You May Have Some Of These Same Questions

I want to first talk about some e-mails I have been receiving over the past
week.

I received a bunch of e-mails over the weekend that the TRIN, TICK and all kinds
of other stuff…are indicating a big drop from here…not a pullback but a BIG
drop. Well, I can’t begin to tell you how many times the market was supposed to
be trashed in the past three months. Some people even went out on the limb calling
for exact days…they were wrong. If the market indeed tops, it will give clues
over time…not in one day. I am still seeing too many good-looking charts. I
doubt the market craps out with so many names. Be careful of the so-called
“grand call.”

I am also getting e-mails about the massive insider selling in the market.
Statistics show that insiders are selling by a large margin over insider buying.
They are correct…but like sentiment, insider selling and buying is a secondary
indicator. Price and volume are primary.

I am getting e-mails about high valuations and that earnings are not going to
come through. Many smart people think that valuations are ridiculously out of
whack. They may be right, but the market does not care about it right now…in
fact, the market does not care about you nor me. In the short run, it will do
what it wants to do regardless of valuations. EVENTUALLY, the market will pay
the piper. I do believe that reality will hit one day. For example, I don’t see
how a
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PowerRating) can trade at 100x earnings…and that’s for starters. The problem is
that I just do not know when EVENTUALLY will occur. I do believe I will be ready
if the market decides to splatter. The market will give clues when it tops.
Sentiment is already in place. Lots of froth, lots of speculation, bulls
outnumbering bears by record margins.

But…we will need to see REAL selling. Corrections have occurred because buyers
became exhausted…but every time that has happened in the past three months, no
sellers appeared…and eventually, the negative reversals were surpassed. We
will then need to see leading stocks start to gag on heavy volume, bounces on
light volume…and then breakdowns. I don’t believe this process has even
started…and may not start any time soon. JUST REMEMBER, THE MARKET IS THE
FINAL ARBITER, NOT OPINION…NOT HOPE…NOT PRAYER. I have tried all. They have
never worked. There is no replacement for hard work, sound buying discipline and
more importantly, strict sell rules.

Earnings start coming out in the next couple of weeks. As usual, do not pay
attention to the news, pay attention to how the market, the groups and the
stocks act towards the news. The market will show its hand in the next few
weeks.

As long as I can find leadership, the market is in good shape. Even on the down
days, stocks are breaking out. Yes, the bases are shorter because we are now in
secondary base time, but that’s OK.

Knight Trading Group
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PowerRating) pops out on better numbers. Powerful move.

Digital River
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PowerRating) is an example of a secondary base breakout. The first move occurred on
4/24. This breakout was from a multi-month base. The latest move is off of a 9
week base.