At the close, the SP 600 and SP 400 led the way with a .2% gain, the DJIA rose .1%, the SP 500 and NYSE closed slightly below the flat line, and the Nasdaq was lower by .2%. Leading stocks continued to keep pace and outperformed the broad market today, with the IBD 100 and IBD New America indexes rising .3%.

Volume was much lower on the Nasdaq-which is exactly what you want to see right after a follow-through. But to be honest more price gains immediately is always prefered. The NYSE volume came in slightly below yesterday’s level. As you can assume, the advance and decliners were basically even on both the NYSE and the Nasdaq, with a slight positive bias. The positive breadth is nice to see when the indexes were slightly down. But there was more volume on the down stocks so I guess you can call it a wash. There were 366 new highs to only 35 new lows. The put/call ratio, despite the rallying market is still at 1. Traders are still betting against this market.

Which is basically how you could call today’s trading. Except oil stocks. The Amex Oil index rallied 1.7%, topping all the other sector indexes out there. Oil sectors made up 8 out of the top 10 IBD industry group list and 75% of the Oil & Gas- US integrated stocks made new 52 week highs. The other top two groups in the top ten was the Food-Dairy Products group and the Mining-Gems group. These groups don’t necessarily have the excitement and innovative products that is normally associated with strong bull markets.

So basically we still are not seeing anything new from new leading industry groups and simply have a resumption of the uptrend from the October 2002 lows. Today and yesterday was nice but we still have very few stocks shaping up beautiful green bases. Today, I had 10 new longs show up, for me to take. However, only two are worth any real investment. And both of those have iffy patterns. RVSN is a little too extended to be a completely safe buy with a small cut loss (high reward/low risk ratio) and LHCG is just overall an uptrending stock that still has a lot of violent reversals before resuming the trend. However, if you watch RVSN, you can probably pick it up for a better price on a low volume pullback. But until I can find stocks that are more green and have less red on my charts, I still am staying cautious with the new longs I take. We still have a lot of crap and not a lot of quality.

When you don’t get any severe pullbacks or long-term sideways trading in the stock market, this is what happens (low VIX = less money to be made). We need a big pullback to get volatility back in this market. With VIX up near 20, even then there will be a lot more stocks making 100% plus moves in short time frames. A VIX at 30 and you will fall in love with this strategy. A VIX at 10, like now, is just not going to produce a lot of great longs that make HUGE gains. That is just the way it works. There is nothing I can change about it. I hate it and you hate it, trust me. We need more volatility!

However, like I have been saying for some time now, if you can daytrade and you understand how to buy not only breakouts but how to manage buying stocks at support and selling at resistance, I suggest to keep playing that game. Solar stocks are making the VERY FEW good daytraders that I know quite wealthy. Holding (not daytrading) ASTI for instance has given you a 100% gain the past 10 days. Why don’t I daytrade these and make a killing? Good question. The truth is: I hate daytrading. I don’t like being glued to the monitor and making quick buys without having time to review the situation. But I am sure if I wasn’t so lazy and would daytrade the solar stocks, I am sure I would be doing OK. Not great; but OK. I have played that game before. It is not like it would be a new adventure.

No top ranked stocks fell on heavy volume today in the IBD 100. And out of 174 longs, I had zero complete sales and only two partial sales. One of the partial sales was OEH. OEH is starting a climax run on the short-term/intermediate time frame. So, the reality is, out of 174 stocks, only one was sold because it needed to be sold. But to be honest even that sale was very small as I pretty much nailed that top. Do a search on the forums, to see for yourself. Overall, a very strong day, despite the flat close by the indexes.

Don’t fight this trend. I know it sucks that the market did not give us a real pullback to help us set up a ton of new charts in new longs that will launch a great bull market. But we have to take what we can get. What we are getting is higher stock prices. This is another reason why it is NEVER smart to panic sell. Just think of all the longs you sold off completely that are now higher. I made a sell decisions on Feb 27 and shortly after based on the chart. NOTHING else came into play, except the fact that the market was selling off so you have to sell some breakdowns that you might not sell in a bullish tape.

This low VIX rally, unfortunately, seals the fate of the market. This low VIX will not offer us many big winners. Like I keep saying, the August 2006 rally was the worst rally I have ever been a part of. The reason is simple: a low VIX. After big bear markets a high VIX ensures many 100%-1000% winners can be captured. A constant low VIX will just help us keep afloat. This is not the market to be going all-in on yet.

I had a very busy day today, with medical appointments and mandatory shopping trips with the wonderful love of my life. Aloha and I will see you in the chat room!

At the close, the DJIA and the Nasdaq fell .6%, the SP 500 fell .5%, and the SP 600 fell .4%. The good news is small caps did not lead to the downside this time. The bad news is leading stocks, measured by the IBD 85-85 index led to the downside with a .8% loss.

The wonderful Christmas holiday news was that volume came in well below yesterday’s levels and was well under the 50 day volume average. This is just what you want to see on a pullback. Volume keeps coming in lower every day the averages pullback. PREFECT!

Breadth was negative on the NYSE by a 5-to-3 margin and negative on the Nasdaq by an 8-to-7 margin

Oil stocks were among the worst of the session. The Amex Oil Index fell 1.2%, and the Philadelphia Oil Service Sector Index eased 0.6%. The Nasdaq Telecom Index slipped 1.3%.

For the week, the Nasdaq led to the downside with a 2.3% loss, the SP 600 fell 1.5%, the SP 500 dropped 1.1%, and the DJIA managed only a .8% loss. Overall, it was a bad weak, just by looking at the numbers. However, when volume is included, it was the perfect pullback. It is very nice to see this selling come on very low volume. It would be MUCH worse if volume was rising. But it isn’t.

The Nasdaq is now at its 50 dma, joining the SP 600 at this critical line. It will be important to see how the indexes shape up here in the coming weeks. Strong selling through this line will be bearish. However, if the indexes either drift around here on low volume or blast off the lines on strong volume, it will be bullish for the markets.

The Nasdaq currently is at the bottom of its trading range and has not broken down so jumping to the bear side is not a smart decision yet. The longer-term trend is still up on both the Nasdaq and SP 600 so the smart play is to remain focused on the long side. Until the trend changes, you have no reason to.

It is going to be a light volume week ahead. There will be many small stocks that should produce some nice gains in this kind of trading environment. At the same time, during this time, if you have any stocks that selloff on heavy volume you might want to consider getting rid of them. A lot of small caps run a ton during this kind of trading. However, if you are long a bunch of junk and they don’t move and instead go down, you should get rid of them.

Hopefully, the market will keep pulling back all next week. That would create a beautiful basing pattern for a possible upside breakout for the indexes. Low volume pullbacks are about as good as it gets after such a strong run up as we have had in the indexes.

Even though it doesn’t seem like the Christmas spirit is in the air on Wall Street, it is to me. I love low volume pullbacks during the holidays. More often than not, a low volume rally over the holiday periods leads to selling. Low volume pullbacks then lead to higher volume rallies. This is my perfect Christmas scenario right now. This is what I wanted and this is what I am getting, so far.

The big money will not be playing this week, so expect little changes in the markets.

Aloha, Mele Kalikimaka and Hau’oli Makahiki Hou!

I will see you at Investors Paradise.

New Swing Longs: NONE

Adding To Longs: NONE

New Swing Shorts: NONE

**number is % gain since long taken. Only stocks up 25% have numbers**

Longs Up On The Day (low vol non-IBD excluded): PTT-109 AOB-99 STEC-82 MA-94 FFH-27 PCCC-35 APLX-29 PSPT-32 TTEC-62 JSDA BLUD INAP MAIL HEI CCO FMCN EVEP IMKTA IFOX IWOV AMOT CTCM DECK GIFI PCC SKX NHWK VEH AB CVLT AMSF CACB IMA DLB WTS IPHS IMMU TZIX SEAC HAUP AFT

Stocks On Radar Screen: ATNI EMCI MOCO CALM TAST ITMN ISPH DAR PRKR TLEO STKR IDN SAB

The Important Partial Profits/Losses: RTSX ONT HOTJ SRSL

Completely Take All Profits/Losses: GSL TDY