Tech Mania Leads to Parabolic Breakout Mode
The herd
stampeded Friday again as the Nasdaq hit the 61% mark for the
year to date. The Dow is up 22.9% and the Generals will more than likely run the
S&P 500 to over 20%. It now stands at 16.6% for the year. It was an active
day for the Generals and also the big program players. Volume was just over 1
billion, the upvolume-to-downvolume ratio was good at 66% up, with 668
million shares of the over 1 billion shares up and only 286 million shares down,
or 28%. NYSE breadth was only +553 advances over declines and, believe it or
not, there were only 90 new highs vs. 99 new lows on the NYSE on this big markup
day. That compares to 258 new highs and 63 new lows on the Nasdaq. Institutional
blocks of 10,000 shares or more were very active at about 21,000.
“Right now,
with tech mania and the reinvestment of new monies…we are in a parabolic
breakout mode.”
These internals continue to indicate the
narrowness of the move on the S&P 500 and with only 29% of all NYSE stocks
above their 200-day moving averages, you can forget about the rest of the
market. Buyer beware. We have mentioned many times in previous commentary about
the last two days of a month and the first five days of the next month, and how
most of the winning action is contained in that timeframe. Right now, with tech
mania and the reinvestment of new monies which takes place during the first five
days of a month, in addition to portfolio managers panicking to show more techs
in their portfolios, we are in a parabolic breakout mode.Â
Continuation entries above the previous
day’s high, especially the second entry after the headfakes are finished, have
proven very rewarding in the high relative-strength stocks that are leading the
rush. Check your screens on TradingMarkets.com.Â
No real pullback yet, as the recent
headfake was a break below consolidation at the 1400 level, and then an endrun
to break out of the top above 1425 on Friday. Take whatever continuation entries
they give you, with tight stops. Second entry clearly will be best after this
recent runup. Markets are perverse and most stops are sitting below Friday’s
lows. Good entry can very well be if they run these Friday stops, and then you
can enter on a return above Friday’s low with a very tight stop. If the upmove
continues for a few more days, this strategy will give you a high-probability
entry with lower risk because of the tight stop. You will be right immediately
or else it will reverse and the correction is on.
Program
Trading NumbersBuySellFair
Value3.801.702.70
Pattern Setups
Echostar Communications
[DISH>DISH], Applied Materials [AMAT>AMAT], SDL Inc. [SDLI>SDLI],
General Motors Cl H [GMH>GMH], Wal-Mart [WMT>WMT], Dollar Tree
[DLTR>DLTR], and Legato Systems [LGTO>LGTO].
Regarding NSOL on Friday, I hope some of
you caught that move, as it gave you trade-through entry above 166 and traded up
to a high of 198. The prior day, Thursday, gave you the alert as it closed above
the high of a 15-day daily bar consolidation on more volume than its prior 5-day
average volume, and also on a wide-range bar. Save the daily chart. Also, it’s
great to see Microsoft rushing to challenge new highs after the knee-jerk
reaction by many porfolio managers who blew it out at the 84-85 level. Most of
them have probably panicked and bought it back above 90. For your information,
Microsoft’s pattern, right at a rising 200-day moving average, was the exact
same pattern as that of the Internets when they started their momentum
move.Â
Have a good trading
day.