28 Straight Days Of Volume Below Average On The NYSE; Nasty Late-Day Action Sends Stocks Lower Giving The Nasdaq And SP 500 A Distribution Day
May 1, 2008
I have to admit that I was a bit busy after the bell with some massive surf which is actually some of the biggest surf I have ever seen on our lower west/south shores since I moved here in June 2000. Since then we have had some big ones but breakwall was a consistent 8 foot face to 10 foot face on EVERY set and I got worked. Thankfully, my board is still in tact but sadly my ego is not as I definitely looked like a donkey. But, hey, at least I got out there. Obviously, the crowd was not very large.
But, I still love doing this FOR YOU GUYS and so here I am tired as can be about ready to do this for free. You are welcome! 
LOL. I am obviously joking so please no need to send any nasty comments. We have no time for that at BWT.com.
Today seemed like everything was going to be OK and that was the case until a little after 2pm EST when the indexes began a nasty selloff. Thankfully, when we look at the big picture, we can say that the selloff was really not that bad considering where we have come from 1/22. However, to reverse in such a nasty fashion is not good. But the good news, over on my end, is that many stocks I owned went higher and the few that did pullback show a tail on the daily chart pattern which indicates that buyers came in to support the stock before the close. Most stocks that did take a little hit are still holding key support and did show bullish intraday price action. The point is that in an overall uptrend you do not EVER want to lose your position by panic selling. Even though I did not panic sell, look at CLR the past month. How do you think I feel about taking a small loss in that? To be honest I could care less. There are more important things to worry about. Like breathing when you are being held underwater and in whitewash for over a minute. That is a little more important than making money. I’ll take living for one thousand, please.
The great news amongst this 1% up day in the Nassy turning into a .5% loss on higher volume is that leading stocks still held above the water and are in much better shape overall. The IBD 100 gained .3% today as more and more breakouts still showed up and held today including two VERY NICE breakouts that I will be going long. Not only did I notice a lot of breakouts, from not so perfect bases, there were a lot of stocks in my top CANSLIM scans that are building very round cup patterns or are nearing a breakout from proper double bottom patterns. I have to admit, if we can get that sideline mutual fund cash to come off the sideline and get back to work, this market is probably going to have a nice little rally. But if they return and start dumping stocks, to go along with all the recent distribution days, things could get nasty pretty quickly. Hopefully they will come back buying and not selling.
Before I get back to stocks I saw that GDP came in above 0% but I keep hearing the word recession everywhere I turn. Am I crazy or is not a recession back to back months of negative GDP. I am not the smartest guy in the world but I sure have made A TON OF MONEY in the stock market (and at the poker tables) and I know bullish charts when I see them. And even though I DO NOT have more than five to six near-perfect charts and zero perfect charts, I still have a TON of high quality fundamentally sound stocks setting up in very round and bullish basis with some breaking out on strong volume. This many round bases in this many stocks is a sign of a healthy market. It would really blow if they came back selling thus destroying these nice charts. That would be the MOST bearish situation that could possibly occur. It is OK if we have ugly charts and we keep selling as eventually it will lead to a bull like that recent downtrend we had. But if we start to build nice charts and some of our near-perfect longs turn into ugly trash (think of NEU and CMP recently; both were VERY HEAVY longs when I initially went long but after the near-perfect start they deteriorated.) that will be very bearish.
But with GDP still above 0% I think some people are just too negative and to say that the economy is in a recession with everything blowing up is just a straight up lie. I am looking at the front page of IBD right now and see .6% and see nothing below zero which means everyone that thinks it is horrible out there is being influenced a little too much by pump prices and the media. YES IT IS BAD out there but there are so many other things that are extremely cheap today that we do have trade-offs. Sometimes, though, I feel like I am the only one that can see this however. I guess that is why I CONSISTENTLY make money in the stock market. And even when it is trendless avoid losing money; I simply NEVER listen to CNN or the liberal major network news. They are corrupt to their biased views and the recession they talk about simply doesn’t exist and is helping drive consumer confidence, the U of Michigan survey, and the IBD/TIP polls to record lows. Buy em when they fear em. Right now they fear em.
The only crowd that sadly is getting bullish again is the Investors Intelligence survey of newsletter writers. The index shows 40.9% bulls to 31.8% bears. So they are starting to feel good again. That didn’t last too long, did it? The AAII also confirms the crowd on the short term has turned bullish as the bulls are leading the bears 52% to 26%.
Getting back to the internals, volume was much higher on the Nasdaq as it actually was above average rising around 25%. The NYSE was up over 10% but still below average. That made it the 28th straight day of below average volume showing that institutional investors have no interest in moving stocks here. I do not know why this is but I would like to see them come in buying stock soon. The Nasdaq has actually had four days of either average or above average volume since 3/20. Three of those days came with higher closes which shows that the few funds that are active in the stock market are at least buying stocks. That was the case until today, however, where they sold stocks on higher volume. Still overall this market is building a base for what hopefully is a move higher.
I like to think like that because I see the IBD 100, Nasdaq 100, SP 600, and the SOX index all making nice slow steady gains off the recent January lows. While that is happening, machinery, gold, select metals, and chemical-fertilizer stocks are showing some signs of climax parabolic topping action and as along as they move the money into the previously mentioned sectors everything is going to be alright. If they do not and the commodity stocks start moving higher again, it might not be good overall. I am going to stay positive.
But what is not staying positive is the new highs to new lows. There were 79 new 52-week highs to 104 new 52-week lows and the stocks leading the new highs list are still unimpressive with transportation, energy, retail, medical, business services, and banks leading. It is not that bad but let’s be honest it would be better to look like this electronics, solar, retail, banks, computer software, internet, transportation, computer hardware, and biotech. That would be MUCH MORE EXCITING and get me feeling a lot more bullish about this market. But for now I guess with transportation-railroad and metal products-distributors having 27% and 20% of their groups stocks hitting new highs I am going to have to take whatever I can get and just smile and be happy about it.
The worst group today in the top 20 was the Building-Residential/Commercial group. This is quite funny because many members in my chat room, including myself, were very happy by time the closing bell rang because we went long, in bulk, a stock two days ago as it bounced perfectly off the 50 DMA. The stock’s fundamentals were also fantastic and estimates were very strong, including solid mutual fund ownership growth. This stock, so far, has it all. But do not fall in love with ANY STOCK EVER. This stupid stock could reverse tomorrow WIPING OUT ALL of the gains on heavier volume. ANYTHING can happen in the market right now as it has gotten very unpredictable recently. However, if we can get volume back to the upside, I have a feeling things will continue to get easier. I am starting to make good money in very short amount of time again with those longs and if this continues we can finally start to enjoy our first monster stocks of 2008. There just has to be some MA’s in there (so far it is up 460% for us in a little over 1 3/4 years).
Just to give you guys some stocks to watch for future potential longs, I suggest you dig into some of these gems. I am not long any of these stocks but would like to get long any of them if they would either bounce off the 50 DMA on huge volume or setup and breakout of a base at least 5-7 weeks longs. MPWR, V, CMI, BBD, ITU, CBD, UBB, and CYBS are all on my radar for future potential longs. But they need to either create another three-week tight to seven month cup with handle pattern with green BOP or, like I just said, bounce off the 50 DMA on strong volume.
OK, I hope this all made sense because a 3-hour surf session when you have Multiple Sclerosis, combined with having to scan all my charts, enter orders, and write very nice longs and shorts analysis has made me very tired. I am not sure if anything that I have typed makes sense but I hope it does and I hope something in here makes you a lot of money. I know I need to make a lot more money. I keep getting parking tickets!! Aloha and I will see you in the Gold Forums and the Platinum Chat Room where it is always a 10 foot peeling swell with non-stop sets and barrels!!! Maui No Ka Oi!
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