Nasdaq Leads The Way Higher On Slightly Higher Volume As Semiconductor Stocks Account For Much Of The Gains; AAPL Disappoints

April 24, 2008

It was another typical day that we have seen recently where not a lot gets accomplished and we pretty much just give back whatever happened the day before in the opposite direction. Still, I do believe, that today’s gains coming with higher volume is a positive overall. And if you look at your Nasdaq daily chart, you will see that pattern show up a lot the past month (lower volume selling, higher volume rally). That is the reason the Nasdaq carries an ACC/DIS rating of A- which makes it the most heavily accumulated index out there.

Today, however, that was minor compared to the SOX’s 4% powerful rally that saw shares of BRCM leap today on huge volume. I am starting to believe that what I COULD be seeing is a rotation from commodity stocks (which don’t appear to be done yet at all) into technology stocks. That can best be viewed by taking a look at your daily SOX chart for 2008. As you can see we have a ton of excellent price action to go along with all that support right in the 340 to 350 zone. The move in the SOX today gets it ever closer to being able to take back and claim its 200 DMA. Tech stocks led in 9900 and big-cap tech did well in 2003 also. However, since then it has been all commodities but if the parabolic runs I am seeing in POT MOS AGU FEED etc…I will continue to monitor those stocks for a blowoff top and watch Semi/Tech stocks for more breakouts or possible bottoms.

I HATE calling bottoms while a stock market is falling and I hate saying a stock has bottomed until after the fact it looks bottomed. When I look at the stocks in the Semi index, I can honestly say, that I am starting to get that “feel-good” feeling in my body where I think that we are just moments away from launching a big rally. However, anything can happen in this market and I promise you that INDEED ANYTHING CAN HAPPEN. EVEN THOUGH IT LOOKS LIKE this market is going to resolve itself to the upside via some tech stocks trying to regain a strong uptrend. But once again, though I feel good and it appears eventually the SOX can take off and run, anything can happen and that is why I am prepared for anything and everything. Up, down, sideways, or a halt. I have my game plan ready to go!!

Volume was higher on the Nasdaq today, like I said earlier, which does give me conviction the people that are active in this market (smart money) is buying stocks and they are not selling them which is indicated by the low volume on the pullbacks. Today, in IBD, I noticed that the NYSE volume was lighter. But on my Telechart it was heavier. Still with it being below average and just slightly higher or lower, it really doesn’t matter; it was below average and that is all we need to know–the big boys were still not actively investing their money.

Those that were invested are still focusing on the energy sector, with 16 of today’s 61 new 52-week highs coming from oilandgas. Other areas that are leading include metals/steel and chemicals with 7 and 5 new 52-week highs respectively. There were other groups that shined today like food (CALM and sd) stocks but overall those commodities simply do not excite me as their charts are showing multiple days of HEAVY distribution only to revers a once strong and great uptrend.

Some key market metrics that I saw today is that Investors Intelligence survey which came out showing that the bulls have retaken the lead with 39.1%kl to the bears 35.6%. This shows that the newsletter writers believe we have bottomed and from here are no longer extremely pessimistic according to survey. The put/call also fell a bit today on the rally to .87. The numbers being registered recently shows a market where more and more players are embracing the long side. This crowd is doing it by buying puts.

Also another important sentiment gauge, however, shows the exact opposite with the NYSE short-interst ratio which came in at yet another all-time high of 11.32. This means it now takes almost 11 1/2 days of average volume to cover all the shorts out there on the NYSE. That is a TON of added buying power. If the growth and value mutual funds that have been raising cash all of a sudden start putting that word out to buy stocks and they start accumulating them in bulk.

Overall, as you can see, it is still a mixed choppy and random DANGEROUS environment. Until we get more volume to the upside or downside (at this point I don’t care which one), there is no way I can go all-in on the long or short side. I have a bias to the bull side on a short-term and sub-intermediate term. But when it comes to long-term and intermediate, I feel like we have a LOT of backing and filling still yet to do.

But I do have some nice charts with two being DARN CLOSE to perfect charts. I assume if we are to blast off into another new powerful rally we are going to have to see more max green BOP filled charts show up for me to get real bullish here. For now, I will remain cautious and near 50% cash level. I have a little over 50% of my account long, after selling down one of my bigger (top 5 but not top 3) positions. I feel like the stocks I have a lot of are going to do really really well now as the remaining large positions are very sound, green, and show little selling. So, for now, I am completely happy with my holdings (50% long, 1% short, 49% cash).

Aloha and I will see you in the chat room, where I will probably be a little late, after having such a fun day at the Westin. It was nice to go back to the hotel I used to work around and see so many old friends. There is nothing!!! in life more important than friends and family. NOTHING! Remember that and life will always be enjoyable and meaningful. ALOOOOOHA, I will see you in the fun chat room, where I prove trading/investing in stocks can be both fun and VERY profitable (but sometimes…we lose too…BRKR happens…it will happen again…that is why we ALWAYS cut our losses).

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