Once again, it looks like the Fed, this time with GWB, has come to save the day for the stock market, as stocks rallied on the good news that the Fed and GWB are on the path to help distressed home owners with rising mortgage payments that they can not make. While I am okay with helping out the poor homeowners, as long as he does not help out the stupid lenders that practiced this predatory lending, I will happy.
As it was, the markets ended the low-volume holiday spirited week with gains across the board, with the NYSE leading the way with a 1.5% gain. However, that gain came on lower volume, unlike the Nasdaq which saw volume rise, but breadth was 6-to-1 in favor of advancers over decliners. The best index for the week was the IBD 100, gaining 1.4%. So the appetite of the buyers was very healthy, even though NONE of those buyers were “the smart” money. If they were, you would have seen volume over the 50 day volume average. As it was it was just another retail driven pre-holiday rally.
It was, however, despite the low volume, a very important week, with Wednesday signaling a follow-through day to the attempted rally that started on August 16. Even though the rally attempt came on day 10, the volume was well below the 50 day volume average, and there were almost zero stocks with top fundamentals and great chart patterns breaking out of fresh and well formed bases. Overall, we can confidently say that this follow-through was very weak and was very uneventful. That is what normally happens when you get one of these low volume follow-through days before a long holiday weekend in the summer.
The thing you have to remember is that despite the follow-through happening on low volume, thus increasing its chances for failure down the road, we still had a follow-through and it has to be respected. Being disciplined and respecting the rules is the only way to prevent yourself from missing a possible uptrend that could come from this. Looking for longs and not convincing yourself that “this rally will fail” (how many times did I hear that on Thursday and Friday??) is your only concern right now. If we can’t find any new longs breaking out of green, tight, accumulation filled bases and the market rolls over, then you cut your losses. It is that easy.
But, if you try to outsmart the market and show it how smart you are, you are going to look as ridiculous as EVERYONE (AND I MEAN EVERYONE) did during the July/August lows in 2006. While I was not bullish on those lows because of the low volume and lack of strong longs, I still respected the trend and went long many stocks that made 50%-100% gains. Finding these three gems (HRZ, AFSI, and TESO–all produced 50% gains quickly) that I loaded up on enabled me to make some very nice gains while many people struggled with the last rally. This is why WE follow rules and not sheeple.
Now, how will we know if this rally is going to fail? We will know if this rally is going to fail if all of a sudden we start getting hit with distribution days. It only takes one distribution day to throw the rally into trouble. But if we get four to five distribution days before breaking the August 16 lows, you can guarantee it will not be long before those lows are breached. The also other OBVIOUS signal that this rally has failed will be if we pierce those August 16 lows. That is your failure line.
Right now, sentiment seems to be a bit bearish and that, in turn, is bullish for equities. The put/call ratio hovered around .8 to 1.10 all week long and closed Friday at a still pretty high .90. That clearly is showing us that the retail crowd is placing nearly as many bearish bets as long bets. When the crowd thinks they are smart enough to make money on the downside, it is probably safe to assume the downside is not the side to be on. This also lines up with the Investors Intelligence survey. This survey shows only 41% bulls to 37% bears. While this number did NOT cross, normally confirming a market bottom, the fact that these numbers have touched definitely shows that there are enough bears out there to produce a rally as their money comes in off the sidelines. However, it would have been a lot better if the bulls and bears would have crossed. That definitely would have me thinking we bottomed. But, there is still more possible work to do. If the bears were at 45% and the bulls were at 35%, and I had some nice green charts, you better believe I would be in the “bottom calling” camp.
Some things that make it hard for me to believe all the selling is over is that we have absolutely no new leaders with nice charts stepping up currently. Now, that could change, with the Computer and Internet-E Commerce groups moving up the ranks, along with the Telecom stocks showing their muscle leading stocks with the amount of new 52-week highs on Friday. If these stocks can find me some fresh leaders, then I will be much happier. But as it is most of these groups don’t have much working for them just yet.
Instead, we have the Food-Dairy Products group leading this current rally. THAT IS NOT BULLISH. The other problem I see is that we are being led up by a select and very small group of big-cap growth (most being tech) stocks. GRMN, GOOG, BIDU, AAPL, RIMM, DRYS, CELG, ZNH, LFC, TNH, CHL, EXM, and FWLT continue to just breakout, build a sloppy base, breakout, build another sloppy base, breakout, and do this over and over. So far so good, with these stocks. However, IF their uptrends ever stop, you can bet that the markets selloff will just be beginning. Many inexperienced investors already see these stocks as a buy on every dip. Soon they will be convinced that EVERY dip is a buy, no matter how many dips they have. When that happens, you better believe I will be short and maxed out on margin in these once loved former leaders.
One other key thing about this rally attempt is that only the SP-500 has a B rating. When the stock market bottomed in March 2003 (after putting in the real bottom in October 2002) the Nasdaq carried an ACC/DIS rating of an A-. So even if we have in fact made a short-term bottom, it is almost guaranteed to not be ready for a real rally for at least a very long time, as there is plenty of distribution still lingering in this market. When you have the IBD 100 with a D- for an ACC/DIS rating, it seriously can’t be all that great out there. Take this along with the fact that the only index above the 50 day moving average is the Nasdaq and you have a market that still has plenty of headwinds facing it, despite that follow-through.
In honesty, it still appears, the best play is to continue to stay long your strong stocks in an uptrend, to keep new buys and new shorts small unless the charts are perfect (not many like that at all), cut your losses fast on those stocks that do not work out, and to try to stay off too much margin and remain cash heavy until a clear trend establishes itself. I hate to tell you, but, right now, there is no solid uptrend or downtrend; just a big wild low-volume mess that is sure to only continue.
WINNERS: KHD 131% ZNH 238% MOS 140% EBIX 60% VDSI 141% CRNT 105% OMTR 215% BCSI 91% ANO 167% FSLR 59%
Showing posts with label bulls. Show all posts
Showing posts with label bulls. Show all posts
Monday, September 03, 2007
Friday, July 13, 2007
Leading Stocks Help Take Indexes To All-Time And Six Year Highs; The Bears Who Continue To Fight This Trend Get What They Deserve
For the second week in a row, stocks put in one impressive week of gains, with today’s gains coming in some small part to the University of Michigan consumer confidence index coming in at 92.4 above estimates of 86. However, that simply was not the reason for today’s gains, as another round after afternoon short squeezing hit the indexes sending them near the highs of the session with the Nasdaq closing just short of its HOD. The gains also came in the face of oil rising $1.43 to $73.93.
At the close, the DJIA, SP 500, and SP 600 all hit new all-time highs rallying .3% and the NYSE and Nasdaq gained .2%. The NYSE hit another all-time high and the Nasdaq hit a new 6 1/2 year high. The best part about today’s gains, of course, comes in the fact that leading stocks led the way, once again. The IBD 100 gained .7%, doing much better than the broad market.
Volume was lower today, compared to yesterday’s volume. But considering that we produced some really big gains (biggest on the DJIA since 2003) and were right before the weekend, today’s action has to be considered very bullish and constructive. We could have sold off on lower volume or even higher volume.
There were some weak points with the internals. Despite the gain in the Nasdaq, decliners beat advancers by a 7-to-6 ratio and advancers barely beat decliners on the NYSE. There were also 150 new 52-week lows, despite the markets hitting new highs. But with 683 new 52-week highs, it is not anything to worry about.
For the week, it really doesn’t get much better than what we saw. The DJIA led the way with a 2.2% gain, the Nasdaq followed with a 1.5% gain, and the NYSE and SP 500 gained 1.4%. The best new, obviously, was that leading stocks, once again, beat the broad market for the week. The IBD 100 produced a 2.5% gain, after last weeks 5.2% gain. The best news, however, comes from my own personal IB portfolio. After having a poor weak last week, I managed to return a 10.3% gain for the week. This is what happens when you are in the right stocks. The outperformance has been there every week, except for one, since the March lows. This is what proper disciplined growth momentum investing is all about. There is no doubt, this is a great short-squeezing July, full of breakout in many leading stocks.
I remember, last year, constantly referring to our market as having a potential to repeat a 1995 scenario. Not long after, I heard Kudlow and IBD also bring this up. Now recently Cramer has brought it up, refreshing my memory on that scenario. The only thing that is different is that rates are not being cut yet. If the market keeps rallying and inflation does come into a more moderate pricing zone that would be great. However, no matter what happens, it looks like the 1995 scenario has and is playing itself out. This continues to be the most amazing market that gets absolutely no credit on major media outlets. And if Cramer and history is right and this is a replay of 1995 we have a lot more room to run, especially with tech just now joining the party.
This, however, creates the perfect wall of worry that the stock market needs to climb higher. If you think there is not any fear out there and that everybody is just giddy and happy with this market, let me remind you that the put/call ratio spiked to .99 on Tuesday after the market “swooned,” according to the media. The fear and blatant top calling is, ONCE AGAIN, something you do NOT see at market tops. EVERYBODY and I mean EVERYBODY is in love with the market and everybody will be talking about these good times.
Now, if you are a subscriber to my gold service, I know it seemed like Christmas this week as a LOT of gains were made in many favorite stocks. We did have one suck it up (MTOX) but one out of every other one is not that bad. However, I am not losing my mind over the gains and understand that this is what is supposed to happen in bull markets. It is when my neighbors start celebrating their gains that I will get nervous.
As of right now, to go along with the put/call still being at .76, the NYSE short-interest ratio is still near all-time highs at 7.52. LOL, this is not the number you will see at a market top. The other thing with this bearishness and start of parabolic runs in the charts is the fact that stocks are not doing crazy splits yet. Well, I take that back. I did see RIMM announce a 3-for-1. PEOPLE THAT IS A WARNING. PARABOLIC RUNS AND EXCESSIVE STOCK SPLITS ALWAYS LEAD TO A TOP. So keep your eyes out, even though I don’t expect one for months and months. It pays to be prudent.
And when we do top I have my list of stocks to short: GOOG, AAPL, RIMM, AMZN, ICE, BIDU, FWLT, FSLR, TNH, MA, and CME. I’ll give them to you for free, knowing that most of traders will NOT be able to short these at the right moment and history shows that most will be squeezed out of their shorts many times before the real fall comes. And by that time traders are so dejected that they miss the right moment. I won’t. :)
To prove my point that most will not be able to short the market when they are supposed to, I am finding out many traders are not very good at going long stocks either. In the free chat rooms I monitor I see a lot of traders selling prematurely all the time. Many have bought stocks to sell them on the smallest uptick and now want back in. By watching this action, I can understand why more gains at this juncture will not need a lot of volume. This retail crowd buying on top of the shorts being forced to cover due to them not being able to take the squeeze anymore ensures we will keep going higher. Even thought the crowd is bullish, yet betting bearishly, it doesn’t take much to take a market up with low supply and high demand.
If you did not notice this week, GE, COP, JNJ, HD, SHLD, and AMGN all announced stock buyback. FOLKS! These are no small-fries. These are real big giant companies. This along with all the M&A’s and leaders going into exponential to parabolic moves is the reason why you have to be long here. ABN is selling its LaSalle bank to BAC, ENR is buying PYX, and RTP outbid AA for AL with a $38 billion bid, and you want to be short stocks and long puts? Yeah right! Not me! You want to be short stocks only in a bear market and this is not a bear market. This market is not yet ready to top.
The reasons I see for a top are weak. They involve us being overbought and it involves the high bullishness in the surveys. The overbought can be attributed to the McClellan, 10-DMA of Adv/Dec line, and Arms index. The McClellan is moving overbought but it is nowhere near the 80s at only 68.6. The 10-dma index is overbought but nowhere near extreme levels, and the Arms index is overbought ALL THE TIME. It is almost useless. As for the surveys: the realmoney.com poll shows 69% bulls, 11% bears, and 20% netural. The Investors Intelligence is at 69.5% bulls and 21.8% bears. The AAII is at 44% bulls and 30% bears. However, relying on these for tops is useless. It is better using the UBS euphoria index and that is NOWHERE near euphoric levels seen in 2000.
Also, with the Gold, Steel, Metal, Mining, and all the old leaders moving along with the SOX index and all the technology stocks moving up the IBD 197 industry list it is very hard for me to be worried about a top. Look at AA. It is moving like a tech stock. That is a bull market if I have ever seen a bull market. Seeing the SOX and electronic stocks help leading the market to new highs is just a beautiful thing to see. Especially, when they are joined by so many other groups.
My suggestion is to continue to stay long and strong. Don’t go out trying to chase performance and do not chase stocks way beyond logical pivot points. If you are long, continue to enjoy the gains, but make sure you take some profits along the way when the stock’s price and/or volume acts odd. When the market tops and leading stocks are rolling over, trust me, I will let you know. You will see me selling off many of my top stocks and cutting my new buys short very quickly by them failing immediately. Also the amount of longs will dry up. As they are starting to do on my scans. Most stocks are well beyond proper buy points. Right now, it is all about holding the stocks you are long and riding the gains. Going long a lot of stock here is just a little too risky.
So let the overseas money with a strong Euro continue to find a safe home in the US equity market. As long as they are buying this market, you have to stay long.
Second quarter earnings really start rolling out this week. Expect a rise in volatility, as always happens during earnings season. Remember, going long a stock before earnings is a dangerous play. But selling a long ahead of earnings is an immature amateur play that only newbie emotional inexperienced traders do. Normally, if the stock is in an uptrend, the earnings don’t matter, as the stock will rise. Vise versa, in a bad market. VSCN is a perfect example. They miss, yet their stock rises. Such is a bull market. And that is what we are in.
Aloha and I will see you in the chat room!
Sidenote: Since May 2, 2003 the IBD 100 is up 216% compared to the SP 500’s 66% gain. The greatest traders are the greatest traders for a reason: history.
top holdings up this week - purchase date
TRCR 531% - 1/12
MA 240% - 8/2
OMTR 192% - 9/15
KHD 150% - 5/30/06
IHS 146% - 12/21/05
ULTR 141% - 10/27
TTEC 129% - 8/25
CPA 128% - 9/15
DECK 117% - 9/13
IGLD 103% - 10/26
CNH 103% - 11/2
CKSW 103% - 10/11
HURN 96% - 9/13
APLX 95% - 9/28
EVEP 94% - 11/16
AFSI 89% - 4/12
CXW 89% - 5/19/06
VDSI 85% - 1/14
CTCH 83% - 1/24
INNO 83% - 6/4
FSLR 76% - 5/23
HURC 71% - 12/18
LFL 66% - 12/13
ATX 65% - 12/12
VSR 63% - 6/15
CRNT 62% - 5/21
TESO 60% - 2/16
NAVI 58% - 12/18
IMA 57% - 8/2
SNDA 55% - 12/26
SMTX 55% - 6/15
NTLS 55% - 1/30
TASR 54% - 6/6
ICOC 52% - 5/18
IMMR 50% - 6/21
Market Commentary At Big Wave Trading Bronze Level One
New Swing Longs: Silver Level Two
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
At the close, the DJIA, SP 500, and SP 600 all hit new all-time highs rallying .3% and the NYSE and Nasdaq gained .2%. The NYSE hit another all-time high and the Nasdaq hit a new 6 1/2 year high. The best part about today’s gains, of course, comes in the fact that leading stocks led the way, once again. The IBD 100 gained .7%, doing much better than the broad market.
Volume was lower today, compared to yesterday’s volume. But considering that we produced some really big gains (biggest on the DJIA since 2003) and were right before the weekend, today’s action has to be considered very bullish and constructive. We could have sold off on lower volume or even higher volume.
There were some weak points with the internals. Despite the gain in the Nasdaq, decliners beat advancers by a 7-to-6 ratio and advancers barely beat decliners on the NYSE. There were also 150 new 52-week lows, despite the markets hitting new highs. But with 683 new 52-week highs, it is not anything to worry about.
For the week, it really doesn’t get much better than what we saw. The DJIA led the way with a 2.2% gain, the Nasdaq followed with a 1.5% gain, and the NYSE and SP 500 gained 1.4%. The best new, obviously, was that leading stocks, once again, beat the broad market for the week. The IBD 100 produced a 2.5% gain, after last weeks 5.2% gain. The best news, however, comes from my own personal IB portfolio. After having a poor weak last week, I managed to return a 10.3% gain for the week. This is what happens when you are in the right stocks. The outperformance has been there every week, except for one, since the March lows. This is what proper disciplined growth momentum investing is all about. There is no doubt, this is a great short-squeezing July, full of breakout in many leading stocks.
I remember, last year, constantly referring to our market as having a potential to repeat a 1995 scenario. Not long after, I heard Kudlow and IBD also bring this up. Now recently Cramer has brought it up, refreshing my memory on that scenario. The only thing that is different is that rates are not being cut yet. If the market keeps rallying and inflation does come into a more moderate pricing zone that would be great. However, no matter what happens, it looks like the 1995 scenario has and is playing itself out. This continues to be the most amazing market that gets absolutely no credit on major media outlets. And if Cramer and history is right and this is a replay of 1995 we have a lot more room to run, especially with tech just now joining the party.
This, however, creates the perfect wall of worry that the stock market needs to climb higher. If you think there is not any fear out there and that everybody is just giddy and happy with this market, let me remind you that the put/call ratio spiked to .99 on Tuesday after the market “swooned,” according to the media. The fear and blatant top calling is, ONCE AGAIN, something you do NOT see at market tops. EVERYBODY and I mean EVERYBODY is in love with the market and everybody will be talking about these good times.
Now, if you are a subscriber to my gold service, I know it seemed like Christmas this week as a LOT of gains were made in many favorite stocks. We did have one suck it up (MTOX) but one out of every other one is not that bad. However, I am not losing my mind over the gains and understand that this is what is supposed to happen in bull markets. It is when my neighbors start celebrating their gains that I will get nervous.
As of right now, to go along with the put/call still being at .76, the NYSE short-interest ratio is still near all-time highs at 7.52. LOL, this is not the number you will see at a market top. The other thing with this bearishness and start of parabolic runs in the charts is the fact that stocks are not doing crazy splits yet. Well, I take that back. I did see RIMM announce a 3-for-1. PEOPLE THAT IS A WARNING. PARABOLIC RUNS AND EXCESSIVE STOCK SPLITS ALWAYS LEAD TO A TOP. So keep your eyes out, even though I don’t expect one for months and months. It pays to be prudent.
And when we do top I have my list of stocks to short: GOOG, AAPL, RIMM, AMZN, ICE, BIDU, FWLT, FSLR, TNH, MA, and CME. I’ll give them to you for free, knowing that most of traders will NOT be able to short these at the right moment and history shows that most will be squeezed out of their shorts many times before the real fall comes. And by that time traders are so dejected that they miss the right moment. I won’t. :)
To prove my point that most will not be able to short the market when they are supposed to, I am finding out many traders are not very good at going long stocks either. In the free chat rooms I monitor I see a lot of traders selling prematurely all the time. Many have bought stocks to sell them on the smallest uptick and now want back in. By watching this action, I can understand why more gains at this juncture will not need a lot of volume. This retail crowd buying on top of the shorts being forced to cover due to them not being able to take the squeeze anymore ensures we will keep going higher. Even thought the crowd is bullish, yet betting bearishly, it doesn’t take much to take a market up with low supply and high demand.
If you did not notice this week, GE, COP, JNJ, HD, SHLD, and AMGN all announced stock buyback. FOLKS! These are no small-fries. These are real big giant companies. This along with all the M&A’s and leaders going into exponential to parabolic moves is the reason why you have to be long here. ABN is selling its LaSalle bank to BAC, ENR is buying PYX, and RTP outbid AA for AL with a $38 billion bid, and you want to be short stocks and long puts? Yeah right! Not me! You want to be short stocks only in a bear market and this is not a bear market. This market is not yet ready to top.
The reasons I see for a top are weak. They involve us being overbought and it involves the high bullishness in the surveys. The overbought can be attributed to the McClellan, 10-DMA of Adv/Dec line, and Arms index. The McClellan is moving overbought but it is nowhere near the 80s at only 68.6. The 10-dma index is overbought but nowhere near extreme levels, and the Arms index is overbought ALL THE TIME. It is almost useless. As for the surveys: the realmoney.com poll shows 69% bulls, 11% bears, and 20% netural. The Investors Intelligence is at 69.5% bulls and 21.8% bears. The AAII is at 44% bulls and 30% bears. However, relying on these for tops is useless. It is better using the UBS euphoria index and that is NOWHERE near euphoric levels seen in 2000.
Also, with the Gold, Steel, Metal, Mining, and all the old leaders moving along with the SOX index and all the technology stocks moving up the IBD 197 industry list it is very hard for me to be worried about a top. Look at AA. It is moving like a tech stock. That is a bull market if I have ever seen a bull market. Seeing the SOX and electronic stocks help leading the market to new highs is just a beautiful thing to see. Especially, when they are joined by so many other groups.
My suggestion is to continue to stay long and strong. Don’t go out trying to chase performance and do not chase stocks way beyond logical pivot points. If you are long, continue to enjoy the gains, but make sure you take some profits along the way when the stock’s price and/or volume acts odd. When the market tops and leading stocks are rolling over, trust me, I will let you know. You will see me selling off many of my top stocks and cutting my new buys short very quickly by them failing immediately. Also the amount of longs will dry up. As they are starting to do on my scans. Most stocks are well beyond proper buy points. Right now, it is all about holding the stocks you are long and riding the gains. Going long a lot of stock here is just a little too risky.
So let the overseas money with a strong Euro continue to find a safe home in the US equity market. As long as they are buying this market, you have to stay long.
Second quarter earnings really start rolling out this week. Expect a rise in volatility, as always happens during earnings season. Remember, going long a stock before earnings is a dangerous play. But selling a long ahead of earnings is an immature amateur play that only newbie emotional inexperienced traders do. Normally, if the stock is in an uptrend, the earnings don’t matter, as the stock will rise. Vise versa, in a bad market. VSCN is a perfect example. They miss, yet their stock rises. Such is a bull market. And that is what we are in.
Aloha and I will see you in the chat room!
Sidenote: Since May 2, 2003 the IBD 100 is up 216% compared to the SP 500’s 66% gain. The greatest traders are the greatest traders for a reason: history.
top holdings up this week - purchase date
TRCR 531% - 1/12
MA 240% - 8/2
OMTR 192% - 9/15
KHD 150% - 5/30/06
IHS 146% - 12/21/05
ULTR 141% - 10/27
TTEC 129% - 8/25
CPA 128% - 9/15
DECK 117% - 9/13
IGLD 103% - 10/26
CNH 103% - 11/2
CKSW 103% - 10/11
HURN 96% - 9/13
APLX 95% - 9/28
EVEP 94% - 11/16
AFSI 89% - 4/12
CXW 89% - 5/19/06
VDSI 85% - 1/14
CTCH 83% - 1/24
INNO 83% - 6/4
FSLR 76% - 5/23
HURC 71% - 12/18
LFL 66% - 12/13
ATX 65% - 12/12
VSR 63% - 6/15
CRNT 62% - 5/21
TESO 60% - 2/16
NAVI 58% - 12/18
IMA 57% - 8/2
SNDA 55% - 12/26
SMTX 55% - 6/15
NTLS 55% - 1/30
TASR 54% - 6/6
ICOC 52% - 5/18
IMMR 50% - 6/21
Market Commentary At Big Wave Trading Bronze Level One
New Swing Longs: Silver Level Two
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
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