Stocks Start The Week Where They Left Off On Friday; China Turns Up The Pressure On Traders By Raising The Trading Tax

May 30, 2007

Stocks picked up right where they left on Friday, with the indexes rallying across the board. The SP 600 led the way with a .9% gain, the Nasdaq followed with a .6% gain, the NYSE and SP 500 rose .2%, and the DJIA gained .1%. The IBD 100 gained .8%.

Volume was about 10% higher on both the NYSE and Nasdaq, giving the market an accumulation day on the back of a day where Consumer Confidence came in at 108 in May from 106.3 in April. Crude oil fell $2.05 to $63.15 helping stocks trade higher. The most bullish of today’s events came with RBS bidding $95 billion for ABN Amro, crushing the bid by Barclays.

Breadth was positive on the Nasdaq by a 7 to 5 margin and by a 2 to 1 margin on the NYSE. The put/call ratio fell to a more moderate .81, indicating market players are getting a little more complacent on our rallies.

There was nothing particularly shocking or super interesting regarding Tuesday’s trading, as traders get back to work after a long holiday shortened weekend. Many of my top stocks and personal holdings had a great day and I can not find many stocks to sell. There are plenty to buy but few to sell due to weak performances. Everything is simply working right now.

The dip buyers keep showing up as the pattern of lower volume rallies after heavy selloffs continue. As long as those low volume rallies keep pushing the indexes to new highs, there is nothing to fear except fear itself. Speaking of fear, China is doing its best to scare traders as the index is now down over 6% after China raised its trading tax. This has put some early pressure on our futures market and should lead us to a lower open.

However, we should expect to see the dip buyers show up again. If they don’t show up, that will tell us a lot more than if they do. The pattern of buy the dips continues. And until that trend changes there is no reason to fight the trend, as long as you are quick enough to get out before things get rough.

The only big economic numbers tomorrow is the release of the FOMC minutes of the last meeting. Besides that the news wires look pretty quiet. However, there should be a good deal of action in the early going, after tonight’s China selloff. Aloha and I will see you in the chat room.