The Semiconductor Index, SP 600, Nasdaq, IBD 85-85, SP 400, and IBD 100 All Had Great Days Today Making For One Very Bullish Session; It Is Very Nice To See So Many Nice Charts Right Now

April 16, 2009

Commentary by John Ward

Well, this market continues to prove its mettle. After a distribution day on Tuesday, it looked for a while like Wednesday was destined to close in the red as well. Only a last-hour rally saved the day. However, I still heard grumbling about volume being a little light. So what does the market do? It treats us to a Thursday where we finish higher on heavier volume than the day before. Not sure if that will impress those who insist on looking for any and all flaws in order to pooh-pooh this rally, but it impressed me. Plus, I’m seeing CANSLIM-quality stocks like VNUS, VPRT, RMG CYBS, LL, BKE, POWL rally off their lows and, to my mind, now is the “show me” moment. Will they continue to improve technically or just sputter out? Time to put up or shut up, right? How these stocks and stocks of this ilk fare will probably tell you where this market goes from here. Please understand that I’m not saying that I will buy any of these stocks, just that they are of high quality and I’m watching to see how the market treats them. What makes me confident that they might do well is the way the market has been treating leaders which have already emerged. Those who are subscribers to BigWaveTrading know exactly what I’m talking about.

Having said all that, though, one must temper his enthusiasm and consider the “other side of the coin,” as they say. And just what is the other side of that coin? Well, it’s what all those who took part in the Tax Day Tea (Taxed Enough Already) Parties around the country were up in arms about –namely, our tax policies, the bailouts, out-of-control spending, governmental interference in free markets, etc., etc….

Given the sheer number of people who participated in the “Tea Party” protests, it’s safe to assume that many out there are feeling somewhat jaded, if not altogether fed-up with their elected representatives, perhaps even some who are reading this commentary. Just remember this: there is always plenty about any situation to entertain and amuse you, if only one pays attention. Like Jimmy Buffet says: “If we couldn’t laugh, we would all go insane.” Case in point: Representative Jan Schakowsky (D) of Illinois. She was out there recently damning the protests and protesters as both “despicable” and “shameful.” The protests, she claimed, were simply an “effort to mislead the public about the Obama economic plan that cuts taxes for 95 percent of Americans and creates 3.5 million jobs.” Coming from her, any comment regarding taxes or jobs is hilarious! And just what makes her remarks so rich? I will quote from an article published in USA Today from August of 2005:

“The husband of an Illinois congresswoman pleaded guilty Wednesday to tax violations and bank fraud for writing rubber checks and failing to collect withholding tax from an employee. Robert Creamer, a political consultant married to four-term U.S. Rep. Jan Schakowsky, could face four years in prison on the two felony counts when he is sentenced Dec. 21.”

I will wait for your laughter to subside before continuing….

Now something not quite so funny is the fact that the S&P 500 earnings are down 60% over the past 17 months, the largest decline of GAAP (Generally Accepted Accounting Principles) earnings on record. Seeing how we’re in the midst of another season of earnings, it stands to reason that we take this fact into consideration too. Earnings are expected to fall for a seventh quarter in a row before it’s all said and done. That would make this the longest losing streak since guess when? If you said the Great Depression well done!

As we all know, though, the market is forward-looking. Does this rally then portend brighter days ahead? If so, then how much longer will this downward trend in earnings continue? I was actually asked this question today, believe it or not. This is the way I wish I had answered: “Well, I’d ask my dog but he’s busy at the moment chewing his tail like an idiot,” yet, unfortunately, all I could come up with was: “I haven’t the foggiest.”

But, really, who on earth cares? Why get caught up worrying over future earnings? Let the market worry about that. You just take its cue. I’m guessing you’re here to trade stocks and make money, not to ponder the intricacies of complex economic trends. So let me tell you, just between you and me, fretting over the S&P 500 earnings (or things like that) isn’t going to help you buy a MONSTER STOCK as it breaks out of a proper base on huge volume, and it won’t teach you how to handle it as it makes its life-changing run higher. In fact, it won’t help you do much beyond bore your family and friends to tears and make them want to change the subject as fast as possible. While it’s important to be cognizant of the facts as they stand and to be sensitive to underlying conditions, don’t let these things become too big of a distraction. Only the genius of the stock market is able to gauge what might come. Follow its lead. If you do then the market will reward you and, trust me, the money will make you much more interesting.

Anyway, I leave you this morning with an over 2,000 year-old quote from the Satyricon, a novel that is for the ages:

“Just as dumb creatures are snared by food, human beings would not be caught unless they had a nibble of hope.” (Petronius, a man who knew a thing or two about misguided rulers)

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