Weak manufacturing data set the stage for early morning selling, but like Tuesday buyers stepped up to push stocks higher.  However, today’s action wasn’t driven by any one stock like Tuesday and CSCO’s dividend announcement.  The market ignored its seemingly overbought conditions to push higher into the close with the NASDAQ overcoming the 2300 level.  Major market averages once again tested their 200 day moving averages and found support a very bullish sign indeed.  Another positive day even with volume coming just under yesterday’s level as this market remains in a solid uptrend.

Leading stocks continue to act well and all though we have yet to see monster moves we may very well be on the cusp of these moves.  While we all clamor for MONSTER MOVES they simply do not happen every day.  For example RDWR (Big Wave Trading members were long prior to yesterday’s move) type move will become more frequent rather than an exception.  We do have the ingredients to foster such moves.  The question will be whether or not you have the ability to identify the stocks?  Big Wave Trading members will be on top of these high flyers.

Many traders continue to try and trade for a pull back because they feel the market is overbought.  The same goes for oversold market conditions.  What is exciting for most is thought of buying “low” and selling “high” over and over again.  If it were THAT easy we would have many more successful traders, not to mention many more million, if not billionaires.  The key to all of this is to know how to hold onto the best stocks as they go through “normal” corrections or reactions to moves higher.  Most do not understand how to hold even if the market or stocks appears to be overbought.  Buy and hold traders are a completely different story, but this class of investor tends to sell well after a stock makes its run.  We would rather buy stocks at or near proper entry points and sell the stock as it moves up in its run.

Getting back to this market we are continuing to find stocks either breaking out or setting up in bases.  Not to ignore the current holdings we are seeing add points to our current holdings.  An uptrend in doubt would not be showcasing so many buy points.  In fact, we’d be seeing stock failures all over if this uptrend wasn’t meant to be.  Sticking to the top stocks will yield us plenty of gains.

Cut your losses short and ride the Big Wave of your winners.

Top Current Holdings With Total Returns Since Purchase That Were Higher Today: JKS 118% RDCM 52% RES 33% MIPS 25% NR 24% SPRD 20% ISLN 17%

At the close, the SP 600 led the way with a .8% gain, retaking its 50 day moving average. The NYSE rallied .7%, the SP 500 and Nasdaq each gained .6%, and the DJIA gained .5%. The IBD 100 led again, for the second straight day in a row, with a .8% gain. That is two days now that the index has been on pace or kept ahead of the market. NYSE volume was slightly lower and the volume on the Nasdaq was lower by 4%, indicating that big institutional firms still have no interest in snapping up large amounts of shares here. Advancers beat decliners by a 5-to-2 margin on the NYSE and by a 2-to-1 margin on the Nasdaq. New highs beat new lows by 211 to 68. The breadth and new highs show that there still appears to be more upside left in this dead cat, high put/call (1.1) ratio bounce.

I am still only calling this a bounce, because I am not seeing ANY new stocks appear on my scans with green beautiful charts. And I am not seeing any accumulation what-so-ever on the indexes. We are going into day six of the rally attempt. If we do not get a 1.7% gain on heavier volume tomorrow or on day seven, the chances of us getting a rally that will produce anything special is greatly reduced. Remember how long it took the rally off the July/August lows to get started last year? It was well over 10 days. That launched one of the weakest rallies I have EVER been a part of. Only 180 stocks made 100% gains or more during that advance. That is stunningly pathetic. The longer we wait on the follow-through, the less of a chance we have of having a great rally. I am not looking for a follow-through to happen and even if we get one I expect it to fail shortly after. We really have a LOT/TON of work to do to fix the mess that the February 27th sell-off created.

However, there are a TON of impatient traders out there that have learned NOTHING from history’s greatest traders. Livermore, Loeb, O’Neil, Baruch all knew how important it was to sit on cash and not invest when the odds were not in your favor. How do you know when the odds are not in your favor? When the indexes are not in a serious uptrend or downtrend. When they are going back and forth like this it has always been the cash play that has been the smart play. The impatient and history ignorant traders that are swinging for the fences in this market are going to eventually be served a very painful reminder on why it is not smart to make overly bullish or bearish bets in a market that is confusing like this one is. These traders will NEVER learn and it is probably for the better as they ensure an even more liquid market for trend traders to enter.

If you feel like you are missing out on the action, then trade with a little bit of your money. Just don’t make any stupid bearish or bullish bets with all your cash in this market. There is for sure to be more wild price action in the coming weeks, depending on what the FOMC has to say. That meeting wraps up tomorrow at its usual 2:15EST. Nothing new is expected to come out and the Fed is expected to hold rates steady at 5.25% for the sixth straight time. The wording in the statement is what all commentators will be focusing on. It seems that a slowing economy and inflation is what is occurring now in our markets. If that is the case I sure wouldn’t be looking for the Fed to be cutting rates anytime soon.

Tomorrow the fireworks will all be over the Fed. However, we are setting up for a positive open tomorrow, on the back of good earnings reports from ORCL and ADBE. This positive open is sure to cause the early shorts more pain. Everyone was asking me three weeks ago why I wasn’t shorting everywhere. Well the past two days of gains is one of the reason. The other reason is simply history. The best time to short stocks is FIVE TO SEVEN MONTHS AFTER THEY HAVE TOPPED. Being too early has cost many great traders many profits. I am not one of these traders who will lose my profits by trying to be a hero. I don’t want the top and the bottom. I want the big meaty middle; the filet-mignon, if you will.

Before I wrap it up for the night and go out to see the movie “300,” I want to bring to your attention one key stat I saw today: The Singular Research group offered a report today stating that margin debt is at a new all-time record of $296 million in February. This is considered a contrarian indicator and signals that the crowd overall is very bullish buying stocks on margin. Do you know when the last all-time high was? It was in March of 2000. The month that the meltdown in tech and internet stocks started. Take it for what it is but this report has not seen those numbers since the last IMPORTANT top in the stock market. The current short interest on the NYSE is very low and the amount of share buybacks are still very bullish overall for the market but the crowd is going out on a limb buying stocks and in the long-term that could be very negative. On the short-term though it is hard to argue with all the share buybacks.

Which side is right? We don’t know yet. CASH IS KING!!! right now. Until we get a clear trend and truly know which side is the right side, I will continue to play the beautiful longs that setup and the ugly shorts that setup. There isn’t a lot on either side, which tells me we still have more time to tire and frustrate the weak traders and investors, in this market. I hope you had a great day. I had a TON of errands to run and had to help out a vehicle-less friend all day so I apologize for the lack of showing up in the chat room today.

Aloha and I will see you in the chat room tomorrow. Remember, CASH IS KING!!!

At the close, the SP 400 and 600 led the way, hitting all-time highs, with .5% gains, the NYSE followed, hitting all-time highs, with a .34% gain, the SP 500 was next with a .07% gain, and the DJIA and the Nasdaq finished with a .04% gain. Leading stocks kept up with the SP 400 and 600, with the IBD 100 gaining .4% on the day. It is very positive to see the leaders continue to keep pace with the leading indexes of the day.

Volume was slightly higher on the NYSE and well higher on the Nasdaq. The higher volume, combined with the very nice intraday price reversal, gives today’s action a sense of accumulation off this dip to the 50 dma. It can only be bullish to see buyers stepping in here to support stocks at this key moving average.

Breadth was positive on both the NYSE and the Nasdaq–which is good because with such little change breadth easily could have been flat. Advancers beat decliners by a 5-to-3 margin on the NYSE and by an 8-to-7 margin on the Nasdaq.

It was another day of clear outperformance by leading and small cap stocks. Not to be left out, the NYSE, has been showing some incredible strength too. That is mainly due to the strength in the Building and Steel stocks. The IBD Steel-Specialty Alloy group has risen from 157 to 2 in the past three months, the Steel-Products group has risen from 94 to 13 the past three months, and the Building-Residential/Commercial has risen from 189 to 12. This is some extreme strength the past three months in three economically sensitive groups. These groups are old leaders but with the overall broad strength in this rally, I personally think it is a good thing to see the old leaders rise with new leaders. However, I am finding few if any stocks in these groups that I want to go long. That might be a sign something isn’t right. However, with all these groups rising, things are obviously going well.

The losers of the day were the Semiconductors, with the SOX index giving up .5% today. However, this is of no surprise to seasoned chart readers as the stock has failed to hold above the 50 and 200 dmas, broke down below the December lows in January, and continues with its steady downtrend from January 2006. There are few leading stocks doing well in this sector, and with most markets hitting new highs while this SOX index lags, there is no reason to be long stocks en masse in this sector.

The put/call is still pretty high, sitting at .85. This shows me people are still placing there bets on the short side, even though the market keeps hitting new highs. This is very bullish for further stock gains. This is probably why EVERY dip is getting bought, with no end in sight, for now.

We shall see how the market does tomorrow, off of CSCO’s earnings. I doubt it will have much of an impact but I am sure it will be the topic of the morning on CNBC and in the chat rooms and message boards. Don’t fight the tape and keep playing this trend till it ends. This is an amazing bull market and until we get clear distribution it pays to stay long and strong.

Great luck and I will see you tomorrow in the Chat Room. Aloha!

At the close, the DJIA led the way higher with a .79% gain, the SP 500 gained .66%, the Nasdaq rallied .62%, and the SP 600 gained .57% hitting another all-time high. Leading stocks lagged, with the IBD 85-85 and IBD 100 indexes up .2%. Not what you like to see on such a strong day.

Volume was much higher on both the NYSE and the Nasdaq. That is just what you like to see on a day of strong gains. The volume surge and bounce by the Nasdaq right on the 50 dma is also a very positive development from today’s trading.

Breadth was positive on the NYSE by a 2-to-1 margin and was positive on the Nassy by a 5-to-4 margin.

Everybody already knows everything about the Fed. So I am not going to get into it. I just think it is a good thing that the Fed sees the economy getting stronger. However, I still wouldn’t mind a quarter point drop. I still think that would be healthier than where we are here and psychologically it could add a boost to consumer confidence. It isn’t until the market starts selling off and they are cutting rates that there is anything to worry about. Cutting rates in a rising market would actually be very good. But that is all wishful thinking.

The facts say that the stocks that did participate today all did so from lagging groups. Just like yesterday it was oil, today it was transports and builders. The DJ Transportation index gained 2.7% and the IBD Transportation-Service group EXPLODED upward by 6.3%.

I would rather see small caps, tech, and leading stocks leading, instead of big caps and laggards in builders and transports. So, to me, it appears another confirmation that we are going to be in a choppy market. If we are rotating back to old leaders from current leaders or they are going to play catch up, the Nasdaq may have problems making significant gains here.

Moving on to my next subject: GDP. The GDP grew 3.5% this quarter compared to economist projected 3% total. That growth shows you why the stock market is still going up. With the economy growing the way it is, the market is going to keep on moving higher. So all the bears can try to call tops all they want but this strong economic data PROVES that the market AS ALWAYS is right. And it is rewarding investors who follow the trend. I am starting to get some really great returns on longs that I took when this rally started.

This is still a bull market and I am still finding plenty of fresh new longs to take in this environment. And to go along with all the new longs I find, I am not selling off many holdings. There have been very few complete sells and there really have not been that many stocks flashing scary sell signals. A lot of stocks are clearly signaling profit taking signals on the way up and that is helping me lock in gains on the way up so when the selloff comes instead of panicking I can hold and wait for the bounce that normally happens in bull markets. If the stock doesn’t bounce, obviously there is something wrong and it needs to be sold.

I am not going to fight the trend and if you are shorting this market you are making a silly arrogant mistake and missing out on some huge winners. Hopefully, everyone reading this is long and strong. Aloha and I will see you in the Chat Room.