A very volatile week comes to an end with the markets losing anywhere from .5% to 1% on the day. The good news about this pullback was that it did come on lower volume. But it is possible that could have been a function of a long-weekend. The bottom line is that the week ends on a weak note and stocks finished lower on the week anywhere from 3.6% to 5.2%.
Overall the theme of this week was volatility and uncertainty. Even though there were two quiet day this week, there were three very loud days that showed the market is still not a rational animal right now and is instead a wild scared beast that reacts on a whim to any and all news deemed relevant to short-term traders at the time.
Sadly, almost all form of momentum investing (besides staying short) is working on the long side. Every time we seem to have some leaders start to show up that could lead the market in a new direction they get hit. The most recent example is the Education stocks that got whacked on Thursday after STRA came out and disappointed.
The good news for us is that we can get short these stocks as they fail at resistance on higher volume and begin to rollover. The bad news for us is that it means that the market is still not going to be moving higher for any of us to get rich or wealthy from capital gains anytime soon. About the only good news out of that is that after enough failures people will come to expect it and then the leaders will work.
That might be the case now as Mining-Gold/Silver stocks are not only #1 but have hit #1 BEFORE most of the stocks in this sector has setup and broken out with their price above the 50 day moving average with the 50 DMA above the 200 DMA. This is one of the first groups in a while that I can remember setting up in bullish charts before ALREADY having a major previous run-up. This is why this group feels stronger than past leading sectors.
Now while that may not be good for the market it could very well be very good for us that are long Gold in our IRA and have gold stocks that we have locked on our radar screens ready to go heavily long if those magical beautiful setups occur.
Basically what I have been seeing in leaders are that PAST leaders breakdown that are currently at the top of the list for past six-month and twelve-month performances thus leaving a group that has already been going up for a while and still moving up as the #1 group. This isn't by strength but by default of being the strongest WEAKEST. That is why after these groups are becoming #1 we have been seeing them crack and break not too much long after.
I mean if we just look at the recent top sectors we had security stocks, medical stocks, and recently education stocks that have all failed after becoming the new leaders because they were already in LONG-TERM (going back to 2000 or 2003) major uptrends. They were not anything new.
Now at the same end everyone can say well Gold isn't new either, Einstein! However, a lot of the charts that are setting up in proper bases are longs that have not had a major run yet that are still very fresh and could still have a long way to go especially with the conditions of the world economy the way it is. The old gold stock leaders are not really "leading" this time around (gold stocks helped lead in 2005 and Gold has been moving higher since 9/11). Instead there are plenty of "fresh and nice" charts.
I am still praying that the IYW is hinting at technology turning because time-after-time big bull markets are started and led by the technology sector because this is OBVIOUSLY where innovative and exciting companies are coming from. That is unless they make an amazing energy drink like HANS! Then they can grow 9,250% in four years. But the real money is made in technology stocks that are major innovators like CSCO which grew 60,000% in a little over 9 years. TASR also moved 2,390% for me in nine months. So as you can see, no matter if it is an electricity gun, a router, or an energy drink, if it is new...it can make you a LOT OF MONEY if the company is being run correctly! This is why CANSLIM rocks!! You can always find these stocks by researching and using Investor's Business Daily products (and no I am NOT paid by IBD; the tools are just that great!).
I want to wish everyone a very happy Valentine's Day and have a great 3-day weekend/President's Day! ALOOOOOHA!!
top longs/(shorts) with their total returns since my first purchase MAKING ME MONEY TODAY: ANCI 57% (OKE 36% POT 46% AAPL 38% PG 19% AMX 46% MOS 50% AMSG 17% PRGO 19% APD 41% CYT 64% CASY 27% ARB 70% RDK 29% IPHS 31% RIMM 51% MCY 22% CETV 89% SPG 53%)
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Showing posts with label big winners. Show all posts
Showing posts with label big winners. Show all posts
Sunday, February 15, 2009
Sunday, November 11, 2007
Another Selloff Helps Stocks Put In One Of Their Worst Weeks In Five Years; The Time To Be Long Has Passed
Subscribers to this site definitely were not caught by surprise when it comes to the selloff we have had the past three days. After Tuesday's market session I ended up with a TON of strong CANSLIM quality longs that appeared to signal that the market was ready for another leg up. However, the very next day, stocks reversed hard on heavier volume and many of the new buys were left looking quite mediocre. That particular action was very bearish to me and caused me to pen this right after the closing bell on Wednesday:
Screw This Market; Nasty Selloff After Such A Strong Day Is A Clear Topping Signal
November 7, 2007
I am losing my bullish bias. All my hard work yesterday was rewarded with this!!! Screw this market. Sell all laggards, cut your losses in stocks not working, take in some profits, and raise cash. This market is in for some rough times. Even if it turns around I don’t care anymore. The easy money is being made on the short side now. It is time to get rid of the bullish bias. This is the most confusing market I have EVER seen. Since 1996 I have never seen a market so screwy. Get out of your new longs and take profits. It is time to start selling. If there is nothing wrong with your longs, keep holding.
What makes all of this worse is that today I just loaded up on FNDT in my IRA. This is now the third buy in a row I have made in my IRA that has been a loser (SNDA, BLL, and now FNDT). Right now, I freaking suck, so it is best to not follow my trades unless you really like them. The easy money off the August lows has come and gone. I don’t know what the market is going to do next (probably goes lower) and with all of this volatility I do not want to be a part of it.
I have never seen such a freaking crazy market. The 2000 top has NOTHING on this wild action. If we are not topping, then damn it I really have lost all ability to read the market. Right now, it is unreadable. Anyone bullish or bearish is just asking to get punched in the face. I will continue to take both longs and shorts and will keep everything 1% or smaller of my initial equity.
I am so upset words can not even express how upset I am. Screw this market!!! Have a great evening. Aloha!
I was upset at the time because I felt like it was possible the market was going to rally hard the very next day offering up new longs. Thankfully, the caution that I suggested was rewarded as the Nasdaq sold off 4.4% the past two days. For those that listened to me and took money off the table, way to go. We missed out on some major carnage.
Now my style now forces me to hold at least 10-20% of a long all the way until it closes below the 200 dma (that is why I am still long ZNH even though I KNOW it has topped). The reason I do that is because I have been stopped out of a TON of big winners by not waiting for this event to happen. I am bringing this up because even though I am still long over 100 stocks, it is only because they are above key support and the 200 day moving average. There are about 25% of stocks in my portfolio that if I traded my old style would be complete sells. It would save me money to cut them now, I am sure. But like I just said, I guarantee, my returns would not be as strong if I did not adhere to this rule. I would have been out of MA, IHS, and many other stocks that I am instead enjoying large gains in. I have missed out on too many huge winners to not adhere by this rule.
But, if you are in a stock that no longer posses a green chart with a strong uptrend, you should probably get out of it. This market has definitely changed and this selloff is MUCH different than the rest. This is the first selloff where there is no safe haven. They have finally gotten to ALL of the leaders. There was only one group, come Friday, that did not suffer any selling, and thanks to the exhaustion gap following great earnings (earnings always look the BEST AT THE TOP) FSLR put in, it is probably safe to say that group is done. When I look at the angle of ascent of FSLR, JASO, and SPWR and then see the island reversals in all three stocks it becomes clear that these stocks now look like they have topped.
JASO is the best example of this. After a large uptrend the stock makes its biggest one day move on Thursday by putting in an exhaustion gap off of FSLR earnings. Then the very next day, it gaps lower on its largest volume ever, losing more than it gained on the gap higher, and BOP went red. This is very ugly action after such a bullish previous day. This was the last sub-sector that was holding up in the market. Now they have gotten these too.
The day before was the first day we officially saw all four leading stocks of this five-year bull market all selloff on strong volume the same day. When you look at the strong volume of the selling in all of these stocks, you can see that there have been very few days where we have seen back-to-back days of selling like this in all of our leaders. What makes this even more evident that the leaders are topping is the fact that the fifth and sixth horseman have problems too (GRMN and FSLR).
FSLR's action the past three days confirms the poor action in the leaders with everything I just listed above with the solars. But the first official leader of the bull market that started October 2002 was GRMN. Anyone who has been following GRMN recently knows that the stock has more than likely put in a real top and if you are still holding on to any shares I hope it is only 20% or less as the volume and follow-through selling after a five year bull market simply can't be ignored. This stock has topped. All of our leaders have topped. Now the next step is waiting for an area to short.
Before I go over where I want to short these leaders, first I think it is important for you all to understand why these stocks may be topping. If you look at a chart of BIDU going back to 2005 on an arithmetic chart, you will notice that the stock has pretty much been a very tight stock trending higher until early/mid October where it had its first huge volume selloff. That was the first warning that real dumping was occurring. Then after an extreme rally, the stock has rolled over on heavy volume the past two days. What this stock currently has going for it is that the stock is still above the 50 day moving average. But by looking at the recent distribution in the chart and noticing the very wide trading range recently appearing, it appears the stock is done. With the market already under distribution it isn't going to shock me when this leader falls.
RIMM is the same way since the 2002 lows as it has been in a steady uptrend. Around June this year, the uptrend starting to move at a more exponential slope and along the way RIMM did an excessive 3 for 1 split. After that, the stock rallied on lower volume (not bullish) and then had a breakout (could be exhaustion) gap on huge volume. Since the gap in June was the breakout, this is possibly an exhaustion. The rally that followed the gap was also on lower volume and now the past two days the stock has sold off on heavy volume. The two day decline of 14% on large volume is the most severe selling the stock has seen since its rally started and is a clear sign that there is not much left in this former leader. The good news, like BIDU is that it is above the 50 day moving average. So if you are long there is no reason to sell all of it but if you have not locked in any profits you better do so.
The worst looking of the leaders on the short term is GOOG. GOOG's 9% drop the past two days has come on very large volume and when you combine the two days of selling it is the heaviest volume since March 2006. If you look at a two day chart on an arithmetic scale you can see the drop is the most severe drop the stock has seen since it started trading and the drop looks very nasty on the chart. The long uptrend line from September has now been broken on huge volume which is a clear profit taking signal. Just like the other leaders this stock remains above the 50 day moving average but it too is so weak in the short term that it would not surprise me if we go right through that line. However, if you are still long some, keep holding. Until the 200 day moving average is broken there is no reason to get out of all your GOOG long.
The last leader that is holding up is AAPL. Once again, a two day chart shows the severity of the 11% drop the past two days as the candlestick bar is much longer than anything else you can see on this chart. This stock started to get roughed up in August as it had a LOT of selling hit the stock but back then the stock found strong intraday support on most of the days that the heavy selling hit it. That caused it to rally off the lows to the November highs. The problem with the rally is that the majority of it was done on lower volume. That indicated that the retail crowd was the only crowd interest in buying it up here. That low volume rally has now been met by heavy volume selling, just like most low volume rallies are. This stock is resting on the 50 day moving average and looks the weakest out of all the leaders. If you have not taken profits on this stock, you better take some profits on this one. However, until it closes below the 200 dma, I don't think you should sell all of it.
The only leader that has broken is GRMN. I am using GRMN as an example for the rest of the leaders in what I want to see before I go short. Because shorting leading stocks before they are ready to be shorted leaves you in massive pain. Just ask all the short sellers of these leading stocks in February and August. I am sure they are still feeling that pain. I know many traders who shorted some of these leaders both in February and July/August. Both times they felt it. Some think shorting GRMN right here is the right play now. I still don't think that is the case. GRMN still hasn't failed the 200 day moving average so it is still possible it could bounce here and break through the 50 day moving average and go on to new highs. While I doubt that will happen, I will tell you what I would like to see happen so that I can short this stock.
I would like to see GRMN touch the 200 day moving average and begin a rally to the downtrending 50 day moving average (if you look at the average, you will see it has turned lower). I would then like to see it bounce around the 50 day moving average for a while and/or rally above it and break back down below it. Then I will wait for a high volume selloff around the 50 and 200 day moving average. If you look at the stock DNB, you will see what I would love to see GRMN do. If GRMN breaks down just like DNB did in the middle of October, I will load up in GRMN. The other reason that I would load up is that if GRMN ends up looking like DNB, we can guarantee that the market will be still selling off like it has been recently. There has been a ton of distribution in the stock market the past few months and if the leaders start selling off I truly doubt volume will be low.
Even though I was getting bearish on Wednesday, I have to admit I still wasn't ready to abandon the bull case, as I know that it is hard to stop bullish momentum. But there were two stocks on Thursday that gave me "hope" that the bull was going to continue. One was the stock you read about earlier called FNDT. The other one was EXLS.
FNDT was not a perfect chart at all as the stock did not have two straight months of max BOP. But it did the second best thing which is to bounce off the 50 day moving average, put in a very bullish intraday reversal, breakout to or near recent highs on extremely strong volume, and do it with BOP going max green. Well FNDT did the latter and three days later was looking great as the stock was breaking out to new highs and closing at its HOD with BOP still max green. So obviously the stock deserved to be in my IRA. I only put what I consider the best looking charts in there. I have to admit I normally want a lot more max green BOP but I was getting very trigger happy in this market as the lack of perfect charts was driving me crazy.
But the stock market slapped me right in my face the very next day as it slammed FNDT almost 3%. That was enough to officially kill the beautiful chart. Well it was still beautiful but the chances of failure rose. And sure enough come Friday the stock closed below the 50 day moving average on heavy volume a clear signal to sell almost all of it. I am now holding 25% in my regular accounts since I went long on 11/1. But the buy in my IRA on 11/6 has been completely sold. So that now makes the last three longs in my IRA all losers. And with FNDT failing (it had such a nice chart and extremely strong fundies with good estimates) it was one of my last hopes that this bull market was not over finally being destroyed. As this five year bull market appears to be ending, I am slowly coming to the acceptance that it is over.
My final hope that the bull market was not over yet came on Thursday night as I did my scans. I happened to come across a stock that had a 99 EPS rating and had some great fundamentals overall once I started to delve deeper into this stocks story. Not only were the fundamentals incredible for EXLS the chart was very long and the right side seemed very sound with the slight accumulation and green BOP spread about. The best thing about the chart seemed to be that the RS line was leading the price into new high grounds by such a great margin that if the market was putting in lows (which I was not sure if it was or not because the leaders were just cracking and I was not sure a short-term oversold rally was going to happen or not) this stock would explode higher. So I even went long quite a bit despite the weak market because this stock looked so good.
But proving once and for all that being long is now completely wrong, the stock gapped slightly and sold off all day long ending just slightly off its LOD. Just like FNDT, this was a complete sale as it immediately reversed the breakout. Now since I follow my rules hardcore, I still own 20% of this long for my accounts and 25% in the Conservative CANSLIM port on our website since it did not close below the 50 day moving average/24.71 level. But back in the old days I would definitely have sold it all by now and I recommend that if you have a smaller portfolio that you sell all of it. This stock was so pretty on Thursday, despite the nasty market selloff. If this stock would have rallied off of an oversold bounce the gains would have been great and might have produced a great stock. In a bull market this chart pattern in a stock with this kind of fundamental power in EPS and sales growth would produce 80% plus gains (80% is the move off the closing lows in July to the highs in November). However, a stock that fails this kind of super strong nice pattern is definitely in the wrong market environment. Sadly, for the stock, it takes a perfectly amazing pattern that would have rocked in a bull market and throws it the ground and kicks it in the gut. How rude!!
Is it possible that the market could put in a huge bullish reversal on Monday and then give us a follow-through day four days later? Of course it is. Anything can happen in the stock market. That is why you must never marry the bullish or bearish side. You must always stay flexible. I will tell you this though, if we do get a follow through in the next five days, it is going to take months to produce hot charts. There are very few charts that look like NYX. And before NYX becomes a new long it is going to need to move sideways to slightly higher a bit longer as it is still too deep in its basing pattern from the November 2006 highs.
Some of the reasons why I personally think that we will not bottom any time too soon is because no matter how many people say that there is fear out there I do not see it. I did see that the AAII bear ratio hit 50% which is high but I have seen the Investors Intelligence numbers recently and I believe that is at 22% right now. At the lows in August it was 35% bears and 45% bulls. With the bulls also at 55% right now, I doubt we are at the lows right here. Even at the February lows the bears hit 30% so I am not sure how there can be too much fear in the market right now. On the realmoney.com site I see 35% are bullish and 41% are bearish. In August the bears hit 60% and the bulls hit less than 25% so this bull/bear survey is off the bottom mark too.
But the most important sentiment indicators, imo, are the ones where actual money is put on the line. In that case, the put/call ratio is always one of my favorites to look at. One of the most interesting things I saw this week was that on Wednesday when the market sold off the put/call went from .96 to .90 CLEARLY signaling that there was absolutely no panic put buying during the selloff. That was another bearish warning that something bad was coming. Well on Thursday the ratio spiked up to 1.10. But then on Friday with the Nasdaq falling 2.5% and the IBD 100 falling 3.2% the put/call ratio actually fell from 1.10 to 1.03!! It is simply stunning that an index can selloff 2.5% and the options players bet against the trend and buy the dips since that is what they have been used to since October 2002. The put/call ratio dropping two of three down days this week despite the selloff is the most clear indication that there is no fear out there in actual market players.
The last place to look for fear is the VIX index. The VIX did increase 33% the past three days and that is a major development but just as there was no real fear in the selling in February there is no real fear in this selling right now either. The lows in August were put in once VIX got over 35. What proves my point that the big money is made with a high VIX, the rally that followed produced many brand new longs that made 25-100% gains in three months or less. If the VIX would have gotten over 50, we would have had a ton of 50%-200% gainers. That is how the VIX works. The higher the VIX the more money we make in our longs. The higher the VIX the worse the selloff is to give us fewer stocks to focus on. The few stocks that produce hot pretty green charts always become our new longs that give us huge fast gains.
Right now, the VIX is at 28.50 and until the VIX gets to 35 there is no way that we can even begin to talk about a market that is too oversold and needs to bounce because the market has gotten too bearish too fast. No matter what the talking fundamentalist blind-traders say on CNBC, you must follow your charts and listen to their silent voices. The charts speak louder and more truth than any analyst on TV or on the radio ever will. Those who told me to buy banks all the way down the past few months could have saved their clients a bunch of money if they would have learned to use charts. God bless Don Worden and his TC2007. I don't know what I would do without it. Without it, I wonder if there even would be any stock market commentary by me. This is the greatest way to make a living. Definitely one of the hardest. But still one of the best ways to make an honest dollar!
Aloha and I will see you in the chat room where no matter what market direction we are in we always stay in control and make money (except for this week--it sure was painful; ouch!). ALOHA!!!!
Screw This Market; Nasty Selloff After Such A Strong Day Is A Clear Topping Signal
November 7, 2007
I am losing my bullish bias. All my hard work yesterday was rewarded with this!!! Screw this market. Sell all laggards, cut your losses in stocks not working, take in some profits, and raise cash. This market is in for some rough times. Even if it turns around I don’t care anymore. The easy money is being made on the short side now. It is time to get rid of the bullish bias. This is the most confusing market I have EVER seen. Since 1996 I have never seen a market so screwy. Get out of your new longs and take profits. It is time to start selling. If there is nothing wrong with your longs, keep holding.
What makes all of this worse is that today I just loaded up on FNDT in my IRA. This is now the third buy in a row I have made in my IRA that has been a loser (SNDA, BLL, and now FNDT). Right now, I freaking suck, so it is best to not follow my trades unless you really like them. The easy money off the August lows has come and gone. I don’t know what the market is going to do next (probably goes lower) and with all of this volatility I do not want to be a part of it.
I have never seen such a freaking crazy market. The 2000 top has NOTHING on this wild action. If we are not topping, then damn it I really have lost all ability to read the market. Right now, it is unreadable. Anyone bullish or bearish is just asking to get punched in the face. I will continue to take both longs and shorts and will keep everything 1% or smaller of my initial equity.
I am so upset words can not even express how upset I am. Screw this market!!! Have a great evening. Aloha!
I was upset at the time because I felt like it was possible the market was going to rally hard the very next day offering up new longs. Thankfully, the caution that I suggested was rewarded as the Nasdaq sold off 4.4% the past two days. For those that listened to me and took money off the table, way to go. We missed out on some major carnage.
Now my style now forces me to hold at least 10-20% of a long all the way until it closes below the 200 dma (that is why I am still long ZNH even though I KNOW it has topped). The reason I do that is because I have been stopped out of a TON of big winners by not waiting for this event to happen. I am bringing this up because even though I am still long over 100 stocks, it is only because they are above key support and the 200 day moving average. There are about 25% of stocks in my portfolio that if I traded my old style would be complete sells. It would save me money to cut them now, I am sure. But like I just said, I guarantee, my returns would not be as strong if I did not adhere to this rule. I would have been out of MA, IHS, and many other stocks that I am instead enjoying large gains in. I have missed out on too many huge winners to not adhere by this rule.
But, if you are in a stock that no longer posses a green chart with a strong uptrend, you should probably get out of it. This market has definitely changed and this selloff is MUCH different than the rest. This is the first selloff where there is no safe haven. They have finally gotten to ALL of the leaders. There was only one group, come Friday, that did not suffer any selling, and thanks to the exhaustion gap following great earnings (earnings always look the BEST AT THE TOP) FSLR put in, it is probably safe to say that group is done. When I look at the angle of ascent of FSLR, JASO, and SPWR and then see the island reversals in all three stocks it becomes clear that these stocks now look like they have topped.
JASO is the best example of this. After a large uptrend the stock makes its biggest one day move on Thursday by putting in an exhaustion gap off of FSLR earnings. Then the very next day, it gaps lower on its largest volume ever, losing more than it gained on the gap higher, and BOP went red. This is very ugly action after such a bullish previous day. This was the last sub-sector that was holding up in the market. Now they have gotten these too.
The day before was the first day we officially saw all four leading stocks of this five-year bull market all selloff on strong volume the same day. When you look at the strong volume of the selling in all of these stocks, you can see that there have been very few days where we have seen back-to-back days of selling like this in all of our leaders. What makes this even more evident that the leaders are topping is the fact that the fifth and sixth horseman have problems too (GRMN and FSLR).
FSLR's action the past three days confirms the poor action in the leaders with everything I just listed above with the solars. But the first official leader of the bull market that started October 2002 was GRMN. Anyone who has been following GRMN recently knows that the stock has more than likely put in a real top and if you are still holding on to any shares I hope it is only 20% or less as the volume and follow-through selling after a five year bull market simply can't be ignored. This stock has topped. All of our leaders have topped. Now the next step is waiting for an area to short.
Before I go over where I want to short these leaders, first I think it is important for you all to understand why these stocks may be topping. If you look at a chart of BIDU going back to 2005 on an arithmetic chart, you will notice that the stock has pretty much been a very tight stock trending higher until early/mid October where it had its first huge volume selloff. That was the first warning that real dumping was occurring. Then after an extreme rally, the stock has rolled over on heavy volume the past two days. What this stock currently has going for it is that the stock is still above the 50 day moving average. But by looking at the recent distribution in the chart and noticing the very wide trading range recently appearing, it appears the stock is done. With the market already under distribution it isn't going to shock me when this leader falls.
RIMM is the same way since the 2002 lows as it has been in a steady uptrend. Around June this year, the uptrend starting to move at a more exponential slope and along the way RIMM did an excessive 3 for 1 split. After that, the stock rallied on lower volume (not bullish) and then had a breakout (could be exhaustion) gap on huge volume. Since the gap in June was the breakout, this is possibly an exhaustion. The rally that followed the gap was also on lower volume and now the past two days the stock has sold off on heavy volume. The two day decline of 14% on large volume is the most severe selling the stock has seen since its rally started and is a clear sign that there is not much left in this former leader. The good news, like BIDU is that it is above the 50 day moving average. So if you are long there is no reason to sell all of it but if you have not locked in any profits you better do so.
The worst looking of the leaders on the short term is GOOG. GOOG's 9% drop the past two days has come on very large volume and when you combine the two days of selling it is the heaviest volume since March 2006. If you look at a two day chart on an arithmetic scale you can see the drop is the most severe drop the stock has seen since it started trading and the drop looks very nasty on the chart. The long uptrend line from September has now been broken on huge volume which is a clear profit taking signal. Just like the other leaders this stock remains above the 50 day moving average but it too is so weak in the short term that it would not surprise me if we go right through that line. However, if you are still long some, keep holding. Until the 200 day moving average is broken there is no reason to get out of all your GOOG long.
The last leader that is holding up is AAPL. Once again, a two day chart shows the severity of the 11% drop the past two days as the candlestick bar is much longer than anything else you can see on this chart. This stock started to get roughed up in August as it had a LOT of selling hit the stock but back then the stock found strong intraday support on most of the days that the heavy selling hit it. That caused it to rally off the lows to the November highs. The problem with the rally is that the majority of it was done on lower volume. That indicated that the retail crowd was the only crowd interest in buying it up here. That low volume rally has now been met by heavy volume selling, just like most low volume rallies are. This stock is resting on the 50 day moving average and looks the weakest out of all the leaders. If you have not taken profits on this stock, you better take some profits on this one. However, until it closes below the 200 dma, I don't think you should sell all of it.
The only leader that has broken is GRMN. I am using GRMN as an example for the rest of the leaders in what I want to see before I go short. Because shorting leading stocks before they are ready to be shorted leaves you in massive pain. Just ask all the short sellers of these leading stocks in February and August. I am sure they are still feeling that pain. I know many traders who shorted some of these leaders both in February and July/August. Both times they felt it. Some think shorting GRMN right here is the right play now. I still don't think that is the case. GRMN still hasn't failed the 200 day moving average so it is still possible it could bounce here and break through the 50 day moving average and go on to new highs. While I doubt that will happen, I will tell you what I would like to see happen so that I can short this stock.
I would like to see GRMN touch the 200 day moving average and begin a rally to the downtrending 50 day moving average (if you look at the average, you will see it has turned lower). I would then like to see it bounce around the 50 day moving average for a while and/or rally above it and break back down below it. Then I will wait for a high volume selloff around the 50 and 200 day moving average. If you look at the stock DNB, you will see what I would love to see GRMN do. If GRMN breaks down just like DNB did in the middle of October, I will load up in GRMN. The other reason that I would load up is that if GRMN ends up looking like DNB, we can guarantee that the market will be still selling off like it has been recently. There has been a ton of distribution in the stock market the past few months and if the leaders start selling off I truly doubt volume will be low.
Even though I was getting bearish on Wednesday, I have to admit I still wasn't ready to abandon the bull case, as I know that it is hard to stop bullish momentum. But there were two stocks on Thursday that gave me "hope" that the bull was going to continue. One was the stock you read about earlier called FNDT. The other one was EXLS.
FNDT was not a perfect chart at all as the stock did not have two straight months of max BOP. But it did the second best thing which is to bounce off the 50 day moving average, put in a very bullish intraday reversal, breakout to or near recent highs on extremely strong volume, and do it with BOP going max green. Well FNDT did the latter and three days later was looking great as the stock was breaking out to new highs and closing at its HOD with BOP still max green. So obviously the stock deserved to be in my IRA. I only put what I consider the best looking charts in there. I have to admit I normally want a lot more max green BOP but I was getting very trigger happy in this market as the lack of perfect charts was driving me crazy.
But the stock market slapped me right in my face the very next day as it slammed FNDT almost 3%. That was enough to officially kill the beautiful chart. Well it was still beautiful but the chances of failure rose. And sure enough come Friday the stock closed below the 50 day moving average on heavy volume a clear signal to sell almost all of it. I am now holding 25% in my regular accounts since I went long on 11/1. But the buy in my IRA on 11/6 has been completely sold. So that now makes the last three longs in my IRA all losers. And with FNDT failing (it had such a nice chart and extremely strong fundies with good estimates) it was one of my last hopes that this bull market was not over finally being destroyed. As this five year bull market appears to be ending, I am slowly coming to the acceptance that it is over.
My final hope that the bull market was not over yet came on Thursday night as I did my scans. I happened to come across a stock that had a 99 EPS rating and had some great fundamentals overall once I started to delve deeper into this stocks story. Not only were the fundamentals incredible for EXLS the chart was very long and the right side seemed very sound with the slight accumulation and green BOP spread about. The best thing about the chart seemed to be that the RS line was leading the price into new high grounds by such a great margin that if the market was putting in lows (which I was not sure if it was or not because the leaders were just cracking and I was not sure a short-term oversold rally was going to happen or not) this stock would explode higher. So I even went long quite a bit despite the weak market because this stock looked so good.
But proving once and for all that being long is now completely wrong, the stock gapped slightly and sold off all day long ending just slightly off its LOD. Just like FNDT, this was a complete sale as it immediately reversed the breakout. Now since I follow my rules hardcore, I still own 20% of this long for my accounts and 25% in the Conservative CANSLIM port on our website since it did not close below the 50 day moving average/24.71 level. But back in the old days I would definitely have sold it all by now and I recommend that if you have a smaller portfolio that you sell all of it. This stock was so pretty on Thursday, despite the nasty market selloff. If this stock would have rallied off of an oversold bounce the gains would have been great and might have produced a great stock. In a bull market this chart pattern in a stock with this kind of fundamental power in EPS and sales growth would produce 80% plus gains (80% is the move off the closing lows in July to the highs in November). However, a stock that fails this kind of super strong nice pattern is definitely in the wrong market environment. Sadly, for the stock, it takes a perfectly amazing pattern that would have rocked in a bull market and throws it the ground and kicks it in the gut. How rude!!
Is it possible that the market could put in a huge bullish reversal on Monday and then give us a follow-through day four days later? Of course it is. Anything can happen in the stock market. That is why you must never marry the bullish or bearish side. You must always stay flexible. I will tell you this though, if we do get a follow through in the next five days, it is going to take months to produce hot charts. There are very few charts that look like NYX. And before NYX becomes a new long it is going to need to move sideways to slightly higher a bit longer as it is still too deep in its basing pattern from the November 2006 highs.
Some of the reasons why I personally think that we will not bottom any time too soon is because no matter how many people say that there is fear out there I do not see it. I did see that the AAII bear ratio hit 50% which is high but I have seen the Investors Intelligence numbers recently and I believe that is at 22% right now. At the lows in August it was 35% bears and 45% bulls. With the bulls also at 55% right now, I doubt we are at the lows right here. Even at the February lows the bears hit 30% so I am not sure how there can be too much fear in the market right now. On the realmoney.com site I see 35% are bullish and 41% are bearish. In August the bears hit 60% and the bulls hit less than 25% so this bull/bear survey is off the bottom mark too.
But the most important sentiment indicators, imo, are the ones where actual money is put on the line. In that case, the put/call ratio is always one of my favorites to look at. One of the most interesting things I saw this week was that on Wednesday when the market sold off the put/call went from .96 to .90 CLEARLY signaling that there was absolutely no panic put buying during the selloff. That was another bearish warning that something bad was coming. Well on Thursday the ratio spiked up to 1.10. But then on Friday with the Nasdaq falling 2.5% and the IBD 100 falling 3.2% the put/call ratio actually fell from 1.10 to 1.03!! It is simply stunning that an index can selloff 2.5% and the options players bet against the trend and buy the dips since that is what they have been used to since October 2002. The put/call ratio dropping two of three down days this week despite the selloff is the most clear indication that there is no fear out there in actual market players.
The last place to look for fear is the VIX index. The VIX did increase 33% the past three days and that is a major development but just as there was no real fear in the selling in February there is no real fear in this selling right now either. The lows in August were put in once VIX got over 35. What proves my point that the big money is made with a high VIX, the rally that followed produced many brand new longs that made 25-100% gains in three months or less. If the VIX would have gotten over 50, we would have had a ton of 50%-200% gainers. That is how the VIX works. The higher the VIX the more money we make in our longs. The higher the VIX the worse the selloff is to give us fewer stocks to focus on. The few stocks that produce hot pretty green charts always become our new longs that give us huge fast gains.
Right now, the VIX is at 28.50 and until the VIX gets to 35 there is no way that we can even begin to talk about a market that is too oversold and needs to bounce because the market has gotten too bearish too fast. No matter what the talking fundamentalist blind-traders say on CNBC, you must follow your charts and listen to their silent voices. The charts speak louder and more truth than any analyst on TV or on the radio ever will. Those who told me to buy banks all the way down the past few months could have saved their clients a bunch of money if they would have learned to use charts. God bless Don Worden and his TC2007. I don't know what I would do without it. Without it, I wonder if there even would be any stock market commentary by me. This is the greatest way to make a living. Definitely one of the hardest. But still one of the best ways to make an honest dollar!
Aloha and I will see you in the chat room where no matter what market direction we are in we always stay in control and make money (except for this week--it sure was painful; ouch!). ALOHA!!!!
Saturday, July 07, 2007
Fourth Of July Holiday-Shortened Week Goes Out With A Bang; Shorts Continue To Feel The Squeezing Pain Of The Bulls
A positive employment report, positive revisions to past reports along with the unemployment rate holding steady at 4.5%, and acquisition news that EYE raised the offer from a previous company to buy BOL for $75 a share helped stock indexes rise steadily higher all day long in a nice stair step fashion. By the closing bell, all indexes ended in the green, with big-cap tech leading. All of this came despite another increase in oil to $72.81 a barrel-highest close since September. This market continues to move higher despite the highs in oil, confirming that this is the greatest market story never told. (this refers to the severely biased media that REFUSES to acknowledge how INCREDIBLE this rally from October 2002 is).
The NYSE led the way, closing at an all-time high, with a .5% gain and the Nasdaq and Nasdaq 100 gained .4%, hitting 6 1/2 year highs. The DJIA and SP 500 closed slightly higher with a .3% gain and the SP 600 gain was even smaller with a .1% gain. The great news, once again, was that leading stocks trumped the general market indexes, with a 1.2% gain. This is the picture perfect action that you want to see in a bull market. When leading stocks are leading the general indexes, there are much larger gains being made in top growth stocks than value stocks.
Volume was lower than the day before, as it appeared traders started the weekend and/or their vacations early. The lower volume does help alleviate fears that if volume on the downside shows up soon that it will not be that heavy. As it stands now, the NYSE has five distribution days (many weak distro days) and the Nasdaq only has one, signaling that the market is still very healthy up here hitting new highs despite the lower volume.
With the lower volume, however, we did get good breadth confirming the gains today. The other positive is that the breadth improved as the rally continued throughout the day. Advancers beat decliners by a 5-to-3 margin on the NYSE and by a 3-to-2 margin on the Nasdaq. New 52-week highs beat new 52-week lows by 527 to 83, clearly showing the strength of this market after four days of strong price action.
For the week, the Nasdaq led the way with a 2.4% gain, the NYSE followed with an impressive 2%, the SP 500 and SP 600 rallied 1.8%, and the DJIA gained a solid 1.5%. The clear obvious winner this week was the IBD 100 index and my account. The IBD 100 rallied 5.2% and my account rallied 7.3%. This week reversed my poor showing from last week and continued the trend of my account well outperforming the market for the past sixteen weeks (the length of this rally from the March lows).
It has been a powerful four days of low volume gains for the market but I would not be surprised if we get a pullback here as it seems we have worked off the oversold condition and turned some bears into bulls the past week. Some of the key numbers comes from the realmoney.com poll this weekend. It shows that those surveyed lean bullish with 70% expecting price gains for the upcoming week. There are only 13% registering as bears. This also comes with the McClellan and other overbought/oversold indicators get overbought after the past week of price gains. The VIX has also worked off its bullish higher volatility from late June, signaling that the easy money has been made.
However, despite this, the NYSE short interest ratio rose again to near all-time highs closing at 7.66 on Friday. That and the put/call ratio is still around the level it was at the beginning of the week with it closing at .76. This clearly states that despite what people say, traders did not make bullish bets and in fact continued to take the opposite side of the clear trend. The other slightly bullish sentiment news is that bullishness from the Investors Intelligence survey fell to 49.4%. But, bearishness fell also to very low levels of 18%.
The other sentiment index that I noticed giving a signal that the market might be tired here is the ISEE Options put/call index. This index hit 186% on Thursday which is a level where the market normally does not do very well in the short-term following this reading. Combine this with some of the events above, the fact that new buys are starting to get a little difficult to find in top stocks, and the new buys that do show up are in low-float small cap stocks with mixed/poor fundamentals and we just shouldn’t be surprised if we get a pullback. Now a severe pullback–that is something I just don’t see in the cards with this much negativity pouring out of our nightly news.
Another clear reason why I don’t see a top happening anytime soon is that leading stocks with top fundamentals are simply not topping. And history shows that the leaders top BEFORE the market tops. So as long as AAPL, RIMM, BIDU, GOOG, and Chemical stocks are making new highs and are not churning, putting in heavy volume selloffs, or cutting their 50 day moving averages, there is absolutely NO reason to even think of trying to call a top. Once you see these four horseman top and reverse and then can look at the major indexes and see a clear downtrend, on heavy distribution, with lower highs and closes below the 50 day moving average then, and only then, will I listen to the bears.
Until then, the bears are just filled with nothing but pure crap and lies. And their opinions are worth the equivalent of the returns you have received as a bear this year: NOTHING! Pure worthless opinions that do NOT agree with the facts on the ground. This is why trend followers will ALWAYS outperform the top and bottom callers. They will NEVER return what the greatest traders of all-time returned by simply following and listening to top stocks and the general direction of the market.
Now, like I have said before, and like I keep listing on my forums, there are a lot of charts starting parabolic runs. But that is just it: they are starting them or in the middle of them. Very few appear to be in the late stages of runs seen in other parabolic runs in stocks like ERS in 2006 and tech stocks in the 2000 market. Even RevShark sees this, confirming what I have been seeing for weeks and weeks now. Still, until they top, there is no reason to predict when the run will end.
There is even evidence, in the Semiconductor index, that many large big-cap tech stocks are ready to run there. Many are at new 52-week highs and a lot of the sub-components of the Semiconductor/Electronics group have made big moves in the IBD 197 industry group list. It is very good to see the Semi’s join the market as this appears to be very bullish and should help turn some of those bears into the bulls camp, since they always say that it isn’t a real bull market unless the Semi’s are moving. Maybe I am stuck in years gone by, with this statement, but I still have heard plenty of people tell me that this rally (FOR THE PAST FOUR YEARS MIND YOU) is not that great of a rally because Semi stocks never led. Uhm, who said they had to lead? It is much better just seeing stocks like INTC, NVEC, NVDA, ADM, etc. making solid consistent gains. And that is what they are doing. The whole sector looks great. Of course, the best looking one recently has been SMTX. Those who subscribe at the gold level are well familiar with that very very pretty chart.
With a lot of the bullish leanings you are reading in this weekends post, you must also realize that I am no idiot. I have been partial selling many stocks that are in climax/parabolic type runs. Many, not all, of the stocks you see listed below have recently had 10-25% sold via the basic trading necessity of locking in profits. Holding your whole load as the stock continues to race up the charts in an exponential matter is not smart as sudden reversals become more and more likely. Small and smart selling based on either new highs with low volume, new highs with little price change and huge volume, or major reversals where the stock is up a lot on the day but then reverses to close lower are clear places to selloff 10%-20% of your big winners. Locking in some gains and then holding on for a possible climax run is just what the smart traders of yesteryear did and the smart traders of today do. One thing we definitely don’t do (not saying I am great, btw. Trust me I am FAR from it) is call tops. And that is one thing you will not see me do as long as we are moving higher and hitting new all-time and six-and-a-half year highs.
We have earnings season officially kicking off on Monday, with AA releasing earnings after the close. During the week we have numbers from stocks like INFY, PBG, DNA, MAR, YUM, and CTAS, and to close the week off we have GE. After that the fireworks really get going when the earnings really start pounding the table. Isn’t it funny how fast this time of the year can sneak up on you? Besides that there are, like always, economic numbers to digest. But nothing this week should impact the market like earnings will.
Aloha and I will see you in the chat room where you can guarantee we are ALWAYS on the right side of the market.
top holdings up this week - purchase date
TRCR 463% - 1/12
MA 223% - 8/2
OMTR 185% - 9/15
IHS 146% - 12/21/05
CPA 133% - 9/15
KHD 130% - 5/30/06
TTEC 128% - 8/25
ULTR 125% - 10/27
DECK 120% - 9/13
CXW 96% - 5/19/06
HURN 95% - 9/13
CNH 94% - 11/2
CRY 90% - 1/10
VDSI 89% - 1/14
EVEP 89% - 11/16
ZNH 84% - 12/26
APLX 84% - 9/28
AFSI 83% - 4/12
CKSW 69% - 10/11
LFL 68% - 12/13
HURC 66% - 12/18
VSNT 64% - 2/5
ATX 62% - 12/12
IMA 61% - 8/2
NAVI 59% - 12/19
TESO 58% - 2/16
XRA 58% - 5/24
KMGB 57% - 6/1
CRNT 54% - 5/21
TTG 54% - 11/30
CCC 53% - 3/26
FSLR 50% - 5/22
NTLS 50% - 1/30
Market Commentary At Big Wave Trading Bronze Level One
New Swing Longs: Silver Level Two
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
The NYSE led the way, closing at an all-time high, with a .5% gain and the Nasdaq and Nasdaq 100 gained .4%, hitting 6 1/2 year highs. The DJIA and SP 500 closed slightly higher with a .3% gain and the SP 600 gain was even smaller with a .1% gain. The great news, once again, was that leading stocks trumped the general market indexes, with a 1.2% gain. This is the picture perfect action that you want to see in a bull market. When leading stocks are leading the general indexes, there are much larger gains being made in top growth stocks than value stocks.
Volume was lower than the day before, as it appeared traders started the weekend and/or their vacations early. The lower volume does help alleviate fears that if volume on the downside shows up soon that it will not be that heavy. As it stands now, the NYSE has five distribution days (many weak distro days) and the Nasdaq only has one, signaling that the market is still very healthy up here hitting new highs despite the lower volume.
With the lower volume, however, we did get good breadth confirming the gains today. The other positive is that the breadth improved as the rally continued throughout the day. Advancers beat decliners by a 5-to-3 margin on the NYSE and by a 3-to-2 margin on the Nasdaq. New 52-week highs beat new 52-week lows by 527 to 83, clearly showing the strength of this market after four days of strong price action.
For the week, the Nasdaq led the way with a 2.4% gain, the NYSE followed with an impressive 2%, the SP 500 and SP 600 rallied 1.8%, and the DJIA gained a solid 1.5%. The clear obvious winner this week was the IBD 100 index and my account. The IBD 100 rallied 5.2% and my account rallied 7.3%. This week reversed my poor showing from last week and continued the trend of my account well outperforming the market for the past sixteen weeks (the length of this rally from the March lows).
It has been a powerful four days of low volume gains for the market but I would not be surprised if we get a pullback here as it seems we have worked off the oversold condition and turned some bears into bulls the past week. Some of the key numbers comes from the realmoney.com poll this weekend. It shows that those surveyed lean bullish with 70% expecting price gains for the upcoming week. There are only 13% registering as bears. This also comes with the McClellan and other overbought/oversold indicators get overbought after the past week of price gains. The VIX has also worked off its bullish higher volatility from late June, signaling that the easy money has been made.
However, despite this, the NYSE short interest ratio rose again to near all-time highs closing at 7.66 on Friday. That and the put/call ratio is still around the level it was at the beginning of the week with it closing at .76. This clearly states that despite what people say, traders did not make bullish bets and in fact continued to take the opposite side of the clear trend. The other slightly bullish sentiment news is that bullishness from the Investors Intelligence survey fell to 49.4%. But, bearishness fell also to very low levels of 18%.
The other sentiment index that I noticed giving a signal that the market might be tired here is the ISEE Options put/call index. This index hit 186% on Thursday which is a level where the market normally does not do very well in the short-term following this reading. Combine this with some of the events above, the fact that new buys are starting to get a little difficult to find in top stocks, and the new buys that do show up are in low-float small cap stocks with mixed/poor fundamentals and we just shouldn’t be surprised if we get a pullback. Now a severe pullback–that is something I just don’t see in the cards with this much negativity pouring out of our nightly news.
Another clear reason why I don’t see a top happening anytime soon is that leading stocks with top fundamentals are simply not topping. And history shows that the leaders top BEFORE the market tops. So as long as AAPL, RIMM, BIDU, GOOG, and Chemical stocks are making new highs and are not churning, putting in heavy volume selloffs, or cutting their 50 day moving averages, there is absolutely NO reason to even think of trying to call a top. Once you see these four horseman top and reverse and then can look at the major indexes and see a clear downtrend, on heavy distribution, with lower highs and closes below the 50 day moving average then, and only then, will I listen to the bears.
Until then, the bears are just filled with nothing but pure crap and lies. And their opinions are worth the equivalent of the returns you have received as a bear this year: NOTHING! Pure worthless opinions that do NOT agree with the facts on the ground. This is why trend followers will ALWAYS outperform the top and bottom callers. They will NEVER return what the greatest traders of all-time returned by simply following and listening to top stocks and the general direction of the market.
Now, like I have said before, and like I keep listing on my forums, there are a lot of charts starting parabolic runs. But that is just it: they are starting them or in the middle of them. Very few appear to be in the late stages of runs seen in other parabolic runs in stocks like ERS in 2006 and tech stocks in the 2000 market. Even RevShark sees this, confirming what I have been seeing for weeks and weeks now. Still, until they top, there is no reason to predict when the run will end.
There is even evidence, in the Semiconductor index, that many large big-cap tech stocks are ready to run there. Many are at new 52-week highs and a lot of the sub-components of the Semiconductor/Electronics group have made big moves in the IBD 197 industry group list. It is very good to see the Semi’s join the market as this appears to be very bullish and should help turn some of those bears into the bulls camp, since they always say that it isn’t a real bull market unless the Semi’s are moving. Maybe I am stuck in years gone by, with this statement, but I still have heard plenty of people tell me that this rally (FOR THE PAST FOUR YEARS MIND YOU) is not that great of a rally because Semi stocks never led. Uhm, who said they had to lead? It is much better just seeing stocks like INTC, NVEC, NVDA, ADM, etc. making solid consistent gains. And that is what they are doing. The whole sector looks great. Of course, the best looking one recently has been SMTX. Those who subscribe at the gold level are well familiar with that very very pretty chart.
With a lot of the bullish leanings you are reading in this weekends post, you must also realize that I am no idiot. I have been partial selling many stocks that are in climax/parabolic type runs. Many, not all, of the stocks you see listed below have recently had 10-25% sold via the basic trading necessity of locking in profits. Holding your whole load as the stock continues to race up the charts in an exponential matter is not smart as sudden reversals become more and more likely. Small and smart selling based on either new highs with low volume, new highs with little price change and huge volume, or major reversals where the stock is up a lot on the day but then reverses to close lower are clear places to selloff 10%-20% of your big winners. Locking in some gains and then holding on for a possible climax run is just what the smart traders of yesteryear did and the smart traders of today do. One thing we definitely don’t do (not saying I am great, btw. Trust me I am FAR from it) is call tops. And that is one thing you will not see me do as long as we are moving higher and hitting new all-time and six-and-a-half year highs.
We have earnings season officially kicking off on Monday, with AA releasing earnings after the close. During the week we have numbers from stocks like INFY, PBG, DNA, MAR, YUM, and CTAS, and to close the week off we have GE. After that the fireworks really get going when the earnings really start pounding the table. Isn’t it funny how fast this time of the year can sneak up on you? Besides that there are, like always, economic numbers to digest. But nothing this week should impact the market like earnings will.
Aloha and I will see you in the chat room where you can guarantee we are ALWAYS on the right side of the market.
top holdings up this week - purchase date
TRCR 463% - 1/12
MA 223% - 8/2
OMTR 185% - 9/15
IHS 146% - 12/21/05
CPA 133% - 9/15
KHD 130% - 5/30/06
TTEC 128% - 8/25
ULTR 125% - 10/27
DECK 120% - 9/13
CXW 96% - 5/19/06
HURN 95% - 9/13
CNH 94% - 11/2
CRY 90% - 1/10
VDSI 89% - 1/14
EVEP 89% - 11/16
ZNH 84% - 12/26
APLX 84% - 9/28
AFSI 83% - 4/12
CKSW 69% - 10/11
LFL 68% - 12/13
HURC 66% - 12/18
VSNT 64% - 2/5
ATX 62% - 12/12
IMA 61% - 8/2
NAVI 59% - 12/19
TESO 58% - 2/16
XRA 58% - 5/24
KMGB 57% - 6/1
CRNT 54% - 5/21
TTG 54% - 11/30
CCC 53% - 3/26
FSLR 50% - 5/22
NTLS 50% - 1/30
Market Commentary At Big Wave Trading Bronze Level One
New Swing Longs: Silver Level Two
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
Saturday, June 16, 2007
Tame Core CPI Data Traps The Bears As Stocks Rally On Heavier Volume; The Incompetent Short Sellers Just Don't Get It
Stocks started Friday off just right as stocks gapped higher thanks to a tame core CPI. The CPI moved up .7% in May–the biggest since September 2005–but the core CPI was up only .1%. That was less than the .2% expected by economist. That also lowered the YOY core CPI to 2.2% which was the smallest in 14 months. The CPI data clearly gave investors the hope that the Fed will scrap its bias to raise rates as the recent economic numbers suggest steady economic growth with mild inflation. A sign that rates and economic growth are starting to come in-line can be seen in the yield curve. It has corrected itself and now has a very positive bullish slope to it compared to where it was just three months ago when the curve was inverted.
Other solid news from the economy came from the Labor Department’s production numbers. Industrial production was flat in May, better than the prior two readings of negative growth. Manufacturing production was up .1%, besting the recent levels. And capacity utilization was down showing a lot of capacity which has inflation easing pressure.
These reports were strong enough to get buyers hungry for stocks. And when you combine that with options expiration you had the perfect mix for big stock gains on big volume. When all was said-and-done, stocks climbed across the board, with the SP 600 up 1.2%, the Nasdaq rose 1.1% to six-year highs, the NYSE higher by .9%, the SP 500 was up .7%, and the DJIA rose .6%. This sent all stock indexes near all-time highs and gave the indexes their fifteenth straight positive Friday close. For the third day in-a-row the IBD 100 led the market, with a 1.5% gain. That can only be described as perfect action in a market making strong gains despite all the bearishness.
Volume was higher on both exchanges. On the NYSE volume was 41% higher and 27% higher on the Nasdaq. Despite the higher volume coming on the back of quadruple witching, the fact that volume was so much higher on the NYSE is a clear confirmation of the rally after last weeks and Tuesday’s selling.
As for the internals, they were rather strong, with advancers beating decliners on the NYSE by a 13-to-3 ratio and on the Nasdaq by a 2-to-1 ratio. The really strong reversal to the bullish side was the new highs and new lows. The amount of 52-week highs exploded to 609 and new 52-week lows were only 70, finally sending an end to the mixed message of this statistic.
A rough start to the week was quickly corrected as we came up to the positive retail sales report on Wednesday. For the week, the Nasdaq led the way higher with a 2.1% gain, the NYSE rose 1.9%, the SP 600, the SP 500 gained 1.7%, and the DJIA rose 1.6%. However, when comparing those gains to leading stocks, you can tell that the action was where it is supposed to be in strong markets. The IBD 100 rallied 4% for the week. When you have leading stocks leading a rally, there is NO reason to be looking for a top. I could understand the bearishness before when this index was not keeping up. But being bearish now shows just a complete lack of respect for history.
Leading stocks never really got whacked (unlike the Sopranos finally–what a load of crap) when the market pulled back. The action in those leading stocks was a clear signal that there were not real problems with this market. Granted, it could have gotten a lot worse, but those stocks normally break down well before a stock market is about to top. The fact that those current leading stocks held was proof enough to me that this was not the right time to be calling a top. AAPL and GOOG, besides the current leading stocks, are your tell. As long as these stocks are holding their 50 dma’s, there is NO reason to get bearish just because everyone else is. Crowd mentality is a disease and last time I checked you are supposed to stay away from diseases. Remember: going with the crowd (after you get out of HS) is what morons do. People that can not think for themselves go with the crowd. Those people do NOT make money in the stock market year in and year out. Stay away from this thinking.
The other clear obvious reason that nobody should have gotten full-on-bearish was that all the indexes rested right at their 50 day moving averages. After touching those averages, the indexes have done nothing but rally higher. This is exactly how you want to see strong markets act. They, seriously, don’t get much better than this.
The Nasdaq’s accumulation/distribution rating has risen to a C+ from a D- on Thursday. This is an amazing jump and also should confirm the rallies strength off the 50 dma. And when you take that with the NYSE short interest ratio being near an all-time high at 7.58, you have a clear scenario where you can see the smart money buying stocks (acc/dist rating) and the dumb money (hedge funds/retail) shorting stocks. The shorts are the ones who are wrong here. The price gains prove that. The one group of traders that have been right about this rally since it started–which happens to be where the bulls and bears crossed in the investors intelligence survey–has been the newsletter writers according to the investors intelligence survey. These guys have been bullish and continue to be bullish since they crossed in June. The current reading shows 56.7% are bulls; the five-year high is 62.9%.
What could be better? Volatility. The constant gains since March 2003 without a 10% decline on the DJIA is the reason why my top stocks only have so many up 100%. In normal bull markets, that start after a downtrend, where the VIX rises to above 25, I will be able to produce at least 5 stocks up over 300% and over 20 stocks up over 100% within six months. That clearly has not been the case with this rally as the VIX has not been over 20 since early 2004 and has not seen 30 since March 2003. This is why, in 2003, everything you touched went up 100% within months using the style I have. Right now, as you can see, 50% gains are like the 100% gains and the 100% gains are like the old 200% gains. Until this market sells off there is not going to be a “sh*t-load” of money to be made, unless you are quick with trading the China or solar stocks.
However, if you just stayed with leading stocks and have been long stocks in the Chemical-Fertilizer sector you would be sitting on a HUGE gain. These stocks have been leaders for the past six months and YTD they are up 91% blowing away another other sector when it comes to performance. This goes to show, once again, that leading stocks lead the market by a LONG shot. This compares to 10% gains in the NYSE and SP 600 or the 14% gain in the IBD 100 YTD. However, either way you look at it, investing in leading stocks is where the money is.
Where the money is not is in shorting this market. With that high NYSE short interest ratio and the market near all-time highs a further short-squeeze has to be expected at this point. The perma-bear traders like TraderTim, whom if you study about will find out is a depressed near-sadistic individual, are the perfect fuel this fire needs to keep burning. The hardest thing for most it seems is to actually believe the FACTS that are appearing right in front of your face with the indexes up near these all-time highs. Most people seem to want to believe the rants of delusional egotistical arrogant self-absorbed liars. If that is the game you want to play, be my guest. I will deal with the facts of the current market and continue to play the trend to the upside and make money.
Before I end this, there is one more thing that should be known that most traders don’t seem to understand. This market is a bit oversold with the 10-day moving average of the advance/decline line well under the zero level where this oscillator judges overbought and oversold. With that in mind, the amount of stocks above the 200-dma is only at 68% compared with 86% back in February and 84% back in April. Yet, here we are with the NYSE .5% away from an all time high and the Nasdaq already at a new 52-week high, yet the market has 20% less stocks above the 200-dma. That clearly shows that we have a lot of stocks that can join the rally, that can send the indexes even higher than they are now. Some may say that this is a sign of weakness. To that I only have to say really? Then why is the Nasdaq at a new 52-week high and why are the indexes only less than 1% away from an all-time high?
Facts are facts, folks. We have a stock market hitting new 52-week highs, on near all-time short interest, with a record setting economy, and a lot of bearish headlines on your late night biased-news networks. This can only mean one thing: stocks are going to move higher.
top holdings up this week - purchase date
TRCR 466% - 1/12
PTT 341% - 11/16
MA 218% - 8/2
OMTR 155% - 9/15
CCOI 135% - 9/27
KHDH 131% - 5/30/06
TTEC 131% - 8/25
AOI 127% - 11/9
ULTR 126% - 10/27
IHS 121% - 12/21/05
MFW 116% - 1/29
MOS 116% - 10/12
SVNT 112% - 8/24
MEH 112% - 8/30
CPA 108% - 9/15
HRZ 105% - 9/27
DECK 98% - 9/13
CRY 95% - 1/10
PRGX 92% - 1/12
CXW 92% - 5/19/06
EVEP 90% - 11/16
CNH 88% - 11/2
APLX 80% - 9/28
IGLD 80% - 10/26
HURN 78% - 9/13
VDSI 73% - 1/4
NTL 71% - 4/13
LTS 67% - 1/11
XRA 66% - 5/24
ZNH 65% - 12/26
MCZ 64% - 3/27
LFL 63% - 12/13
VSNT 61% - 2/5
NSH 58% - 12/19
TESO 56% - 2/16
AFSI 55% - 4/12
BMA 52% - 10/24
TSYS 50% - 1/26
TTG 50% - 11/30
Market Commentary At Big Wave Trading Bronze Level One
New Swing Longs: Silver Level Two
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
Other solid news from the economy came from the Labor Department’s production numbers. Industrial production was flat in May, better than the prior two readings of negative growth. Manufacturing production was up .1%, besting the recent levels. And capacity utilization was down showing a lot of capacity which has inflation easing pressure.
These reports were strong enough to get buyers hungry for stocks. And when you combine that with options expiration you had the perfect mix for big stock gains on big volume. When all was said-and-done, stocks climbed across the board, with the SP 600 up 1.2%, the Nasdaq rose 1.1% to six-year highs, the NYSE higher by .9%, the SP 500 was up .7%, and the DJIA rose .6%. This sent all stock indexes near all-time highs and gave the indexes their fifteenth straight positive Friday close. For the third day in-a-row the IBD 100 led the market, with a 1.5% gain. That can only be described as perfect action in a market making strong gains despite all the bearishness.
Volume was higher on both exchanges. On the NYSE volume was 41% higher and 27% higher on the Nasdaq. Despite the higher volume coming on the back of quadruple witching, the fact that volume was so much higher on the NYSE is a clear confirmation of the rally after last weeks and Tuesday’s selling.
As for the internals, they were rather strong, with advancers beating decliners on the NYSE by a 13-to-3 ratio and on the Nasdaq by a 2-to-1 ratio. The really strong reversal to the bullish side was the new highs and new lows. The amount of 52-week highs exploded to 609 and new 52-week lows were only 70, finally sending an end to the mixed message of this statistic.
A rough start to the week was quickly corrected as we came up to the positive retail sales report on Wednesday. For the week, the Nasdaq led the way higher with a 2.1% gain, the NYSE rose 1.9%, the SP 600, the SP 500 gained 1.7%, and the DJIA rose 1.6%. However, when comparing those gains to leading stocks, you can tell that the action was where it is supposed to be in strong markets. The IBD 100 rallied 4% for the week. When you have leading stocks leading a rally, there is NO reason to be looking for a top. I could understand the bearishness before when this index was not keeping up. But being bearish now shows just a complete lack of respect for history.
Leading stocks never really got whacked (unlike the Sopranos finally–what a load of crap) when the market pulled back. The action in those leading stocks was a clear signal that there were not real problems with this market. Granted, it could have gotten a lot worse, but those stocks normally break down well before a stock market is about to top. The fact that those current leading stocks held was proof enough to me that this was not the right time to be calling a top. AAPL and GOOG, besides the current leading stocks, are your tell. As long as these stocks are holding their 50 dma’s, there is NO reason to get bearish just because everyone else is. Crowd mentality is a disease and last time I checked you are supposed to stay away from diseases. Remember: going with the crowd (after you get out of HS) is what morons do. People that can not think for themselves go with the crowd. Those people do NOT make money in the stock market year in and year out. Stay away from this thinking.
The other clear obvious reason that nobody should have gotten full-on-bearish was that all the indexes rested right at their 50 day moving averages. After touching those averages, the indexes have done nothing but rally higher. This is exactly how you want to see strong markets act. They, seriously, don’t get much better than this.
The Nasdaq’s accumulation/distribution rating has risen to a C+ from a D- on Thursday. This is an amazing jump and also should confirm the rallies strength off the 50 dma. And when you take that with the NYSE short interest ratio being near an all-time high at 7.58, you have a clear scenario where you can see the smart money buying stocks (acc/dist rating) and the dumb money (hedge funds/retail) shorting stocks. The shorts are the ones who are wrong here. The price gains prove that. The one group of traders that have been right about this rally since it started–which happens to be where the bulls and bears crossed in the investors intelligence survey–has been the newsletter writers according to the investors intelligence survey. These guys have been bullish and continue to be bullish since they crossed in June. The current reading shows 56.7% are bulls; the five-year high is 62.9%.
What could be better? Volatility. The constant gains since March 2003 without a 10% decline on the DJIA is the reason why my top stocks only have so many up 100%. In normal bull markets, that start after a downtrend, where the VIX rises to above 25, I will be able to produce at least 5 stocks up over 300% and over 20 stocks up over 100% within six months. That clearly has not been the case with this rally as the VIX has not been over 20 since early 2004 and has not seen 30 since March 2003. This is why, in 2003, everything you touched went up 100% within months using the style I have. Right now, as you can see, 50% gains are like the 100% gains and the 100% gains are like the old 200% gains. Until this market sells off there is not going to be a “sh*t-load” of money to be made, unless you are quick with trading the China or solar stocks.
However, if you just stayed with leading stocks and have been long stocks in the Chemical-Fertilizer sector you would be sitting on a HUGE gain. These stocks have been leaders for the past six months and YTD they are up 91% blowing away another other sector when it comes to performance. This goes to show, once again, that leading stocks lead the market by a LONG shot. This compares to 10% gains in the NYSE and SP 600 or the 14% gain in the IBD 100 YTD. However, either way you look at it, investing in leading stocks is where the money is.
Where the money is not is in shorting this market. With that high NYSE short interest ratio and the market near all-time highs a further short-squeeze has to be expected at this point. The perma-bear traders like TraderTim, whom if you study about will find out is a depressed near-sadistic individual, are the perfect fuel this fire needs to keep burning. The hardest thing for most it seems is to actually believe the FACTS that are appearing right in front of your face with the indexes up near these all-time highs. Most people seem to want to believe the rants of delusional egotistical arrogant self-absorbed liars. If that is the game you want to play, be my guest. I will deal with the facts of the current market and continue to play the trend to the upside and make money.
Before I end this, there is one more thing that should be known that most traders don’t seem to understand. This market is a bit oversold with the 10-day moving average of the advance/decline line well under the zero level where this oscillator judges overbought and oversold. With that in mind, the amount of stocks above the 200-dma is only at 68% compared with 86% back in February and 84% back in April. Yet, here we are with the NYSE .5% away from an all time high and the Nasdaq already at a new 52-week high, yet the market has 20% less stocks above the 200-dma. That clearly shows that we have a lot of stocks that can join the rally, that can send the indexes even higher than they are now. Some may say that this is a sign of weakness. To that I only have to say really? Then why is the Nasdaq at a new 52-week high and why are the indexes only less than 1% away from an all-time high?
Facts are facts, folks. We have a stock market hitting new 52-week highs, on near all-time short interest, with a record setting economy, and a lot of bearish headlines on your late night biased-news networks. This can only mean one thing: stocks are going to move higher.
top holdings up this week - purchase date
TRCR 466% - 1/12
PTT 341% - 11/16
MA 218% - 8/2
OMTR 155% - 9/15
CCOI 135% - 9/27
KHDH 131% - 5/30/06
TTEC 131% - 8/25
AOI 127% - 11/9
ULTR 126% - 10/27
IHS 121% - 12/21/05
MFW 116% - 1/29
MOS 116% - 10/12
SVNT 112% - 8/24
MEH 112% - 8/30
CPA 108% - 9/15
HRZ 105% - 9/27
DECK 98% - 9/13
CRY 95% - 1/10
PRGX 92% - 1/12
CXW 92% - 5/19/06
EVEP 90% - 11/16
CNH 88% - 11/2
APLX 80% - 9/28
IGLD 80% - 10/26
HURN 78% - 9/13
VDSI 73% - 1/4
NTL 71% - 4/13
LTS 67% - 1/11
XRA 66% - 5/24
ZNH 65% - 12/26
MCZ 64% - 3/27
LFL 63% - 12/13
VSNT 61% - 2/5
NSH 58% - 12/19
TESO 56% - 2/16
AFSI 55% - 4/12
BMA 52% - 10/24
TSYS 50% - 1/26
TTG 50% - 11/30
Market Commentary At Big Wave Trading Bronze Level One
New Swing Longs: Silver Level Two
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
Saturday, June 09, 2007
Stocks Bounce Back From Thursday's Selloff On Lower Volume; Indexes Still Holding Their 50 Day Moving Average
THIS WAS THE COMMENTARY FROM THURSDAY'S SESSION THAT WAS POSTED BEFORE THE OPENING BELL ON FRIDAY FOR PAID SUBSCRIBERS:
Inflation Worries Send Stocks Lower, Closing At Their LOD, On Heavy Volume; Caution Is Best Advised Here
By MauiTrader
Dip buyers were severely punished today as stocks sold off hard after bonds fell and yields rose. During the trading day, bond yields on the 10 and 30 year note crossed 5% for the first time in eleven months to close at 5.12% and 5.22%. This led Bill Gross to go bearish on bonds for the first time twenty-five years. And if that wasn’t bad enough for inflation angst, crude oil rose to near $67 a barrel on a bad refinery report from the EIA. This was enough to spooks traders, all day long, and convince some traders that Ben might have to hike rates this year. That is a quick turnabout off the hopes of a rate cut later this year.
There was some good news out there, with the jobless claims coming in at its lowest level in three weeks, lower by 1,000 to 309,000. Also retailers reported a strong month of sales for May and April merchandise wholesale sells rose faster than inventories. However, obviously, this did not matter with the fears of higher inflation.
At the close, stocks fell across the board and almost all of the indexes closed at their LOD. The SP 400 led the way lower collapsing 2.1%, the SP 600 followed with a 1.9% whack, the NYSE, Nasdaq, and SP 500 fell 1.8%, and the DJIA fell 1.5%. There were two clear rough spots today: transports and leading stocks. The DJ Transportation Average, which started lagging the DJIA well before today’s fall, swooned 2.4%. The IBD 100 faired even worse, as leading stocks fell off a cliff with a 2.8% loss.
Volume was higher on the Nasdaq and much higher on the NYSE, giving these indexes another distribution day. This was the third one in-a-row for the NYSE. During the past four weeks the SP 500 and DJIA have four distribution days, the NYSE has five, and the Nasdaq has an extremely high seven. It is amazing with that many distribution days that the Nasdaq is actually still above the 50 dma.
The way the indexes look right now, it appears that they are rolling over. However, the breadth of this selling seemed climatic and panicky today. So we could find support here at the 50 dma. There were only four out of 197 industry groups that were up today–and 150 of those fell 1% or more. A similar number was put in yesterday for total breadth amongst the industry groups. Also, breadth today was extremely extreme today on the NYSE with decliners beating advancers by a 10-to-1 margin. That seems almost impossible. Breadth was better on the Nasdaq but still a tad extreme with decliners beating advancers by a 4-to-1 margin. On the DJIA decliners beat advancers by a 30-to-0 ratio. It has been a long time since I have seen every DJIA stock fall on the same day.
Another indication that the selling might have been a bit panicky was the put/call ratio rising to 1.12. If this wasn’t panic selling and people were buying the dips, this ratio would be lower. At the same time, to show you how key this point of the market is, the amount of new 52-week lows is now higher than the 52-week highs. This, to me, is near shocking. We are around 3% to 4% off the all-time highs, yet we had 143 new 52-week lows!!! and only 90 new 52-week highs. This reading here tells me that this market, when it does turn, is going to be rough for a while. That put/call might be good on the short-term but longer-term this kind of internal reading is bearish. I just wish I could remember the last time the market was doing so well but the new lows were higher than the new highs.
I think it is safe to say that this rally is under pressure now, as the rest of the world also looks to be weakening, following the lead of China. Even though the indexes are not below the 50 dma yet it is still time to get cautious with all the distribution days mounting up on top of today’s selloff.
I have been advising to keep new buys small since Friday, after maxing out my personal account after Wednesday’s market. The markets have a history of topping out after I get all of my money completely invested. The bulk of my gains are made in the beginning but near the end after selling weak stocks to strong stocks you eventually max out. And that is normally when the markets slow down. That with the poor quality of the longs since Friday (not the charts, but the fundamentals and liquidity of the stocks) and the distribution days were our tell that something was about to happen.
However, do NOT panic sell. If you have nothing wrong with your stock and your holdings or some of them are acting like everything is OK with the market, you want to hold them. This could be the end of the selling or just the start. If it is the start, you should be sitting on some nice gains that a confirmation of a pullback will not kill you. If it is not the start of a pullback you can hold your longs for more gains. Remember, you NEVER want to be scared out of a position. Sell the weak stocks that are moving lower or not acting right and keep the winners that are either still moving up or are pulling back in a normal low volume fashion. There were only 20 complete sells and out of those only two were high quality stocks. Another 40 stocks got a haircut. I have been very busy today. But it will pay off in the long-run. It always does.
After being up eight of nine weeks, the market was getting overbought and needed this pullback. I hope this isn’t a top because I would hate to sell off some of my bigger beautiful longs but anything can happen tomorrow that could change all those nice charts in one fell swoop and that is why I have to prepare myself mentally for anything and everything. I want higher prices and most of my charts are holding up very well but at the same time the market would be a lot more healthy and more rewarding for me if I could get a pullback, go to cash, and then wait for the next time to go all-in on margin to the long side (hopefully with VIX around 30 or so). Markets that rally AFTER a big pullback will always produce stocks that will move 100%-500% in short periods of time. If we bounce here, trust me, we still will not be having any of that.
Here, also, may be another key tell for a market top: the leaders of this bull as far back as 2003 are still running. GOOG, AAPL, RIMM, CROX, etc… As long as these stocks keep hitting new highs it is hard to think the market could actually top. Also none of these stocks are in climax runs which means they could have a lot of room to keep running. In fact I can’t find any climax looking charts.
There is absolutely one thing you must NOT do. Do NOT buy the dips. Do not buy stocks when the market is falling. You are only supposed to be going long stocks in top sectors in markets that are trending up. I obviously can maneuver a bit differently. But most traders should stay very disciplined and play by the rules until they are making consistent money the right way by buying top stocks moving higher in top sectors in markets moving up. I heard some subscribers and other participants in other rooms talk of buying the dip. I would wait for breakouts, if I were you. Look for charts like TTG CRNT and KHDH. Not charts like IMR.
We have the Commerce Department report on the April trade deficit and we have weakness in most Pacific/Asia markets so that will be on the minds of traders. That and of course the worry of what the market is going to do after yesterday’s selloff. But I don’t need that in my life. I have enough things to worry about. And the stock market will never be one of those things I will ever have to worry about. When you have rules, discipline, and sound strategy that you have tested and used to make a good living off of, you don’t have to.
Aloha and I will see you in the chat room!! It’s Aloha Friday, No Work Till Monday……dee dee de de de…..
top holdings up this week - purchase date
TRCR 430% - 1/12
PTT 303% - 11/16
MA 187% - 8/2
CCOI 144% - 9/27
OMTR 134% -
TTEC 130% - 8/25
ULTR 116% - 10/27
MEH 113% - 8/30
MOS 109% - 10/12
MFW 108% - 1/29
KHDH 107% - 5/30/06
DECK 97% - 9/13
CPA 97% - 9/15
CXW 91% - 5/19/06
IGLD 87% - 10/26
EVEP 86% - 11/16
MVIS 86% - 12/21
APLX 83% - 9/28
VDSI 79% - 1/4
HURN 77% - 9/13
MCZ 74% - 3/27
CLRT 73% - 11/30
CNH 72% - 11/2
TTG 63% - 11/30
TESO 60% - 2/16
LFL 57% - 12/13
NSH 57% - 12/19
AFSI 56% - 4/12
VSNT 54% - 2/5
APFC 52% - 3/5
XOMA 51% - 1/12
HURC 50% - 12/18
Market Commentary At Big Wave Trading Bronze Level One
New Swing Longs: Silver Level Two
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
Inflation Worries Send Stocks Lower, Closing At Their LOD, On Heavy Volume; Caution Is Best Advised Here
By MauiTrader
Dip buyers were severely punished today as stocks sold off hard after bonds fell and yields rose. During the trading day, bond yields on the 10 and 30 year note crossed 5% for the first time in eleven months to close at 5.12% and 5.22%. This led Bill Gross to go bearish on bonds for the first time twenty-five years. And if that wasn’t bad enough for inflation angst, crude oil rose to near $67 a barrel on a bad refinery report from the EIA. This was enough to spooks traders, all day long, and convince some traders that Ben might have to hike rates this year. That is a quick turnabout off the hopes of a rate cut later this year.
There was some good news out there, with the jobless claims coming in at its lowest level in three weeks, lower by 1,000 to 309,000. Also retailers reported a strong month of sales for May and April merchandise wholesale sells rose faster than inventories. However, obviously, this did not matter with the fears of higher inflation.
At the close, stocks fell across the board and almost all of the indexes closed at their LOD. The SP 400 led the way lower collapsing 2.1%, the SP 600 followed with a 1.9% whack, the NYSE, Nasdaq, and SP 500 fell 1.8%, and the DJIA fell 1.5%. There were two clear rough spots today: transports and leading stocks. The DJ Transportation Average, which started lagging the DJIA well before today’s fall, swooned 2.4%. The IBD 100 faired even worse, as leading stocks fell off a cliff with a 2.8% loss.
Volume was higher on the Nasdaq and much higher on the NYSE, giving these indexes another distribution day. This was the third one in-a-row for the NYSE. During the past four weeks the SP 500 and DJIA have four distribution days, the NYSE has five, and the Nasdaq has an extremely high seven. It is amazing with that many distribution days that the Nasdaq is actually still above the 50 dma.
The way the indexes look right now, it appears that they are rolling over. However, the breadth of this selling seemed climatic and panicky today. So we could find support here at the 50 dma. There were only four out of 197 industry groups that were up today–and 150 of those fell 1% or more. A similar number was put in yesterday for total breadth amongst the industry groups. Also, breadth today was extremely extreme today on the NYSE with decliners beating advancers by a 10-to-1 margin. That seems almost impossible. Breadth was better on the Nasdaq but still a tad extreme with decliners beating advancers by a 4-to-1 margin. On the DJIA decliners beat advancers by a 30-to-0 ratio. It has been a long time since I have seen every DJIA stock fall on the same day.
Another indication that the selling might have been a bit panicky was the put/call ratio rising to 1.12. If this wasn’t panic selling and people were buying the dips, this ratio would be lower. At the same time, to show you how key this point of the market is, the amount of new 52-week lows is now higher than the 52-week highs. This, to me, is near shocking. We are around 3% to 4% off the all-time highs, yet we had 143 new 52-week lows!!! and only 90 new 52-week highs. This reading here tells me that this market, when it does turn, is going to be rough for a while. That put/call might be good on the short-term but longer-term this kind of internal reading is bearish. I just wish I could remember the last time the market was doing so well but the new lows were higher than the new highs.
I think it is safe to say that this rally is under pressure now, as the rest of the world also looks to be weakening, following the lead of China. Even though the indexes are not below the 50 dma yet it is still time to get cautious with all the distribution days mounting up on top of today’s selloff.
I have been advising to keep new buys small since Friday, after maxing out my personal account after Wednesday’s market. The markets have a history of topping out after I get all of my money completely invested. The bulk of my gains are made in the beginning but near the end after selling weak stocks to strong stocks you eventually max out. And that is normally when the markets slow down. That with the poor quality of the longs since Friday (not the charts, but the fundamentals and liquidity of the stocks) and the distribution days were our tell that something was about to happen.
However, do NOT panic sell. If you have nothing wrong with your stock and your holdings or some of them are acting like everything is OK with the market, you want to hold them. This could be the end of the selling or just the start. If it is the start, you should be sitting on some nice gains that a confirmation of a pullback will not kill you. If it is not the start of a pullback you can hold your longs for more gains. Remember, you NEVER want to be scared out of a position. Sell the weak stocks that are moving lower or not acting right and keep the winners that are either still moving up or are pulling back in a normal low volume fashion. There were only 20 complete sells and out of those only two were high quality stocks. Another 40 stocks got a haircut. I have been very busy today. But it will pay off in the long-run. It always does.
After being up eight of nine weeks, the market was getting overbought and needed this pullback. I hope this isn’t a top because I would hate to sell off some of my bigger beautiful longs but anything can happen tomorrow that could change all those nice charts in one fell swoop and that is why I have to prepare myself mentally for anything and everything. I want higher prices and most of my charts are holding up very well but at the same time the market would be a lot more healthy and more rewarding for me if I could get a pullback, go to cash, and then wait for the next time to go all-in on margin to the long side (hopefully with VIX around 30 or so). Markets that rally AFTER a big pullback will always produce stocks that will move 100%-500% in short periods of time. If we bounce here, trust me, we still will not be having any of that.
Here, also, may be another key tell for a market top: the leaders of this bull as far back as 2003 are still running. GOOG, AAPL, RIMM, CROX, etc… As long as these stocks keep hitting new highs it is hard to think the market could actually top. Also none of these stocks are in climax runs which means they could have a lot of room to keep running. In fact I can’t find any climax looking charts.
There is absolutely one thing you must NOT do. Do NOT buy the dips. Do not buy stocks when the market is falling. You are only supposed to be going long stocks in top sectors in markets that are trending up. I obviously can maneuver a bit differently. But most traders should stay very disciplined and play by the rules until they are making consistent money the right way by buying top stocks moving higher in top sectors in markets moving up. I heard some subscribers and other participants in other rooms talk of buying the dip. I would wait for breakouts, if I were you. Look for charts like TTG CRNT and KHDH. Not charts like IMR.
We have the Commerce Department report on the April trade deficit and we have weakness in most Pacific/Asia markets so that will be on the minds of traders. That and of course the worry of what the market is going to do after yesterday’s selloff. But I don’t need that in my life. I have enough things to worry about. And the stock market will never be one of those things I will ever have to worry about. When you have rules, discipline, and sound strategy that you have tested and used to make a good living off of, you don’t have to.
Aloha and I will see you in the chat room!! It’s Aloha Friday, No Work Till Monday……dee dee de de de…..
top holdings up this week - purchase date
TRCR 430% - 1/12
PTT 303% - 11/16
MA 187% - 8/2
CCOI 144% - 9/27
OMTR 134% -
TTEC 130% - 8/25
ULTR 116% - 10/27
MEH 113% - 8/30
MOS 109% - 10/12
MFW 108% - 1/29
KHDH 107% - 5/30/06
DECK 97% - 9/13
CPA 97% - 9/15
CXW 91% - 5/19/06
IGLD 87% - 10/26
EVEP 86% - 11/16
MVIS 86% - 12/21
APLX 83% - 9/28
VDSI 79% - 1/4
HURN 77% - 9/13
MCZ 74% - 3/27
CLRT 73% - 11/30
CNH 72% - 11/2
TTG 63% - 11/30
TESO 60% - 2/16
LFL 57% - 12/13
NSH 57% - 12/19
AFSI 56% - 4/12
VSNT 54% - 2/5
APFC 52% - 3/5
XOMA 51% - 1/12
HURC 50% - 12/18
Market Commentary At Big Wave Trading Bronze Level One
New Swing Longs: Silver Level Two
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
Saturday, June 02, 2007
Leading Stocks Lead The Way As A Very Bullish Week Comes To A Close; NYSE Short Interest At Five-Year Highs
A lot of strong economic data helped stocks finish higher, on Friday, but they were off from their early morning highs. However, the closes were still impressive and the DJIA even had a very strong final hour, even with the Shanghai market falling another 2.7% (still up 50% this year). At the close the SP 600 hit an all-time high rallying .8%, the NYSE hit an all time high rallying .6%, the SP 500 hit an all-time closing high rallying .4%, the Nasdaq hit 6 1/2 year highs rallying .4%, and the DJIA rallied .3% hitting another all-time high.
The most important action, came in the form of leading stocks. The IBD 100 gained 1%, marking the fifth session in a row that the IBD 100 has outperformed the broad market. Leading stocks leading the market tells you that this rally is strong and should have some real legs behind it. It has taken a long time for these stocks to establish a dominate role in this market, since the March 2003 - May 2006 period, but now they are taking the lead from the DJIA. Let’s hope this continues.
Volume was 19% lower on the Nasdaq and 11% lower on the NYSE, which kind of puts a damper on the gains. But the figures for the week confirm the markets strength. The SP 600 was the strongest performer with a 2.8% gain, the Nasdaq followed with a 2.2% gain, the NYSE gained 1.7%, the SP 500 rallied 1.4%, and the DJIA gained 1.2%. The IBD 100 blew away the competition, with a 3.9% gain. This is what you want to see. This is something we really have not seen since the bottom last July/August. Welcome back leading stocks!
There were two advancers for every stock that declined on the NYSE and there were three winners for every two losers on the Nasdaq. New highs finally picked up, with an impressive 799 new 52-week highs. This kind of expansion should give the doubters of this rally some reason to turn a bit more bullish. If that doesn’t work, they have the put/call ratio still up there around the .75 area. That is not high but it is not low either. The most important and telling internal is the amount of short sellers out there.
The NYSE short interest ratio is at its highest level in more than five years at 7.74. This shows major pessimism amongst short sellers and this should keep the market bullish. It is not a given but the high short interest ratio with a higher put/call ratio shows that the crowd is still on the wrong side, despite some surveys.
The AAII survey has come out with 45% bears and only 33% bulls, confirming that the retail crowd is shorting the upticks. One of the most dangerous, arrogant, and ego-driven trade you can possibly make in such a strong tape. Most of these traders are trying to “outsmart” the market. A play that has a very low success rate.
Other surveys, however, show the opposite. The Investors Intelligence survey still shows a very high amount of bulls and the realmoney.com most recent weekend poll is showing 57% of the readers bullish. However, by looking at the post on Rev Shark’s blog, it doesn’t seem that many are bullish on this tape. A lot of the realmoney.com readers leave much to the imagination, anyways. I don’t see too much talent around there.
The other clear fact that the actual trading is not bullish for the retail crowd is the fact that equity ETF’s saw outflows this week. You don’t see that at tops. You see extreme inflows into mutual funds and ETF’s. This shows that the crowd is skeptical on the current rise. Being emotional in the market and betting against the trend is an even worse double whammy that is sure to keep you from beating the market in the long run. If I wasn’t on margin I wouldn’t be beating the market this year. That tells me exactly how rough the current uptrend really is. It is not as easy as it looks–unless you are a daytrader, then I assume it is safe to say “it is easy.” Let’s see how long that last.
What does seem to not be lasting is the weak economy. On one of the busiest weeks I can remember this year, economic data came rolling in confirming what I have been saying all year long–this economy is on FIRE!!! Yes, GDP did come in at its lowest level in five years but it appears to be a short-term thing as the numbers this week confirmed that everything appears to be fine with the economy. That is confirmed by the banks finally getting a bid this week.
The strong economic data on Friday came from the payroll figures as jobs grew 157,000 in May above expectations. The core inflation reading came in at only .1% which was below expectations also. Overall a good report. Then the ISM manufacturing index climbed to 55 in May, showing expansion from April. A reading over 50 is bullish. These kind of economic numbers is why this market never goes down. The DJIA and SP 500 are now up 8 out of the last 9 weeks. An unbelievable run, to say the least.
This unbelievable run is allowing for a TON TON TON of breakouts. Everywhere I scan, I can find breakouts. So that confirms in my mind that this bull still has room to run. If we do reverse now, I can tell you it would be very significant because this many stocks breaking out of fresh bases should mean that the market is going to run. A reversal would be a fakeout breakout and would trap many longs. If I could, and if I was a billionaire or even a millionaire (I am still young and live on Maui, don’t forget that), I would be long 500 stocks right now. There are just that many nice charts. They are not all green and pretty but they are still there. Stocks like TLVT are easily passed with all the nice charts out there. However, a gain of 15% in three days shows that every breakout seems to be working here.
This market does require a lot of work to keep up with the gains in the NYSE, compared to other bull markets. This is in direct correlation with the VIX. Remember, a low VIX, means lower volatility and when stocks rise they will not go up as much when the VIX is at 12 than if the VIX was at 32. All the stocks you see up 100% would be up 300%, if this rally came right after a horrible bear market like the March 2003 was. Even though the gains aren’t as much, the duration is a lot longer. This makes it hard work and can really put a drain on you. I know it is me. I really want a pullback, I really need a pullback, and I just want some time to relax. I doubt I am going to get that.
What also confirms that I doubt I am going to get that? Well after eight out of nine weeks of gains, why should I expect anything else. And the 10-year yield is now confirming what I have been saying all year. The 10-year is now at its highest level in nine months, at 4.94%. The odds of a Fed cut this year fell to 16% from 100% a month ago. Remember, in the world of stocks it is the opposite of what you would think would work. A Fed raising rates tells us that the economy is on fire and they need to slow it down. A Fed cutting rates tells us the economy is in trouble and they need to fill it with cash. With the odds increasing of no rate cut, you can rest assure that this economy is doing just fine. This should be bullish for stocks.
To finish this weekends analysis off I want to state that I don’t think the USA is in a bubble AT ALL. China may be in a bubble but if anyone has IBD and can remember the chart comparing the seven year run-up to the DJIA 29 and Nassy 00 top, you can clearly see China could have a long way to run. Especially since the Nasdaq had a P/E over 200. I believe China is around 45-50.
I did see some bubble action in a lot of stocks last month. But they have either fallen and that money moved into other leaders or they are still holding up. Two personal longs that I saw go into OBVIOUS climax runs (TNH and ONT) were both sold and since then the move has looked like the correct one. TNH is still holding but ONT looks done. Either way those charts had climax runs. There aren’t too many out there like that. Heck, I can’t even find stocks to sell. I only had two partial sales and zero complete sells out of 240 longs (70 are major holdings, the rest are for rent money and fun). The day before there were also no complete sales. Stunning. Normally, even in bull markets, there is always one or two that needs to be cut. Not in this market.
Enjoy the rest of your weekend. Go Anaheim!!! Go Cleveland!!! Aloha and I will see you in the chat room.
http://mauitrader.blogspot.com
top holdings up this week - purchase date
KNOL 365% - 1/12/06
TRCR 350% - 1/12
PTT 240% - 11/16
MA 202% - 8/2
CCOI 152% - 9/27
TTEC 146% - 8/25
ULTR 122% - 10/27
HRZ 115% - 9/27
MFW 115% - 1/29
MEH 113% - 8/30
KHDH 108% - 5/30/06
IHS 106% - 12/21/05
CPA 104% - 9/15
MOS 104% - 10/12
CRY 103% - 1/10
NEXC 101% - 10/25
PRGX 96% - 1/12
CXW 92% - 5/19/06
IGLD 91% - 10/26
DECK 86% - 9/13
EVEP 83% - 11/16
JSDA 80% - 12/20
CNH 79% - 11/2
VDSI 78% - 1/4
APLX 77% - 9/28
HURN 77% - 9/13
MVIS 76% - 12/21
MCZ 74% - 3/27
IMMU 73% - 12/19
FTEK 67% - 10/6
TTG 64% - 11/30
NSH 61% - 12/19
LFL 61% - 12/13
BMA 56% - 10/24
TESO 54% - 2/16
NTL 50% - 4/13
SCI 50% - 10/10
Market Commentary At Big Wave Trading Bronze Level One
New Swing Longs: Silver Level Two
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
The most important action, came in the form of leading stocks. The IBD 100 gained 1%, marking the fifth session in a row that the IBD 100 has outperformed the broad market. Leading stocks leading the market tells you that this rally is strong and should have some real legs behind it. It has taken a long time for these stocks to establish a dominate role in this market, since the March 2003 - May 2006 period, but now they are taking the lead from the DJIA. Let’s hope this continues.
Volume was 19% lower on the Nasdaq and 11% lower on the NYSE, which kind of puts a damper on the gains. But the figures for the week confirm the markets strength. The SP 600 was the strongest performer with a 2.8% gain, the Nasdaq followed with a 2.2% gain, the NYSE gained 1.7%, the SP 500 rallied 1.4%, and the DJIA gained 1.2%. The IBD 100 blew away the competition, with a 3.9% gain. This is what you want to see. This is something we really have not seen since the bottom last July/August. Welcome back leading stocks!
There were two advancers for every stock that declined on the NYSE and there were three winners for every two losers on the Nasdaq. New highs finally picked up, with an impressive 799 new 52-week highs. This kind of expansion should give the doubters of this rally some reason to turn a bit more bullish. If that doesn’t work, they have the put/call ratio still up there around the .75 area. That is not high but it is not low either. The most important and telling internal is the amount of short sellers out there.
The NYSE short interest ratio is at its highest level in more than five years at 7.74. This shows major pessimism amongst short sellers and this should keep the market bullish. It is not a given but the high short interest ratio with a higher put/call ratio shows that the crowd is still on the wrong side, despite some surveys.
The AAII survey has come out with 45% bears and only 33% bulls, confirming that the retail crowd is shorting the upticks. One of the most dangerous, arrogant, and ego-driven trade you can possibly make in such a strong tape. Most of these traders are trying to “outsmart” the market. A play that has a very low success rate.
Other surveys, however, show the opposite. The Investors Intelligence survey still shows a very high amount of bulls and the realmoney.com most recent weekend poll is showing 57% of the readers bullish. However, by looking at the post on Rev Shark’s blog, it doesn’t seem that many are bullish on this tape. A lot of the realmoney.com readers leave much to the imagination, anyways. I don’t see too much talent around there.
The other clear fact that the actual trading is not bullish for the retail crowd is the fact that equity ETF’s saw outflows this week. You don’t see that at tops. You see extreme inflows into mutual funds and ETF’s. This shows that the crowd is skeptical on the current rise. Being emotional in the market and betting against the trend is an even worse double whammy that is sure to keep you from beating the market in the long run. If I wasn’t on margin I wouldn’t be beating the market this year. That tells me exactly how rough the current uptrend really is. It is not as easy as it looks–unless you are a daytrader, then I assume it is safe to say “it is easy.” Let’s see how long that last.
What does seem to not be lasting is the weak economy. On one of the busiest weeks I can remember this year, economic data came rolling in confirming what I have been saying all year long–this economy is on FIRE!!! Yes, GDP did come in at its lowest level in five years but it appears to be a short-term thing as the numbers this week confirmed that everything appears to be fine with the economy. That is confirmed by the banks finally getting a bid this week.
The strong economic data on Friday came from the payroll figures as jobs grew 157,000 in May above expectations. The core inflation reading came in at only .1% which was below expectations also. Overall a good report. Then the ISM manufacturing index climbed to 55 in May, showing expansion from April. A reading over 50 is bullish. These kind of economic numbers is why this market never goes down. The DJIA and SP 500 are now up 8 out of the last 9 weeks. An unbelievable run, to say the least.
This unbelievable run is allowing for a TON TON TON of breakouts. Everywhere I scan, I can find breakouts. So that confirms in my mind that this bull still has room to run. If we do reverse now, I can tell you it would be very significant because this many stocks breaking out of fresh bases should mean that the market is going to run. A reversal would be a fakeout breakout and would trap many longs. If I could, and if I was a billionaire or even a millionaire (I am still young and live on Maui, don’t forget that), I would be long 500 stocks right now. There are just that many nice charts. They are not all green and pretty but they are still there. Stocks like TLVT are easily passed with all the nice charts out there. However, a gain of 15% in three days shows that every breakout seems to be working here.
This market does require a lot of work to keep up with the gains in the NYSE, compared to other bull markets. This is in direct correlation with the VIX. Remember, a low VIX, means lower volatility and when stocks rise they will not go up as much when the VIX is at 12 than if the VIX was at 32. All the stocks you see up 100% would be up 300%, if this rally came right after a horrible bear market like the March 2003 was. Even though the gains aren’t as much, the duration is a lot longer. This makes it hard work and can really put a drain on you. I know it is me. I really want a pullback, I really need a pullback, and I just want some time to relax. I doubt I am going to get that.
What also confirms that I doubt I am going to get that? Well after eight out of nine weeks of gains, why should I expect anything else. And the 10-year yield is now confirming what I have been saying all year. The 10-year is now at its highest level in nine months, at 4.94%. The odds of a Fed cut this year fell to 16% from 100% a month ago. Remember, in the world of stocks it is the opposite of what you would think would work. A Fed raising rates tells us that the economy is on fire and they need to slow it down. A Fed cutting rates tells us the economy is in trouble and they need to fill it with cash. With the odds increasing of no rate cut, you can rest assure that this economy is doing just fine. This should be bullish for stocks.
To finish this weekends analysis off I want to state that I don’t think the USA is in a bubble AT ALL. China may be in a bubble but if anyone has IBD and can remember the chart comparing the seven year run-up to the DJIA 29 and Nassy 00 top, you can clearly see China could have a long way to run. Especially since the Nasdaq had a P/E over 200. I believe China is around 45-50.
I did see some bubble action in a lot of stocks last month. But they have either fallen and that money moved into other leaders or they are still holding up. Two personal longs that I saw go into OBVIOUS climax runs (TNH and ONT) were both sold and since then the move has looked like the correct one. TNH is still holding but ONT looks done. Either way those charts had climax runs. There aren’t too many out there like that. Heck, I can’t even find stocks to sell. I only had two partial sales and zero complete sells out of 240 longs (70 are major holdings, the rest are for rent money and fun). The day before there were also no complete sales. Stunning. Normally, even in bull markets, there is always one or two that needs to be cut. Not in this market.
Enjoy the rest of your weekend. Go Anaheim!!! Go Cleveland!!! Aloha and I will see you in the chat room.
http://mauitrader.blogspot.com
top holdings up this week - purchase date
KNOL 365% - 1/12/06
TRCR 350% - 1/12
PTT 240% - 11/16
MA 202% - 8/2
CCOI 152% - 9/27
TTEC 146% - 8/25
ULTR 122% - 10/27
HRZ 115% - 9/27
MFW 115% - 1/29
MEH 113% - 8/30
KHDH 108% - 5/30/06
IHS 106% - 12/21/05
CPA 104% - 9/15
MOS 104% - 10/12
CRY 103% - 1/10
NEXC 101% - 10/25
PRGX 96% - 1/12
CXW 92% - 5/19/06
IGLD 91% - 10/26
DECK 86% - 9/13
EVEP 83% - 11/16
JSDA 80% - 12/20
CNH 79% - 11/2
VDSI 78% - 1/4
APLX 77% - 9/28
HURN 77% - 9/13
MVIS 76% - 12/21
MCZ 74% - 3/27
IMMU 73% - 12/19
FTEK 67% - 10/6
TTG 64% - 11/30
NSH 61% - 12/19
LFL 61% - 12/13
BMA 56% - 10/24
TESO 54% - 2/16
NTL 50% - 4/13
SCI 50% - 10/10
Market Commentary At Big Wave Trading Bronze Level One
New Swing Longs: Silver Level Two
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
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