Nothing Changed The Current Outlook I Have On The Market, After Today’s Trading

May 18, 2007

Despite the small losses today, the biggest negative I see is that breadth was weak all day and closed near 3-to-2 negative on the NYSE and 8-to-5 negative on the Nasdaq. This continues the recent theme of weakness with the internals despite gains in the indexes.

The biggest item of interest today was oil rising 3%. That is quite a jump in the price of crude and I am sure that will impact us at the pump. Not sure how rising gas prices actually help our markets. But so far the market can do no wrong.

The good news for the bulls is that the bears can not get ANYTHING going to the downside. The bad news for the bulls is the fact that this market keeps rallying on internal weakness and lower volume. Something has got to give eventually. But when that happens NO one knows. For now the trend is up and I am going with it.

The only thing I can see that may be hinting at a possible top is that two stocks that I owned that both made 200% gains since late 2006 have now put in clear tops. TNH put in a clear top on 5/14. As the rally gained steam near the end, volume started to pick up to its heaviest levels. Then all of a sudden on 5/14, prices hit a new high and reverse on HUGE HUGE HUGE volume. That big reversal on the stocks biggest one day of volume since the rally started is a clear sign of a stock putting in a top. TNH is the top stock in the top industry group in this rally. This chart now looks just like ERS in 2006. Back then ERS was the top stock in the top industry group in the market. I called the ERS top last year and I am calling the TNH top this year.

The other stock is the super speculative ONT. ONT was doing fine today, after a series of days where the stock made big gains on very large volume, then near the end of the day it reverses on HUGE trade. If you look at an arithmetic chart going back to early 2006, you can see that the stock has not moved as far as TNH. But this is not a TNH kind of stock. The fundamentals suck so it isn’t going to run as much. However, the accent leading to today’s reversal and the amount of volume (HUGE!) on today’s reversal after such a long uptrend signals that the fun in this stock is probably over too.

These two stocks are leaders in price gains and have put in climax tops. This could be bearish for the market, as leading stocks lead the market up and down. TNH’s reversal is the closest thing I have seen to ERS in a full year. I wonder if TNH is going to lead us down? I guess time will tell.

Aloha and I will see you in the chat room! If you are not a gold subscriber, trust me, you are missing a TON!!

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