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Sunday, May 22, 2005
Market Recap
The four day winning streak ended for the Dow and S&P on Friday, but the NASDAQ continued its winning streak to six days in a row. It is showing the market leadership we need the NASDAQ to show on this next bull run. The Dow fell 21 points, the S&P lost 2 points, and the NASDAQ gained 4 points. The volume Friday was light for an options expiration day. Mr. Greenspan spoke Friday in NY and stated that there is a housing bubble. This man is on a mission to slow the economy and stop the growth of the housing market in my opinion. He also stated that interest rate hikes are not going to slow in the near future. You would think this news would have had sellers out in droves on Friday but they were nowhere to be found. I think at this point, even though I think Greenspan is off his rocker, we need to short the cyclical stocks. If rates continue to go up, the economy will falter and if that happens, we should have a balance of cyclical shorts and long positions in the strongest stocks in the market. I am leaning towards technology and biotech for this leadership.
Last week, I began to buy some of what I think are strong stocks that will do very well in the next bull market. Stocks like DNA, LCAV, ITRI, GOOG, KOSP and UTHR. There are a few more I want but I expect a pullback in the market soon. I do not want to get over extended on the long side. Even though these stocks should do well going forward, they could still pullback. I would like to hold these for awhile and not get stopped out, but this means having very loose stops. We had a stop on LCAV at 37.40 the last time we bought it and were taken out of the trade only to have the stock breakout into new highs again. Stops are good but they also can take you out of good stocks on shakeouts. We cannot have it both ways, if we are going to use stops to prevent losses, we should expect them to prevent some gains as well.
Short Squeeze
Some of this recent rally had to be the result of short covering. The volume early on in the rally was light which suggested that it may be nothing more than short covering. Many sectors had record short positions just over a week ago. According to The Wall Street Journal, short interest on both the NASDAQ and NYSE were at new all-time highs. When short interest is at or near new highs, it usually means a rally is imminent. This short interest means bearish sentiment is high and when that happens, usually the opposite occurs.
Consistent high volume is what we need to see if the rally is going to hold. We had a couple of days with good volume but not all of these up days were on high volume. We need to see a pattern of high volume up days and light volume down days to know that institutions are putting money to work. Until we see higher volume confirm the gains, it is difficult to believe the current strength is anything more than an oversold rally. With the Fed still in tightening mode and the light volume summer season almost upon us, combined with the markets overbought condition, the inevitable pullback will come.
STHQ Messageboard
For those of you who do not read our message board. I would like to welcome you to do so. A couple of members brought up a good point about our board in their posts this weekend and I totally agree with them. One calls our message board “Full of Treasure” the other “The best and most objective I've seen”
I am not trying to toot our own horn by mentioning these posts here. I am trying to get everyone to realize we have some fantastic stock traders in this membership, and they share with us their great picks. There are far too many stocks in the stock universe to put on the bulletin. But with our members' sharp eyes and willingness to share, we have many stocks posted on the message board that we would be missing out on if our service didn't have this great message board. I only have one set of eyes so I cannot watch it all but working together as a group; we can find those hidden gems. I urge you to actively participate on the message board. I would like to take this time to thank all our members who participate on the board making it what I think is the best message board around. And let's not forget our OTC bb message board, finding many big gainers. Yes, this service is much more than just the alerts. The following is excerpts form those posts mentioned above and I want to thank KC and Bob1 for their kind messages.
“I'm amazed at how this board triangulates the markets. It is great to have a place to confirm assumptions, hear independent analysis and thoughts, and benefit by others eyes and ears. The best and most objective I've seen!”
Bob 1
“The message board is certainly full of treasure, I hope we all pay attention to all the good picks contributed by different members. The message board here is the best anyone can find. For instance, I posted #71985 a few days ago. You can get 10%+ on BOOM, USEG, PLLL, GEOI and ABLE up 50%+ today”.
KC
Upcoming Commentary Topics
Thanks to all those who have sent emails requesting us to cover certain topics in the commentary. Many of these topic requests are excellent and as a result, I believe these topics will be very educational to all members. In the upcoming weeks, I will be doing commentaries on subjects including:
- The Business Cycle
- Options 101
- Pro-Forma Earnings
- On Balance Volume
- Stock Buybacks
Please continue to send in your requests. If you have a request for a specific topic, please send them to me at david@stocktradershq.com with the title of the topic in the subject line. I can only do one topic per night and I have had many requests but I will get to them all over time so do not think you have been forgotten. I welcome every request, keep them coming. Thank you.
STHQ Chart Index - If you go to the chart index in the left side menu, you can review and study charts we have annotated for each stock listed in the past.
Earnings Calendar
We have added the earnings link for each stock on the bulletin. To access the link for earnings you can either use this link below or click the link on the bulletin for the corresponding ticker. Click the online bulletin in the left side menu for access to the earning calendar for each stock listed. It is not recommended to hold a position through earnings. You can always buy the stock back after the dust settles.
http://www.earnings.com
Stockcharts listing
Please vote for us once a day at Stockcharts.com. http://stockcharts.com/def/servlet/Favorites.CServ...
Thank you all for voting
For New Members
For all the new members with us, please make sure to read the link “How to use Bulletin” at the bottom of the Bulletin page on the website. It is critical you know how to use this trading tool before trying to trade the stocks mentioned. The effectiveness of your trades will diminish if you do not completely understand how the information is presented. |
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