Traders Take An Extra Day Off; Stocks Dance Around And Close Basically Flat, On Slightly Higher Volume.

April 10, 2007

Stock investors returned from a long three-day Easter weekend to a very inactive market. Even though trading was pretty wild, choppy and volatile today, the market still traded in a very narrow range and basically did not move from Thursday’s close.

Stocks started the morning off higher, possibly thanks to the strong non-farm payroll numbers. As I stated on Saturday, economist saw this number come in with a 180,000 jump in March. Well above the 135,000 estimates from economist. The biggest positive from the environment was the unemployment rate dipping to 4.4%, instead of ticking up to 4.6%. This shows that this economy is still doing very well despite the bad econ numbers we have been seeing the past quarter.

However, after that gap, it was just a bunch of wild and meaningless action that did show a bit of weakness as traders sold off stocks in the final hour. That reversed some indexes to close red. By the close, the DJIA, NYSE, IBD 100, and SP 500 all ticked up slightly under .1% and the Nasdaq and SP 600 lost .1%. It was a day of meaningless action.

Volume was higher on both exchanges, with volume on the Nasdaq coming in 12% higher and 1% higher on the NYSE. Still, volume was well below the 50 day moving average, indicating that the big boys simply did not show up today. Advancers were pretty much even with decliners on the NYSE and advancers beat decliners by a 9-to-7 margin on the Nasdaq. The put/call ratio edged up to .8.

The only odd thing about today’s market, imo, is the fact that stocks did not go anywhere after oil fell 4.7% to $61.51. The last time oil tumbled, stocks exploded to the upside. However, this time, stocks did not do much and even oil stocks did well today. The best of the best today was the DJ Transport avg. That average powered higher by 1.9%. The group was helped in part by Warren Buffet disclosing via SEC documents that he has purchased a 10.9% stake in BNI and also purchased shares in two other railroad companies. This along with a private equity group reportedly interested in buying DOW shows that smart money still sees value out there in this market.

Today’s action still leaves the market where it was before even last week started: Direction-less with no conviction to the bull or bear side. The bulls simply can not get anything going, after the follow-through day in March. The bears simply can not get ANYTHING going to the downside either. Every time the market attempts to sell-off, buyers step in and support stocks. However, that is where it stops as once the support comes in there is no more buying from that point. That shows that we are probably set up for a do nothing market environment heading into the summer.

This market is still not convincing me that this rally will last either. Where is the volume to the upside (especially recently)? Where are my breakouts from bases lasting at least five weeks long with great fundamental characteristics (CANSLIM quality stocks)? They are not showing up STILL. Yes there is GEO and NTLS today. But GEO is from a much longer uptrend. This is not a fresh breakout to new 52-week highs. GEO has been in a solid uptrend for four years! So even if this breakout works, the chances of you getting another 300% plus run is near impossible. NTLS is much better. That stock at least has a chance as it is a very new IPO and this is only its second base. Still this does not instill confidence with me that this rally is going to produce a lot of NTLS type of stocks. We need more stocks with better CANSLIM traits to breakout or we will just have to continue to nibble on the small POS that pops up everyday.

In saying that though, obviously, without the market being in a downtrend it is still foolish to look for and/or actually short stocks. DNDN is a perfect example of why to NEVER short small-cap stocks with over 20% of the float short. In 10 days the stock is up over 400%. If you were short that stock, you would not only be broke fiscally but also emotionally destroyed and more than likely beyond the point of return.

AA officially kicks off earnings season tomorrow. DNA and GE also report this week. Let’s hope that this starts some fireworks. Aloha and I will see in the morning in the chat room.