Thursday, June 5, 2008

Nasdaq Does Follow-Through, Albeit Weakly - Time to Look for Some Longs

IBD did give the follow-through nod to today's action but they did it in a roundabout way. Here's what they said:

"Nasdaq volume nudged slightly lower, off 0.3%. NYSE volume eased 6%. However, scores of leading stocks rallied in heavier volume, a clear sign of accumulation. Ideally you'd like to see the market indexes pack a punch of higher volume when they nab price gains of this size.
That said, Thursday's action underscored the market's resilience. Combined with other recent gains, it also signaled that the market has recaptured its uptrend."


Not the most ringing endorsement for today's trading but we have to take what we get. The fact that volume was even a little lower on a day where the indices were up almost 2% across the board is not the best news. I would have love to have seen huge volume today, but if this year has taught me anything, it's that this market rarely feels like giving us what we want.

My Market Monitor scans showed that there were 495 higher volume breakouts of 4% or higher - that is a pretty good number. Anything over 300 shows good accumulation. However, that is the first 300 plus day we've had since May 12 according to my calculations. That shows a lack of accumulation overall. One other interesting fact from these scans - the ratio of stocks up 25% vs. down 25% in the last 65 days is as stretched to the bullish side as it has been this year (1477/307). Usually if that bearish number gets below 200, the market is very overextended and likely to have a meaningful correction. We're not there yet, but if this rally does continue, it is something to watch out for.

Basically, we have to take the action for what it is - rather bullish - and go from there. As you can see on the charts below, the small caps have broken out but the Nasdaq just could not break to new highs. That also worries me a bit - they had the last half hour of the session to do so but couldn't. With the jobs report out tomorrow, I have a feeling the market will have a very powerful rally due to the number of shorts out there right now, or just crap the bed and roll over right here. We'll find out soon.

Nasdaq and Russell 2000
Here are the three stocks I entered today (RCH was after-hours) and the one I didn't (and I am kicking myself about that one). If the market keeps moving higher tomorrow, I am hopeful these will do the same, but will also keep my stop loss levels fairly tight. I still don't feel too comfortable giving stocks a lot of room to move around here.

SOL, HERO
RCH, SIM

Oil stocks picked up big-time today and it sure looks like their pullback is over. Some (GMXR, EAC, HK, XCO, FST, WLL, CLR, GDP, PVA) never pulled back in the first place. Based on the action in DUG today, I am guessing this sector will move higher from here. Below are a few smaller stocks that you can look at if you want exposure and don't want to chase. I also like a few bigger stocks like ECA, XEC, NBL, SU, and CNQ - they just don't move as fast.

GSX, NGAS, MMR, CPE

Here are some of the other charts I see as possible longs for tonight. I probably won't enter any of these - rather look at the ones I entered today and possibly add to the starter positions if we get another nice day tomorrow. Out of these, I like VISN and WIND the best.

MELA, AETI, VISN, TITN
WIND, AUTH, GGB, MRB
All Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

I am not including any shorts in tonight's post because I don't think it's wise to try and catch the exact top by shorting here. Even if we have a massive reversal tomorrow and head lower, there will be time to get some shorts on. I probably tried too hard in this area the past week, anticipating instead of reacting, and it cost me a few small losses.

I am kind of interested to see what happens tomorrow. With as high a short interest as this market has, a good jobs report (and does anyone think the powers that be will make sure the report is good?) could cause another move higher and a massive short squeeze. That is a distinct possibility in my mind. At the same time, I see the market monitor numbers getting stretched a bit, and I still see many stocks looking like they are climaxing (SQM and PCX are two that come to mind immediately). Perhaps a continuation of this rally tomorrow will begin the process of getting these shorts to throw in the towel and cover, causing more of these climax runs, at which time the market finally poops out for good, and heads lower in earnest. Just a thought - honestly, I have no idea what to expect anymore from this market. A disappointing jobs report tomorrow could also be major trouble with the weaker volume today. Who knows? We'll see what Friday brings. Just try to be prepared for anything. Best of luck in your trading.

1 comment:

debt consolidation unsecured said...

Thanks for posting these charts. It's easier track NASDAQ ups and down when you can compare graphically all those index fluctuations throughout the day.