Another Gap And Trap; Stocks Close Slightly Higher, After Selling Off On Higher Volume. Stocks gapped higher, once again, and then turned tail and sold off into the closing bell. This makes the market four for five on the gap, trap, and reverse trade. The early morning's rally was credited to the drop in oil prices and the resolution of the Middle East crisis. The markets later responded by reversing those gains as the reality of a slowing economy once again crept into market participants heads.
By the close the Nasdaq reversed a 1.7% gain to close up only .6%, the SP 600 finished up .3%, and the SP 500 and Dow Jones Industrial Average reversed 1% gains to close up only .1%.
Volume was higher on both the NYSE and the Nasdaq by a small uptick over Friday's levels. However, the big news with the volume is the fact that before the reversal happened I believe volume was running around 35%-40% below Friday's average. When the market reversed, volume started to pickup, and the next thing you know we close with volume higher than the day before. That is very bearish action. Breadth was positive on both exchanges and that could be taken as a slight positive to the bearish action with the price and volume.
The market remains a very volatile and choppy beast. It is doing its best to wear out traders and knock the new comers out of the game. The market always does this. As soon as EVRYONE was interested in Gold and Oil, the markets started to act funny and the top then came shortly after in May. Since then most traders are not making much headway. This is going to knock out a lot of weak players. Don't become one of these weak traders. Stay strong and know that another bull will come.
August is ALWAYS the slowest month of the year, with Wall Street vacations and plain old cyclicality. So be ready for more days that are just flat dead or days where big percent moves turn into tiny moves. That is what normally happens in August. It is usually a very slow month, either ticking up or down on low volume. Just make sure you stay awake and keep an eye open for any bullish signs that a tradeable rally is approaching.
Are there any positives in this market? Sure there is! The bears are getting pretty darn cocky in the stock chatrooms I monitor, the horrible traders are getting extremely desperate to make some money, there is some outperformance in Tech stocks short-term over other sectors, and the Nasdaq could be building a base to launch out of for a tradeable rally. However, with all this one thing must be remembered: We are still in an intermediate downtrend on all indexes and in a long-term downtrend on the Nasdaq and SP 600. It is going to be hard making any significant gains with these indexes in such negative shape. It sure as the hell doesn't help that the Nasdaq's 200 dma is ready to join the 50 dma on a downtrend path with prices under both averages. Not good.
So with all of this I still recommend staying extremely patient, extremely positive, disciplined, and keep those watchlist updated constantly. Don't get lazy. If there are waves in the morning I will not be in Investors Paradise. If there are no waves I will be home like always. Aloha!
New Swing Longs: CGX PSPT -- both for a small trade only.
Stocks Follow Through On The Attempted Rally From 21 Days Ago; Where Was The HUGE Volume? Stocks bolted higher, thanks to data from the PPI that might indicate the Fed is done with rate hikes. Whatever the reason for the rise is I don't care. All I need to know is the facts and the facts state that the market had a follow-through day today and that the trend in the short term is now up. Knowing what the current trend is and not the reason for the move is how I make my money. Tomorrow CNBC will have everyone focused on the CPI. Let's see if the market can follow-through on today's gains.
Speaking of gains, all major market indexes put in an impressive day. The Nasdaq gained 2.2%, the SP 600 rose 2.1%, the SP 500 rose 1.4%, and the Dow Jones Industrial Average rose 1.2%. The big winners for the day was the Semi Index with a 3.7% gain and the Nasdaq 100 with a 2.7% gain. Leading stocks lagged the Nasdaq with the IBD 100 rising only 1.9%. Normally you want to see leading stocks outperform the indexes when you start a rally.
Volume was higher on both the NYSE and the Nasdaq by a pretty good margin over yesterday's levels. However, yesterday was an extremely quiet day. So no matter what happened today you would think volume would have picked up. The real question is how much volume came with this price explosion? The answer is NOT MUCH! Volume was below the 50 day volume average on both the NYSE and the Nasdaq. LOL.
Breadth was positive on the NYSE by a 5-to-1 margin and by a 3-to-1 margin on the Nasdaq.
If you check the best rallies during the past twenty years you will see that HUGE price explosion with volume are the stuff real rallies are made of. Not low volume short covering bounces. Some of the biggest and most volatile rallies happen in a bear market. The rallies that normally launch new bull markets have a TON of volume and trade well over the 50 day volume average. So far this one is not acting right. Not to boot that the best rallies also happen when the follow through comes within 3 to 7 days of the rally attempt; not 21.
Some rallies have worked fine from late follow throughs. However, these rallies don't normally last very long. The one thing to remember is that NO bull market has EVER started without a follow-through. In saying that, however, not all follow-through guarantee a bull market. So making sure the right leadership is at the top is very important. I don't see that leadership yet, with this rally.
An example is the failed June follow-through. That follow-through had terrible leadership in it with defensive sectors and old leaders leading. The rally follow-through that worked in October 2005 had plenty of tech stocks and innovative stocks with nice bases. The March 2003 rally was filled with commodity, high tech, and other exciting industries at the top when that rally started and volume was HEAVY on that follow-through also.
The one real positive for the follow-through attempt is all the distribution days that the indexes put in were wiped out by this follow through. I thought it was only a matter of time before the selling really took the indexes lower. The fact that they battled off those days has to be taken as a positive on the short term. The other positive is that the Nasdaq has regained its 50 dma line.
Hopefully you are keeping your watchlist updated and are now ready to take any positions in any stocks that breakout out from clean bases on strong volume. Also making sure they have a lot of the CANSLIM traits is extremely important too. Don't settle for junk.
Today was a bit of a surprise for everyone and I took a hit in my account today. Having a bad day is nothing to get worried or upset about. Thinking that you should be making great money in this market is just setting yourself up for disappointment. This is a traders and gamblers market. Not a market for making big money in. It is better to stay heavy in cash till the trend is clearly up. There will be plenty of time to get long if this rally is the "real" rally. Don't do anything stupid and chase performance. Make sure the stock is breaking out of a sound pattern.
There are not a lot of those right now. Most stocks are low priced pieces of junk moving, stocks breaking out of ugly bases, stocks under a ton of resistance, and the few that are shaping up need more time before they have a chance of breaking out correctly from pretty patterns.
The bears overconfidence/ego was finally brought back down to Earth today. The chatrooms I monitor and the message boards I read were full of overconfident and cocky bears. This move today should hopefully humble them and keep them quiet for a bit. If you were caught on the wrong side remember cut your losses, regroup, and stand pat in cash for a more clear opportunity.
It will come. Stay ready, patient, positive, and motivated to make some money. We could get a nice tradeable rally here. If we don't, no big deal. We will keep waiting till all the stars line up. I will see you at Investors Paradise.
Stocks Follow-Through on The Follow-Through, On Heavier Volume. Stocks continued their winning streak, closing higher for the third day in a row. Today was a nice confirmation day on yesterday's follow-through. The gains were due to a low number in the CPI report, giving investors confidence that the Fed may be done with its rate hiking cycle. After today's numbers Fed Funds Futures fell to around 10-20% (depending on where you get your data from) for a hike in the upcoming September FOMC meeting.
By the close the Nasdaq led the way with a 1.6% gain, the SP 600 gained 1.5%, the Dow Jones Industrial Average ticked up .9%, and the SP 500 lagged with a .8% gain. The most impressive move of the day was in the Semiconductor Index with a 4.3% gain.
Volume was higher on both the NYSE and the Nasdaq. Volume came in well above the 50 day volume average on the Nasdaq, giving an impressive signal that this rally probably will have some trading legs to it. Advancers beat decliners by a 3-to-1 margin on the NYSE and by a 2-to-1 margin on the Nasdaq.
Now, on the above paragraph, you will see I said "trading legs" and not a bull market. I say this because there are some problems with this rally. Besides, volume still being suspect, and a lot of ugly charts still littering the battlefield, leading stocks are lagging on this uptrend. The IBD 100 lagged the market again today with only a .8% gain. This is not what you like to see with the Nasdaq up 1.6%. If the Nasdaq was up that much and the IBD 100 was up 2.2% or something like that, I would be totally excited about this rally. However, this rally is still very suspect and should be taken with a grain of salt. Don't over-do-it to the long side.
In saying that I don't think it is wise to short this rally either. We had a follow-through day signaling that the trend is up. Fighting that trend is a stupid play, period. Until this rally fails, going short, is the wrong play. As the shorts who did not take profits and/or did not cover their shorts at proper cut loss points know, being on the wrong side of a short is extremely painful.
The indexes are all in much better shape, after the last two days. All indexes now sit above key resistance levels that are now support levels; old resistance becomes new support. If the markets hold these levels and keep rising, you can bet there will be plenty of nice trades to take in the coming days. As you can see, tonight, there are some nice ones. The two longs yesterday worked well, which is a change of character for breakouts from the recent market. This isn't "the rally" but it is still shaping up to be a nice tradeable rally.
I don't know what is going to happen tomorrow and you can be sure NO ONE knows either. We know the sub-intermediate trend and short-term trend is up now on all indexes and shorting is the wrong play right now. Until we fail (if we fail) I would not try shorting the rallies.
Stay alert and on your toes. Anything is possible in a market like this. I don't doubt this rally will fail but you NEVER know how long a "trading" rally can last. Three months, two months, or one month....heck who knows maybe this is another leg in a bull market that started in 2003. Somehow, though, I really doubt it.
Great luck out there. I will see you at Investors Paradise.
Four Days In A Row Of Gains; Hard Afternoon Reversal Leaves Room For Some Concern. As the title says, stocks were up again for the fourth straight session. Helped by a good HPQ quarter, stocks rallied up nicely into the afternoon. However, two horrible rulings against MRK sent the indexes down fast erasing most of the gains.
By the close the Nasdaq was up .4%, the SP 500 and 600 were up .2%, and the Dow Jones Industrial Average eked out a .1% gain.
Volume came in lower on both the NYSE and the Nasdaq, signaling momentum might be running out on the upside in the very short-term. Breadth was positive by a 6-to-5 margin on the NYSE and by a 3-to-2 margin on the Nasdaq.
Though the market continues to offer gains, and this rally continues to perform better than the June rally try, there are some things that are bothering me. First off, almost all of my longs are poor quality cheap merchandise. The second and most troubling thing is the IBD 100. This index has lagged the markets, once again, falling .7% today. This is the fourth day in a row of underperformance. As I said last night, on my blog, normally at the start of powerful bull markets leading stocks lead the indexes. This is not happening.
These late follow-throughs have continued to work in the past but I am not sure about leading stocks not leading whenever the markets of 1935, 1943, 1960, and 1978 followed-through. I have studied the bottoms of the late follow-through day rallies and did notice the late follow-through days that had a HUGE surge in volume lasted longer and were way more smooth than the late follow-through days on lower volume.
So even though there are worries right now to be aware of, we still have to recognize that we are in an uptrending market and the path of least resistance is to the upside. While that is going on, I am going to be doing my best to make money on the long side. I wouldn't short this market until it fails--if it fails--so you can have the odds on your side. Three out of four stocks follow the trend of the market.
The only thing I can for sure recommend in this environment is to book some profits of at least 25% when you have them. You don't want to give back a 25% gain in a tough market like this. And there have been a lot of gains evaporated quickly in this environment by the not-so-swift-of-foot traders.
Stay flexible in this environment, don't marry your long positions, don't marry your short positions, stay positive, keep your watch list updated, and I will see you at Investors Paradise.
New Swing Longs: NITE UTK PME STEC APN ILE VC
New Swing Shorts: NONE
Longs Outperforming (low volume non-IBD stocks excluded): TWTC-160 IHS-52 TYL-27 BWP-25 WEBX HMSY DIGE SEIC GPIC HWAY CTCM IMA JTX TRMB DGX MO BRR OMRI CHINA ALSK IDEV FORR RMR
Shorts Outperforming (all): USG-49 EL JOYG RES PII IYT AME HCBK WTI WERN RS X STLD EXBD DDE HYDL SIGI GSF NC KG KMR CEN KMP
Completely Cover Shorts: RCNI BLK RRGB
Stocks On Radar Screen: CPA HPQ ALY CSL NVEC NUVO BW
Stocks Finish A Great Week, Closing Higher For The Fifth Day In A Row Once again, major market indexes closed in the green, after staging a very nice bullish reversal intraday. After moving down thanks to a poor DELL earnings report and accounting issues with the company, it was nice to see the market reverse that selling and close higher. The higher close shows that the market, for now, wants to go higher. You couldn’t have asked for a better week.
The Dow Jones Industrial Average and the SP 500 both finished with .4% gains, the Nasdaq closed up .3%, and the SP 600 lagged with a .1% gain. This closed a week which saw the Nasdaq rise an extremely impressive 5.2%, the SP 500 gained 2.8%, and the Dow Jones Industrial Average finished the week up 2.6%. For the Nasdaq it was the best week in more than three years!
Volume was lower on both the NYSE and the Nasdaq, as should be expected of a Friday in August. Breadth got better as the day moved on and by the close was positive on the NYSE by a 9-to7 margin and was pretty much even on the Nasdaq.
What more can I say about this week than WOW! If you read my post last Thursday and Friday you will see I made comments about the chances of the market being boring the rest of the month; boy was I wrong. I had no clue the bullish action that we saw this week was coming upon us. There simply was no reason for the move except that the CPI and PPI report let enough bulls take control of a quiet tape. Don’t even try to tell me it was the cease fire in Lebanon. The UN has passed multiple cease fires and resolutions before. They are a joke to Hizbollah, Iran, and Syria. That had NOTHING to do with this weeks action.
Even though I can not explain the move this week, I have to respect the fact that the market has solidified. Every trading day this week, dips were bought. The market got stronger, everyday, as the day went on. The DJIA and SP500 are now back to all being in uptrends on all time frames. The Nasdaq is still in an intermediate downtrend and long-term in a lateral phase but the short-term and sub-intermediate are up. With these trends in place, this is the position I take.
Since we are in solid uptrends and have had a follow-through, does that make me super bullish? Absolutely not. We were very oversold, had too much pessimism in the surveys, had cocky shorts, and too many people ONCE AGAIN thought that Armageddon was here. This made for the perfect recipe for a nice reversal. The biggest thing that bothers me about this rally, however, is the poor leadership. The IBD 100 has lagged the markets everyday of this rally.
The IBD 100 is loaded with oil stocks and that is why it is lagging. However, at the beginning of really strong bull markets that launch gains of 50% or more for the indexes, you have leading stocks leading the market. The IBD 100 was up only 1.9% for the week. If it was up 7%, while the Nassy was up 5%, I would be all over this rally. When the market bottom in March 2003 and more recently October 2005, leading stocks led the rally. The top stocks in the top industries were outperforming the market. Right now that is not happening and that is enough to keep me cautious about this current rally.
Maybe during the next pullback these oil stocks will fall off the list and the those stocks will be replaced by newer more exciting names in innovative fields that show the stock making huge earnings and sales gains. If that happens and the IBD 100 starts leading the market then we will know this market is clear to the upside for a little bit. Until that happens I am skeptical of all rallies in this market environment.
What kind of Industries do I want to see lead? The ones that led this week! If they can keep leading after the next market pullback and have some of those stocks replace the old oil laggards I will be more than happy about this rally. Those sectors include: Internet-Network, Household-Cons Elec, Elec-Semi Mfg, Internet-ISP, Mach-Const, Elec-Semi Equip, Internet-Soft, Transp-Airline, Computer-Man, and Transport-Services. Until then, I remain skeptical.
Next week is supposed to be very quiet on the economic front and that along with it being vacation time in August should present us with a very quiet week. I was wrong last week. I hope I am not wrong this week. I would not mind taking a couple of days off.
I hope this rally this past week did not hurt you that much. If you stayed disciplined and followed cut loss rules you should have done just fine or escaped with minimum losses. If you have not gone long any of the wonderful longs I have taken, you still have time to catch plenty of market winners. If this is a “real” rally there will be plenty of stocks breaking out of great patterns for you to choose from.
Have a great Sunday and I will see you Monday at Investors Paradise!!
A Boring Day On Wall Street Ends With Stocks Pulling Back On Extremely Low Volume. Stocks gapped down in the morning only to stay there for the rest of the day. The gap down credit went to LOW’s earnings and the blame for the market not rising throughout the day was given to higher prices in crude oil. The truth is that Wall Street is on vacation and there aren’t enough players to bid stocks up or take them down.
By the close the SP 600 led the way on the downside with a .9% loss, the Nasdaq followed with a .8% hit, the SP 500 fell .4%, and the Dow Jones Industrial Average lost .3%.
Volume came in around 20% lower than Friday’s already dull levels, on both the NYSE and the Nasdaq. This was easily one of the quietest non-holiday trading day of the year. Breadth was negative on the NYSE by a 9-to-7 margin and negative on the Nasdaq by a 2-to-1 margin.
After five days of gains, the market was bound to have a pullback, with so many oscillators getting into the overbought area. Does this small pullback indicate the start of something more severe? I am not sure but I am sure of two things: we are in an uptrend and fighting that trend right now seems silly; and never short a dull market. The one thing for certain right now is that the market is dull.
With the tape as quiet as it is this week and with stocks still giving mixed signals I still say staying in cash is the smart play. Staying defensive and waiting till the market makes its trend well more clear is advised. If this rally is the real deal, like I keep saying, there will be plenty of beautiful high quality stocks breaking out of nice bases.
For now, I have some shorts working, some longs working, some shorts not working, and some longs not working. I might as well be in cash but the trader in me knows that by being positioned properly with the charts when a trend become clear the early buys will help build profits for later plunges into possible BIG winners. For that to happen we need to have the kind of follow through like the October 2005 bottom or better yet the best kind of bottom possible like the March 2003 bottom. Those bottoms had much better leadership in those rallies than this rally does.
So with that I can not think of anything of significance I can add that has not been posted in this blog the past four or five entries. Please, read the post, to know exactly what the market is doing now. And that is the only thing you need to know. What happens in the future is irrelevant, as long as you are prepared. And that is the whole point of this blog.
Great luck out there and I will see you at Investors Paradise.
New Swing Longs (Keep them small): NEU VTIV MNG
New Swing Shorts: NONE
Longs Outperforming (non-IBD low vol. movers excluded): CTCI-66 VLG-50 SYKE-37 TYL-32 BAM-39 CXW-26 BWP-26 ALY TRMB CHINA WNR TRMA HSR DJO DIGE LMT OMRI BRR MA BMR RMR
Shorts Outperforming (all): USG-50 JOYG-31 NTE-29 ZRAN-26 GYI-23 BPFH-18 GTRC-15 BTH MAS PII POOL IYT SUPX PDCO AME HTLD HCBK VB WTI WERN FRC RS DSL CNI X STLD CPF XPRSA NCI DDE FDX USU ARO TZIX BEC SIGI ATPG NC CBST LAMR CCO KG KMR CPE CFC CEN KMP CBD EL
Completely Cover: AGP GKIS—You see why I tell newbies not to short and stay in cash during downtrending markets? Imagine if this was the only short I decided to take and I decided to load the boat in it, instead of going short 50 shares. I would be broke, owe my trading/brokerage firm money, and probably would have been devastated that I would have quit the game. Stay in cash.
Choppy Session Ends With The Indexes Mixed An early morning rally due to the possible progress with Iran (don't count on it at all) was sold about three hours into the rally after another Fed head made hawkish statements about rate hikes and inflation. Moskow may not have been the reason for the fall in stocks but he certainly did not help. By the close the markets found some dip buyers and the selling eased.
At the close the SP 600 rallied .3%, the Nasdaq rose .1%, the Dow Jones Industrial Average fell .05%, and the SP 500 led to the downside with a .1% loss.
Volume was higher on both the NYSE and the Nasdaq. However, volume was still well below the 50 day volume average and was lower than Friday's session. Breadth was positive on both the NYSE and the Nasdaq. Advancers beat decliners by a 10-to-7 margin on the NYSE and by a 8-to-7 margin on the Nasdaq.
Thank God, there are only seven more days left of August. Then after that is Labor Day and then finally we can get back to business as usual on Wall Street. Until the traders return to their desk I am afraid there are another three more days of this crap.
Both the bulls and the bears are making good cases in the chatrooms and message boards I monitor. The bulls like the fact we have a follow-through and are holding recent support. The bears like the fact that we aren't gaining much traction to the upside and had a nice intraday reversal today. However is right doesn't matter. The facts remain that this market is dead and there is nobody there to trade it heavily. I wouldn't look to deep into the action this week. It seems silly being a bull or a bear right now in this driftless environment.
If you need to know about the actual market and the situations it is currently facing (support, resistance, trendlines), I recommend heading over to Investors Paradise and reading up on the postings of Phailin and Y. Gross. These two fellows understand the market and its cycles a lot better than I do right now. I only follow the trend. When it comes to figuring out what is next and what the past has told us on the market, these guys are as good as it gets.
The biggest news of the day for me was the fact that Iran has attacked and taken over an oil rig in Romania. If this just doesn't reinforce the fact of what is about to happen I don't know what is. Hamas going into Israel, Hizbollah attacking Israel, Iran attacking Romanian oil rig, and Somolia being overrun by Al-Quaida; does anyone see a pattern here?
Anyways, stay defensive, keep buys and shorts small until we get more follow through on this trendless and choppy market. Great luck out there and I will see you at Investors Paradise.
New Swing Longs (keep them small): EGN TZOO TXCO MIR MGPI KTCC FRO BTJ
Markets Sell-Off On Lower Volume, On Another Quiet Day On Wall Street. Early morning strength was soon sold after the July report of existing home sales came in much weaker than expected. The selling lasted all day, helped along with the news that the US has rejected the proposal by Iran’s fascist leader, until the final hour when stocks were able to get a small bid.
When all was said and done, the SP 600 fell 1.4%, the Nasdaq fell .7%, the SP 500 fell .5%, and the Dow Jones Industrial Average fell .4%.
Volume was well below the 50 day volume averages on both exchanges; the Nasdaq’s volume was lower and the NYSE was basically unchanged from the day before. Since the volume was lower on the Nasdaq and barely higher on the NYSE, there was no distribution day. Decliners led advancers by a 2-to-1 margin on both the NYSE and the Nasdaq.
Today’s market wasn’t that bad and it wasn’t that good either. However, I keep seeing the same thing over and over that I just don’t like about this rally. The IBD 100 fell 1.2%, once again leading the market to the downside. This index is outperforming the markets to the downside and underperforming the indexes when they rally. In a true bull market that has lasting power leading stocks lead the indexes higher and when the markets pullback the leading stocks pullback a lot less. Until this pattern changes we have to be cautious about this rally.
Today was another one of those boring days but this one at least had an obvious trend to it. Unfortunately, for the bulls, it was to the downside. We have been getting overbought in the short term after the recent rally from the follow-through and there are a lot of stocks right at key resistance points. So this pullback had to be somewhat expected. Hence why I said to keep longs small last night on the new longs section.
Like I said in the third paragraph, I am not sure what is to be expected from here. If this short term pullback is going to turn into something bigger we will know soon enough. Those IBD 100 stocks leading to the downside suggest it might happen but until it does I wouldn’t press it on the short side. But if you do go long keep your stops tight and positions small. That way you will not have to worry too much if the pullback does turn into something more severe.
At the same time with the pullback worry comes this scenario: The longer the market flops around the better the chance that some stocks can setup some nice bases to breakout of. One more pullback also might setup the market up for a chance to put in a real bottom as players give up on the rallies working. Or the market could just start moving higher in higher volume. So far the lack of strong volume also keeps me worried about the staying power of this rally.
As long as we hold the lows of the rally attempt I am going to stay short term bullish and am not going to press it on the short side. I will continue to look for longs breaking out of strong patterns, until we have an obvious failure in the indexes.
Longs are not acting the best in this market but at the same time they are not breaking down hard either. Bottom line, this is a confused, low volume, and trendless market right now. Only two more days of this crap this week and then the wonderful weekend will be upon us. Not a moment too soon.
Stay awake in this boring market and I will see you at Investors Paradise.
Roller Coaster Day Ends With Stocks Slightly Higher On Mixed Volume. An early morning gap was soon sold after the new-home sales came in worse than expected. But that was soon absorbed and the indexes spent the rest of the day flopping around to the upside, finishing the day in positive territory.
At the close the SP 500 led with a .2% gain, the Dow Jones Industrial Average and the Nasdaq gained .1%, and the SP 600 fell .2%.
Volume was higher on the NYSE and lower on the Nasdaq. Volume was also, once again, much lower than average. There is another six days of this so be prepared. Breadth was basically flat, with advancers and decliners running a stalemate.
Today was another classic late August snooze-fest. There really isn't anything that happened today that changed the technical picture. A few things underneath have raised caution flags with me. A lot of my individual longs from pretty chart patterns have started faltering and some have broken down. If this market was really ready to get moving, I would not be seeing this happen. That along with the IBD 100 lagging again today (-.4%) just keeps reinforcing the notion that this rally is not "the rally."
The other fact is that this rally is happening on extremely low volume. If we would be pulling back right now on lower volume during the quiet August time, I would be TEN TIMES more bullish. That would setup some beautiful chart patterns. Instead we are ticking up on lower volume, setting us up for a possible reversal on heavier volume when Wall Street gets back to work. I hope I am wrong but history shows that low volume August rallies lead to high volume September selloffs.
Whatever happens really shouldn't matter right now, since everyone has been listening to me since May 11th and has been around 75% to 100% cash. Right? No? You couldn't stop trading? I couldn't either. LOL. However, the positions have all been small and not much has changed since then. The cash has probably kept you safe from forcing to make a decision about being a bull or a bear. A play that has proven silly the past few months.
Right now the market has no real trend and the best bet is to stay patient and keep your cash levels high for that prime moment to strike. This market is going to stay dead and boring for another six days. So stay awake and if you must take a vacation NOW is the time to do it. There is simply not going to be a more quiet week this year than the week that we are about ready to run into.
Great luck out there and I will see you at Investors Paradise.
New Swing Longs: EMS SVNT AHS AMRN
New Swing Shorts: NONE
Longs Outperforming (low vol. non-IBD excluded): AKAM-139 CTCI-65 TYL-34 BTJ TZOO IMA HWAY HMSY PSPT ISYS TRMA MO WNR FORR DGX WEBX PT ALY TXCO GPIC MIR OMRI BRR BMRN STEC DUCK MA
Shorts Outperforming (all): JOYG-34 GYI-25 GTRC-18 POOL-16 PII-15 RS-15 PDCO ARO BTH IYT AME HCBK WTI WERN FRC FDX EXBD NCI XPRSA STLD X KNOT IART SIGI NC CCO KG CFC CSE CBD EL
Completely Cover Shorts: RMK
Stocks On Radar Screen: GHDX CPA CWTR VARI OSG VOLC ZTM TIVO FLSH RGX UDR SOFO
Markets Flatline And Close Mixed, Ending A Quiet Week. The news of the day was in fact that there was no news during the day. Traders started the weekend one day early, obviously.
Stock market indexes finished mixed, with the Nasdaq rising .2%, the SP 600 rising .1%, the SP 500 falling .1%, and the Dow Jones Industrial Average falling .2%.
Volume was lower on both exchanges and was well below the 50 day volume average. Today was the slowest day since July 3rd. This lower than average volume today continued a trend that lasted all week. Just by looking at a chart you can see that the past 11 days on the NYSE and the past six days on the Nasdaq have been very slow trading days. That is sure to continue into next week.
Decliners led advancers by a 8-to-7 margin on both the NYSE and on the Nasdaq.
Final stats for the week have the Dow Jones Industrial Average down the least with a .9% loss, the SP 500 gave up .6%, the Nasdaq 1.1%, and the SP 600 2.2%. The positive on these numbers is that the indexes were up a decent amount last week and so far we are holding those gains. After rising 5% plus last week, the Nasdaq only gave back a fraction of those gains. That pullback on lower volume has to be a decent reason to be bullish on the short term.
There is still plenty of underlying weakness that still requires caution; the amount of new highs on the indexes being much lower than where they were the last time the indexes were at these prices, stocks breaking out of bases and still reversing, overbought readings on some oscillators, and the fact that we are coming upon seasonally one of the weakest weeks in the markets the past 18 yrs are all great reasons to keep cash heavy. The past nine years have seen the indexes fall an average of 2.7% during the final 5 days of August. A good poker player (stock trader) does NOT bet against those odds.
Saying all of that, this low volume market is stupid to try to analyze and make sense of. We simply have to wait. I don't care if no one likes it or not. If you want to make a lot of money when the time is right, and stocks are breaking out and racking up 100%-500% gains in the span of months to a year, you will be smart and keep cash heavy during this kind of oscillating market. Now is not the time to make a living trading stocks - now is the time to preserve your capital so when it is time to make a living trading stocks you will have all of your capital; and not just a former shell of your old account highs.
How many of you have been trading this market and making money (futures traders don't answer me)? I monitor a lot of chatrooms and stock boards; I know the answer. Do you think I am making a lot of money during this market? Nope. I am basically dead even! I haven't made a step forward at all yet I have been trading like a mad man with small positions. Maybe if I had a life I would have gone on vacation and spent my money more wisely.
Don't take sides in this market. It is best to wait for clarity. A clear direction with volume to tell us where the big boys are going is what we need. We don't have that, and until we do, patience is the best advice I can give.
Aloha and have a great Sunday. I will see you later at IP.
New Swing Longs (keep them small): ABCB IDXX TTEC BDCO
Stocks Make Gains In Heavier Volume; Trading Is Still Way Below Average, With Wall Street On Vacation. A big drop in crude oil prices (2.6%) helped stocks rally and mark gains across the board. Some last hour selling knocked stocks off their highs but today's action was bullish.
For the day the Nasdaq rose 1%, the SP 600 rose .9%, the Dow Jones Industrial Average gained .6%, and the SP 500 tacked on .5%.
Volume was higher than Friday's levels, marking bullish action by the indexes (rising on higher volume). However, volume was still well below the 50 day volume average. That is day 12 in a row for the NYSE and day 7 for the Nasdaq. Breadth was positive on the NYSE by a 2-to-1 margin and by a 5-to-3 margin on the Nasdaq.
It was very nice to see stocks rally today with oil stocks taking a nice hit. With the market rising with oil stocks falling it is very well possible that this downtrend is setting up a sector rotation. Tech stocks did very well today and some of the industry groups in the bottom did the best today while the top groups in oil didn't do so hot. If we can get some nice charts setting up in stocks that have solid fundamentals then maybe the market can get its legs and make a real run for a long lasting bull phase.
Right now, we don't have that. The current bad news is the IBD 100. As I keep saying in real strong bull markets this index leads to the upside and lags to the downside. It has been doing the exact opposite this entire rally. Today was no exception, with the IBD 100 only up .7%. That lagged the Nasdaq and SP 600. This is not bullish action for this rally to hold up and become a great bull market. Until the IBD 100 has new leadership this rally is still to be taken with caution.
Saying all of this, I am still finding plenty of wonderful, beautiful charts in stocks with very good fundamentals. These stocks are holding up well and are now making gains a bit more consistently.
What does all of this mean? Just what it says. Take small longs but keep them on a tight leash, if you must trade. The trend is up, still, for now.
The bigger trend is still quite unclear. We need more volume to come into the market before anyone starts making any serious guesses on where the market is going next. I don't like low volume rallies because they can lead to heavy volume selloffs. With all the pretty charts this time I am hoping that isn't the case. But hope doesn't make anybody any money.
Until the trend changes I will still go long small to medium size positions in stocks with solid fundamentals breaking out of beautiful charts.
Never short a dull market! Great luck out there and I will see you at Investors Paradise.
New Swing Longs: IMKTA INWK HGIC LMNX NU TRAC
Adding To Holdings: TZOO ABCB PT
New Swing Shorts: NONE
Longs Outperforming (low vol non-IBD excluded): CVO-137 PMTR-74 TYL-38 GXW-25 VLG-52 IHS-46 AVNC-28 DA-33 ALY TZOO HMSY CHINA ABCB RNST NITE PSPT TRMB TRMA AHS GES NEU CTCM IDXX HSR WEBX PT HWAY IMA BMR SEIC ISYS LMT EGN DGX MIR JTX EMS BRR MA GISX BMRN SVNT MFA RMR
Shorts Outperforming (all): SWC-39 JOYG-36 BTH-15 RS-15 RES PDCO HCBK WTI X STLD HYDL KNOT HSY SIGI ATPG NC GSF KG CPE NGS
Stocks On Radar Screen: NCTY LAYN DRYS DLA VSEA BEBE CACB SMOD CLUB LBIX SWHC MOLX RTK IIVI GHDX LYG MVSN ITC APLX
Stocks Close Near The High's Of The Day, After Staging A Very Impressive Mid-Day Rally. After a weak Consumer Confidence number depressed stocks, a mid-day release of the FOMC meeting minutes was taken as good news by traders as they bid stocks up all the way to the close.
The SP 600 led the way with a 1% advance, the Nasdaq followed with a .5% gain, and the Dow Jones Industrial Average and the SP 500 were the laggards with .2% gains. The serious stand out in today's session was the Philadelphia Semiconductor Index with a 1.7% gain. The IBD 100 also managed a day of outperformance rising .8%.
Volume was much heavier than what it has been the past few sessions but was still well below the 50 day volume average for the indexes. That makes 14 in a row for the NYSE. Breadth was solid with advancers beating decliners by a 2-to-1 margin.
There were some nice action in today's rally. Even though this came on light volume it was nice to see such a mix of industry groups performing well. Food, Apparel-Shoe, Retail-Restaurant, Electronics-Semi, Computer Soft.-Medical, and Office Supplies were just some of the industries seeing decent gains today.
This industry action matches all of the pretty charts I am starting to get on a much more consistent basis. These pretty charts also have good fundamentals which makes me positive that there is still more room to go for these stocks on the upside. By just looking at my current holdings you can see things are going pretty well. Also by looking at my shorts, you can see that their downtrends are ending for most of them.
Traders simply have simply pushed their bets too far on the short side too soon. If this market is going to go into a big bear market you want the trend to be on your side. Even though the volume is low the markets are in an uptrend and you have to respect that. Just think about all those nice charts and gains traders have missed out on the past week because they were too bearish and though those breakouts had to fail. The market is rewarding the contrarian investors; this time it is the bulls.
If you don't think it is too negative out there then take a look at the Consumer Confidence numbers today. Or better yet, take a look at the IBD/TIPP Economic Optimism Index. That one came in at the 3rd lowest level since they started tracking it in February 2001. If that does not tell you that the crowd is too negative, I don't know what else will. If you remember the bulls and bears did barely cross in June. Notice how we have been going up since then? So it could be too bearish out there still.
What worries me? The same stuff I keep writing about every night. We are oversold and we are going up on low volume. This low volume rally is the last thing I like to see. Stocks MUST go higher on higher volume or else this rally is setting itself up for sellers to take control. With so much damage in old leaders a rotation is obviously taking place. How much time and damage we have to go through still is up in the air.
I don't like this low volume rally but I love the high volume breakouts in all the pretty charts it is giving me. Never let emotions get in the way of strict discipline. Losing your discipline will kill you in this market.
If you have not read the last five post, please do. There is more than enough information on the bear side to quench the thirst of the diehard bears. I have made the bearish argument for these indexes enough the past two weeks that I am not sure what else I can add.
So with that I say: Never short a dull market! Aloha and I will see you at Investors Paradise.
New Swing Longs: PRFT HCSG BMC RAH
Adding To Holdings: TRMA ISYS
New Swing Shorts: NONE
Longs Outperforming (low vol. non-IBD excluded): PMTR-75 IHS-60 VLG-52 BTJ TRMA ISYS IMKTA RNST HSR CHINA PSPT DIGE GISX NEU HWAY IMA BMR AHS DGX TZOO DUCK WEBX INWK BRR EMS MA STEC ALTH SVNT LMNX BMRN TTEC KONA HGIC TRAC RMTI ZILG RMR
Shorts Outperforming (all): USG-46 NTE-32 GTRC-18 PDCO HCBK DSL XPRSA HYDL FDX USU HSY KG STNR CFC NGS
Markets End Mixed On Mixed Trade; Five Days Of Gains In A Row For The Nasdaq. It was a mixed day for the markets as small caps and technology stocks led the way while big caps lagged. However, it wasn't that bad as the only index with a loss was the SP 500 and it was very small. The Nasdaq keeps the winning streak alive with five in a row and it was the third day in a row the gains came on higher volume. Pretty good but not great.
At the end of the day, the Nasdaq led the way with a .6% gain, the SP 600 rose .4%, the Dow Jones Industrial Average rose .1%, and the SP 500 ticked down less than .01%. The big winner of the session was the Semiconductor Index rising 1.8%. The Electronics-Semi Equipment and the Electronics-Semi Mfg. were the leaders in that industry.
Volume was higher on the Nasdaq and was lower on the NYSE. But the one constant theme was volume being below the 50 day volume average on both exchanges. That makes it 15 in a row for the SP 500 and 9 in a row for the Nasdaq. Breadth was positive on the NYSE by a 5-to-3 margin and positive on the Nasdaq by a 3-to-2 margin.
There was really only one piece of news that mattered to the market today and that really didn't have an impact. It was still nice to see the GDP revised up to 2.9% from 2.5%. However, they were looking for 3%. But that market news really doesn't matter anyways.
What I want to focus on today was something that stood out like a sore thumb in the chatrooms I monitor. The negativity out there seems to me to be very thick. I am not sure if this whippy market is making traders crazy but some of the comments I am reading in these rooms have the sound of a desperate trader confused beyond belief.
I for a fact no that there are not a lot of people long this market and everyone is looking for the same thing in September. I wouldn't put it past the market to allow everyone to be right but how often does that happen? Something feels strange out there. I think it is more bearish than what it appears. There were some sentiment numbers given to me today that support my theory. I think it showed only 18% bullish!! That goes along with the bulls and bears matching each other in June on the II Survey and the market having a follow-through day with lots of nice charts breaking out.
So I want everyone to be aware that it is bearish out there. If they are talking about there being no God in #activetraders to them talking about a recession in #daytraders you can be sure it is negative out there. That means that in the short-term there could be enough steam for further advances, even with the market showing overbought conditions.
However, with all of this we still have to exercise caution as this rally is on low volume and the bears do have valid points that I have gone over ad naseum over the past week.
But as long as I keep getting all of these pretty charts--Eight more tonight--I am going with the trend and going long these gems. The GES and TZOO will be in the bunch but the TZOO purchase, once again, should NEVER have been taken. Besides those two, the other 50 stocks are doing fine. So why should I argue with that. I will let the sad boys in #activetraders and #daytraders do that. And besides those two rooms, you should check out RevShark's and Jim Cramer's blog. Tons of hate talk. I even got one today. I was proud of myself.
Great luck out there and don't ever give up. I will see you at Investors Paradise. Aloha.
New Swing Longs: BEBE KAI ABMD IIVI BEAS MEH WGA VRGY
Wake Me Up, When Labor Day Is Over. After spending most of the day in a coma, stocks started a late session rally only to end flat by the closing bell. There was plenty of news today on the economic front, however, nothing was market moving today.
By the end of everything, all of the indexes ticked down less than .1%. If you want a picture perfect snapshot of a dull day, today was the day.
Volume was a tad higher on both the NYSE and the Nasdaq. With the choppy intraday trade and with a close that barely moved the indexes .05% today had the possibility of being a day of churning. It is too early to make assumptions; we have to wait till volume comes in on the downside before you could call this a churning day. And since volume was still below the 50 day volume average, it is really silly to call this anything other than pre-holiday trading ahead of a long weekend.
Breath was positive on the NYSE by a 5-to-3 margin and basically flat on the Nasdaq.
August is finally over and by looking at the final numbers it was obvious all the negativity leading into this month paid off for the contrarians. The Nasdaq gained 4.4% for the month, the SP 500 2.2%, and the Dow Jones Industrial Average 1.8%. It proves, once again, don't listen or trust the media. When they get super-negative it is smart to bet against them. The bulls win this month.
The upcoming weekend is starting early with the markets flatlining today as the traders that can move the market have obviously checked out and have gotten a start on the 3-day weekend early. With that I don't expect anything exciting tomorrow. Volume should be some of the lowest of the year.
My final thoughts about the recent market is still centered around the bearishness I see out there. Everyone thinks that this rally is going to fail very soon; everyone. Or at least that is what it sounds like to me. I am seeing all the reason listed everywhere that I have listed here. The low volume, we are overbought, one of the worst month of the years, etc... All of that is known by most traders I talk, read, or listen to. I guess the market could make everyone right but somehow that seems unlikely.
One of the most interesting things I notice is the fact that this week was supposed to be historically one of the weakest weeks of the year. Go back to last week in my blog on Thursday or Friday; you will see that I listed some historical facts on how the last week of August has been one of the worst weeks the past 18 years. Well, how has the market done so far this week? Not too bad. Is that an omen for the upcoming month? If this was supposed to be one of the weakest weeks and we went higher, I wonder if we cant just keep building on this rally.
Ah, who cares? Whatever happens will happen. As you can see I have laid out both arguments and scenarios. That means I am ready for both situations. However, I am leaning for more upside due to all the obvious reasons. The most obvious being all the beautiful charts making high volume bounces or breakouts all over the place. I did not have that off the June rally, remember? Just go back and read what I was posting there. Facts are facts. Speaking of another fact: This is a very tough market!!
Tomorrow will be dead as I am sure traders are turning a 3-day vacation into a 4-day vacation. With that have a great Friday and I will see you at Investors Paradise.
New Swing Longs: BFIN ISIG MWRK ORB SMOD ICI
New Swing Shorts: NONE
Longs Outperforming (low vol non-IBD excluded): CVO-141 VLG-52 SYKE-39 DA-33 HMSY-30 BWP-31 OMRI-25 VRGY IMKTA DJO INWK NITE EGN NEU TTEC IMA ALY IDXX PSPT LMT CXW DGX ISYS GISX SEIC KAI CTCM MA EMS MNG STEC AVCI FORR ABMD LMNX ALTH BMRN MFA WGA ZILG
With Nobody Around, Traders Bid Stocks Higher; Enjoy The 3-Day Labor Day Weekend! On a day lacking of traders, the few that remained found no problem bidding stocks higher as a good job's report number was the only reason they needed. The buying that they did helped the Nasdaq join the SP 500 and the Dow Jones Industrial Average in hitting three month highs.
At the closing bell, the Dow Jones Industrial Average was up .7%, the SP 500 up .6%, the Nasdaq up .4%, and the SP 600 lagged with a .3% gain. That finished off a week that saw the SP 600 lead with a 2.6% gain, the Nasdaq follow with a 2.5% gain, and the Dow Jones Industrial Average and the SP 500 finished with 1.6% and 1.2% gains respectively.
Obviously, volume came in lower than the day before, as traders headed out to turn a 3-day weekend into the beloved-on-Wall Street 4-day weekend that every holiday turns into. This makes it 17 in a row on the SP 500 and 11 in a row on the Nasdaq for volume coming in under the 50 day volume average. Advancers beat decliners by a 2-to-1 margin on the NYSE and by a 4-to-3 margin on the Nasdaq.
There are a lot of conflicting opinions right now on what this market is supposed to do. I am in the I-Don't-Know camp. I like it here. But what I do know is the facts and what the facts tell us is that there are some bullish reasons for this market and there are a lot of bearish reasons. So what are they?
The positives aren't that much but there is the fact that the II Survey of bulls/bears did meet at the same level June--that rarely happens, the Nasdaq is up 3.7% since its follow-through in July, everyone is expecting a September selloff based on cycles, lots of stocks are breaking out--not all are holding but this is better than in June, and tech and small-cap stocks are leading big-cap stocks.
The negatives are a bit more convincing. The yield curve is inverted, AAII Survey shows that bears dropped to a low level, the II Survey has been showing more bulls and less bears the past week, the IBD 100 is lagging the market--normally in raging bulls this index leads, the McClellan oscillator is overbought, the ARMS index is overbought, the 10 dma of the adv/dec line is overbought, and we rallied on very low volume.
There are other bullish and bearish reasons out there but these are the ones that are coming to my mind as I type this. After looking at everything and taking it in, I would say you have to put me in the "I am following the trend but I am not trusting it AT ALL" camp. The negatives FAR outweigh the positives.
The only other thing of interest I noticed today was the fact that IBD has plastered GROW on every market recap and Nasdaq summary it can create. Why did they have to talk about it so much? Sheesh, LOL. The breakout probably will not work now (I am joking) as it will be ready by everyone everywhere as the only stock that looked HOT after Friday's market. Oh well, with the earnings and sales growth I am sure some IBD traders aren't going to be the reason why this stock rallies or falls.
Volume should return sometime next week, as the vacations end and the traders return to their desk. This along with the 50 day volume average coming in should make it clear where the big boys are putting their money to work in the coming days. Volume is what we are going to need to be able to establish and make a commitment to one side or the other. This driftless action makes it pointless to try to trade too much and hit homeruns that can not be hit.
With that I leave you with the famous words of Rick James performed by Dave Chappelle on the 'Chappelle Show.' "Eat, drink, and be merry b*tch*s!"
Have a great Labor Day weekend and I will see you at Investors Paradise.
New Swing Longs: GROW
New Swing Shorts: NONE
Longs Outperforming (low vol non-IBD excluded): DSGX-54 IHS-53 SYKE-39 BAM-47 DA-37 CXW-25 NEU MWRK ORB BW LMT HCSG NITE BTJ ALY VRGY RNST IDXX SZE INWK VTIV DIGE SEIC IMA WNR PT WEBX MO EGN TRMA DJO BRR EMS MA STEC LNCE ICI WGA
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