have setup into perfect buy areas. There are a lot of charts bouncing right off the 50 dma or breaking out of longer bases on very strong volume with green charts. The complete sells obviously did not look like these.
This is why pullbacks are good. I can get rid of the crap that is not working and buy pure quality with better charts. If you are a silver or gold member you can see those beautiful charts and then compare them to the sells I made on Thursday and see I have moved money from stocks with broken patterns to stocks that are ready to move. In fact, Friday’s scan has revealed the most what I would consider “near perfect” charts in one day for more speculative stocks since 2007 began. If Thursday’s selloff had not happened, I would have had less money to put into these pretty charts. Instead I now have more money to use on margin in the prettier charts that should do MUCH better than what I have. This is why pullbacks are good: you can sell laggards and move money into cash (which would be better than losing money) or move the money into stocks with better chart patterns.
Without a pullback, you instead hold the laggards and have less money to work in the better patterns. Turnover is good; not bad. Another positive about smaller selloffs are that you don’t have 4% pullbacks like you do in February. Those kind of vicious pullbacks are the result of non-stop markets that never have 1% pullbacks in the DJIA or 2% pullbacks in the Nasdaq. When you don’t have normal pullbacks, you get one day crashes. So these things are good not bad.
The dip buyers are still working and even after the dip buyers are done the retail and sometimes institutional crowd is right there putting money to work. Right now people do not want to be left behind and the best thing to do is stay out of there way, not fight the trend, and to just ride the trend. Right now it is a completely bullish market, despite some complacency (the put/call fell below .7), and doing anything but going long here is the wrong play.
Whatever you do, do NOT chase performance. Demand the stock is bouncing off a key moving average or is breaking out of a base at least five weeks long. If you do this you put yourself in a much better position of avoiding severe one day losses that happen to a lot of stocks during earnings season. But, thankfully, we are out of that crazy season and back to our normal trading pattern off of news and economic events.
I am not sure where the sell in May and go away crowd is. But maybe they will show up this week. However, I truly doubt that is going to happen just yet. We have the CPI on Monday and I hope everyone is having a great weekend. Aloha and I will see you in the chat room!!
Market Commentary At Big Wave Trading Bronze Level One
New Swing Longs: Silver Level Two
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
top holdings - purchase date
KNOL 366% - 1/12/06
TRCR 323% - 1/12
PTT 280% - 11/16
TNH 246% - 10/26
MA 180% - 8/2
TTEC 159% - 8/25
ANO 150% - 2/14
IGLD 127% - 10/26
JSDA 125% - 12/20
ULTR 109% - 10/27
MEH 108% - 8/30
HRZ 106% - 9/27
BAM 106% - 11/17/05
CPA 105% - 9/15
SVNT 100% - 8/24
MFW 94% - 1/29
EVEP 93% - 11/16
NEXC 91% - 10/25
CRY 82% - 1/10
KHDH 80% - 5/30
CXW 78% - 5/19
PAE 73% - 3/22
DECK 71% - 9/13
HURN 69% - 9/13
VDSI 67% - 1/4
LFL 65% - 12/13
CNH 64% - 11/2
NSH 62% - 12/19
APLX 61% - 9/28
TESO 57% - 2/16
BMA 57% - 10/24
KALU 55% - 12/6
Saturday, May 05, 2007
A Very Eventful And Green Week Comes To A Close With Stocks Up Across The Board On Mixed Volume
Stocks started the day off on a very positive note thanks to a couple of big merger rumors and more positive earnings from top stocks that outweighed the poor jobs report. Reports that MSFT wants to buy the search engine YHOO (around a $50 billion transaction) and that RTRSY is being offered takeover bids possibly by Thomson Financial definitely put a fire to a market that is just flush with M&A activity. Great earnings from CROX FSLR UEIC PCLN and RIO did not hurt either.
Good news from the micro could not be found in the macro today. The April jobs report showed only 88,000 jobs were added this month. This was below the 100,000 expected by pundits and was the smallest increase in two years. This is another sign that the economy is starting to slow down. Unemployment ticked up to 4.5% and average hourly earnings rose .2% below expectations of .3%. This can be taken as slightly positive since it does not show rapid inflation in wages.
The good start gave way to a midday reversal that was quickly supported by the dip-buyers, possibly thanks to another fall in oil, and they proceeded to abid stocks up in a choppy fashion into the close. Oil fell $1.26 to $61.93 ending a week where crude oil fell a total of 6.8%. That obviously is good news for consumers.
At the closing bell the SP 600 led the way hitting an all-time high with a .5% gain, the NYSE followed also hitting an all-time high with a .4% gain, the Nasdaq neared 7-year highs closing with a .3% gain, and the DJIA hit an all-time high and the SP 500 came near a 7-year high gaining .2%. Growth investors had a lot to be thankful for today as the IBD 100 led for the third session in-a-row with a .8% gain.
Volume was slightly higher on the Nasdaq by about 2% and for the second day in-a-row the NYSE’s volume came in lower. That is a slight negative divergence with the NYSE hitting all-time highs the past two sessions on lighter volume. However, breadth was very positive which does put a slight positive spin on the lower volume. Advancers beat decliners by a 3-to-2 margin on the NYSE and by an 8-to-7 margin on the Nasdaq. There were a healthy amount of new 52-week highs with 609 and even though there were 66 new 52-week lows the fact that they didn’t expand on an up day is good enough.
For the week the DJIA led the way higher with a 1.1% gain, the NYSE followed with a .9% gain, the SP 500 and the SP 600 rose .8%, and the Nasdaq lagged with a .6% gain. The IBD 100 finally did something two weeks in a row that it has not done for months–lead the market. The IBD 100 gained 1.2% for the week, outpacing the DJIA by a tiny amount. However, that is not nearly as impressive as the fact that the DJIA is up 23 out of the past 26 sessions (I have not checked but I think I got that wrong yesterday) and has hit record highs in seven of the last eight sessions. The current streak of 23 up days out of 26 is one short of the record set in 1927 when it was 24 for 27. Get your “24 for 27″ rally hats on (not really–there is no need to cheer).
I have to admit, last week was one of the more exciting weeks I have been a part of in a while. I am not sure why but I believe it has to deal with the fact how confused everyone seems to be about this market. I have to admit I am not a genius to know why we are rallying. But I am smart enough to know that that is all I really need to know. While I continue to go long stocks, I still see a lot of people hesitant to buy stocks here.
I have to admit, I am, in my IRA. But in my regular accounts I am not afraid at all. There were only two stocks that I am going to have to completely sell-off yesterday due to breakdowns. One was E** (4% loss) and the other was I*** (8% loss). I scaled into INXI so that position did not hurt me and then EDS was bought so close to the 50 dma that that did not hurt me. It is hard for me to be bearish on that. But what I can take away as bearish is the fact that both of these stocks had BEAUTIFUL charts and had strong fundamentals. I have not seen such pretty charts with strong fundies breakdown like that since late February.
So how does that prove the crowd is bearish? It doesn’t. This does: The AAII survey came in with 55% bears this week which was the number seen at the July lows. There were only 29% bulls in the survey. Even though this survey is very fickle it still shows how bearish the crowd is still. If that doesn’t convince you the crowd is bearish let’s take a look at their actions.
The put/call ratio is still above the .6 area at .75. Until the number is below .6 it is hard to say that the crowd is not making bearish bets. And the biggest piece of interesting figures I could find on how investors are actually investing came from AMG. They report that mutual funds had outflows of $5.41 billion for the week ending on May 2. First quarter mutual fund inflows are down 30% from last year!! You do NOT see mutual fund outflows at the top of a market. So when people remind you that this market feels like 1999–it may in fact feel that way, but in 1999 mutual fund inflows were pouring in. It wasn’t until well after the market top that the trend reversed.
Rolling with this theme it also becomes clear that many market pundits are nervous with the rally (I am slightly in the boat–but I still go with the trend). Don Hays, Al Goldman, David Peroni, Dick Arms, James DePorre, Cody Willard, and a few others are issuing either cautious outlooks and in a few cases are starting short positions and/or taking longs off the table. This along with Seeking Alpha’s data showing that sell-side analyst have SP 500 stocks as buys at the lowest level in over ten years!!! Did you get that. The sell-siders are not telling you to buy stocks yet. When they start issuing buys and strong buys, then we probably should be worried. For now it seems everyone is doing the worrying for us.
The other incredibly bullish working thesis this market has going for it is earnings. Earnings are now coming in at a 12% YOY increase, KILLING estimates of 3.2%. This was supposed to be the first quarter in fourteen quarters that earnings grew under 10%. Well have now erased that possibility and now it is 15 quarters in-a-row of stocks showing 10% or higher YOY EPS gains. This is the greatest economic story ever and it gets absolutely NO attention paid to it by the biased media. It is shameful and disturbing that people do not even understand how incredible it is that we are about ready to have 10% gains 15 quarters in-a-row. One more quarter like this and it would be a full four years of 10% gains. INCREDIBLE to say the least.
There can be no doubt about it, last week was an eventful wild week. What a week it was with all the M&A announcements and speculations, great earnings reports, record high closes, and economic data. Of course the big story of the week was the NWS bid for DJ. That clearly showed the bears that this market is for bulls only. Anyone short any stock should take a look at a giant stock like DJ, see how it acted on the news, and then reevaluate why you are short.
A pullback would be very nice here to help setup some nice proper green bases so that stocks can blast out of them when the rally starts again. But if there is no pullback, still demand that you buy stocks coming out of great bases or are bouncing right off of the 50 dma on big volume. The longer we go without a pullback the harder it is to find a lot of perfect stocks setting up in perfect bases.
The one thing you must not do here, unless you are very experienced, is to chase momentum. That game is for the daytraders who can use leverage and get in and out of positions at lightning speed and still make a ton of money. Unless you have mastered the smooth style of a CANSLIM based system, I doubt it is worthwhile for you to try daytrading the highflyers. And the absolute thing you MUST NOT do is short the market or go short stocks in uptrends. AMZN, DNDN, DJ, and RTRSY are all good reason to not short this market.
Have a great weekend. Let’s hope that next week isn’t as jam packed with so much market moving news. I need a break. Aloha and enjoy your weekend! I will see you in the chat room. Aloha!!
Market Commentary At Big Wave Trading Bronze Level One
New Swing Longs: Silver Level Two
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
Top Holdings - Date Of Purchase
KNOL 393% - 1/12/06
TRCR 282% - 1/12
PTT 282% - 11/16
TNH 178% - 10/26
MA 171% - 8/2
TTEC 167% - 8/25
JSDA 136% - 12/20
IGLD 123% - 10/26
ANO 116% - 2/14
ULTR 111% - 10/27
HRZ 108% - 9/27
CPA 104% - 9/15
MFW 103% - 1/29
ONT 102% - 12/21
PAE 101% - 3/22
EVEP 99% - 11/16
BAM 99% - 11/17/05
HURN 79% - 9/13
KHDH 77% - 5/30
CXW 77% - 5/19
DECK 71% - 9/13
IMMU 69% - 12/19
VDSI 66% - 1/4
CNH 64% - 11/2
IMKTA 54% - 8/28
CLRT 54% - 11/30
NSH 54% - 12/19
CKSW 53% - 10/11
MNTG 52% - 11/9
LFL 52% - 12/13
Good news from the micro could not be found in the macro today. The April jobs report showed only 88,000 jobs were added this month. This was below the 100,000 expected by pundits and was the smallest increase in two years. This is another sign that the economy is starting to slow down. Unemployment ticked up to 4.5% and average hourly earnings rose .2% below expectations of .3%. This can be taken as slightly positive since it does not show rapid inflation in wages.
The good start gave way to a midday reversal that was quickly supported by the dip-buyers, possibly thanks to another fall in oil, and they proceeded to abid stocks up in a choppy fashion into the close. Oil fell $1.26 to $61.93 ending a week where crude oil fell a total of 6.8%. That obviously is good news for consumers.
At the closing bell the SP 600 led the way hitting an all-time high with a .5% gain, the NYSE followed also hitting an all-time high with a .4% gain, the Nasdaq neared 7-year highs closing with a .3% gain, and the DJIA hit an all-time high and the SP 500 came near a 7-year high gaining .2%. Growth investors had a lot to be thankful for today as the IBD 100 led for the third session in-a-row with a .8% gain.
Volume was slightly higher on the Nasdaq by about 2% and for the second day in-a-row the NYSE’s volume came in lower. That is a slight negative divergence with the NYSE hitting all-time highs the past two sessions on lighter volume. However, breadth was very positive which does put a slight positive spin on the lower volume. Advancers beat decliners by a 3-to-2 margin on the NYSE and by an 8-to-7 margin on the Nasdaq. There were a healthy amount of new 52-week highs with 609 and even though there were 66 new 52-week lows the fact that they didn’t expand on an up day is good enough.
For the week the DJIA led the way higher with a 1.1% gain, the NYSE followed with a .9% gain, the SP 500 and the SP 600 rose .8%, and the Nasdaq lagged with a .6% gain. The IBD 100 finally did something two weeks in a row that it has not done for months–lead the market. The IBD 100 gained 1.2% for the week, outpacing the DJIA by a tiny amount. However, that is not nearly as impressive as the fact that the DJIA is up 23 out of the past 26 sessions (I have not checked but I think I got that wrong yesterday) and has hit record highs in seven of the last eight sessions. The current streak of 23 up days out of 26 is one short of the record set in 1927 when it was 24 for 27. Get your “24 for 27″ rally hats on (not really–there is no need to cheer).
I have to admit, last week was one of the more exciting weeks I have been a part of in a while. I am not sure why but I believe it has to deal with the fact how confused everyone seems to be about this market. I have to admit I am not a genius to know why we are rallying. But I am smart enough to know that that is all I really need to know. While I continue to go long stocks, I still see a lot of people hesitant to buy stocks here.
I have to admit, I am, in my IRA. But in my regular accounts I am not afraid at all. There were only two stocks that I am going to have to completely sell-off yesterday due to breakdowns. One was E** (4% loss) and the other was I*** (8% loss). I scaled into INXI so that position did not hurt me and then EDS was bought so close to the 50 dma that that did not hurt me. It is hard for me to be bearish on that. But what I can take away as bearish is the fact that both of these stocks had BEAUTIFUL charts and had strong fundamentals. I have not seen such pretty charts with strong fundies breakdown like that since late February.
So how does that prove the crowd is bearish? It doesn’t. This does: The AAII survey came in with 55% bears this week which was the number seen at the July lows. There were only 29% bulls in the survey. Even though this survey is very fickle it still shows how bearish the crowd is still. If that doesn’t convince you the crowd is bearish let’s take a look at their actions.
The put/call ratio is still above the .6 area at .75. Until the number is below .6 it is hard to say that the crowd is not making bearish bets. And the biggest piece of interesting figures I could find on how investors are actually investing came from AMG. They report that mutual funds had outflows of $5.41 billion for the week ending on May 2. First quarter mutual fund inflows are down 30% from last year!! You do NOT see mutual fund outflows at the top of a market. So when people remind you that this market feels like 1999–it may in fact feel that way, but in 1999 mutual fund inflows were pouring in. It wasn’t until well after the market top that the trend reversed.
Rolling with this theme it also becomes clear that many market pundits are nervous with the rally (I am slightly in the boat–but I still go with the trend). Don Hays, Al Goldman, David Peroni, Dick Arms, James DePorre, Cody Willard, and a few others are issuing either cautious outlooks and in a few cases are starting short positions and/or taking longs off the table. This along with Seeking Alpha’s data showing that sell-side analyst have SP 500 stocks as buys at the lowest level in over ten years!!! Did you get that. The sell-siders are not telling you to buy stocks yet. When they start issuing buys and strong buys, then we probably should be worried. For now it seems everyone is doing the worrying for us.
The other incredibly bullish working thesis this market has going for it is earnings. Earnings are now coming in at a 12% YOY increase, KILLING estimates of 3.2%. This was supposed to be the first quarter in fourteen quarters that earnings grew under 10%. Well have now erased that possibility and now it is 15 quarters in-a-row of stocks showing 10% or higher YOY EPS gains. This is the greatest economic story ever and it gets absolutely NO attention paid to it by the biased media. It is shameful and disturbing that people do not even understand how incredible it is that we are about ready to have 10% gains 15 quarters in-a-row. One more quarter like this and it would be a full four years of 10% gains. INCREDIBLE to say the least.
There can be no doubt about it, last week was an eventful wild week. What a week it was with all the M&A announcements and speculations, great earnings reports, record high closes, and economic data. Of course the big story of the week was the NWS bid for DJ. That clearly showed the bears that this market is for bulls only. Anyone short any stock should take a look at a giant stock like DJ, see how it acted on the news, and then reevaluate why you are short.
A pullback would be very nice here to help setup some nice proper green bases so that stocks can blast out of them when the rally starts again. But if there is no pullback, still demand that you buy stocks coming out of great bases or are bouncing right off of the 50 dma on big volume. The longer we go without a pullback the harder it is to find a lot of perfect stocks setting up in perfect bases.
The one thing you must not do here, unless you are very experienced, is to chase momentum. That game is for the daytraders who can use leverage and get in and out of positions at lightning speed and still make a ton of money. Unless you have mastered the smooth style of a CANSLIM based system, I doubt it is worthwhile for you to try daytrading the highflyers. And the absolute thing you MUST NOT do is short the market or go short stocks in uptrends. AMZN, DNDN, DJ, and RTRSY are all good reason to not short this market.
Have a great weekend. Let’s hope that next week isn’t as jam packed with so much market moving news. I need a break. Aloha and enjoy your weekend! I will see you in the chat room. Aloha!!
Market Commentary At Big Wave Trading Bronze Level One
New Swing Longs: Silver Level Two
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
Top Holdings - Date Of Purchase
KNOL 393% - 1/12/06
TRCR 282% - 1/12
PTT 282% - 11/16
TNH 178% - 10/26
MA 171% - 8/2
TTEC 167% - 8/25
JSDA 136% - 12/20
IGLD 123% - 10/26
ANO 116% - 2/14
ULTR 111% - 10/27
HRZ 108% - 9/27
CPA 104% - 9/15
MFW 103% - 1/29
ONT 102% - 12/21
PAE 101% - 3/22
EVEP 99% - 11/16
BAM 99% - 11/17/05
HURN 79% - 9/13
KHDH 77% - 5/30
CXW 77% - 5/19
DECK 71% - 9/13
IMMU 69% - 12/19
VDSI 66% - 1/4
CNH 64% - 11/2
IMKTA 54% - 8/28
CLRT 54% - 11/30
NSH 54% - 12/19
CKSW 53% - 10/11
MNTG 52% - 11/9
LFL 52% - 12/13
Saturday, April 28, 2007
Stock Indexes Close Mixed And With Little Change, On Lower Volume; DJIA Up 19 Out Of Past 21 Sessions
Despite amazing earnings reports from BIDU, MSFT, VSEA, MFW, DV, TEX, MTD, NOV, VLCM, NTGR, and DRIV, stock indexes decided to focus on the early morning GDP report and opened flat to slightly lower. GDP growth came in at 1.3% in the most recent quarter, down from economist 1.8% expectations and a four-year low. The poor GDP reading and the fact that YOY inflation is running at 2.2% definitely had a slightly negative impact. This poor reading helped the Euro hit a record high against the US dollar. The poor numbers were enough to keep the market choppy most of the day but the DJIA still hit another all-time high.
At the close the DJIA and the Nasdaq led the way higher with .1% gains, the SP 500 finished flat, the NYSE fell .1%, the SP 600 fell .3%, and the SP 400 led the way lower with a .4% drop. Leading stocks, in the form of the IBD 100, did not lead to the upside but they did not lead to the downside either, falling .2%. A respectable showing.
The most impressive index out of the group continues to be the DJIA. The DJIA is now up 11 of the past 12 days and up 19 of the past 21 days. This is only the third time in the past 110 years that this index has closed up 19 of the past 21 days. The other two times? 1927 and 1929. How did that turn out? I think if you have done any research on your own, you know how it ends.
Volume was lower across the board, with volume coming in lower on the NYSE by about 12% and lower on the Nasdaq by about 14%. The most troubling of today’s action was breadth. Breadth was negative across the board and negative by a fair amount, despite the small gains and losses. Decliners beat advancers by a 4-to-3 margin on the NYSE and by an 8-to-5 margin on the Nasdaq. This negative divergence in breadth has been a constant theme all week long. New 52-week highs came in at only 388 but new 52-week lows were only at 68. So at least the new lows did not expand.
For the week, the DJIA and the Nasdaq led with 1.2% gains, the SP 500 and SP 400 followed with .7% gains, the SP 600 rallied .4%, and the NYSE gained .1%. The best news came from leading stocks. The IBD 100 gained 1.6% on the week, finally outpacing the broad market. This impressive week gave the indexes their fifth up week in the past six weeks and the fourth up week in-a-row. This market is clearly starting to enter a semi-crazy phase.
Despite the market not making much headways the past two days, there have been an insane amount of action in individual stocks during that time. Many stocks are gapping up and continuing to rally afterwards after reporting great earnings. Other stocks are going into climax runs which is starting to produce some substantial gains in a lot of the old leaders in metals and other steel related stocks. You can see a list of these climax runs on the Gold forums, if you are a subscriber. It is best to look at the stocks listed on an arithmetic chart going back to 2002. There you can clearly see that a lot of stocks are going on climax runs after years of strong gains. These kind of moves happen when too many people are shorting rising stocks. With the put/call still at .84 it is clear people are still betting against stocks even as they rally.
Another clear sign of out-of-control momentum can be found in China’s Shanghai index and the stocks in that index. A gold subscriber Randyy has posted an index chart and three charts of stocks clearly in parabolic rises. His charts are just as pretty as the charts in TC2007. I definitely recommend taking a look if and when you have a chance. You can clearly see it is getting down-right scary the mania that is going on in China.
The other thing about this insane rally is that the DJIA is clearly the leader now. The fact that after four plus years of gains that the DJIA is now leading clearly shows that we are near the end of this great bull market. The only positive to come with the DJIA gains is the fact that small cap stocks are still moving higher. As long as small caps and leading stocks can keep pace with the DJIA I doubt the top is going to happen tomorrow or very shortly. There is probably still plenty of time left for stocks to rally, even with the crowd getting more bullish and less bearish.
Since I go with the trend (ALWAYS) of the market, this market has been treating me very well recently as many of my top holdings representing significant portions of my account make substantial gains at this point in the rally. Still, back in 2003 when this rally started, people were bearish everywhere and I had charts breaking out of beautiful patterns on strong volume that made gains immediately. Despite being very long still, the recent buys simply don’t explode like they did when this whole thing started. The other clear thing about that rally was that everything was clicking on ALL cylinders. The only thing that was constant was the bearishness as stocks rose.
This time the crowd is very bullish and there are many warning signs that are starting to show up underneath the recent price gains. Some clear negative divergences that I am worried about are the relative strength of the Nasdaq and IBD 100 lagging well behind the SP 500, the moneystreams (technical indicator in tc2007) in the indexes are making lower highs with prices making higher highs, the amount of new 52-week highs keep decreasing on every new high in the markets (Nov-Jan-April), breadth is starting to be negative everyday even during the days when stocks rise, sentiment indicators are all bullish (realmoney, marketvane, investors intelligence, and AAII), GDP is trending down, and earnings growth is below 10% for the first time in four years. This is all troublesome. None of this existed during 2003 when this rally started.
The positive are few but still very important. The fact that the put/call is at .84 shows that the traders are still shorting this rally and the VIX is still not at new lows, despite the markets being at higher highs. There is more volatility in stocks right now which are producing better gains than the gains from August to late February. This is a positive but is typical of markets in speculative stages. This divergence however positive right now is actually bearish in the long-term as it shows the market is setting itself up for a dramatic move; that move would probably be lower, since the VIX is trending higher.
So to sum things up, this market is still trending higher and we must continue to be long here for some potential huge gains. But the fact that the DJIA is up 19 out of 21 and that hasn’t happened since 1929 is just showing you how insane this market has gotten. We are clearly in a very speculative stage and with all the breakouts I am still getting there should be more upside, but we must be ready for the eventual sell-off. When that happens it is probably going to be very ugly.
It is going to get ugly because everyone I know is long the stock market now and all the perma-bears that used to be around in all the chat rooms that I monitor are now virtually gone. There is also very few people talking about the possibility of the bubble popping. Instead I am starting to hear those famous words: it is different this time. Sure it is! Sure it is!
The one thing I want to make sure is that people that are thinking of going long DJIA stocks here should NOT move their portfolio into these stocks just because they are outperforming on the short term. Over the long-term it is clear that top stocks that breakout from sound chart patterns and that have great fundamentals via earnings, sales, ROE, and profit margin clearly outperform these stocks in the long run. Don’t forget, despite the DJIA beating the IBD 100 the past three months, since May 2, 2003 the IBD 100 index is up 164.5% compared to the SP 500’s 59.6% gain. It is clear where the big money is made: in top stocks.
There are more earnings and a lot of economic numbers coming up this week so traders are sure to have plenty of reasons to move stocks all over the place. Even though I don’t like all the negative divergences I have, as long as the trend is up I will keep riding it. Maybe the old axiom of sell in May and go away will come to fruition but until it the actual selling shows up it remains foolish to sell now. There is still a very high wall-of-worry out there for stocks to climb.
Aloha and I will see you in the chat room!!!
Market Commentary At Big Wave Trading Bronze Level One
New Swing Longs: Silver Level Two
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
Top Holdings Up This Week - Date Of Purchase
KNOL 353% - 1/12/06
TRCR 265% - 1/12
AKAM 191% - 9/30/05
TTEC 171% - 8/25
TNH 156% - 10/26
JSDA 155% - 12/20
MA 128% - 8/2
HRZ 115% - 9/27
MFW 109% - 1/29
ONT 105% - 12/21
MEH 102% - 8/30
IGLD 101% - 10/26
CPA 101% - 9/15
EVEP 98% - 11/16
ULTR 97% - 10/27
HMSY 94% - 6/23
ANO 94% - 2/14
PAE 90% - 3/22
CLRT 86% - 11/30
EPHC 85% - 12/20
LTS 85% - 1/11
BAM 83% - 11/17/05
MOS 82% - 10/12
KHDH 78% - 5/30
VDSI 72% - 1/4
CXW 71% - 5/19
PERY 65% - 10/4
CNH 64% - 11/2
DECK 62% - 9/13
IMKTA 61% - 8/28
XOMA 60% - 1/12
SLP 58% - 2/5
RKT 55% - 12/4
MNTG 55% - 11/9
TESO 51% - 2/16
At the close the DJIA and the Nasdaq led the way higher with .1% gains, the SP 500 finished flat, the NYSE fell .1%, the SP 600 fell .3%, and the SP 400 led the way lower with a .4% drop. Leading stocks, in the form of the IBD 100, did not lead to the upside but they did not lead to the downside either, falling .2%. A respectable showing.
The most impressive index out of the group continues to be the DJIA. The DJIA is now up 11 of the past 12 days and up 19 of the past 21 days. This is only the third time in the past 110 years that this index has closed up 19 of the past 21 days. The other two times? 1927 and 1929. How did that turn out? I think if you have done any research on your own, you know how it ends.
Volume was lower across the board, with volume coming in lower on the NYSE by about 12% and lower on the Nasdaq by about 14%. The most troubling of today’s action was breadth. Breadth was negative across the board and negative by a fair amount, despite the small gains and losses. Decliners beat advancers by a 4-to-3 margin on the NYSE and by an 8-to-5 margin on the Nasdaq. This negative divergence in breadth has been a constant theme all week long. New 52-week highs came in at only 388 but new 52-week lows were only at 68. So at least the new lows did not expand.
For the week, the DJIA and the Nasdaq led with 1.2% gains, the SP 500 and SP 400 followed with .7% gains, the SP 600 rallied .4%, and the NYSE gained .1%. The best news came from leading stocks. The IBD 100 gained 1.6% on the week, finally outpacing the broad market. This impressive week gave the indexes their fifth up week in the past six weeks and the fourth up week in-a-row. This market is clearly starting to enter a semi-crazy phase.
Despite the market not making much headways the past two days, there have been an insane amount of action in individual stocks during that time. Many stocks are gapping up and continuing to rally afterwards after reporting great earnings. Other stocks are going into climax runs which is starting to produce some substantial gains in a lot of the old leaders in metals and other steel related stocks. You can see a list of these climax runs on the Gold forums, if you are a subscriber. It is best to look at the stocks listed on an arithmetic chart going back to 2002. There you can clearly see that a lot of stocks are going on climax runs after years of strong gains. These kind of moves happen when too many people are shorting rising stocks. With the put/call still at .84 it is clear people are still betting against stocks even as they rally.
Another clear sign of out-of-control momentum can be found in China’s Shanghai index and the stocks in that index. A gold subscriber Randyy has posted an index chart and three charts of stocks clearly in parabolic rises. His charts are just as pretty as the charts in TC2007. I definitely recommend taking a look if and when you have a chance. You can clearly see it is getting down-right scary the mania that is going on in China.
The other thing about this insane rally is that the DJIA is clearly the leader now. The fact that after four plus years of gains that the DJIA is now leading clearly shows that we are near the end of this great bull market. The only positive to come with the DJIA gains is the fact that small cap stocks are still moving higher. As long as small caps and leading stocks can keep pace with the DJIA I doubt the top is going to happen tomorrow or very shortly. There is probably still plenty of time left for stocks to rally, even with the crowd getting more bullish and less bearish.
Since I go with the trend (ALWAYS) of the market, this market has been treating me very well recently as many of my top holdings representing significant portions of my account make substantial gains at this point in the rally. Still, back in 2003 when this rally started, people were bearish everywhere and I had charts breaking out of beautiful patterns on strong volume that made gains immediately. Despite being very long still, the recent buys simply don’t explode like they did when this whole thing started. The other clear thing about that rally was that everything was clicking on ALL cylinders. The only thing that was constant was the bearishness as stocks rose.
This time the crowd is very bullish and there are many warning signs that are starting to show up underneath the recent price gains. Some clear negative divergences that I am worried about are the relative strength of the Nasdaq and IBD 100 lagging well behind the SP 500, the moneystreams (technical indicator in tc2007) in the indexes are making lower highs with prices making higher highs, the amount of new 52-week highs keep decreasing on every new high in the markets (Nov-Jan-April), breadth is starting to be negative everyday even during the days when stocks rise, sentiment indicators are all bullish (realmoney, marketvane, investors intelligence, and AAII), GDP is trending down, and earnings growth is below 10% for the first time in four years. This is all troublesome. None of this existed during 2003 when this rally started.
The positive are few but still very important. The fact that the put/call is at .84 shows that the traders are still shorting this rally and the VIX is still not at new lows, despite the markets being at higher highs. There is more volatility in stocks right now which are producing better gains than the gains from August to late February. This is a positive but is typical of markets in speculative stages. This divergence however positive right now is actually bearish in the long-term as it shows the market is setting itself up for a dramatic move; that move would probably be lower, since the VIX is trending higher.
So to sum things up, this market is still trending higher and we must continue to be long here for some potential huge gains. But the fact that the DJIA is up 19 out of 21 and that hasn’t happened since 1929 is just showing you how insane this market has gotten. We are clearly in a very speculative stage and with all the breakouts I am still getting there should be more upside, but we must be ready for the eventual sell-off. When that happens it is probably going to be very ugly.
It is going to get ugly because everyone I know is long the stock market now and all the perma-bears that used to be around in all the chat rooms that I monitor are now virtually gone. There is also very few people talking about the possibility of the bubble popping. Instead I am starting to hear those famous words: it is different this time. Sure it is! Sure it is!
The one thing I want to make sure is that people that are thinking of going long DJIA stocks here should NOT move their portfolio into these stocks just because they are outperforming on the short term. Over the long-term it is clear that top stocks that breakout from sound chart patterns and that have great fundamentals via earnings, sales, ROE, and profit margin clearly outperform these stocks in the long run. Don’t forget, despite the DJIA beating the IBD 100 the past three months, since May 2, 2003 the IBD 100 index is up 164.5% compared to the SP 500’s 59.6% gain. It is clear where the big money is made: in top stocks.
There are more earnings and a lot of economic numbers coming up this week so traders are sure to have plenty of reasons to move stocks all over the place. Even though I don’t like all the negative divergences I have, as long as the trend is up I will keep riding it. Maybe the old axiom of sell in May and go away will come to fruition but until it the actual selling shows up it remains foolish to sell now. There is still a very high wall-of-worry out there for stocks to climb.
Aloha and I will see you in the chat room!!!
Market Commentary At Big Wave Trading Bronze Level One
New Swing Longs: Silver Level Two
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
Top Holdings Up This Week - Date Of Purchase
KNOL 353% - 1/12/06
TRCR 265% - 1/12
AKAM 191% - 9/30/05
TTEC 171% - 8/25
TNH 156% - 10/26
JSDA 155% - 12/20
MA 128% - 8/2
HRZ 115% - 9/27
MFW 109% - 1/29
ONT 105% - 12/21
MEH 102% - 8/30
IGLD 101% - 10/26
CPA 101% - 9/15
EVEP 98% - 11/16
ULTR 97% - 10/27
HMSY 94% - 6/23
ANO 94% - 2/14
PAE 90% - 3/22
CLRT 86% - 11/30
EPHC 85% - 12/20
LTS 85% - 1/11
BAM 83% - 11/17/05
MOS 82% - 10/12
KHDH 78% - 5/30
VDSI 72% - 1/4
CXW 71% - 5/19
PERY 65% - 10/4
CNH 64% - 11/2
DECK 62% - 9/13
IMKTA 61% - 8/28
XOMA 60% - 1/12
SLP 58% - 2/5
RKT 55% - 12/4
MNTG 55% - 11/9
TESO 51% - 2/16
Saturday, April 21, 2007
Stocks End A Very Powerful Week With More Gains; Volume Picks Up On Options Expiration Day
By MauiTrader
On Friday, stocks did what they have been doing all week, finding dip buyers that send the indexes higher into the close or at least higher than the open. A rash of good earnings from some big players like SLB GOOG AXP CAT and HON sent stocks higher at the open. But right after that very powerful gap higher, stocks started pulling back, as investors were quick to take some profits. However, once again, dip buyers came in and smart market makers did their best job to make shorting and put buying as painful as possible for the bears and sent stocks higher into the close. It was a very bullish options expiration.
At the close, the DJIA led the way with 28 out of 30 components up and hit all-time highs for the third day in-a-row, with a 1.2% gain. That makes it seven straight days and 15 out of the last 16 days this index has been higher. If that isn’t excessive, I am not sure what is. The SP 600 followed with a 1.1% gain, the NYSE was behind it with a 1% gain, the SP 500 rallied .9%, and the Nasdaq lagged with a .8% gain. It was another all-time high for the NYSE and six-and-a-half year highs for the SP 500 and Nasdaq. Other indexes hitting all-time territory include the Russell 2000, DJ Transportation Average, DJ Utility Average, and the SP 400. The SP 600 is a fraction away from all-time highs.
The good news from Friday, out of the world of leading stocks, was that the IBD 100 finally stopped its streak of underperformance, rallying 1.3%. It was a very nice change after eight of nine days of clear underperformance. Does that mean that growth investing is back in style? Probably not. We are four-plus years into a bull market. The small-caps have moved on to the big-caps. Your last leaders of secular bull markets.
Volume was higher on both exchanges, with volume rising 1% on the Nasdaq and by 18% on the NYSE. The higher volume finally gives the market a good accumulation day but the volume was driven higher, without a doubt, by all the options expiration activity. Without that activity, it is doubtful that the gains would have come on higher volume, especially on the Nasdaq.
Internals were very bullish, for a change this week, with advancers beating decliners for the first time in three sessions. Advancing stocks beat declining issues by a 3-to-1 margin on the NYSE and by a 2-to-1 margin on the Nasdaq. New highs finally expanded, with 602 showing up on the 52-week high list and 62 stocks showing up on the new 52-week low list.
For the week, the DJIA led the way with a 2.8% gain, the SP 500 was next with a 2.2% rise, the NYSE gained 1.8%, the Nasdaq rallied 1.4%, and the SP 600 lagged with a 1.3% gain. Proving that big-caps is where it is at, the IBD 100 lagged all indexes hardcore, with a .5% gain. This was, without a doubt, one of the best weeks of the year.
It was a very good week that finally saw volume start to show up. That higher volume started out badly, with the markets suffering a distribution day or two. But after Friday, those distribution days have been forgotten. Like I said it was good to see volume show up. However, the best rallies have volume show up immediately as the market is following-through. That high volume is best when it is preceded by a low volume sell-off. But as this market has shown since July and August, where the indexes started rallying on lower volume, you don’t always need a ton of volume to have a rally. All you need are some big-cap stocks to move and volume becomes obsolete.
This market is, obviously, being led by big-cap stocks, as the DJIA hits highs day after day after day. This is not a great market for CANSLIM growth investors but there is still plenty of action in the big-cap markets and the smaller low-priced junk stocks. These may not be growth stocks, but they are moving like they are at this stage of the game. If you check out the chart, in IBD, of value funds vs. growth funds, you will see that the big caps are in favor. Big-caps and value stocks is what is moving. Growth stocks have been lagging but are finally starting to get some life after Friday. However, since this is not the start of a fresh bull market and we do not have growth stocks leading, I still advise against going all-in with margin at this stage of the game.
The strength of this market has been quite impressive, recently, as there are simply no pullbacks and every small intraday dip is being bought up quickly. I simply don’t like that action as it sends many great stocks past proper pivot points and then as they don’t pullback that leaves us with no option to jump on the great stock. Instead do to proper risk/reward analysis we just have to watch them keep moving higher. Luckily, I still am having no problem finding stocks that are bouncing off the 50 dma or breaking out without gonig too far too fast. But I am missing a few stocks that I really wanted due to this.
In my opinion, the retail crowd seems very giddy and exuberant-especially CNBC. But AMTD and ETFC earnings reports show that traders are not participating in this current move higher like they were earlier. Still the traders that are trading this move are very bullish. The MarketVane survey has 75% of futures traders bullish, the realmoney.com poll shows 61% are bullish, the Investors Intelligence survey shows newsletter writers bullish by 52%, and the AAII poll has 46% of participants bullish. That along with the put/call being down to the .68 area clearly shows that investors are getting more and more bullish. That is giving this market a bit of a frothy feel but overall this frothiness feels NOTHING like the froth we had in early 2000. I have a lot of amateurs that I know telling me stocks are going higher. But they aren’t telling me they are going to the moon and they are not telling me that “there is no way this market is going lower.” Most still see the possibility of lower prices. That shows that the current madness that is starting is just that: starting.
The speculative momentum that is picking up pace now in the Chinese solar stocks is getting evident in the charts as these stocks are moving higher in a quite dramatic expansion as volume picks up the higher it goes. That is normally good. But when you are so far away from a proper breakout pivot point and volume is this heavy it is potentially bearish. For now it is not bearish but in the future if prices start not moving very much, you will know you have churning. Until the churning happens, though, might as well ride the trend higher. I never fight the trend and you should not either. Ride the speculative momo in these higher until the train derails. Momentum is a strange beast as it will ALWAYS last longer than you think it can.
There are many reasons for this market to go lower. The weak dollar hitting 26-year lows against the British pound, the low volume rallies, big caps leading small caps, speculative crap moving, record short interest levels on the NYSE, and poor numbers from stock trading firms are all reasons to worry about with this market. But as long as market keeps going up I am not going to worry about these.
I am worried about some internal data.The number of new highs shrinks every day. And if you look at a long-term trend of new highs since November, you can see that the trend of new highs is lower despite the market going higher. Another nasty divergence showing up is in the Relative Strength line of the Nasdaq. If you look at the highs in November, you will see that each rally after a selloff brings the Nasdaq higher and higher. Now if you look at the RS line, you will see the opposite. As the Nasdaq hit a new high in January, the RS line lagged. When it hit a new high late February, the RS line lagged even more, and now with the Nasdaq hitting new highs again, the RS line is once again lower. Lower highs and lower lows in the RS and higher highs in the Nasdaq is a very negative divergence. On top of that divergence is the negative divergence in the moneystream (proprietary indicator of tcnet). If you look at the peak in MS in February you can see now that even with the Nasdaq in higher ground (or around the same area) the MS line is well off the highs. Higher highs in price, with lower volume and negative divergences in the MS and RS line, is not bullish for the near future.
But like I keep saying over and over and over, these are just things we need to keep in the back of our head. As long as the trend is up that is where we should be investing. These things just let us know that we probably do not have a lot of upside left and when the market does turn we should be ready for some real selling.
It seems that since the February 27th market sell-off, all the previous big worries over the sub-prime market leading to a broader sell-off in financials have past. The market looks like it is expecting a soft landing, instead of a hard landing.
Showing support of that thesis is the fact that earnings are coming in much higher than what was expected by the Thomson Financial combined estimates. Those estimates were looking for a 3.3% rise in earnings, instead of the usual 10% plus earnings growth we have seen for the past 14 quarters. So far earnings have come in averaging 5.2% growth and 66% of the companies that have reported have posted better than expected results. This is much better than those low estimates but still the trend in earnings is clear. They are down. As earnings and the GDP goes, so goes your stock market.
Speaking of GDP, next week we have the release of Q1 GDP. Estimates are for 1.8% but economist are telling us to not focus on that number and instead should wait for the final revision as there will be some data problem due to automobiles. This growth, as per earnings, is slowing and below the usual 3% we have seen since the Bush tax cuts. Other items on tap include the March durable good numbers, existing-home sales, and new-home sales. Besides that we have earnings from powerhouses such as F MMM BSX HAS TXN XOM LMT COH and MSFT. This will surely cause the market some excitement as traders continue to weigh the positives and negatives of this market.
Are we setting ourselves up for the proverbial “sell in May and go away” or will earnings keep us moving higher? We will know by the end of next week. Aloha and I will see you in the chat room!!
Market Commentary At Big Wave Trading Bronze Level One
New Swing Longs: Silver Level Two
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
Top Holdings Up This Week - Date Of Purchase
KNOL 332% - 1/12/06
PTT 317% - 11/16
AKAM 236% - 9/30/05
CVO 197% - 8/18/05
TTEC 169% - 8/25
TRCR 163% - 1/12
JSDA 153% - 12/20
TNH 144% - 10/26
OMTR 140% - 9/15
ANO 120% - 2/14
CCOI 117% - 9/27
HRZ 107% - 9/27
NEXC 102% - 10/25
CLRT 101% - 11/30
CPA 100% - 9/15
ULTR 95% - 10/27
ONT 94% - 12/21
EVEP 94% - 11/16
IGLD 91% - 10/26
MFW 86% - 1/29
IMMU 85% - 12/19
LTS 82% - 1/11
BAM 81% - 11/17/05
MOS 78% - 10/12
BONT 75% - 10/03
BMTI 74% - 10/25
IIVI 71% - 8/30
EPHC 69% - 12/20
HURN 66% - 9/13
XIDE 66% - 1/29
IMKTA 65% - 8/28
KHDH 63% - 5/30
DA 63% - 1/25/06
CXW 62% - 5/19
BMA 61% - 10/24
DECK 55% - 9/13
MNTG 52% - 11/9
TESO 50% - 2/16
On Friday, stocks did what they have been doing all week, finding dip buyers that send the indexes higher into the close or at least higher than the open. A rash of good earnings from some big players like SLB GOOG AXP CAT and HON sent stocks higher at the open. But right after that very powerful gap higher, stocks started pulling back, as investors were quick to take some profits. However, once again, dip buyers came in and smart market makers did their best job to make shorting and put buying as painful as possible for the bears and sent stocks higher into the close. It was a very bullish options expiration.
At the close, the DJIA led the way with 28 out of 30 components up and hit all-time highs for the third day in-a-row, with a 1.2% gain. That makes it seven straight days and 15 out of the last 16 days this index has been higher. If that isn’t excessive, I am not sure what is. The SP 600 followed with a 1.1% gain, the NYSE was behind it with a 1% gain, the SP 500 rallied .9%, and the Nasdaq lagged with a .8% gain. It was another all-time high for the NYSE and six-and-a-half year highs for the SP 500 and Nasdaq. Other indexes hitting all-time territory include the Russell 2000, DJ Transportation Average, DJ Utility Average, and the SP 400. The SP 600 is a fraction away from all-time highs.
The good news from Friday, out of the world of leading stocks, was that the IBD 100 finally stopped its streak of underperformance, rallying 1.3%. It was a very nice change after eight of nine days of clear underperformance. Does that mean that growth investing is back in style? Probably not. We are four-plus years into a bull market. The small-caps have moved on to the big-caps. Your last leaders of secular bull markets.
Volume was higher on both exchanges, with volume rising 1% on the Nasdaq and by 18% on the NYSE. The higher volume finally gives the market a good accumulation day but the volume was driven higher, without a doubt, by all the options expiration activity. Without that activity, it is doubtful that the gains would have come on higher volume, especially on the Nasdaq.
Internals were very bullish, for a change this week, with advancers beating decliners for the first time in three sessions. Advancing stocks beat declining issues by a 3-to-1 margin on the NYSE and by a 2-to-1 margin on the Nasdaq. New highs finally expanded, with 602 showing up on the 52-week high list and 62 stocks showing up on the new 52-week low list.
For the week, the DJIA led the way with a 2.8% gain, the SP 500 was next with a 2.2% rise, the NYSE gained 1.8%, the Nasdaq rallied 1.4%, and the SP 600 lagged with a 1.3% gain. Proving that big-caps is where it is at, the IBD 100 lagged all indexes hardcore, with a .5% gain. This was, without a doubt, one of the best weeks of the year.
It was a very good week that finally saw volume start to show up. That higher volume started out badly, with the markets suffering a distribution day or two. But after Friday, those distribution days have been forgotten. Like I said it was good to see volume show up. However, the best rallies have volume show up immediately as the market is following-through. That high volume is best when it is preceded by a low volume sell-off. But as this market has shown since July and August, where the indexes started rallying on lower volume, you don’t always need a ton of volume to have a rally. All you need are some big-cap stocks to move and volume becomes obsolete.
This market is, obviously, being led by big-cap stocks, as the DJIA hits highs day after day after day. This is not a great market for CANSLIM growth investors but there is still plenty of action in the big-cap markets and the smaller low-priced junk stocks. These may not be growth stocks, but they are moving like they are at this stage of the game. If you check out the chart, in IBD, of value funds vs. growth funds, you will see that the big caps are in favor. Big-caps and value stocks is what is moving. Growth stocks have been lagging but are finally starting to get some life after Friday. However, since this is not the start of a fresh bull market and we do not have growth stocks leading, I still advise against going all-in with margin at this stage of the game.
The strength of this market has been quite impressive, recently, as there are simply no pullbacks and every small intraday dip is being bought up quickly. I simply don’t like that action as it sends many great stocks past proper pivot points and then as they don’t pullback that leaves us with no option to jump on the great stock. Instead do to proper risk/reward analysis we just have to watch them keep moving higher. Luckily, I still am having no problem finding stocks that are bouncing off the 50 dma or breaking out without gonig too far too fast. But I am missing a few stocks that I really wanted due to this.
In my opinion, the retail crowd seems very giddy and exuberant-especially CNBC. But AMTD and ETFC earnings reports show that traders are not participating in this current move higher like they were earlier. Still the traders that are trading this move are very bullish. The MarketVane survey has 75% of futures traders bullish, the realmoney.com poll shows 61% are bullish, the Investors Intelligence survey shows newsletter writers bullish by 52%, and the AAII poll has 46% of participants bullish. That along with the put/call being down to the .68 area clearly shows that investors are getting more and more bullish. That is giving this market a bit of a frothy feel but overall this frothiness feels NOTHING like the froth we had in early 2000. I have a lot of amateurs that I know telling me stocks are going higher. But they aren’t telling me they are going to the moon and they are not telling me that “there is no way this market is going lower.” Most still see the possibility of lower prices. That shows that the current madness that is starting is just that: starting.
The speculative momentum that is picking up pace now in the Chinese solar stocks is getting evident in the charts as these stocks are moving higher in a quite dramatic expansion as volume picks up the higher it goes. That is normally good. But when you are so far away from a proper breakout pivot point and volume is this heavy it is potentially bearish. For now it is not bearish but in the future if prices start not moving very much, you will know you have churning. Until the churning happens, though, might as well ride the trend higher. I never fight the trend and you should not either. Ride the speculative momo in these higher until the train derails. Momentum is a strange beast as it will ALWAYS last longer than you think it can.
There are many reasons for this market to go lower. The weak dollar hitting 26-year lows against the British pound, the low volume rallies, big caps leading small caps, speculative crap moving, record short interest levels on the NYSE, and poor numbers from stock trading firms are all reasons to worry about with this market. But as long as market keeps going up I am not going to worry about these.
I am worried about some internal data.The number of new highs shrinks every day. And if you look at a long-term trend of new highs since November, you can see that the trend of new highs is lower despite the market going higher. Another nasty divergence showing up is in the Relative Strength line of the Nasdaq. If you look at the highs in November, you will see that each rally after a selloff brings the Nasdaq higher and higher. Now if you look at the RS line, you will see the opposite. As the Nasdaq hit a new high in January, the RS line lagged. When it hit a new high late February, the RS line lagged even more, and now with the Nasdaq hitting new highs again, the RS line is once again lower. Lower highs and lower lows in the RS and higher highs in the Nasdaq is a very negative divergence. On top of that divergence is the negative divergence in the moneystream (proprietary indicator of tcnet). If you look at the peak in MS in February you can see now that even with the Nasdaq in higher ground (or around the same area) the MS line is well off the highs. Higher highs in price, with lower volume and negative divergences in the MS and RS line, is not bullish for the near future.
But like I keep saying over and over and over, these are just things we need to keep in the back of our head. As long as the trend is up that is where we should be investing. These things just let us know that we probably do not have a lot of upside left and when the market does turn we should be ready for some real selling.
It seems that since the February 27th market sell-off, all the previous big worries over the sub-prime market leading to a broader sell-off in financials have past. The market looks like it is expecting a soft landing, instead of a hard landing.
Showing support of that thesis is the fact that earnings are coming in much higher than what was expected by the Thomson Financial combined estimates. Those estimates were looking for a 3.3% rise in earnings, instead of the usual 10% plus earnings growth we have seen for the past 14 quarters. So far earnings have come in averaging 5.2% growth and 66% of the companies that have reported have posted better than expected results. This is much better than those low estimates but still the trend in earnings is clear. They are down. As earnings and the GDP goes, so goes your stock market.
Speaking of GDP, next week we have the release of Q1 GDP. Estimates are for 1.8% but economist are telling us to not focus on that number and instead should wait for the final revision as there will be some data problem due to automobiles. This growth, as per earnings, is slowing and below the usual 3% we have seen since the Bush tax cuts. Other items on tap include the March durable good numbers, existing-home sales, and new-home sales. Besides that we have earnings from powerhouses such as F MMM BSX HAS TXN XOM LMT COH and MSFT. This will surely cause the market some excitement as traders continue to weigh the positives and negatives of this market.
Are we setting ourselves up for the proverbial “sell in May and go away” or will earnings keep us moving higher? We will know by the end of next week. Aloha and I will see you in the chat room!!
Market Commentary At Big Wave Trading Bronze Level One
New Swing Longs: Silver Level Two
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
Top Holdings Up This Week - Date Of Purchase
KNOL 332% - 1/12/06
PTT 317% - 11/16
AKAM 236% - 9/30/05
CVO 197% - 8/18/05
TTEC 169% - 8/25
TRCR 163% - 1/12
JSDA 153% - 12/20
TNH 144% - 10/26
OMTR 140% - 9/15
ANO 120% - 2/14
CCOI 117% - 9/27
HRZ 107% - 9/27
NEXC 102% - 10/25
CLRT 101% - 11/30
CPA 100% - 9/15
ULTR 95% - 10/27
ONT 94% - 12/21
EVEP 94% - 11/16
IGLD 91% - 10/26
MFW 86% - 1/29
IMMU 85% - 12/19
LTS 82% - 1/11
BAM 81% - 11/17/05
MOS 78% - 10/12
BONT 75% - 10/03
BMTI 74% - 10/25
IIVI 71% - 8/30
EPHC 69% - 12/20
HURN 66% - 9/13
XIDE 66% - 1/29
IMKTA 65% - 8/28
KHDH 63% - 5/30
DA 63% - 1/25/06
CXW 62% - 5/19
BMA 61% - 10/24
DECK 55% - 9/13
MNTG 52% - 11/9
TESO 50% - 2/16
Subscribe to:
Posts (Atom)