Stock Indexes Hit All-Time Highs And Six Year Highs On Very Strong Volume; This Market Feels Like 1999 All Over Again, On A Much Smaller Scale, Obviously

April 26, 2007

Stocks continued their recent run of powerful gains with another day of impressive price action. There were a number of economic numbers and earnings on the table today for investors to digest. The durable goods number for March came in with a 3.4% and February’s numbers were raised to 2.4% rise from a 1.7% rise. This along with some great earnings from AMZN helped gap stocks higher at the open.

After that more earnings from stocks like BA and GD kept the gains going. Even below estimate new-home sales and a weak ISM manufacturing number falling to 50.9 were no match for the bulls as they squeezed the shorts all day long.

At the close, the dominance of the big caps continued, with the DJIA hitting all-time highs closing over 13,000 with a 1.1% gain. The NYSE and SP 500 followed with 1% gains, the Nasdaq followed with a .9% gain, the SP 400 rallied .8%, and the SP 600 gained .7%. The good news, for the fourth day in-a-row, is that leading stocks led the broad market again. The IBD 100 gained 1.4%, handily beating the markets. However, the IBD 85-85 only kept pace with a 1% gain.

Volume was higher, on both exchanges, and above the 50 day volume average. Volume came in 2% higher on the NYSE but came in a powerful 21% higher on the Nasdaq. Breadth was positive on the NYSE by a 11-to-5 ratio and positive on the Nasdaq by a 8-to-5 ratio. There were 724 new 52 week highs and 75 new 52 week lows. Even though new highs are expanding, new lows are expanding also. That seems a bit odd, as we hit all-time and six year plus highs.

Top stocks came from the Oil&Gas sector as an almost 2% jump in oil to $65.84 sent many oil stocks rallying. The Philly SOX index also followed-through on its breakout yesterday with a .8% gain today. The Philly SOX index is near 52-week highs and many stocks in the semiconductor index are starting to make some real gains. This along with the solar (JASO STP TSL SPWR SOLF) and metal stocks, big cap stocks, and other low priced stocks moving shows that this market is in a really really bullish phase right now. This will probably end really bad, but for now we must continue to make money on the long side. It is clearly where the big gains are at.

Other indexes hitting all-time highs, besides the DJIA, were the Russell 1000, Russell 2000, SP 400, DJ Transportation Avg., and DJ Utility Avg.

Remember those distribution days last week? They sure didn’t amount to much did they. If you remember (you can check the archives) I said that the last two distribution days the Nasdaq saw did not feel like distro days because they put in positive intraday reversals and even on one of the days closed higher than where it opened. How was that bearish? It wasn’t. Those days simply did not have the feel of a market being distributed on. That is why I still have very few COMPLETE sells. It is just normal profit taking in stocks that are putting in rapid price appreciations.

Despite all the negative divergences in the new highs, oscillators, breadth, moneystreams in the indexes, RS of the Nasdaq, and lagging of leading stocks, there are some positives. Those lagging leading stocks are starting to finally take the lead. The past four days of this index leading makes it a lot harder for me to hate the current rally. What was once painful for growth investors is now starting to pay off.

The investors intelligence survey also came in with bulls dropping down to 51.1% from 52.7%. So despite the gains, newsletter writers became more cautious. That is a little bullish. But the drop in the put/call to .75 probably washes that out, in my opinion. Also the extremely high bullish readings in the market vane survey is actually very bullish. The last time the number was up around 74% was in 1997 and 1998 before the market took off for some big gains.

The bulls are obviously in COMPLETE control and are in the mood to crush shorts. I monitor a lot of chat rooms and have to admit all the perma-bears are gone. They have completely ran away. The biggest and loudest of them all ever since 2003 in one of the larger ones I monitor has been gone now for a whole month. This along with very few traders I know shorting the market shows that we are getting very long in the tooth as many of the perma-bears have finally thrown in the towel. The shorts have been crushed, via the portfolio and ego.

Momentum is here and the run-away train is out of control. There is no use in fighting the tape. Ride the trend and stocks higher for now but be ready to jump and get out of the way of the upcoming train-wreck that will happen eventually. I don’t know if it is going to be now, three months from now, or six months from now, but when this massive short-squeeze rally is over, it is going to top out hard. There are simply too many parabolic looking old leaders out there (I list them every night in the ‘Gold Forums’). But until they actually top and reverse hard, all news is good news to these stocks. The only thing I keep reminding myself of is the famous wall-street axiom: sell in May and go away.

Aloha and I will see you in the chat room in the morning!!

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