Stock Tiger Stalking Stocks™

For Monday February 26, 2007  

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Dow -38.54 at 12647.48, Nasdaq -9.84 at 2515.10, S&P -5.19 at 1451.19

For the week, the S&P 500 fell -0.3%, the Dow -0.9%, the Nasdaq gained +0.9%, and the Russell 2000 rallied +1.0%

Friday saw a continued pullback in the Dow blue chips and the media says it is because of a weak financial sector on some worries over the sub prime mortgage market. Of course I think the Dow needed to test the bottom channel as shown in the morning videos for a couple of days and the media  just makes up things to put news to a situation. If there was really some big concern the markets would not have held up so well.

I noticed that briefing com says that the market is getting ahead of itself as it knows (briefing) that earnings growth will slow this year and there may be yet an interest rate hike from the Fed. If only reason made the market. For a lot of the time though it doesn't. As long as people want to buy and keep doing it stock prices go up regardless of earnings as we can always have multiple expansion when people are willing to pay a higher PE (price to earnings) than they were in the past. That has yet to happen in this cycle but it still may so stock prices could continue even if earnings fall.

Here is the weekly view of the major indexes with the Russell 2000 leading the way.

And here the sector winners and looser for the week.

It was a stand out week again at ST and even with a short week we had super gains so did not pay so much attention to the news this week. We had 29 stocks on our watch list hit their buy point and only 2 of them closed lower than the buy point on the first day.

On Friday it was particularly nice as two of the stocks ran up over 30%. MSI has been on our list since the start of the month and when they have a long base they often can make a greater break out and it did. Many in the chat room jumped in right at the break and we hope that many more had buy stops in place.

NEOL has been on the list since Feb 16 and it also has a nice long base and ran up 30%.

VLCM already had gained $2 on Friday by the time our buy got hit but it still added $2.24 for the buy point. If you can't watch the market you need to buy using buy stops and diversify.

Here is the full list of our buys for the week (actually I see that ERES is not there but it went over the buy by a 2 cents and closed lower by 4 cents so not significant either way)

If you put 10% of your money into  each trade at the buy price and sold at the end of the first day your portfolio would be up 12.7% this week. This table shows a $100k portfolio using $10,000 on each trade but the percentage gain is the same if you used $25k or $2k per traded. The key is to buy as many as you can for diversification and so you do not miss the moves.

Lets get the the index charts. The daily Dow shows pretty much the standard pattern so far. after a rally up a pullback to the trend line. It is better to figure it will repeat itself until it doesn't. We have had a few Turn-around-Tuesdays before and may again this week as it is the end of the month and window dressing time. If the trend line does break the 50-day EMA is not far below.

This is the larger view of the 15-min chart we have been showing in the morning videos. Depending on how drawn it almost tagged the lower channel line but a retest would be better. Going long the futures close to the channel bottom if stochastics is under 20 and then coming back over 20 is low risk as if it fails you see it soon and can exit. The last time this bounced it ran up 259 points total so even on the E-mini a gain of $1,295 on tying up about $1,800 per contract.

The Dow Wilshire 5000 is getting very close to its high so would not be surprised to see it continue at least for the test.

The NYSE made little change as it consolidates. It really has only a couple of days though I think before it has to make a bigger move as now it looks sitting can weaken it.

The Nasdaq still looks good sitting on top of the break out line. The recent rally in the chip stocks has helped but a bit too early to tell if that was only some quick speculating or if it is the start of some accumulation. This week may help clarify as we watch the Sox and the Nasdaq.

As the Nasdaq continues to gain ground, if it does we will watch the trend line here as if the Nasdaq continues to outpace the S&P 500 we may set up for a wider rally ahead. When the lines on the chart go up the the Nasdaq is outperforming the S&P.

The monthly of the Nasdaq 100 using the QQQQ shows a net gain for the week.

The NASI is above the trend again and the MACD broke above its trend and zero line so may continue a while.

We show the semiconductor sector in three charts. First the SOX on a weekly version so you can see that if this break gets legs it has a lot of room to run over the coming weeks.

Here is a daily SOX showing more clearly the current resistance.

The proxy SMH on the daily gapped and it is at resistance so a short term pullback would be helpful to build some support before a break out try.

The CRB commodities index had been in rally mode and closed just under the 38% retrace so a break there will take it to the break out line at about 322.

And Oil on the weekly chart ran up a buck. Unless it breaks back above the $65 level I think it has little effect at all on the rest of the markets so up or down a couple of dollars means little.

On cold winter days those who live in such climates know that often the sky on such days is quite blue. Today I was walking across the street from the Ministry of Foreign Affairs and noticed the contrast of the sky to the building so took a shot.

(For an interesting effect scroll the page with the building off the screen on the bottom and then scroll slowly up.)