“VIX and VXN continue to be “low.”  I had the opportunity to speak with an individual who had graciously share that some large institution was handling a large quantity of employee options.  There is a debate if the VIX/VXN have sufficiently signal a bottom.  Afterall, both have moved almost 100% off their May lows wouldn’t that show enough fear?  One explanation that was given to me was the large, LARGE amount of employee options that had hit the market forcing this large institution to sell volitility (vol).  What this creates, a low VIX and VXN.  Therefore, if this large institution was selling vol than VIX and VXN have moved sufficiently because the indexes are “artificially” low.  But, in my experience if a financial instrument are “artificially” low or high they tend to OVER correct on the other side.  In this case, VIX and VXN aren’t sufficiently pricing in fear and will overshoot at some point.  The bottom line, we haven’t seen our ultimate lows leading up to a new bull market and we should continue to wait patiently on the sidelines.”

I think it is important here to note that when anything is held down artificially it will over correct to the other side.

Best,

Market Speculator

After the March lows and a small market rally, the new high list started to slowly build. And now we are at a point where even on down days, the past two weeks, the amount of new highs either match, are breakeven, or barely losing to new lows.

On Friday there were 244 new 52-week highs to 95 new 52-week lows. This was the best reading I have seen yet, since God knows when. I know in the August to October there were a lot of stocks hitting new highs but I am not sure it looked THIS GOOD then.

The leadership is clearly focused in one area too. The energy stocks had 96 of the 224 stocks hitting new highs come from their list. These stocks that you should be watching for future bounces off the 50 DMA or breakout are PDO, FPP, ATN, PHII, RAME, HUSA, RDC, APWR, TELOZ, WLL, ESV, APC, WMB, OXY, GMXR, COP, NE, CVX, GTE, SFY, CNQ, GU, HOS, BTU, NXY, ECA, BTE, HK, CAM, HES, PDE, FTI, UNT, WFT, MCF, STR, PXD, HP, CPX, PXP, SPN, PBR, HAL, MMR, E, SSL, SWN, WTI, WHQ, PBRA, SM, EAC, GLF, PVA, FST, TTES, CXG, and WES. All of these stocks have GREAT fundamentals and are all leaders based on price performance.

Other leading groups are the Metals/Steel with 14 stocks hitting new highs. The all-stars of this group are SUTR, MTL, MEA, GTI, GGB, TS, SID, X, NUE, RS, SCHN, VMI, and MT. Behind that was the Machinery stocks with 12 new highs and WGOV, ENS, AME, BUCY, JOYG, GHM, ABB, ATU, PDE, FTI, NDSN, FLS, and CFX.

One of the hottest groups with three of the top 20 industry spots are the Transports with EGLE, UNP, GNK, BNI, KEX, NSC, WAB, and CSX. Mining had 8 hit new highs with FCX, RIO, BHP, RTP, and CLF leading the way with strong fundamentals. The Medicals are still hanging on with 7 new highs and ZOLL, ICLR, STE, and LSR are the top guys in that group.

Utility, Retail, Computer Software all rounded out the top groups with five stocks hitting new highs each. EGN, NFG, SBS, BKC, CVS, GYMB, LL, BKE, BMC, ATVI, ANSS, SY, and ANST are leading the way in those groups on Friday.

Everything you see here are hitting new highs when the market is still a good distance away from its old highs. These are our current leaders and as long as this market rallies, I want to be long these stocks.

I know some of you believe we are going to top soon. But I am telling you RIGHT NOW that stock charts look great all over the place. You name a lagging sector three months ago and it has moved up the list with a lot of high-growth technology and consumer speculative sectors. Along with the old commodity leaders just slowly selling off, which gives them a weaker RS performance to the big winners, but still keeps them rallying is taking place.

Overall, volume or no volume, as long as we trend up and I have a couple of really nice stocks and that one perfect chart–I do however need a few more perfect stock charts to have me completely fall in love, however–continues to move higher, I am going to be very happy with what I can get in a market that has a low VIX (around 17) and is full of ETF’s that now suck up money that used to find its way into “hot” stocks. This is just less money that can be put to work in the momo monsters like MXC and PDO.

Aloha and I will see everyone in the chat room at 630AM HST/1230PM EST.

current longs/(shorts) and their total returns: GEOI 118% CMP 65% SOL 36% ICO 49% VISN 52% DGLY 49% HA 42% PDO 78% CPE 46% CSIQ 56% HIL 50% MTL 67% MCF 172% JST 40% IHS 258% EBIX 169% MA 477% (EEFT 33%)

However, there is nothing wrong with being prepared, but until the market actually cracks, I will have to go with the short-term to intermediate term uptrend and ride the wave for however long it wants to last. The sad thing is that the way some of my stocks that looked great just a couple of weeks ago now look only average to somewhat above average. This is OK but in a brand new bull market, we would normally have 5-6 near-perfect to perfect charts right now. Instead I have one. One chart STILL looks “hot” out of about 4 or 5 that were starting to. Basically this has been the theme ever since April 2006 but thank God some gems here and there have still been able to shine through the rough.

It has been a long time since a WHOLE BUNCH of stocks setup in proper to perfect bases and then broke out and ran away. The truth is, I am only finding a few gems here and there and usually when I find a gem it fails. However, for every 3 or 4 that fail and that we can cut quickly thus saving ourselves a LOT of pain, we will always have one that can run. They might not be of high quality like AFSI but as long as 1 or 2 are around I guess that is good enough. But the further we go along without these near-perfect to perfect charts setting up or even holding on the more problems we will run into in the future.

It was good to not see the market follow-through on the selling that hit the market yesterday, after we were down midday, as the market reversed early losses. But the lack of gains and some poor action in some of my better stocks after earnings were taken poorly just shows me that this market is probably not out of the woods yet. I guess it was sort of foolish to think that everything was clear considering there were a lot of people that I know that NEVER sold their stocks–normally there is always panic selling as John Q. public finally gets the crap scared out of them via the heavily-biased left media. If these morons that report the news actually understood how economics work maybe we wouldn’t see this at every bottom. The fact that some in my family that are known for doing the wrong thing at the wrong times have not done what they normally do is my clue that a “for sure” bottom has not been fully enforced.

The investors intelligence cam out yesterday and that showed that newsletter writers have already returned and embraced the new bull with 44.4% coming in bullish and only 32.3% bearish. That tells me they are already hoping that the worst has passed. The VIX is below 20 which is yet just another low level that tells us that the crowd has become complacent with the current market and needs a good scare. A VIX this low makes it REAL HARD to find, buy, and hold Monster Stocks for significant gains as you simply can NOT get the huge returns with a low VIX. The crowd is also bullish on the RM.com, marketvane, and AAII surveys showing that the crowd is bullish on equity prices at least in the short-term. I hope they are all right as I love making money as much as the next guy but something tells me that betting with the crowd is not the wisest of plays. But if that crowd is right I’ll take whatever gains we can get.

What I do find positive still about this market is that oil went up .16 to 123.69 hitting an intraday high of 124.57. Since oilandgas stocks make up 6 of the top 20 industry groups based on six-month price performance, the IBD 85-85 index managed to rally 1.2% which outpaced all the other stock market indexes. It is always nice when leading stock lead but I don’t think it is that bullish when the whole market’s leadership is based on oilandgas. Well it is not all oil&gas, in the top 20 industry groups, 3 are in the transportation group, 3 are in the machinery group, 3 are in the metals group, 2 are in the building group, and the medical and chemical sector have one each. So really, the market is being made up of four leadership groups: energy, metals, machinery, and transportation. This is where it is at and this is where I want you to focus. Why?

Because there were 108 new 52-week highs to 162 new 52-week lows and 42 of those new highs were in the energy sector. That clearly tells me that if you want to make big money in this market, you have to be long oil stocks. How much longer can the run last? I don’t know and nobody else knows. But they continue to breakout and run. With oil stocks being so extended on some daily charts, it is wise to watch for pullbacks and bounces off the 50 DMA on strong volume. If you can get a low vol. pullback followed by a higher volume bounce it might be worth getting long some of these high-flying strong fundamental growing oil stocks. Besides these stocks, 7 new highs were in the metals, 6 in the medical, and 5 in the metals. So in these past two paragraphs, along with the last four post, I have made it more than clear where the leadership has been.

If you are still having problems finding winning stocks, you might want to take a trip to the energy sector. Solar stocks are just starting to get hot too. This is definitely the only game in town that has some juice with some follow through, besides metal stocks. Some of the oil stocks to keep an eye on for low vol. pullbacks include WLL, PVA, PDE, CNQ, WFT, SPN, CRZO, FTI, SU, APC, SD, NXY, NBL, and PXP. That is just a few of the TOP QUALITY longs based on fundamentals and price performance. Other high quality stocks in the other groups include MT SID NUE MEA CHD BHP CLF.

Even though I am nervous about this rally lasting, like I said yesterday, I hope that I am a contrarian indicator of myself and that we blast off and continue higher. It is possible that if we continue to rotate into some of the tech, retail, and other financials that have been catching a few bids that this market could take off. Especially with the NYSE short-interest ratio HITTING ANOTHER ALL-TIME HIGH of 12.94!! This means it now takes a full 13 days to cover all the shorts in the NYSE. Now, when you take that data and combine it with all those high quality growth mutual funds that I keep listing in my mutual fund list in the forums, you possibly have a very bullish mixture that could unleash a powerful rally. I hate to think that all these amateur short-sellers are going to be rewarded with a falling market. But if they are, that can only set us up for better chances in the future to make a ton of money. Or if they are wrong and they are all squeezed by the big elephants buying that will occur when they return, I will take what we are given and just pray more stocks setup in chart patterns.

The put/call barely fell to .81 but is still above the .80 which confirms that the options amateurs are still a “little” busy with the puts. When this put/call gets to under .70 for a few days then I will be real nervous that we have gotten too relaxed. But until then, when I take the persistently higher put/call with the constant all-time high hitting NYSE short-interest ratio something tells me that the public is a bit too pessimistic.

However, all of this depends on your time frame and I still believe that you want to be a little long here, not short, and even though I thought getting more long than cash heavy was the right decision, I now believe it might be right for the best to go 50% long/50% cash. But if we get a few more distribution days and the leaders continue to crack and my last “perfect” chart breaks, I will be turn from a cautious bull to a cash heavy wave hunter as surfing will be my priority over messing with this choppy and insane market. Hopefully, the market will trend on us soon. Aloha and I will see you in the chat room, where we are always in an uptrend!! ALOOOOHA!!! Maui No Ka Oi!!! 808 4-LIFE!!!!!!

When the day started off, it sure did not seem like the good times were going to continue as more bad news rolled in from so many areas that it seemed the market was due for a rest. June oil climbed $1.87 to close at $121.84 and hit an HOD of $122.73. This definitely sent some fear in the market, on top of the UBS negative banking report, the FNM and FRE announcement, and then going back to oil GS predicting it to hit $200. However, proving that markets climb a wall of worry, indexes were able to shake all of this nonsense off and most indexes closed near their HOD with every index but the DJIA up .8% (the DJIA was up .4%).

The best news was not the higher volume than the day before, either. No, the best news, once again, was the dramatic and dynamic leadership of the IBD leading indexes. The IBD 85-85 came in with a heavier volume 1.3% gain. Leading stocks continue a pattern that started about a month ago with them making moving lower on the down days and now rising higher on the up days. This pattern has really started to develop recently and appears to be continuing that path for a little while long, at least.

For all of those that are bearish, remember there is still part of the crowd that is starting to embrace it. The put/call fell below .8 today to .77 which indicates more bullish bets are starting to be made on the options market. However, on the stock exchanges, things continue to look bullish as a contrarian play with the NYSE short interest ratio hitting YET AGAIN ANOTHER all-time high of 12.82. It now takes almost 13 days of average daily NYSE volume to cover the 4% of the market that is short. This is incredible extreme and is a sign to me that you want to be on the other side of the trade.

If that sentiment doesn’t help you with your contrarian position, maybe the CNN poll of the walking sheep. Sadly, these people on the street have come in with 79% believing we are in a recession. One of my former colleagues at RM.com believes that those that use the two Q’s in a row on negative GDP are silly for using that. If that is the case, then he might be right in that we are in a recession. But if you use the back-to-back GDP readings then we are still moving higher and the economy just slowed down. The extremely biased liberal media will make sure that Clinton or Obama becomes the next President and they will bad talk this economy no matter how untrue or exaggerated it is. The fact so many see the economy as half empty is my sign to be bullish AT LEAST FOR NOW.

For those that have a problem with oil, all I have to say is “why didn’t you invest in oil stocks back in 2003 before the Iraq war?” If everyone was for sure this was going to be the result of the war on terror, why did not more people do what most intelligent investors do when something major is about to change: make an investment. If you knew prices were going higher and that GWB was going to reward the “evil oil men,” why did you not go long? Even if you blindly bought HAL, you would be up over 300%. Instead of crying, go out there and do something about it.

Some think that expensive oil and gas is going to hurt this market. In fact, everyone does, however, I think it is wise to take a look at your top leading stocks based on six-month industry price performance. If you take the time to look there you will notice the number one industry is the oil&gas-US expl/prod group which rose 4% today helping lead the market higher. Oil is a leader folks! Not a laggard. Higher oil is good for this market as they are our leaders and the rotation from safety stocks to technology stocks is also going on underneath, helping produce even stronger gains as the entire market is bullish.

That can be seen in today’s new 52-week highs to lows which, once again, favored the new highs 161 to 109! Another bullish victory and further confirmation the tide is rising. Energy stocks made up 65 of the new highs with stocks like APC, UNT, CLR, HK, HES, BRY, and SM leading, metal/steel had 11 with GTI, MT, SCHN, and GGB leading. Transportation stocks continue to run with 9 new highs and WAB, GNK, and CHRW leading there. Mining, medical, and machinery all had 5 each with JST, GDI, BUCY, OMI, GILD, RIO, RTP all being top stocks in those groups.

Other leading oil stocks include XEC, WTI, CRK, ARG, NBL, PQ, and NE. Even SOHU, GMCR, and many other leading stocks from a wide range of industries were putting in impressive gains as this rally is broad and has included a TON of leading stocks amongst a lot of industries, even though the PERFECT to near-PERFECT chart patterns STILL ARE NOT SHOWING UP minus about a handful–IF EVEN THAT!!

All of these oil stocks hitting new highs are not the only group that is showing insane performance, btw. With 32% of the US Expl/Prod stocks hitting new highs today, there were other leading groups that dominated. Steel-producers saw 28%, transportation-railroad 27%, machinery-const/mng 25%, oilandgas-international int 22%, oilandgas-drilling and metal products-distribution 20% were just some of the other industry groups with nearly 1/4 of the group hitting new highs. For a market that is well off its 52-week highs, we sure do look good, as of now.

However, I have to admit there is still just one problem. The 32 days of below average daily volume on the NYSE needs to change. The average volume on the Nasdaq must rise. It is great!! to see the NDX and SOX leading with the IBD 100 and IBD 85-85 but until a TON of volume returns, via the form of all that cash being raised on the sidelines by mutual funds of top quality fund managers, I will remain a cautious bull. Do you understand that!? A CAUTIOUS BULL. NOT A RIP-ROARING BULL. BUT A CAUTIOUS BULL.

I am very long but still have plenty of cash to work with for potential PERFECT charts to setup the next few weeks to months but until this happens I figure it is best to not get too carried away and too excited about the prospects of a decent uptrend developing. Things are starting to look better but until some of my personal best looking charts start putting in stronger price performances and more stocks that look like that show up, I am afraid it is still nothing more than a REALLY NICE bear market bounce.

This market must prove to me it is anything else. The only way it will be able to do that is volume. Great luck out there and I will see you in the chat room where we NEVER give up. ALOHA and pray for surf!

Just a reminder for the newbies:

IBD’s 20 Rules For Investment Succes

These rules aren’t based on our personal opinion or those of Wall Street’s experts. IBD built detailed models of all the most successful stocks every year from 1880 to 2005. We analyzed their common characteristics, what factors existed before these very best companies had huge advances and how these factors changed when the stocks topped. So these rules represent how the market actually works. If you ignore them and rely instead on personal opinions, feelings or emotions, you are potentially arguing with how the market has functioned for 120+ years and you will likely make more costly mistakes.

Thursday’s action was definitely a positive sign for the permabull/goldilocks crowd, volume surged while we had price gains.  However, Friday’s action is showing that this market isn’t quite ready to break up/down.  Jesse Livermore always stated that more money was made by waiting rather than doing.  CASH continues to be KING, throwing a large amount of dollars at this market will only get your account to shrink.

We can certainly be taking small positions, we have been here at Big Wave Trading.  However, we are keeping a lot of cash on hand so we can be ready for the next big bull run.

Market Speculator

Maybe that is why the market could not build on the weakness and instead rallied higher the rest of the day off the lows until 2pm when traders unwound some of their longs into the weekend. Overall though, it was very positive action, following a strong rally on April Fool’s Day. That now makes it three constructive sessions in-a-row where stocks have held on to the gains.

Volume, however, was, once again, nowhere to be found as it came in lower for the third straight day on both exchanges. I would be A LOT more happy about the low volume consolidation if the indexes were pulling back. But they are slightly rallying on this low volume and while not bearish, by far, I still would much rather see higher volume gains and lower volume pullbacks. It is good to see that two of the three days on the DJIA have been lower. But overall they are slightly rising on lower and lower volume. Overall not a good LONG-TERM development. BUT! it is a very good short-term development as this is the first rally attempt that has not been thrown back immediately.

It is good on the short-term, obviously, because the trend is our friend and a rising market lifts a lot of high quality boats, normally. It is no different this time around as within just a few days I have gone from very few good charts to a TON of good charts. However, before we all get all happy and bullish, and start “guessing and calling” bottoms that NO ONE EVER knows is a real bottom UNTIL AFTER the fact, we still have to ask the seriously important question of “where are my HOT charts?” There still are ONLY a couple to none. In EVERY very strong bull market I have been a part of I have had two or three OBVIOUS longs and a couple more. This time around there are only a few that stick out to the point where I say “ooooooooh.” And the sad thing is is that even these have problems. Ugh, nothing can be perfect. All I need is one perfect chart and I can make a lot of money being VERY CONFIDENT in loading up on the potential candidate. But those charts still are not there.

Now, that is not to say that one more month to two more months of a rally can not lead to some of these fantastic ‘MONSTER STOCKS’ setting up. There are a lot of charts out there now in uptrends, with heavy accumulation, and green to max green BOP. But like I keep telling you (and my paid subscribers know in a LOT more detail of why and what I like) there is just not that chart that looks like APPY and RICK of late 2007 and AFSI and TESO of early 2007 (you MUST have tcnet with BOP to see the same thing that I do. The beauty will knock your socks off). When they show up I will not hesitate to pounce and load up for the HUGE gains in a short amount of time. I will be focused on the MA 350% gains while other focus on their “value bargains” of LEH, GS, C, and other PIECES OF CRAP that are worthless in my mind. If the stock is BELOW the 50 and 200 day moving average, IT IS CRAP UNTIL IT IS NO LONGER BELOW THOSE LINES. The greatest stocks of ALL-TIME since 1880 HAVE ALL STARTED THEIR BIGGEST, FASTEST, AND LEAST VOLATILE RUNS AFTER!!!!!!!!!!!!!!!! THEY WERE ALREADY OVER!!!!!!!!!!!!! THE 50 AND 200 DMA. Those are just the facts; NOT MY OPINIONS. MY OPINIONS LIKE YOUR OPINIONS ARE WORHTLESS!

On that lovely note, some of you might be wondering what stocks I have been going long (over 25 new/adds longs were taken this week). Well, there is no way I can tell you that as with us now in an uptrend-IF WE STAY IN ONE-the stocks I am going long now are going to do 4-5x as well as the beaten down names you will read about on TSCM and watch on CNBC IF THE WORK. If they don’t move up immediately, I CUT THEM IMMEDIATELY. If they do move higher, they normally go onto significant runs with some lasting as long as two years like my IHS long or over a 1 1/2 like my MA long. Or sometimes they go up 70% in 1 1/2 months like GEOI. Either way this is how I expect everything to act.

Some stocks that I am not going long at the moment that I can tell you to watch for potential big gains would be all the stocks I have gone over in my TSCM columns since the middle of March. I have been posting leading stocks for about a month now and there are many to pick from in there with proper pullbacks or new bases. Some others are just the SAME OLD names that I have already been long once before back from anywhere in 2004-2006. There are NO NEW leaders. SWN, NGS, CLR, POT, FSLR, MOS, MEE, STRA, GFA, CF, SQM, and RIG are all stocks that we should all be familiar with and here they are leading the way once again.

This kind of leadership is fine to follow but being long the stocks already up 3000% since 2003 increases your risk of a potential failure even if a stock breaks out from a base. Just look at FSLR or MEE. Those are NOT proper bases. In fact a lot of the bases in these leading stocks you will notice all have very “loud” bases (a lot of volume in the base). Obviously, those that know their history know that the best breakouts come from FRESH leadership where the volume is BONE DRY in the base. Loud volume in the base indicates a MAJOR war between big institutional bulls and bears which historically is not good for the breakout. Low volume is a clear sign that as the stock sellsoff there are no more sellers left to sell. If volume is very large on the uptrends it is the clear signal that your stock is under massive accumulation and if the volume is low on the pullbacks it is only a matter of time before prices have to rise to meet demand.

So the loud bases and low volume on the rallies in the indexes are HUGE red flags to me and will continue to keep me away from FULLY embracing this follow-through. When nobody was bullish on the late 2006 rally, I WAS (this was when one subscriber who subscribed to Rev finally had enough of losing money with Rev that he joined this site and is NOW ONE OF MY BEST CONTRIBUTORS AMONGST MY CHAT ROOM–CONGRATULATIONS VIVEK!!! I AM VERY PROUD OF YOU. YOU ARE CLOSER AND CLOSER AND CLOSER TO TAKING CONTROL OF YOUR FINANCIAL FUTURE FOREVER). One of the reasons I was bullish during that time was because during the pullback I had nearly ALL of my longs hold up. Very few violated their 200 DMA or violated their 50 DMA on huge volume. It was easy to hold for that final LAME rally up to the February 2007 top.

It is all about following the trend and the quality of that trend was much better than we have now with charts but the things that are the same is that stocks are rising now, like they did then, and volume is nowhere to be found on the indexes. So, just like I did then, I will be following this short-term trend higher with the best performing longs breaking out of proper bases or bouncing off proper support. There are a lot of long candidates out there and there are even more setting up. But I have to admit there are still less than 5 stocks that get me EXTREMELY excited out of a scanning world of 7,000-plus. That is an extremely low number, and while it ensures that I focus on the VERY best looking stocks, it still signals that the market is not very powerful and that with the low volume is a clear warning to NOT load up. It is STILL not the time to load up. So I will continue to spread myself around in a LOT OF HIGH QUALITY LONGS with excellent fundamentals, constantly purging my worst performing stocks and moving that money into stocks acting like NEU (long initiated on 2/11–pretty sure Wendy missed that one).

This speculative (due to volume being very low on the indexes) bullish action in top quality CANSLIM longs is a two-edged sword right now. The good news is that the leading stocks are leading with the IBD 100 up 6% this week compared to the NYSE’s 4.5% gain. That is going to be good for our portfolios as we focus on the best. Too bad with a 22.45 VIX, and with our leaders being from sectors that have ALREADY led this market at one point or another from 2003-2006, the chances of us getting HUGE returns are less than 20%. I have been around too many uptrends to know when one will become a powerful one or a dull.

This one might start off with a bang but unless volume shows up it will just die like EVERY OTHER low volume rally ever. The good news, right now, is that the put/call is still near the 1 area at .98 right now. This number has consistently been over .80 for a very long time. Bulls are at 36% and the bears are at 37% two weeks after the extremely bullish cross (contrarian indicator). But now I see in IBD it says 56% bulls and 25% bears. That can’t be right as visually it appears it is somewhere near bears 40% and bulls 39%. Whatever it is the sentiment is still in the right direction for a good rally with the investors intelligence survey and put/call ratio. The VIX NEVER confirmed a low as it NEVER hit 40 which it has ALWAYS hit before making a REAL bottom (don’t argue with me over this, newbies; go look at your freaking charts going back to 1986). Back during the 1987 crash it hit 170!!!! So don’t you DARE tell me the VIX is high up here at 22. THIS VIX IS PATHETIC and is what is preventing us from making HUGE gains. I have never seen a market hit a real bottom without a 40 VIX and this rally on low volume still has me thinking this.

But like I said the old leaders of steel-producers, oilgas-us expl/prod, manufacturing-farm, building-residential/commercial, chemical-fertilizer, energy-solar/coal, building-AC, oilgas-drilling, oilgas-us royalty, transport-rail, transport-trucking, and chemcial-basic. Wow, where have I seen all of these before? Oh yeah, THE ENTIRE RALLY OF 2003-2006. This is just further confirmation that this is a bull market in commodities as commodity related stocks. There is no doubt that stock related to softs and hards are where it is at. As long as that is the case the REAL big winners that launch HUGE BIG BULL markets will not show up. This explains why we have no “HOT” charts.

If you need further proof, let’s look at the IBD 100. Back in the October 2002 and March 2003 bottom building phase, the IBD 100 was consistently beating the index on the way up. While that was the case on the initial big rally on Tuesday, since then the gains have been a bit mixed. What stands out more is the overall price/volume action of this leading index. The NYSE, SP 500, DJIA, and Nasdaq all have B+, B, B- ratings while the IBD 85-85 and IBD 100 carry a D. If anything, this should definitely be the other way around with the IBD indexes having B ratings and the big cap indexes with D’s. This opposite effect is a clear lagging showing by the index and just another red-flag on this market.

This is why I will NOT load up. Without the IBD 100 leading, HOT stocks setting up in perfect chart patterns, and WAY MORE volume in the overall index charts, it would be CLEARLY FOOLISH to load-up and build HUGE margined out positions in this low volume environment even with the nice CANSLIM charts out there. To be safe enough to load up, those stocks AND THE INDEXES must have volume.

I focus on the leading indexes because out of 65 methodologies tracked by AAII, the CANSLIM system is the #3 top performing methodology after two other “non-system” (can’t use either like CANSLIM; only CANSLIM can be applied for us basically) methods. Those two methods have returned over 2,000% since 1998. But only one other system has returned over 1,380%. That is the CANSLIM system which has returned 1,477% since 1998 compared to the SP 500’s 42% return. Also the IBD 100 from 5/2/2003 to 4/3/2008 has returned 206.6% compared to the SP 500’s 47.2%.

Oh yes! Did you notice that if you invested in the SP 500 in 1998 you have made LESS money than if you would have invested in the SP 500 the day the IBD 100 was created!!!!!! Yeah, tell me again how it is stupid to buy growth stocks????????????

Let’s see, besides CANSLIM, there are two other strategies which are both up over 2,000% since 1998. What are they?

–O’Shaughnessy Tiny Titanstries to predict the future using historical long-term trends. These screens combine both value and growth criteria to find viable investments: The screens focus on reasonably priced, growing companies whose stock price is rising by including criteria such as relative strength, sales and earnings. (2,463% return since 1998).

–Zweig A strategy that identifies companies with strong growth, a reasonable price-earnings ratio given the company’s growth rate, buying by insiders and relatively strong price action. (2,150% return since 1998).

Zweig, O’Shaughnessy, or CANSLIM. I don’t care which one you focus on but if you are doing ANYTHING OTHER THAN THESE THREE SYSTEMS, sorry folks, the truth is that your strategy is WEAK, LAME, AND SOMETHING I DON’T GIVE A DARN ABOUT. Your system sucks, unless it is one of these three! That is just the facts; ONCE AGAIN, NOT MY OPINIONS.

God I love the stock market and God I love leading stocks! The market is in a short-term uptrend and a lot of HIGH-quality CANSLIM stocks are breaking out. Hopefully, the overall market indexes can join in on this action, WITH HIGHER VOLUME, thus allowing me to start putting my margin to use. If that can happen, I will not hesitate to load up on the prettiest HOT and perfect charts and stocks with fundamentals like GXDX FSLR MCF RIMM SID BUCY PCLN TITN once they set up and breakout from a well formed base.

The stocks with incredible fundamental growth like the ones listed above do NOT have to make picture perfect price, volume, max green BOP charts. DRYS and MTL were both very large positions for me during our last rally and neither one of those had perfect charts by far. However, both had incredible EPS, sales growth and other extremely strong fundamental measures.

DRYS was one of my biggest and best longs with a 106% gain from 8/22/07 to 10/29/07. MTL rallied 92% from 9/27/07 to 12/07/07. Had MTL not broken down below the 50 DMA on very HEAVY distribution in the middle of a bear market I might still be long from that point (I am still long NOW from 2/8 with a 32% gain) with a 156% gain. This is why I need to learn to NEVER sell ALL of my long UNTIL it closes BELOW the 200 DMA, no matter what. I will learn my lesson one day. Hopefully you will learn yours before mine.

We have earnings season coming up and that should be full of fireworks and drama. We will need more volume in the market if we want to keep this rally up. I hope you all are having a great weekend so far, I love you all that have respect for me, and would like to encourage all of you morons reading me that don’t like me to please STOP! GET OUT OF HERE and let the winners enjoy the fruits of my spoils. ALOHA and I will see you in the chat room!

Volume and VIX continue to show that we may not have seen our ultimate lows.  The drop in the VIX yesterday tells me the willingness for the market participants to believe we have bottomed.  This is very dangerous and toss in a lower volume massive rally.  It only spells trouble for those who throw their eggs into this market’s basket. 

The Easter Bunny is not always so nice.

Market Speculator

At the close, the Nasdaq led the way with a 2% rally, retaking its 50 day moving average. The SP 500 and NYSE also retook their 50 day moving averages, with each rallying 1.7%. The SP 600 gained 1.6%, the SP 400 rallied 1.4%, and the DJIA gained 1.3%, rounding out a strong day in the markets. The two indexes that are throwing up a red flag to me are: The IBD 100 and the IBD 85-85 index. The IBD 100 gained 1.8% and the IBD 85-85 gained 1.6%, both lagging the Nasdaq’s gains. Normally at the start of a strong bull market, where we get a follow-through, these indexes will lead the market. They did in all the other bottoms, since October 2002, except the most recent one in July/August. Then these indexes also lagged in what turned out to be the weakest bull market I have been a part of.

Volume was much higher today on the NYSE and the Nasdaq. Nasdaq’s volume came in higher by 26%, but the NYSE only saw a 12% jump in volume. That is not a big volume increase over the previous day on such strong price gains. The other problem with the volume is the fact that on the NYSE it was only even with the 50 day volume average. On the Nasdaq it was only a tad higher than the 50 day volume average. On the best and most powerful follow-throughs that launch strong rallies, the indexes will normally launch a rally on volume well above this average. That did not happen this time, so this is another red flag on the rally.

Underneath the rally was quite broad and had strong leadership. Advancers beat decliners by a 9-to-2 margin on the NYSE and by an 11-to-4 margin on the Nasdaq. There were 373 new highs to 57 new lows, showing that there are plenty of stocks moving into new high ground while the indexes still hang below their highs. The only bad thing is that most of these new highs are in defensive stocks and old leaders. The oil & gas stocks are all over this list, just like they have been throughout the past four years. Obviously, there is nothing new and exciting here.

But even with the old leadership from the Oil, Steel, and Metals stocks, there was a pocket of strength in the technology sector. The electronic-semiconductor equipment sector rose 2.8%, the computer-data storage rose 3.1%, and the computer software-desktop group gained 3.3%. They are down there on the industry list, compared to these old leaders, but it is still a good sign to see some tech stocks show up with the old groups. This shows that there could be a rotation into a new fresh area of the stock market.

Let’s get back to the actual market. This market, as of right now, is in a confirmed rally off of a follow-through on the sixth day of the rally. However, as you have just read, there are some problems with the actual follow-through. But the biggest problem is with the actual stocks in the market. Where are the pretty longs? They are not here! Many stocks are still very ugly after the nasty February sell-off and even if they have recovered have done so on very low volume and with very V-ish patterns. Besides that the BOP on these recovered stocks are not in the green area. Most charts are colored yellow and red; not green, like my best performing stocks ALWAYS are. The few stocks that are green are very extended and are no way in a safe position to go long. Unless you are already long, you just have to be patient for better setups. The majority of stocks are extended, ugly, or too red to be worth my time.

If this is a real rally, however, we will see some stocks start to form right side of bases on green BOP and heavy accumulation. If we see that happening within the next two weeks to a month, then you know this rally is for real. However, if we don’t see stocks start forming some beautiful green patterns with tight price action and accumulation, you can forget about this rally holding and/or producing any kind of gains we can make a living off of.

Speaking of this rally, let’s get back to it. If this rally does not continue to make gains on heavier volume and we do get a distribution day in here, along with stocks not showing up with pretty charts, you can be sure this rally will not hold. If that is the case, it could get ugly. But we probably have a while to go before that happens. The put/call ratio is still near 1, at .94. Traders are still betting against this rally. That is bullish in the short-term, but it is no guarantee for the long-term.

This correction was simply too short, also. The fact that we already have a follow-through only a month after a nasty sell-off does not give us time to have stocks create beautiful sound bases. Without the proper time, you get a lot of ugly V shaped bases and not nice round green bases. These V shaped bases are always more prone to failure. You can go back throughout history and do a study on follow-through days that come less than two months from a top. You will find that they, along with the V shaped stocks, fail quite often.

The best follow-throughs, as IBD said today, come at least four to five months AFTER a top. The ones before the four to five months normally fail. A market that has a follow-through after four to five months usually has a TON of stocks that are breaking out of nice long green bases. And if they don’t show up immediately after the follow-through, the odds are high that many leaders will breakout within the next few weeks, as the proper time has been put in to create nice long bases.

Remember, not all follow-through days work. However, no bull market has EVER started without one. They just don’t normal start big powerful bull markets this soon after a sell-off begins. So don’t be surprised if this one fails also. I know one thing: Unless I start getting more green round charts in stocks with great EPS and sales growth, I will not be expecting to make much money in this market enviro. Have you seen the VIX? The stupid thing is back down to the 12 area. Just a few more days of gains and it will be sub 10 again. That will guarantee us very few longs that will make 100% or more gains. You simply can not make big money with the VIX down here. We need a higher VIX, to make big money. The only way to have that is for us to have a big sell-off. Something we have not had since 2002.

I have an MRI scheduled tomorrow due to numbness in my L1 to L5 region. So I might not be around as much as I normally am. For that I apologize. Aloha and I will see you tomorrow in the chat room. Have a great Thursday!

At the close, the Nasdaq led the way with a .35% gain, the SP 400 gained .3%, the SP 600 and DJIA followed with .2% gains, and the SP 500 gained .1%. Leading stocks in the form of the IBD 100 index gained .6%, well outpacing the broader index. However, the lagging index, has overall been a disappointment since the rally started in July/Aug.

Volume was lower on the NYSE and the Nasdaq. The lower volume indicates that the big boys weren’t necessarily falling over each other to chase stocks up here, after such a strong day yesterday. Breadth was positive on both exchanges. Advancers beat decliners by a 10-to-7 margin on the NYSE and by an 8-to-7 margin on the Nasdaq.

There seems to be a problem with traders recently. I am starting to hear TONS of complaints about underperformance. Hello, folks. This is what happens when big-caps lead. The small cap, momentum, and tech stocks simply can and will not keep up. This bull market is more than four years old. The small-cap leadership has changed to big-caps. Therefore, obviously right now growth investors are going to underperform the market, unless they are very lucky and are hitting all the home-runs that I am finding very scarce to find out there.

However, I know what the real problem is. Those traders that now complain that they are underperforming were the same traders that were bitching in August that this rally wasn’t real and was only a short-term bounce. Even though stocks were breaking out of sound bases and I WAS GOING LONG STOCKS, people were bad mouthing the market saying that it couldn’t possibly rally on low volume. Well it has and it hasn’t stopped. This market has not experienced a 2% pullback in how long? It is too long. This makes a TON of stocks too extended to buy. And that is good news for people like me who were long when they were supposed to be long. But it is horrible for those watching the market run without them.

Now those same people are demanding to make money with new buys. Well too bad. There are not a lot of SAFE high reward/low risk buys out there. Everything is too damn extended. In the IBD 6000 index, 931 stocks have A accumulation/distro ratings, 2561 have a B, and 1216 have a C. Only 1200 stocks have D or E ratings. This shows that this market is under good accumulation and that constant accumulation makes it hard for people to find stocks not extended. It is best to stay on the sidelines, if you find yourself in this position.

And also, stop the bitching. You missed the right time to load up on CANSLIM stocks and/or HOT momentum stocks. This current market is only offering crap to trade. I have been keeping all buys small since January 1st and will keep that pattern the same until I get a real pullback. Until the market pullsback 5-10%, there is no way in Hell I am going to load up on any breakout from any stock in any sector unless the market is FLYING ON HUGE VOLUME.

Even though there aren’t a lot of stock setting up and breaking out of nice bases, just look at sectors like the Mach-Construction, Commercial Serv-Schools, Steel-Producers, Food-Dairy, and Computer-Data Storage sectors. They are moving up faster than the overall market. Look at all the Medical stocks hitting new 52-week highs; those stocks lead in bear markets and they may be showing up a the top of the new high tables in preparation of a weak market. But the fact is these stocks are making significant gains. All of this means that there is always a bull market somewhere. Just because you are not making money now does not mean everyone else is not also. You are just in the wrong stocks and/or are overtrading in a market environment where cash is probably better off.

Look at the Perritt mutual fund. He holds 177 stocks (similar to me) and yet he has 23% cash. This shows that some other smart investors that love to buy strength can not find a ton of new buys either. Trust me, if you are not making a killing, don’t worry, others are not either. The only difference is they know that this is not the time to make a killing. The market will let us know when it is time to make a killing. Now is not the time, four years into a bull market and seven months without a 2% decline. We need to have a selloff before any significant money can be put to work in the next batch of winners breaking out of beautiful bases. How do stocks break out of bases when the market never pullsback to give these stocks bases to breakout of?

So here we are with a market that has only had two distro days on the SP500 and one distro day on the Nasdaq for the past four weeks. A market where the DJIA is hitting all-time highs and the Nasdaq fights resistance at 2500. The only logical conclusion here is to expect more gains. There is no reason for the market to stop rallying as the wall-of-worry is still very tall and the market loves to climb these walls. The put/call ratio has come down to the .75 area, suggesting the wall is starting to lower. However, with all the bitching I see out there, I am not so sure the market doesn’t have more pain to inflict the under-invested bulls and the perma-top-calling bears.

Unless you are a crazy daytrader, there is not much you should do here but relax and let the market run and accumulate and keep your cash heavy so that when a pullback does happen you will be ready for it with a lot of money. Patience and more patience is very important to have here. This market will either offer us something to trade with the stocks making bases now that are not on the radar screen yet or we will just have to keep watching this rally and enjoy the gains we will make with the longs that are working. Make sure to get rid of the laggards. Don’t keep trash that is not moving up when the market is moving up.

Great luck out there, don’t let this market get to you, and I will see you in the chat room tomorrow. Aloha!!

At the close, the SP 600 led with a .75% gain, the Nasdaq followed with a strong .7% gain, the SP 500 gained .5%, and the DJIA finished up .3%. The IBD 100 came in with a .3% gain, unfortunately for leading stocks. However, for the week the IBD outpaced the market with a 3.4% gain.

Volume was lower on both the NYSE and the Nasdaq. But volume was above average on the Nasdaq and about even with the 50 day volume average on the NYSE, signalling that there was still plenty of appetite for stocks up here. The lower volume is also to be expected ahead of a three-day weekend.

Breadth was positive on both the NYSE and the Nasdaq. Advancers beat decliners by a 2-to-1 margin on the NYSE and by a 3-to-2 margin on the Nasdaq.

It was an extremely impressive week for the market and one of the best weeks for the Nasdaq in four months. For the week, the Nasdaq 100 led the way as it rallied 3.3%, the Nasdaq Composite rallied 2.8%, the SP 500 gained 1.5%, and the DJIA put in a respectable 1.3% gain. The IBD 100 outperformed all of the indexes, for the week, as was already mentioned, with a 3.4% showing. However, the top index that I see of interest on my screens is the IBD Big Cap 20 index. That index managed a 5.3% gain for the week. Once again, it was a very impressive week. There is NO REASON to be bearish AT ALL.

The other important piece of market moving news this week was falling oil. The 13% fall in oil since the beginning of 2007 had to have some impact on why the market has seen such a severe shift in leadership from oil and commodity related issues to transportation, technology, biotech, and finance related securities. Oil now sits around $53, well off its $75 highs last year.

Some say that this is bad that it is a sign of a slowing economy. I think the actual stock market disagrees with that assesment.

Earnings announcements start next week and that has market pundits talking about a possible sell the earnings scenario. I am not disagreeing in saying that that will not happen. But I disagree with the fortune telling of some market players. We simply don’t know that eanrings will be sold into and with the stock market indexes hitting all-time and six-year highs it seems foolish to me to try to play that guessing game.

When I have this many stocks making these kind of rapid gains, plus this many new longs showing up (even if they are speculative), and very few stocks that must be sold due to proper cutting losses and taking gains procedures, it tells me that this market is not to be shorted.

Very few stocks that have been in long and sustained uptrends are showing me climax sell signals. PTT flashed one and ICE and CCOI flashed mini-short-term topping signals making large price advances on strong volume after a sustained uptrend. PTT is a perfect example of what a climax signal looks like. So with only a few stocks out of almost 300 flashing climax profit taking signals I can only assume there are more price gains to come.

If more stocks would have broken down besides the P.O.S. stocks that I had to selloff before 2007’s rally got underway, more stocks were flashing climax top signals, and I was finding very few new longs, I would say this rally is a fakeout breakout. However, everything says that this rally is the real deal.

Are there problems with this rally? You bet. New highs are much much lower than what they were at the November highs and breadth was slowly been deteriorating the past three months as we move higher. This is a concern but remember I was around in 1999. The whole time from October 1998 to March 2000, breadth lagged, trended down, and even was negative on up days by the time the great bull came to an end.

The point: the market can rally for months and months with poor breadth and less new highs. Why? Because the big caps are carrying the bulk of the gains. Look at the IBD Big Cap 20 gaining 5.3% this week and you will see big caps are leading this rally. Just like they did at the end of 1999. These big caps are creating more of the point gains in the indexes with the smaller stocks selling off but causing less damage.

Until the market actually breaksdown, these are all just concerns. Nothing more and nothing less. The worst thing to do right here is to try to predict or find the non-existant top that could be months from playing out.

As long as we have this many stocks making these gains in this bullish environment, you should know there is only one play to be making. That is to go long the best stocks in the best industries with the best fundamental growth. In one word: CANSLIM.

Enjoy your long weekend and I will see you in the chatroom–where I will be all weekend. Aloha and have a great long weekend.