Oil Falls And The Nasdaq Rallies On Higher Volume; Philly Semiconductor Index Rallies 2.6%

June 20, 2008

There wasn’t really a whole lot going on Thursday when it comes to leading stocks as I only had 4 positions to take. That should tell you it was a pretty boring day for a higher volume session. But sometimes boring is good especially when oil falls almost $5 to $131.93. That along with the good news that Iraq is going to team up with USA oil companies helped keep oil in the spotlight all day long.

However, the only thing that I am interested in doing, besides taking profits in some of my small oil winners, is to now closely watch big oil. I got two stocks that today gave me a short entry signal on big oil. There are about another handful of these guys that are close to being new shorts also. I am not sure if this is “THE TOP” but it is shaping up and looking like it is “THE TOP FOR NOW.” I have charts that have been rallying for years-and-years-and-years that are slowly starting to rollover with heavy churning the past six months preceding this rollover. The rollover also has some decent volume on the drop which signals that the big money is probably selling big oil. The fact that last week oil gained so much and these stocks sold off should also be a tell that the end is near, for now, on this latest oil run.

That looks to be good news for tech stocks which are setting up across the board. Now, obviously, these could all rollover and fail to produce anything. But as long as the Nasdaq continues to rise on stronger volume our chances improve. Still this stupid index needs to get moving SOON!!!! or else I am going to start questioning if this rally is going to turn into a real bull market. But the more we just drift around after the initial March gains, the more I think that this might be a bear market rally. I hope I am wrong. But something tells me I am probably not.

Another piece of what I would consider bad news is the put/call ratio. This stupid ratio has been over 1.00 for a few days now indicating the crowd was too bearish. That along with the bears crossing the bulls again had me feeling like maybe a strong rally could occur.

Well a strong rally did not occur. But instead a minor rally on 12% higher volume took hold on the Nasdaq. Definitely nothing to get the crowd excited right? WRONG! The put/call cratered to its 52-week lows of .63. So you are telling me in one day of minor gains, after a week of non-stop growing bearishness, everyone just turned really bullish? Really? Oy. The only good thing I saw today was the the NYSE short interest ratio JUMPED to a new high at 15.35. It now takes 15 days of average volume to cover all the NYSE shorts. To me that seems like too much and if we can actually get anything going this rally might be a powerful short-squeeze bull market rally.

Whatever happens, is going to happen. I am ready for both outcomes and have now salvaged my accounts after they gave back so much of my gains last week. This week has been MUCH better. Let’s hope we have a strong Friday to close out the week. I sure would HATE to end this week with a nasty selloff. I hope that doesn’t jinx it but I have this negative feeling in the pit of my gut. Hopefully, it is a contrarian signal. ALOOOOOHA and I will see you in the chat room!