Stocks Barely Move, Once Again, But Still Finish Higher; Leading Stocks Keep Leading
June 20, 2007
Stocks spent another boring day drifting around the unchanged area. However, this time, the bias was to the upside, with the SP 600 up .3%, the SP 500 and DJIA up .2%, and the Nasdaq up .01%.
Despite the very boring action by the indexes, there was some exciting action, once again, with leading stocks. The IBD 100 gained .8%, leading the general market for the fifth straight session. This is the action that tells us that the market is in a very bullish phase and that we should remain long until we get a severe reversal.
Until we start seeing leading stocks either climax run or collapse, I have a feeling we have a lot further to go. When you take that with the NYSE short interest ratio near all-time highs, with the indexes near all-time highs, and the general misinformed public showing 70% of respondents to a Gallup poll saying that we are in a recession, you have the fuel for a powerful rally.
I have NEVER research a time or seen a time like this in my life. I have never seen so much pessimism and downright lies about an economy by the media since I began trading. The fact that 70% of people to this Gallup poll can actually say we are in a recession is just stunning. The facts completely show an economy stronger than ANY other economy on record, yet this is what people think? There is only one way this is possible: they are being systematically lied to. Blatant and biased lies have created the biggest wall-of-worry I have ever seen in a bullish tape.
I think the smartest thing to do right now is to reiterate to all of you reading this that this tape is EXTREMELY bullish. I am, once again, almost fully invested. This means that all new longs that I find now will either have to be very small, if I can raise the funds, or have to be skipped. If I find a truly beautiful gem, I obviously will dump some laggards.
But that comes to my next point: when is that going to happen? How in the heck can I be long over 200 stocks (30 are significant) and constantly day-after-day find nothing to dump. I barely have anything moving lower to a cut loss point. I had one complete sell tonight and only three other stocks that needed to either have profits taken or partial losses taken. In a flat market, that clearly shows a bullish tape underneath. This also shows that I pick strong stocks that have the proper traits to keep moving higher. Trust me, if I was long a random basket of 200 stocks, I would probably be selling five to six nightly. The fact you see me with so few sells with so many stocks just confirms how powerful a methodology this form of CANSLIM momentum investing is.
I don’t know about you but I don’t know to many people who can have this problem. I simply have too many stocks moving up and can not free up cash for new buys because nothing is moving down. How often do you hear that?
Just keep this simple: Stay long until we get a real selloff, breach of the 50 dmas of the indexes, and real distribution that is off the chart telling us that we have problems.
Right now, we have so much pessimism, shorts, and put buyers out there that this market has the mix for some big gains. If people keep shorting the market as it rises, and it keeps rising, those shorts are then going to have to cover at higher prices, forcing the stocks higher, and causing the other shorts to cover. This is how you get moves like the moves in CF TNH and KMGB.
The main catalyst for my theory that there is way more upside to come, besides all the pessimism, is in the form of my leading stocks. I am long a ton of big winners and very few show signs of being part of a severe climax run. Do some look like they are starting? Oh yeah. A lot do. But none of them look like what JDSU did back in 2000. If you look at CF and TNH now on a weekly arithmetic chart, you can see the same thing. But study how JDSU topped. It took months and months before the stock finally rolled over and went on to plunge making bears rich.
You see the funniest thing about people shorting the market here is that history clearly tells these idiots that they are playing the wrong game. The best time to short, historically proven, has been 5 to 7 months AFTER a stock tops. If you don’t believe me, pick up a copy of the book by O’Neil on how to short stocks. It shows you some of histories best shorts and you will see the same thing EVERY TIME. They ALL start their biggest and baddest declines months months months AFTER the top. However, these history-ignorant traders are what we need to continue to make money on the bull side. The only thing I could wish for is a higher VIX. That would have me very very wealthy right now. As it is, I will take what I can get.
Aloha and I will see you in the chat room!!
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With regared to move in CF and TNH….see the flood at Coffeyville, which knocked out the lowest cost producer of Urea Amonium Nitrate…taking supply and price pressure off of competitors CF and TNH.