Stocks End Mixed After A Narrow And Choppy Session; Indexes Hold Up Well After Follow-Through
March 22, 2007
Stocks traded in a narrow and choppy range today, digesting the gains from yesterday’s follow-through. That action was overall very positive considering that there were a couple of news items that could have sent stocks lower. Oil rose $2 to close over $61 and for the third week in a row, jobless numbers came in lower; this time by 316,000. However, stocks held up well, consolidating the gains from yesterday’s follow-through.
At the close, the SP 600 and SP 400 led the way with a .2% gain, the DJIA rose .1%, the SP 500 and NYSE closed slightly below the flat line, and the Nasdaq was lower by .2%. Leading stocks continued to keep pace and outperformed the broad market today, with the IBD 100 and IBD New America indexes rising .3%.
Volume was much lower on the Nasdaq-which is exactly what you want to see right after a follow-through. But to be honest more price gains immediately is always prefered. The NYSE volume came in slightly below yesterday’s level. As you can assume, the advance and decliners were basically even on both the NYSE and the Nasdaq, with a slight positive bias. The positive breadth is nice to see when the indexes were slightly down. But there was more volume on the down stocks so I guess you can call it a wash. There were 366 new highs to only 35 new lows. The put/call ratio, despite the rallying market is still at 1. Traders are still betting against this market.
Which is basically how you could call today’s trading. Except oil stocks. The Amex Oil index rallied 1.7%, topping all the other sector indexes out there. Oil sectors made up 8 out of the top 10 IBD industry group list and 75% of the Oil & Gas- US integrated stocks made new 52 week highs. The other top two groups in the top ten was the Food-Dairy Products group and the Mining-Gems group. These groups don’t necessarily have the excitement and innovative products that is normally associated with strong bull markets.
So basically we still are not seeing anything new from new leading industry groups and simply have a resumption of the uptrend from the October 2002 lows. Today and yesterday was nice but we still have very few stocks shaping up beautiful green bases. Today, I had 10 new longs show up, for me to take. However, only two are worth any real investment. And both of those have iffy patterns. RVSN is a little too extended to be a completely safe buy with a small cut loss (high reward/low risk ratio) and LHCG is just overall an uptrending stock that still has a lot of violent reversals before resuming the trend. However, if you watch RVSN, you can probably pick it up for a better price on a low volume pullback. But until I can find stocks that are more green and have less red on my charts, I still am staying cautious with the new longs I take. We still have a lot of crap and not a lot of quality.
When you don’t get any severe pullbacks or long-term sideways trading in the stock market, this is what happens (low VIX = less money to be made). We need a big pullback to get volatility back in this market. With VIX up near 20, even then there will be a lot more stocks making 100% plus moves in short time frames. A VIX at 30 and you will fall in love with this strategy. A VIX at 10, like now, is just not going to produce a lot of great longs that make HUGE gains. That is just the way it works. There is nothing I can change about it. I hate it and you hate it, trust me. We need more volatility!
However, like I have been saying for some time now, if you can daytrade and you understand how to buy not only breakouts but how to manage buying stocks at support and selling at resistance, I suggest to keep playing that game. Solar stocks are making the VERY FEW good daytraders that I know quite wealthy. Holding (not daytrading) ASTI for instance has given you a 100% gain the past 10 days. Why don’t I daytrade these and make a killing? Good question. The truth is: I hate daytrading. I don’t like being glued to the monitor and making quick buys without having time to review the situation. But I am sure if I wasn’t so lazy and would daytrade the solar stocks, I am sure I would be doing OK. Not great; but OK. I have played that game before. It is not like it would be a new adventure.
No top ranked stocks fell on heavy volume today in the IBD 100. And out of 174 longs, I had zero complete sales and only two partial sales. One of the partial sales was OEH. OEH is starting a climax run on the short-term/intermediate time frame. So, the reality is, out of 174 stocks, only one was sold because it needed to be sold. But to be honest even that sale was very small as I pretty much nailed that top. Do a search on the forums, to see for yourself. Overall, a very strong day, despite the flat close by the indexes.
Don’t fight this trend. I know it sucks that the market did not give us a real pullback to help us set up a ton of new charts in new longs that will launch a great bull market. But we have to take what we can get. What we are getting is higher stock prices. This is another reason why it is NEVER smart to panic sell. Just think of all the longs you sold off completely that are now higher. I made a sell decisions on Feb 27 and shortly after based on the chart. NOTHING else came into play, except the fact that the market was selling off so you have to sell some breakdowns that you might not sell in a bullish tape.
This low VIX rally, unfortunately, seals the fate of the market. This low VIX will not offer us many big winners. Like I keep saying, the August 2006 rally was the worst rally I have ever been a part of. The reason is simple: a low VIX. After big bear markets a high VIX ensures many 100%-1000% winners can be captured. A constant low VIX will just help us keep afloat. This is not the market to be going all-in on yet.
I had a very busy day today, with medical appointments and mandatory shopping trips with the wonderful love of my life. Aloha and I will see you in the chat room!
Comments
Comments »
No comments yet.