Short-Busting Rally Continues; Continue To Follow The Trend

July 10, 2007

In all seriousness, I am not sure what I can add today that was not summed up ever so well by me this weekend. The one obvious thing that I can add is to let you know that it is clear that leading stocks are in complete control in this market environment.

My personal account recorded a 7.8% gain today, well outpacing the general market. This is the widest margin of outperformance in my portfolio over the market in months and possibly over a year. The DJIA was the top index today with a .3% gain and the IBD 85-85 gained .5%, to just show you the difference in gains. This is what happens when you are in top stocks in a raging bull market. Even with a low VIX, when leading stocks are moving, they will outperform the market.

The gains earlier in the year by the big-caps seemed a bit ominous at the time. But now that leading stocks are back in vogue, it is now apparent that they were just taking a break before really staging a real run. A run like we are starting to see now.

Volume was even higher today, showing that there is accumulation in the market. Don’t get too euphoric though; the accumulation is still well under the average volume of the past 50 days. However, the positive breadth on the NYSE and 641 new 52-week highs clearly show that there is appetite for stocks up here either by the funds or the retail crowd that is squeezing the shorts.

Heck, just look at TASR. The darn stock with its beautiful green and max green BOP filled chart saw a million more shorts pile into this thing last month as it made new 52-week highs. This has brought the short interest on this stock to 27%. This is happening in a lot of stocks and just proves that the right side of the market is the bull side. If TASR keeps rallying those shorts are going to have to cover and that stock is going to explode higher. This goes for almost all the stocks out there. Shoot, people are even shorting CROX up here in bigger numbers than last month. Stunning, to say the least. This kind of data, along with the NYSE short interest ratio still around the 7.5 area, that makes me feel great being long here.

Now, I will say this. I am starting to get giddy. Seeing my account up this much, hitting all-time highs, with SOOOO many stocks still looking great being in solid green filled uptrends has me starting to wonder if things are getting a bit frothy. Though they may be getting frothy, it appears, via all the charts, that there is still a ton of upside yet to come with the strong EPS guidance and fact that we are not seeing the silly 3 for 1 and rapid 2 for 1 splits yet into these climax runs. Once I start seeing that then I will get worried. For now, I have a feeling, my account is about to be doing even better. It already has started the week on an incredible note. Stocks like SMTX AFSI AMSF MTOX INNO TASR FSLR and TRCR are why I love this game so much. Those who are persistent and are on top of their game always get rewarded. My rewards are finally starting to be handed out.

We are at the start of earnings season and I would not be surprised if we start to see some wild volatility out there in the upcoming weeks. Remember, if you are sitting on any big gains and have not taken any profits off the table, please take some off heading into earnings season. God knows you don’t want to happen to be in the one stock that blows up and wipes out six months plus of gains in one session. That is the stuff that emotionally devastates some traders.

You know the other thing that devastates traders? Not cutting losses. Does anyone remember ROSE? I really like that stock at the time of my purchase. Unfortunately, things did not work out and a clear sell signal was generated in mid/late June. However, had I not followed my rules and left the ugly chart at the time, and instead would have waited and hoped for a rise, I would be screwed. ROSE cratered 12% today and would have seriously hurt a traders account had they not cut their losses. That is why it is the golden rule of all THE GREATEST TRADERS OF ALL-TIME: Cut your losses.

I have been extremely busy today with friends as for some great and wonderful reason I ran into two old friends today that I have not seen in a while. Therefore, I will keep this short for the night as I am very tired at this point.

Aloha, and I will see you in the chat room, where we are always in an uptrend!!

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