A Powerful Rally On Heavier Volume Sends Indexes To All-Time and Six-Year Highs; The Bears Are Morons And This Proves It

July 13, 2007

It was an excellent day for the bulls today as it, once again, pays to be on the right side of the market. The Nasdaq soared to 6 1/2 year highs and the NYSE hit new all-time highs. For those who have been long stocks since the lows in March, this week has been a great week. Today’s gains in the indexes only proves that the trend is your friend and that the smart play in bull markets are to buy the best stocks and to stay long those stocks as long as the indexes are going up.

There simply is not much else you can say to the bears now that has not been said over and over. The arguments that those in the Doug Kass camp have made seriously sound more and more like rantings of seriously disturbed mental incompetents. The arguments that they make continue to “sound” smart, but they simply have no substance. Those “morons” that simply followed the trend of the market and went long stocks are being rewarded soundly this week.

Despite the indexes being up between 1.7% to 2%, my account only rose 4.2%. This was mainly due to MTOX, but what caught my attention is how poorly my outperformance was compared to Monday when I gained over 7% on a day when the market was up .5%. This is nothing to worry about but it might be signaling that the momentum we are seeing on the upside is about ready to slow a bit. Now, that doesn’t mean it isn’t going to pick back up again but the fact that my account did not kill it today is a bit of a concern. Also the put/call ratio has fallen to .68 which is starting to show a little bit of complacency in the short term amongst option traders.

Of course, saying that, I also am quickly reminded by my brain that I had ZERO complete sells tonight. I also found very few stocks to selloff to raise funds for possible new purchases. That tells me that I am in the right stocks and that those stocks clearly want to keep moving higher.

So I completely expect us to have more gains, in the intermediate term as leading stocks, along with some technology stocks, keep leading this rally on higher volume.

When do I think we are going to top? I keep getting asked this question so I will tell you: I DO NOT KNOW. NOBODY knows the exact date of the top and when it is going to happen.

What I can tell you is that we can ALL know the season that we are in. We will know that we are about ready to top when we start to see the following: leading stocks stop breaking out of bases and moving higher and instead start making lower highs and lower lows with heavy distribution. During that time, weak cheap stocks with poor fundamentals will keep moving higher, giving investors a false sense of hope that more gains are coming.

Next, you will see merger and acquisitions start to get out of control, while at the same time you will start seeing 3 for 1 and 4 for 1 and rapid 2 for 1 stock splits. The rapid splits give investors the false sense that they are getting more shares at a cheaper price, even though the math of the splits is simple (the retail public still bites on this).

Going back to the former, the mergers and acquisitions are still at a breakneck pace with RTP buying AL for 38 billion. This shows that the money is still being thrown everywhere. As long as that is happening we are moving higher. It is a liquidity driven market.

The other clear thing that will show up when we top is the blatant outright selling. Do you remember the Tuesday headline: “bears maul wall street.” LOL. Freaking morons at the media just help feed this market higher. The market wasn’t even down 2% and they talked like it got nailed. When you start seeing the market down 3-4% on huge volume, then it is time to worry.

Also, the media. Just look at these bafoons. As long as they keep hating on this greatest economy that will never be told this market is going higher. Once everybody embraces this rally and once everyone is convinced we are only going higher only then can we top.

I hate to tell you this, with the NYSE short-interest ratio near all-time highs around 7.7, you can bet we are no where near this euphoric moment. We are not even close.

Enjoy the gains! The way the charts look and the way my portfolio is acting there should be more to come. You don’t always get markets like this so enjoy this while you can. One day, and it will happen, you will be in a bear market lasting years with VERY FEW chances to make clean consistent money on the long side.

The way this market just keeps going up from every little round of selling is just too impressive to not sit back and enjoy. I am even watching CNBC, which I started doing on Monday after my account did so well. What is great is that if my current holdings keep trending the way they are now, I will be in a position to make a lot of gains.

And when we top, I am going after the big boys, just like the greatest traders of all-time did. GOOG, AAPL, RIMM, ICE, BIDU, FWLT, FSLR, TNH, MA, and CME.

Aloha and I will see you in the chat room!

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