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 Featured 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: Featured.

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.