Boring Day On Wall Street Ends With Stocks Slightly Lower

February 9, 2007

Stocks suffered small losses, on what was a very dull session, overall. After an early morning-selloff, stocks found support and slowly ticked up the rest of the day, finishing well off their lows. The story of the day belonged to retail stocks, as same store numbers rose a better than expected 3.9% with over 60% of all retail stocks beating views.

At the close, all indexes finished lower, with the DJIA dropping the most with a .23% loss, the SP 600 fell .14%, the SP 500 sank .12%, and the NYSE and Nasdaq both fell less than .1%. Leading stocks kept pace with the DJIA, with the IBD 100 losing .3%. However, most stocks held up very well and are well above support in this index.

Volume was slightly higher on the NYSE and was lower on the Nasdaq. There is no price/volume conclusion from today’s session. Breadth was slightly negative on both exchanges, with decliners beating advancers by a 6-to-5 margin on the NYSE and by a 8-to-7 margin on the Nasdaq.

There really were no fireworks today, unless you look at the Building and Finance groups. Bad news from HBC on the failure of loans spilled over to the whole Finance-Mortgage sector, with stocks getting crushed across the board. NEW AHM LEND WM CFC NFI were just some of the victims of this piece of news out of HBC.

The other sector getting wasted by this news was the Builders. The Homebuilding index lost over 2% today and the IBD Building-Res/Comm index loast 1.6%. The big losers there were RYL MTH HOV CHB PHM DHI CTX and TOL. The losses in that sector did not just come because of HBC. TOL announced a drop of 19% in revenues and said cancellations and write-downs were ballooning.

Despite the weakness in these two lagging groups, leading stocks are still holding up well and the bulls are in control basically everywhere else. Even after an early morning hit that might have been the catalyst needed to open up the flood gates for the sellers, off of yesterdays late afternoon reversal, the bears simply did not show up and bulls bid stocks higher giving stocks another “buy the dip” rally. It is obvious the bears simply can not get anything going and pullbacks are still to be bought instead of sold. There is simply no strength behind any move to the downside, and until the dips fail to get support, there is no reason to short stocks here.

I hear some traders getting very bullish on oil as it nears $60 a barrel again. However, this is a commodity that has an obvious top in its long term chart and this is a lagging sector just like the building, metals, and finance-mortgage sector. I still believe it is best to stay away from oil stocks here as they are not the current leaders and have too many amateur bulls and daytraders talking about another run to $70 oil. This is a lagging and old leader. The days of big gains in oil stocks appear to be over.

Don’t fight this powerful bull trend until it is over. Never try to outsmart the Mr. Market. It has a funny way of ALWAYS humbling those that do. Imagine if you tried to buy bargains in the building and mortgage sector the past three/four months instead of buying stocks breaking out of solid bases to new 52-week highs. If you were playing that game, you are now sitting on some pretty large losses while the market continues to rack up gains to the upside.

The way I trade stocks is based on what works, every year, year in and year out. I do not trade based on opinions of what I would like to happen. I trade based off of information and facts. Those facts consistently show the same chart patterns consistently work year in and year out all the time. When they don’t work we cut our losses fast. That is the best insurance available. And in bull markets…we sure don’t use that insurance a lot. History is our friend, everyone. The best stocks every year since 1880 have shown the same patterns year in and year out. You want to score consistent big gains every year no matter what market? Learn this system or a form of the CANSLIM system. It is as close to the Holy Grail as I have come and after years of doing this probably ever will.

Boring Day On Wall Street Ends With Stocks Slightly Lower

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