Stocks Put In An Impressive Rally On Stronger Volume As Leading Stocks Take Complete Control Of The Action; Volume Is STILL Below The 50 Day Volume Average And That Proves Institutions Are Not Buying Stocks Here In-Bulk

April 16, 2008

I have been extremely busy today with errands, surfing, moving furniture, and now this concert I have to run to. So I am going to just go over every data point that I noticed today and tell you what I think about it. Overall, I like this rally A LOT but I have a MAJOR problem with it, FOR NOW. The volume is simply not there. With it below average for the 18th day in-a-row, it is clear that the big boys (they make up 70% to 75% of the markets total volume) are not investing/trading stocks here. This is all short-covering and retail action. So just remember this: the big boys are NOT moving stocks here. We are.

There were 185 new highs to 114 new lows which is the first clear victory I have seen since the downtrend started. That is very good. However, the top eight groups today were chemical-fertilizer, steel-producer, agricultural operations, building-residential, oil&gas-US expl/prod, building-heavy construction, food-dairy, and steel-specialty alloy. These are all OLD leaders from the previous big rally and just proves that this is just another leg and part of the long-term commodity rally.

This must have been helped by MOS, POT, AGU selling potash to China for $576 per metric ton which is up from $176 last year. This is putting those charts in the start of what appears to be a parabolic run. It is just starting and this is not the top but you need to watch these stocks. They are probably going to go on one final fantastic “blow out” run before it is all over. This appears to be the start, by looking at the mass amount of volume this year.

Other stocks rocking today in these areas that might see further gains that I am not long (thus can tell everyone here about) is SID, POT, MOS, AGU, DE, SOHU, BUCY. CLR is another example of a possible SHORT-TERM blow-off top. Some of the best stocks will also be found in these leading industries: energy (79 new highs), metals/steel (10 new highs), ag (9 new highs), chemicals (8 new highs), banks (7 new highs), and transportation (5 new highs). If you can’t find any winners in here, you are simply not looking.

The most impressive action came from the Semiconductor stocks as the SOX was up an incredible 5.5% today. That gain, along with the IBD 100 and IBD 85-85 being up 4%, show that leading and technology stocks are also going along for the rally and are leading it this time. That should be bullish, YOU WOULD THINK!, for at least a few months. This rally is very broad as the NYSE, SP 500 have B ACC/DIS ratings and were up 3%, the Nassy has an A-, and the IBD leading indexes have B’s. This shows everything is being bought and nothing is lagging. Especially with oil and gold stocks still rising. This is a very broad and healthy rally with a lot of stocks breaking out and going to new highs. This was the tell of late 98, late 99, and 2003. Very broad gains, lots of nice charts setting up, but….there was one more thing those rallies had that this one does not….VOLUME!!!!

It is completely missing as volume is still below the 50 day volume average. And even though it was higher than the day before by 11% giving us an accumulation day, the fact it was below average completely tells us that the big boys who have billions of dollars to work with are simply not interesting in putting their hard-earned cash to work in this environment.

The top industry group right now based on six-month price performance is the oil&gas-US Expl/Prod stocks as they have moved up from #42 seven months ago to #1 today. This will be the group to watch for leadership. As long as this group continues to rally, even if the big boys don’t show up on the indexes, the overall market should still do well.

This was all started off the back of good earnings news from JP Morgan and Intel. This continued tonight with eBay and IBM as they both impressed lowered expectations. If the company has high expectations, you can guarantee it is going to get whacked. If it has reasonable to below estimates expectations, you can almost bank that things will be good. So if your company is low-balling the numbers, chances are things will be OK. If they are hot shots, I would keep a close eye on them.

Aloha and have a great Thursday. There is a huge south swell that has started hitting Maui today and tomorrow it should be well over head high I am praying on the sets. If that is the case expect another chillaxed market commentary. Aloha and pray for big surf (it is my backyard; that is why I like south shore surf better than north–I don’t have to drive and pay $4.08 per gallon of gas). ALOOOOHA!!!

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