Oil’s Collapse Helps Lift All Indexes On Higher Volume; Nassy Near Six-Year Highs.

January 12, 2007

Stocks gapped up in the morning, held those levels, and rallied for the rest of the day on the back of another back-breaking decline in oil. This huge 4% drop in oil helped the entire market rally, on Thursday. Oil has now fell 15% in 2007.

At the close, with techs and small caps leading, the SP 600 gained 1.2%, the Nasdaq rallied 1% breaking out above the December highs, and the SP 500 and DJIA gained .6%. The DJIA also hit another all-time high.

The great news today, however, comes in the form of leading stocks. The IBD 100 gained 1.3%, leading the market. The Nasdaq 100 also gained 1%.

Volume was higher on both the NYSE and the Nasdaq. This was also the third day in a row the Nasdaq made gains with volume picking up over the day before. This is clear accumulation by the big boys right off the 50 dma.

By looking at a daily candlestick chart of the Nasdaq, you can clearly see that all seven trading days for 2007 have seen buyers come in and support stocks off the lows of the session. All the tails you see on your Nasdaq chart right on the 50 dma is about as perfect support as you will EVER see at a key moving average.

Breadth was positive on both the NYSE and the Nasdaq by more than a 2-to-1 ratio. Leading stocks saw even better breadth, as did my own portfolio.

The strength of today’s rally just reinforces what I keep saying: You should never short a rising market. The major market indexes are hitting all-time and six year highs right now. There is NO reason to be shorting.

Though I was worried about the recent action in the market I still recognized that we have not turned bearish yet. Until 3 out of the 4 trends (short to long) are in downtrends, you should never short.

This market has continued to make early top callers look foolish. It doesn’t look like that is about to change any time soon, as some market analyst are calling for earnings season to be the top of the market.

I wouldn’t want to be short this market. Especially with such broad strength.

With oil down 15% to $51 a barrel, money has rotated into many sectors. Some of the best performing sectors the past three months have directly benefited from low oil. Transportation-Airlines and Auto/Truck-Tires are just two examples.

Other industry groups that have moved up the charts include Internet-Network Solutions, Media-Periodicals, Leisure-Gaming/Equip, Steel-Specialty Alloys, Finance-Brokers, Internet-ISP, Computer-Manufac, and Computer Software-Desktop. These are just some of many sectors making HUGE jumps up the industry list.

This is the kind of broad strength you see in strong bull markets. It appears we are in a sweet spot here and can expect more gains in the coming days.

Big-Cap stocks do move at the end of a bull market. However, the most powerful moves in a bull market are the last stages. I am not sure if this is one last six month push or what. All I need to know is that we are moving up and I have tons of charts breaking out. That is all I need to know to be long this market. Nothing else matters.

Earnings are next week and many players, like I said before, expect that to be the time when the market cracks. I would not bet on that. I am sure it is going to be volatile but you can thank SarbOx for that.

It is going to be a quiet today tomorrow as there is not much news set to move the market. However, if the first seven days of 2007 are indication of tomorrow action, I am sure it will be eventful even if there is no news.

We shall see what tomorrow brings. Aloha and I will see you in the chatroom.

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