Deflated Today GMI: +2

I had a bad day, today.  Not in the market, but on the road.  Driving back from Baltimore on the interstate, I ran over a piece of wood with nails in it that punctured both tires on the passenger side.  I waited over 2 hours for AAA to come and tow me.  So I am tired and deflated, puns intended.  I need to retire my car tomorrow. So, I will just update the GMI tonight.

The GMI rose to +2.  The Daily QQQQ index is on a firm up trendGmi517  now.  The Daily SPY Index is positive again.  There were 77 52-week highs today in my universe of almost 4,000 stocks, and 55 new lows.  Sixty-nine percent of the NASDAQ 100 stocks rose today, 78% of the S+P 500 stocks and 77% of the Dow 30. The only negative I saw was that the short term interest rate index closed above its 50 day average again, after 2 days below.

Keep an eye on NDAQ if it closes above 15.05.  GOOG hit a new high today, as did PRGS.  NSI and IVGN may pop again.  FORD is on the move again.  (I own some of these stocks.)

Send me your feedback at silentknight@wishingwealthblog.com

Please remember that the stock market is a risky place, especially now.  I am not providing recommendations for you to follow.  My goal is to share tools and methods that I have used over the past 40 years of trading, so that you may learn from them and adapt them to your trading style and needs.  While I do my best, I do not guarantee the accuracy of any statistics computed or any resources linked to my blog.  Please consult with your financial adviser and a mental health practitioner before you enter the stock market,  and please do not take unaffordable risks in the current market environment.  See the About section for more statements designed to protect you (and me) as you navigate this market. Past performance does not guarantee future results, but I would rather learn from a former winner than a loser.

A Good Day–PTRY–WW-GMI: +1

The GMI stayed at +1 today but there were some positive developments.Index516 The successful 10 day new high index climbed to 47, the highest since last April 6.  Moreover, 55% (47/85) of the stocks that hit a new high 10 days ago closed higher today than 10 days ago.  There were only 31 successful new lows–only 40% of the new lows 10 days ago closed lower today than 10 days ago.  Thus, a trader betting on new highs 10 days ago has had a better chance of succeeding than a trader shorting new lows.

Still, there were only 54  52-week highs today compared with 63 new lows in my universe of almost 4,000 stocks.  The Daily SPY index went to undecided today and the important Weekly QQQQ index improved, but is still too close to call.  About 74% of the NASDAQ 100 stocks rose today, along with 84% of the S+P500 stocks and 90% of the DOW 30 stocks.  So the big caps joined in the party with the tech stocks today.  I am most positive on the action of the QQQQ and am long that ETF. The short term interest rate index (see graph in yesterday’s post) closed below its 50 day average for the second consecutive day, a very good sign of less pressure on rates.

My strategy now is to maintain some long positions and wait to see if this rise is for real.  Every long position has a stop order to sell not far from today’s price.  I have no patience with any stock that fails to behave as I expected.  This is the discipline needed to succeed in the market.  It took me 40 years of trading to get to this point.  You can teach yourself this rule immediately.

Among the stocks hitting new highs today that all have triple digit increases in earnings last quarter and are at all time highs:  KND, FORD, CHE, PTRY, SE, PRU.  These are stocks for further study.  Some are extended.  Study their charts and look up their fundamentals and company profile at Yahoo finance (just enter the stock symbol on that link).

Let’s take PTRY as an example.  Ptry PTRY topped out at 35.60 on February 17.  It then began a decline to 27.33 on April 18.  It next began a rise to 34.77 and reacted back to its 10 day moving average (dotted line).  Today it broke to a new high and closed at 36.70 on the highest volume since last October.  (The horizontal blue line reflects the 50 day moving average of volume.)  PTRY produced a gap of .65 between Friday’s high of 34.03 and Monday’s low of 34.68.

How might I trade this stock?  One way would be to make a pilot buy of a small number of shares at the open tomorrow and to place a GTC (good til canceled) sell stop at 34.65, just below today’s low.  If this stock is really strong it should not trade below 34.68 and close today’s gap.  If I am wrong, I will risk a little more than 2 dollars per share (purchase price-sell stop execution price). Another way to trade it is to buy it only if it breaks today’s high of 36.95. (On stocks rising like this one, I often consider selling, the day it closes below its 10 day moving average.)

But before buying, I would check out the company profile and its key statistics on Yahoo.  Looks like the company is making money in the convenience store market.  And the IBD stats give it an EPS rating of 95 and a RS rating of 95, and a composite rating of 98.  Thus IBD rates this company as being in the top 2% of all stocks.  It is noteworthy that other companies in the same sector include SE, WFMI and SPTN, all stocks that have been hitting new highs–a very good sign that the sector is strong.

Send me your feedback at silentknight@wishingwealthblog.com

Please remember that the stock market is a risky place, especially now.  I am not providing recommendations for you to follow.  My goal is to share tools and methods that I have used over the past 40 years of trading, so that you may learn from them and adapt them to your trading style and needs.  While I do my best, I do not guarantee the accuracy of any statistics computed or any resources linked to my blog.  Please consult with your financial adviser and a mental health practitioner before you enter the stock market,  and please do not take unaffordable risks in the current market environment.  See the About section for more statements designed to protect you (and me) as you navigate this market. Past performance does not guarantee future results, but I would rather learn from a former winner than a loser.

This Schizoid Market, Everybody Rotate, Promising Stock-PRGS: WW-GMI: +1

Today, the market disclosed again its schizoid tendencies.  The tech stock index, as measured by the QQQQ, penetrated and closed above its 50 day moving average, while at the same time the large cap stocks, reflected in the SPY and DIA, broke down. This may be the most important signal in weeks regarding the probable direction of the marketAre we rotating from commodities to techs? Seventy percent of the the stocks in the NASDAQ 100 rose today, compared with 25% of the stocks in the S&P500 index, 30% of the stocks in the Dow Jones Industrial average and 25% of the stocks in the Dow Jones Transportation average.

The rise in the NASDAQ 100 today, therefore, cannot be attributed solely to the stellar performance of DELL (+7.4%). There was broad based buying in techs. The following 14 stocks in the NASDAQ 100 each climbed 3% or more today, in descending order of increase:  DELL, ATYT, BRCM, NVLS, SANM, ORCL, SYMS, MRVL, EBAY, VRTS, FLEX, MXIM, KLAC and AMAT. Not all of these stocks are in solid uptrends, but it gives you an idea of the types of industries that moved the most today– semiconductors, software and circuit boards.

The WW-GMI stayed at +1, with  one major difference, the Weekly QQQQ index is now close to positive.Gmi513   This weekly index, when it turns positive, indicates to me that a major uptrend has begun that typically lasts months, not days.  We are not there yet, but I am now more optimistic.  As would be expected from the discussion above, the Daily SPY Index is no longer positive, but with the Daily QQQQ Index turning positive, the GMI stayed the same at +1.  I would not be surprised to see the IBD Mutual Fund Index turn positive next week if the QQQQ continues to rise. There were 17 successful 10 day new highs today and 100 successful 10 day new lows.  There were 31 52-week new highs in my universe of 4,000 stocks and 123 new lows.  These bearish statistics would not reflect the new strength in the tech stocks because these stocks would still be far from trading at new highs.

And then there is the Fed and interest rates.Intindex513 It appears that traders suspect at least a hiatus in the increases by the Fed.  For the first time since April 19, 2004, the short term interest rate index closed below its 50 day moving average.  Have you ever seen a less interest–ing development…..————————————————————————

My Ugly Stock of the Day yesterday, FDG, followed the script on Friday.  FDG fell another 5.4% on its largest volume in a year.  Is that because all of you sold/shorted it? Still, no bad news has come out on FDG, but its Industrial Metals and Minerals sector had a lot of losers today (MEE, ARS and PAL, were among the worst).—————————————————–

Tonight I have a Promising Stock of The Day that caught my attention a few weeks ago and moved up today.Prgs On March 17, PRGS gapped up on huge volume (a gap of 76 cents was created by the difference between the high price on 3/16 of  22.71, and the low price on 3/17 of 23.57).  The stock climbed for a few weeks until it hit 27.73, and then began a decline back to its 30 day moving average.  Note the many green spikes in up volume during the rise. Also note the nearly horizontal blue line in the volume section.  This line tracks the 50 day moving average of volume.  So, on days when the volume is above this line it can be viewed as relatively heavy volume for this stock. It is a sign of strength that almost all such higher volume days are up days (green).

The red line in the volume section is MoneyStream, a proprietary indicator in the Worden TC2005 software.  MoneyStream is similar (but not identical) to the on-balance volume (OBV) indicator authored by Joe Granville. It is a form of a daily cumulative total based on price and volume.  On up days, one adds all of a day’s volume to a cumulative total of volume, and on down days, one subtracts the day’s volume from the total.  MoneyStream is therefore an indication of the strength of a move in terms of number of shares traded.  In a rising stock, I want to see the MoneyStream at new peaks, indicating that the stock is rising on increasing volume.  Clearly, PRGS fits this pattern. 

PRGS settled down for a few weeks and then, what caught my attention was the spike in volume on May 9 when the stock rose, and closed at 27.05.   Over the next 3 days the stock declined, but on relatively low volume.  Then, on Friday, PRGS bounced off of its moving average and closed higher on above average volume. It closed at  27.50, just below its high for the day.

If I wanted to place a wager, I would make a pilot buy of 25 or 50 shares of the stock on Monday and place my sell stop right below today’s low, around 26.40. I would be willing to risk a loss of about $1.10 per share to hop on this potential rocket.  I do not own PRGS, but may actually make this trade on Monday. (Another approach I sometimes use to avoid buying a stock that does not move up or declines, is to place a buy stop order just above the stock’s high of the day today, at 27.65. In this way I only purchase PRGS if it has the power to move higher than it did today.  The downside is that I buy it a little higher and risk losing a little more-about $1.25/share- if it comes back down to trigger my automatic sell stop at 26.40.)

However, before I might buy PRGS, I would research it a little more.  PRGS bottomed out in November, 2002 at $11.50, down from a historic peak of $30.75 in January, 2000.  I usually like to buy a stock trading at its all time high, but will make an exception if it has been a few years since the stock’s historic peak.  (If the stock peaked more recently, then there may be a lot of sellers waiting to unload their shares that they bought at higher levels, so they can get out even or with a small loss. Such overhead supply can slow or kill a stock’s rise.) PRGS has not doubled in the past year, but it recently broke through resistance around $24 which it repeatedly failed to get through for many months in  2003. I next turned to the Yahoo profile for PRGS.  I found that in the most recent quarter the stock’s earnings doubled, from $4.6 million to $9.3 million–not too shabby. The industry is software, which I noted above was one of the strongest sectors today. The stock does not appear to have any eye catching visionary product.  But it is earning more money.

I next go to Friday’s IBD and find that the EPS (earnings per share) ranking for PRGS is 77 and the RS (relative price strength) is 88.  The IBD overall composite ranking is 91, indicating that the stock is ranked in the top 9% of all stocks, on a set of IBD criteria. These values are not as high as I would like, but they are still respectable.  A most important benefit of IBD for me the past 20 years is that the newspaper uses a database that enables them to compare all stocks on a single percentile scale.  William O’Neil, the publisher of IBD and a successful trader and author, has conducted an empirical analysis of the characteristics of growth stocks with the greatest appreciation which he summarizes in his CANSLIM approach.  He has shown that many of these rockets had high RS and EPS, usually over 80, before they took off.  So, I typically check these statistics before I buy a stock.

Now, we come to the art in trading.  We have done our homework but each person will weight the findings differently.  The science is over and the  decision to buy is subjective–and involves some luck.  I do know that if I am certain I am right about a stock, I usually am wrong.  I typically make profits when I am somewhat anxious.  I have to be sensitive to my gut and listen to my inner voice. I don’t have to agree with them, just be aware of how things turn out in the different ways I react.  If I embrace the attitude that I will follow my rules and take small losses quickly, I can usually trade with a minimum of emotion and attention, and just let the transaction take care of itself.

So, will PRGS continue rising?  No one knows, it probably depends largely on whether the tech stocks (measured by QQQQ) keep rising.  There are no guarantees in the stock market. And even when I do everything right, the unexpected can and does occur.  The only way I know to protect myself from this risk is to average up slowly,  set sell stops after each purchase, and avoid placing all of my eggs in one basket.

But I don’t want too many eggs, either. If I pick real winners only about 30% of the time, the more I diversify equally into different stocks, the more I guarantee mediocre results. Gerald Loeb (1965, p. 119), in talking about diversification, said, "it is an admission of not knowing what to do, and an effort to strike an average."(This is why most mutual funds do not perform well. Those that do outperform tend to have a small number of stocks.) However, diversification is a necessary protective tool for new traders, and those who cannot pick good stocks.  To make large profits, I need to concentrate the most money in the few winners I am fortunate to stumble upon.———————————————————-

This is my 23rd post.  This blog has almost taken on a life of its own.  I enjoy writing it and will continue to prepare it if the audience remains interested and grows.  The only thing I ask in return, is that you help to build the audience.  Please refer people whom you think my blog would entertain and inform. In addition, please send me your feedback at silentknight@wishingwealthblog.com. I strive to answer all emails and each of your messages makes a tremendous difference to me and helps to spur me on. Let me know if you have benefited from any of my Words of Wishdom.

Please remember that the stock market is a risky place, especially now.  I am not providing recommendations for you to follow.  My goal is to share tools and methods that I have used over the past 40 years of trading, so that you may learn from them and adapt them to your trading style and needs.  While I do my best, I do not guarantee the accuracy of any statistics computed or any resources linked to my blog.  Please consult with your financial adviser and a mental health practitioner before you enter the stock market,  and please do not take unaffordable risks in the current market environment.  See the About section for more statements designed to protect you (and me) as you navigate this market. Past performance does not guarantee future results, but I would rather learn from a former winner than a loser.

A Bad Day for the Bulls–WW-GMI +1

I hate to tell you this, but the GMI is back to +1. Index512  The Daily SPY Index fell back into limbo.  This is the most difficult, whipsawing market I have seen in a long time.  Tonight, I moved all of my sell stops very close to my stocks’ lows today.  I may end up 100% in cash by this weekend.

The Daily QQQQ Index is barely positive.  The QQQQ bounced off of its declining 50 day moving average today.Qqqq512f_1(click on chart to enlarge)  The fact that this moving average is declining means that each day’s price (the new day added to the average) is less than its price 51 days ago (the oldest day dropped)–not a good sign.  But the 2 largest spikes in volume the past 2 weeks are green, meaning they were up days–a good sign.  If the QQQQ does not close above its 50 day moving average soon, we are probably going to see a volatile continuation of the down trend.

Note that the 50 day moving average peaked in January and has been declining ever since.  Since the January peak through today, 61% of the NASDAQ 100 stocks have declined.  The last time we had a consistent rising 50 day average in this index was from September, 2004 until the top in January, 2005. During that rising period 76% of the NASDAQ 100 stocks rose. Maybe we should stay out of the NASDAQ stocks as long as the QQQQ is below its declining moving average. The SPY and DIA are also currently below their 50 day moving averages.  I’m talking myself into taking the short side again.

There were 87 new 52 week highs today in my universe of 4,000 stocks and 79 new lows.  There were 26 successful 10 day new highs and 93 "successful" 10 day new lows. The bears seem to have the edge in this market.  So I am not going to list any strong stocks today; they will only get slammed tomorrow or next week.

So I will show you an ugly chart of FDG that I almost posted last night.Fdg_2 (If I had, wouldn’t I look perspicacious tonight.) Note the huge red spikes in down volume.  Note the topping out of the moving average. Note the stock trades options.  If I were looking for a short, FDG looks ripe to me. Maybe all of the good news is out on FDG.  There was no news on FDG today telling us why it fell so much.  Remember, the bad news usually shows up in the stock price long before it shows up in the media. Perhaps FDG is getting a lump of coal  next Christmas.

It’s not fair to pick on FDG. So many of its cousins also fell today—BOOM, CCJ, NRD, ARS, to name a few.  In fact, the metals and mining industry chart shows that the entire group is sinking. Metals_1  I think the institutions are giving these mining stocks the shaft.  Sector wide selling bodes well for taking the short side on one of these stocks. Other sectors that were ugly today include silver, copper, metals, steel, aluminum and oil and gas.  What is happening to the commodities?

Send me your feedback at silentknight@wishingwealthblog.com.

Please remember that the stock market is a risky place, especially now.  I am not providing recommendations for you to follow.  My goal is to share tools and methods that I have used over the past 40 years of trading, so that you may learn from them and adapt them to your trading style and needs.  While I do my best, I do not guarantee the accuracy of any statistics computed or any resources linked to my blog.  Please consult with your financial adviser and a mental health practitioner before you enter the stock market,  and please do not take unaffordable risks in the current market environment.  See the About section for more statements designed to protect you (and me) as you navigate this market. Past performance does not guarantee future results, but I would rather learn from a former winner than a loser.

The Bear Blinked, TZOO and Rockets–WW-GMI: +2

Things held today and the GMI rose to +2 (click on chart to enlarge).  Index51105 The Daily SPY index turned positive again.  There were only 35 stocks that hit a new high 10 days ago and closed higher today than they closed 10 days ago when they hit their new highs.  However, these 35 successful new highs represent 71% of the 49 stocks that hit new highs 10 days ago.  The fact that 71% of the new highs increased in value suggests strength in new highs.  The median increase of these 35 successful new highs over the past 10 days was +3.18% (meaning 1/2 of the 35 stocks increased more than 3.18%) and the increases ranged from +.14% to +22.19%.  The biggest gainer was our old friend, NSI (see post on 5/09/05), which hit a new high again today. Other successful 10 day new high large gainers are:  TZIX, GLW, ENWV, ITRI, LIFC, all of which gained at least 10% in the past 10 days.

The moral of the story is if we bought a stock breaking to new highs 10 days ago, we had a 71% chance of making a profit through today. With careful attention to these companies’ profiles and chart patterns, maybe we could even have selected one of the stocks that climbed double digits! (in 10 days)

A lot of the growth stocks I have been following acted well today.  GOOG, IVGN, NSI and CRYP all hit new highs today (I own some of these).  And even some of the boring large cap stocks like UPS, FNM, UTX, INTC, PG, AXP, C, PFE and QCOM seem to be turning. Interest511 This may be why the SPY has been relatively strong.  And the short term interest rate index we have been following has stopped rising. The Fed may be hibernating, and this upturn could be for real.

I have been telling you that when a change in trend occurs the indicators will often go back and forth until the turn has stabilized.  So, the GMI could turn down again.  In this type of market it is a good idea to stay mainly in cash and just nibble at a few stocks or the ETF’s that track market indexes (SPY,QQQQ,DIA).  Then, if the market declines, we can get out with minimal losses. If the rise is real we will have time to jump on board.

One of my stocks declined today and then bounced back with the market.  I was stopped out during the decline (my stop loss price was triggered and I was automatically sold out).  When the market and the stock came back, I bought my stock back at the end of the day and put a new stop loss order in below today’s low price.  Remember yesterday I said that the hobo must jump back on the train if it resumes in the direction he wanted to travel?  So, without emotion, I merely jumped back on the stock.  If I am wrong I will be stopped out again.  I have profited many times by buying back a stock that I have been scared out of.  The temporary decline often sets up a new rise. If you cannot accept a lot of small losses, you should not play this game.

Last night I talked to you about the rocket, TASR, which I successfully traded when it was rising to new highs.  Another rocket of the past year is TZOO. Tzoo I hope no one is buying this "bargain." From April through November 2004, TZOO climbed from $8 to $105.  That is a 13x increase in about 7 months.  I counted 14 weeks in which the stock made a new high during this period. The first time TZOO doubled took 3 weeks.  It took 13 weeks to double again, and then 10 weeks to double again.  Now maybe you  can see why I say that to find a stock that will double in a short time, find one that has already doubled in a short time. (see strategy post, 4/30/05)

So many people want to buy rockets but are afraid to buy a stock that is doubling and hitting new highs.  But that is how you find rockets!  Want to know some stocks that have doubled in the past 15 weeks?  Using the TC2005 program, I scanned my entire universe of almost 4,000 stocks in about 10 seconds and found the following 6 stocks:  ABLE, NSI, BOOM, DSTI, GEOI and FORD.  All of these stocks at least doubled in the past 15 weeks and are near their all-time highs.

These are not recommendations for purchase.  They are recommendations for further research and monitoring.  Do your own homework and if you buy stocks like these you should make small pilot buys and protect yourself with immediate sell stops. Remember, this market is not out of the woods yet and the bear is still stalking it. It is much more profitable to purchase rockets when the market trend is on our side. Let’s be patient.

Send me your feedback at silentknight@wishingwealthblog.com.

Please remember that the stock market is a risky place, especially now.  I am not providing recommendations for you to follow.  My goal is to share tools and methods that I have used over the past 40 years of trading, so that you may learn from them and adapt them to your trading style and needs.  While I do my best, I do not guarantee the accuracy of any statistics computed or any resources linked to my blog.  Please consult with your financial adviser and a mental health practitioner before you enter the stock market,  and please do not take unaffordable risks in the current market environment.  See the About section for more statements designed to protect you (and me) as you navigate this market. Past performance does not guarantee future results, but I would rather learn from a former winner than a loser.

Taser, Google and The Bear–WW-GMI: +1

The WW-GMI took a hit today.  I noted that when a trend change occurs it can often fail to hold. Index0510 So what happened today?  First there were only 90 new highs and 71 new lows in our universe of 4,000 stocks.  Second, the Daily SPY index fell into limbo–it is too close to call.  The Daily QQQQ index is very close to limbo. If it closes down tomorrow it will no longer be positive and we will be back to a GMI of zero.  The IBD mutual fund index is greater than its 200 day average and was approaching its 50 day average, but probably fell  back today.  So where are we?

The weekly QQQQ index is still not positive and remains in a downtrend. I had thought the short term trend was turning up.  But I think that upturn is over or very close to it.  This is a time to be on vacation from the market and in cash.   Otherwise, we risk being whipsawed by the cross-currents of this meandering market.  I thought we were experiencing a short term rally–short term because it was showing up in the daily indexes but not the weekly index.  When the weekly index turns positive we will be in a longer term uptrend. 

A few stocks I own or have been watching held up today:  CRYP, GOOG, IVGN.  Others declined:  SWN, TOL,  SHLD, ORCT, NSI. I have close sell stops on all of my holdings.————————————————-

A reader told me he was interested in TASR.  Tasr I looked at the chart and asked him why he would be interested in a rocket that had peaked and was falling to the earth.  I asked him why didn’t he buy it from April 03 to April 04 when it was a rocket. Notice that for a year this stock repeatedly hit an all time high week after week.  Are you afraid to buy a pattern like this– when the stock went from a split adjusted 0.31 to $32?  If I were you I’d cut out this chart and compare it to every stock you consider buying.  Why not buy a rocket–isn’t that the dream of everyone who enters the great casino?  Did you know that the pros distribute stock to the public on the way down?  Note the huge red spike in volume at the top when someone unloaded a lot of shares. (A red line means that that bar/period, the stock closed less than the prior bar/period.) The little person always is shopping for a bargain.  So a stock trading at $10 must be a bargain  if it is down from $32. Right? I don’t want bargains.  I want to buy stocks that are at their all-time high and which the media say are too expensive.  They ridiculed AOL all the way up in the bubble days.

Do any stocks currently come to mind as a potential overpriced rocket?  I’ll give you a four letter hint–GOOG. Goog See any similarities with the TASR chart?  You know, when a company makes a product that is so universally used that it becomes a verb (Xerox, Fed-X) the stock does pretty well, at least in its early years.  I don’t know how many times each day that I hear someone say they are going to Google something.  I don’t know if it is the right time to buy GOOG, but I do own some.  I bet someday we will all say that we wish we bought some GOOG in the good old days when it only cost  $200 per share–or $X pre-split. However, if we do enter a bear market, rest assured it will eventually get to GOOG.  The bear demolishes everything before it is through.

On that note, let me wish you an "unbearable" day tomorrow.  Maybe the market will surprise me and begin a rise.

Send me your feedback at silentknight@wishingwealthblog.com.

Please remember that the stock market is a risky place, especially now.  I am not providing recommendations for you to follow.  My goal is to share tools and methods that I have used over the past 40 years of trading, so that you may learn from them and adapt them to your trading style and needs.  While I do my best, I do not guarantee the accuracy of any statistics computed or any resources linked to my blog.  Please consult with your financial adviser and a mental health practitioner before you enter the stock market,  and please do not take unaffordable risks in the current market environment.  See the About section for more statements designed to protect you (and me) as you navigate this market. Past performance does not guarantee future results, but I would rather learn from a former winner than a loser.

Market Bulding Strength–WW-GMI: +3

The market continued to strengthen today and the Daily QQQQ index turned positive.  Please note that this indicator can go back and forth before the trend is solidified.  I am very pleased by the market’s action.  Many of the growth stocks I follow broke out today.  I have sold all of my puts and  have taken some long positions.  Index509 There were 115 new highs today and only 49 new lows.  The Daily SPY index continues to be positive.  There are 31 stocks that hit a new high 10 days ago and closed higher today than 10 days ago.  This is the highest the successful new high index has been since April 12.  The GMI is now +3 and tells me that I have a rally that I can trade.  It remains to be seen whether this uptrend will last months or just weeks, or days. 

The bottom line is that the odds have shifted towards owning stocks.  And many of the stocks I am watching have moved up.  Among the stocks I like are: IVGN, SHLD, MHS, CVD, MW, SWN, HANS, TOL, ORCT.  These are not recommendations, although I do own some of them.  These stocks are all trading near their highs and such stocks can reverse direction quickly.  I always place a sell stop order immediately after my purchase goes through.  That way I can sleep nights.  I also make small initial buys and wait to see if the stock moves up as I expected.  I never average down (buy more as the stock falls) and I do not average up too quickly. I am not looking for a stocks that will climb for a day or two.  I am hoping to ride a stock up for weeks or months.  I am buying stocks that are behaving well and that seem to be earning money.

Another tactic that I use is to buy an ETF (exchange traded fund) that reflects a market index.  There are many benefits of ETF’s, compared to mutual funds.  Perhaps the biggest is that ETF’s can be traded like stocks in the middle of the day.  A mutual fund can only be bought or sold at the end of the day after the market is closed and the fund’s assets are tallied.  Thus, with an ETF, you can get in or out quickly if the market should become volatile or violent.  The fees of an ETF are cheap and if you use a deep discount broker the transaction costs are small.

So, if I think the S&P 500 is turning, I can buy the SPY which reflects this index.  The nice thing about buying the SPY is if the S&P 500 goes up SPY will go up. How many times have you seen the market go up and your stock doesn’t move or falls!  At least I know that will not happen with the SPY. 

One big mistake to avoid is to buy for technical reasons and then when the stock fails to rise or declines, to hang onto it for fundamental reasons– because good earnings are expected to come out or there is a really great product or the market is strong.  If I buy because of good price action I must sell because of bad price action–no excuses or rationalizations.  I have violated this rule many times, and paid the penalty.

Sometimes my biggest winners have been stocks that keep coming to my attention over and over.  One such stock is NSI (click on chart to enlarge), a diet and fitness firm.  Nsi NSI has gone from a low of $1.09 last August to a close today of $11.20.  The monthly volume is at an all time high since it came public in 2001.  Its revenue is increasing at a fast rate and there sure are a lot of obese baby-boomers who are looking for the fountain of thinness.  I don’t like to buy cheap stocks like this but I sure am going to watch it.  There is a planned stock offering and this could be affecting the stock’s price. (I remember reading that it is legal for underwriters to stabilize a stock during an offering–sounds like manipulation to me.)———————————————————————

Every morning I want to know if the stock futures are indicating a strong or weak market opening.  I found a web site called, morning call, that tells me if the futures are trading above or below fair value.  Above fair value indicates buying pressure that could lead to an up open, below fair value, to a down open.  Hope you enjoy this site as much as I do.

Send me your feedback at silentknight@wishingwealthblog.com.

Please remember that the stock market is a risky place, especially now.  I am not providing recommendations for you to follow.  My goal is to share tools and methods that I have used over the past 40 years of trading, so that you may learn from them and adapt them to your trading style and needs.  While I do my best, I do not guarantee the accuracy of any statistics computed or any resources linked to my blog.  Please consult with your financial adviser and a mental health practitioner before you enter the stock market,  and please do not take unaffordable risks in the current market environment.  See the About section for more statements designed to protect you (and me) as you navigate this market. Past performance does not guarantee future results, but I would rather learn from a former winner than a loser.