Stocks Post Gains Across The Board, With Choppy Trading; Lower Volume Lessens Impact Of Gains.

January 8, 2007

Stocks were pretty whippy today but a comment from Fed Vice Chairman Donald Kohn helped the indexes start an uptrend off of his dovish comments on the economy. This helped all the indexes finish in the green, with big cap technology stocks shining in the spotlight.

At the close, the DJIA, the SP 500, the SP 600, and the Nasdaq all gained around .2%. However, leading stocks did what they are supposed to and led, with a 1.1% gain on Monday.

Volume was lower on the NYSE and the Nasdaq but volume was still at or above the 50 day volume average.

Breadth was positive on the NYSE, with advancers over decliners by a 10-to-7 margin. On the Nasdaq breadth was even with advancers and decliners pretty much dead even.

Technology stocks were the story of the day with stocks like UCTT, WFR, NTGR, VDSI, FFIV, EMC, IBM, and RIMM all making impressive moves today in an otherwise lazy market session.

These big stocks have continued to bounce around the 50 dma and continue to rally despite all the nay-sayers out there. The bearish talk is all good and dandy but as long as these big caps and the general stock market indexes keep bouncing and rallying off the 50 dma you know that there is more upside still to come.

I may be getting nervous on an upcoming market correction sometime in the near future but that in no way has an impact on my trading. As long as I continue to see stocks act the way they are after I go long them I have no reason to actually turn bearish until the market tells me to.

So far it has not. The holding of key moving averages is my signal that the market is still fine. However, the plethora of cheap high momentum stocks and big cap stocks tells me we are possibly seeing the last days of this four year rally.

Big caps and highly speculative small stocks make the big moves near the end of a long uptrend. Growth and small cap stocks outperform at first then value steps up along with the speculative crowd.

There are still a ton of mergers and acquisitions along with IPO’s that are still signaling further upside. But the lack of quality longs and the amount of partial profits/losses I have been taking the past three weeks shows me that the market is weakening underneath. However, it still has not cracked so no need to worry yet.

I am still long a LARGE amount of stocks but am down by 20 what I was long three weeks ago. This signals also that the market is weakening. I have 100 stocks that make up a nice portion of my portfolio and have 170 stocks that are small speculative plays. This number was 290 three weeks ago. So obviously the market is weakening. So this is something to pay attention to.

With that, I am off to enjoy the rest of the football game uninterrupted. Aloha and I will see you here tomorrow.

Posted by Joshua Hayes | Filed Under Market Commentary