Last Hour Selloff Dampens Effect Of The Strong Intraday Rally; Semiconductor Stocks And The SOX Index Go Flying

July 17, 2007

Overall, it was another excellent day for stocks, as all indexes came off their intraday lows to power higher until a last hour whipping. However, the Nasdaq barely gave back any of its gains and the SOX index put in an incredible day. The SOX index getting a huge lift today has to, at least you would think, start to make the bears think that this rally is for real. Because, everyone knows that everyone only LOVES a bull market if tech is running. And last time I checked, tech is moving baby.

At the end of the day the SOX gained 2.95% hitting its highest level since March 2006. Some of the stocks that helped the index power higher were LRCX, VSEA, KLAC, BRKS, AMAT, and ASML. Overall the Electronics group has been on fire. The Elec-Semi Equipment has moved from 76 to 57 since Friday and the Elec-Military Systems has moved from 81 to 50 the past three months. The Electronic-Component/Connector group is number 37 from 157 three months ago. So obviously the moves in the stocks and industry groups show that the sector everyone loves to see rallying is in fact helping to lead us higher.

However, INTC reported after hours and subsequently sold off 4%. But this started to get the traders talking about a top and a reversal in the semi stocks. This kind of “fear” after a miss by INTC is the reason why stocks keep rallying. If people would have been saying “it is down 4%, what a great buying opportunity.” Then I would say we need to worry. But the fact that the chat rooms were going off with people wanting to short INTC and calling a top to semi stocks is the reason why I doubt the move in these stocks are done. If you look at stocks like HOKU, SIGM, TRT, AMSC, SMTX, MVIS, NVDA, and HURC, you will see that they are no where near climax tops. These are the leading stocks since the July lows in the SOX index.

The only thing that stood out to me today, compared to the market, was the fact that the IBD 100 lost .1%. This was a divergence from the strong showing in the DJIA and Nasdaq. However, my account did worse today losing 3% basically do to one position that was quite large. MTOX. That stock had a horrible breakdown. Thank God, warning signs showed up before today’s swoon and I was out about 40-45% of it in various accounts. Still it hurt and the 10% gain from last week is down to about 3.5%. This is still better than the 1.7% gain in the Nasdaq but still considering how well I did last week it stinks to get hit like this. However, by getting rid of this stock I am able to buy a lot of a beautiful stock tonight. Let’s just hope this one works out better than MTOX. The other stock that sucked recently was AFSI. But I have taken 30-40% off the table already and the rest is going to ride with the price. That is as long as the price stays over the 50 day moving average.

This market has been a great market this year and I am still up over 60% for the year in my IB account despite the last two days. The best news about this outperformance is that I notice it is double the best index YTD. That index is the New Issues Index, none-the-less. That index has a YTD gain of 24.1% leading all other indexes for the year. That shows you right there that this market is hot. It is not often I see this index leading all the other indexes this late in the year. In fact, I have never seen that. So that is a cool fact. My IRA in Scottrade is up 32% YTD. I am not sure how well our realtime portfolio is doing (Mahket tracks that) but last time I checked we were even with the indexes which is very good considering that this portfolio is a CONSERVATIVE portfolio that is operated in a very safe risk-controlled manner. This return also comes with us starting the year 100% in cash and SLOWLY building our positions as the year progressed.

My point with all of this is that leading stocks will ALWAYS make the experienced and smart trader more money than almost any other method out there in the stock market. I posted it this weekend but I will post it again: Since May 2, 2003 the IBD 100 is up 216% compared to the SP 500â€™s 66% gain. The greatest traders are the greatest traders for a reason: history.

My stock charts still look great. I wish I had more “perfect” charts with great fundamentals, but I will take what I can get for now. PESI, which is a new long tonight is a great chart, but the fundies suck. Another great chart out there is ESEA. This one is beautiful, minus the bouts of red BOP, but the fundies are only good for this quarter. This is no HRZ, TESO, or AFSI. When these stocks made their “perfect” chart patterns, they all had great fundamentals. PESI and ESEA just don’t cut it. You need more than a pretty chart to dump a lot of money in a stock. So if I could have a bit more max green BOP perfect base setups that would be nice.

I hope everyone is enjoying this market, despite the F-up like MTOX that happens every once in a while. Don’t forget, I thought FALC would be an amazing long also. That didn’t work out. You can’t win ‘em all. But you can win enough to make a LOT of money.

Aloha and I will see you in the chat room!!!

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