Very Bullish Day Ends With Indexes Higher On Higher Volume; I Am Starting To See A Lot Of Nice Charts But The IBD 100 (Leading Stocks Index) Continues To Lag The Market

March 26, 2009

Thursday was a fantastic day for the stock market as indexes rallied anywhere from 2% to 4% on higher volume. The move today came on the back of an incredible close yesterday which saw the market turn in the last hour and go from a possible red close to a rally of around .8% to 2.2% on the indexes. While the rally was very impressive in the last hour, Wednesday, the best part was that the late rally came with leading stocks leading the way. Earlier in the morning that day it was lagging stocks that were leading the way. The sudden change in the last hour, along with the big price gain on big volume, was very bullish and definitely a change for the better.

Well that change continued today as the market rallied higher all day-though it was choppy-on higher volume. The best part about today’s rally, once again, is that I see a lot of nice high-quality stocks trying to setup and do something positive. That includes another three new longs this morning, with two of them being CANSLIM quality. This is now the second day in-a-row with two CANSLIM longs and I have to be honest I can not remember the last time we had two CANSLIM longs in the same day WITH THE MARKET IN AN UPTREND. I know it has been a real long time. So this is definitely good.

At the same time that this rally is happening, don’t think I am changing my long-term outlook that quickly. While I may be bullish on the market in the short-term and see that I have longs setting up and breaking out that indicate a sub-intermediate to intermediate uptrend could be possible, I still KNOW that if Obama, Geithner, Barney, Bernanke, and crew Inc. get their way and continue to seize control of the free markets via excess regulation, taxes, and oversight you can be sure that when this rally is done we will be going right back to what we were doing during 2008. And that is selling off without any hope for any rally lasting more than a couple of weeks. This rally so far has lasted three weeks and looks like it could last a lot longer, even with a pullback in the short term. That might just setup nicer bases. I know for a fact that there are a few stocks that just need a little bit more time and very well could be EXCITING and financially very rewarding longs.

Some of those stocks can be found in the list of new highs which incredibly shows 32 stocks hitting new 52-week highs while only 10 stocks hit new 52-week lows today. I am not sure but this might be the best NH to NL reading I have seen since 2007. To go along with that, breadth is EXTREMELY positive right now as I bet there isn’t a single industry group down since the rally started, during that period.

The good news about this rally right now is that people are not actually embracing it. The put/call ratio did something I did NOT think it would do today and that is RISE to .87. That caught me off guard but I guess not really as the Investors Intelligence survey still shows 43.3% of professional writers are bearish while only 28.9% are bullish. With that survey goes the AAII survey of us regular retail investors which show that we are 39.1% bullish and 42.4% bearish. This says that despite the rally the last three weeks, most investors, professional and retail alike, are bearish on this market. This means that they expect this rally to fail soon and start another leg back down to a new low. If you know how to play the contrarian game, you know that by looking at the market, your charts, and sentiment that you probably want to take the other side of that trade for now.

One of my personal most exciting things that I see happening is that technology and innovative related industry groups put in good moves yesterday. Of course some laggard groups like the homebuilders led the way with an 11% gain. However, there were plenty of technology related industries in the top 33% of all industry groups that had large groups gains of 2%+ to 9%+. And my personal favorite group was the showing of Computer Software stocks. Not only were there 8 new highs for the Computer Software stocks, which beat the Retail and Medical (5 each) field for top honors, but all of the Computer Software group were in the top 33% of funds.

That makes it clear the top of the market is made up of many fine technology fields (check out the General Market page in IBD to see this or use the Industry Group Ranking screen by IBD). The best Computer Software industry was the Desktop group with a 7.6% gain. The Security group gained 5.1%, the Financial group gained 3.8%, and the Enterprise group gained 3.3%, to go along with the gains in the Desktop group. The eight stocks that hit new highs include SXCI, PEGA, MDRX, CPSI, LFT, TSYS, ARST, and CKSW.

While that Computer Software industry group really has a fire under it, the one group that stood out to me today due to its innovative role in technology along with all the MASS-hysteria around the debate of global warming were the Energy-Other stocks. That industry group made a 9.3% leap today that can be seen in ETFs like TAN (congrats Meg–she is our BEST and I put her up against MANY PROFESSIONALS on the internet out there at investing/trading ETFs) and KWT. I love this group a lot and when the charts with top fundamentals, or just the speculative stocks, setup and breakout on strong volume, green to max-green BOP, and do it from a tight price consolidation, you can be sure I will be looking to get long.

Have a FANTASTIC Friday! Aloha and I will see you in the Platinum Chat Room or Gold Forums. Aloha!

top longs/shorts w/ total returns making me money today: AIPC 40% ANCI 69% (CETV 83% AMX 47%)

FREE YOUTUBE VIDEO (sidenote: In the video I was looking at the weekly chart of the IBD indexes [my bad] and sadly the IBD 100 and IBD 85-85 both lagged w/ gains of 2.4% and 1.4% respectively):