Stocks Continue The Santa Rally With A Day Of Mild Gains On Very Light Post-Christmas Volume

December 27, 2007

There isn’t much to say about today’s market either than the axiom “never short a dull market.” This little saying is proving itself as the low volume Santa Claus rally continues to line traders pockets with money that they are hopefully spending on others this wonderful holiday season.

On that note, I want to thank AuthorEgo (J. W.) for sending me a gift this Christmas. The movie “Wall Street.” I have never seen this movie, oddly enough, during my entire trading career. It was a wonderful gift that I was very excited to get. Kellie (my gf) and I watched the movie the next day and I must say I enjoyed it very much and it made me very happy that I live over 6000 miles away from NYC. At least I believe it is that far. I am not sure.

But the one think that I came away with from the movie is that “greed is good [only if it will be used for good later on].” If your motive is to make money at the cost of anything, then may God have mercy on your soul. If you don’t believe in God, then I just hope karma doesn’t come around to bite you in the place the good Lord split you. The bottom line is do unto others as you would have them do unto you; the golden rule.

Besides now learning who Gordon Gecko truly is and seeing where the quotes “greed is good,” “lunch is for wimps,” and “rich enough to not waste time” come from. Thank you AuthorEgo. Besides that, I received a wonderful gift from many other friends and family members. One of my favorites from my good friend underachievingmofos who sent me the Whitaker’s World Book of Facts. That is the best gift for someone who LOVES the truth, charts, and facts. Knowledge is power and I am definitely armed to the tooth with useful and useless info that can only help me grow.

This was one of the best Christmases every on my end and for those that received my cards on time let’s all consider that a Christmas miracle. If you are not familiar with Hawaii mail, you should know you do not always get everything you are supposed to.

Now that we have wrapped up the Christmas fun, let’s get back to the dead and dull market.

Today’s was an expected drift-less day that came with a low volume upside bias which is the norm in holiday trading, with the Nasdaq leading the broad indexes up .4%. Confirming the newfound strength in this low volume market, the IBD 85-85 rallied .9%. It was yet another day of the Nasdaq and the IBD indexes outperforming the SP 500 to the upside. That is normally a sign of a strong market. No matter how long it last, we should enjoy it and try to profit from it. If this goes on to last for another 12 months, aren’t you going to feel stupid missing out on the huge low volume rally?

Don’t think that can happen? Well, you should know, anything can happen! How do you know there is supply in the market? How do you know that all of the supply in the market has been taken in and now demand is all that is left? That combined with the NYSE short interest ratio at all time highs of 9.56 (meaning it would take over nine days to call in all shorts on average volume) could take the market higher on extremely low volume. All you would need there is rising bids to force margin calls slowly on short sellers that would only compound on the way up. HEY! Anything is possible. Even though I truly doubt this could happen, it still could. And that is the point. You must be prepared for anything.

On that same note, tomorrow could be a huge selloff on big volume. If that is the case, I book my quick gains and go short. Once you are in sync with the market, you will be able to do that but if you think you will get that way in a few months or even a year…LOL….it is time to get realistic and realize you are dealing with one INSANE market.

At one moment you have a market rallying on strong volume with plenty of leaders, then the market is selling off on massive volume do to the subprime meltdown, then you have an wildly ignorant Fed do some crazy market maneuvering that sets off this lower volume rally–there have been two clear accumulation days; so it isn’t like there is no volume on the rally–, and now leads everyone asking what is next. The only thing that is for sure in this market is Solar. And how much longer do you think that trade can last with everyone and their donkeys talking about SPWR SOLF FSLR CSUN and CSIQ ad naseum last night on CNBC. Sheesh.

Then you have a VIX at 18 which signifies that there is very bullish complacency in the market which should be bearish, combined with the investors intelligence survey still showing a lot more bulls than bears telling us that the “smart” money is still bullish. But then the put/call jumps to 1.29 on Christmas Even and comes down to only .94 today showing us that there is fear amongst the dumb money. And then we have the NYSE short-interest ratio going to all-time highs which should be bullish for stocks but the last time it happened was bearish. This equals one jacked up market!

Heck, I just posted another past big winner from the 2000 period, which obviously stretched into the 2001 period. When I was going over my ten plus best performing/looking holdings during that time, I noticed that the Nasdaq fell as much as 60% from the August 2000 highs to the April 2001 lows! Now, what is even more amazing is that those 12 stocks all look great and much more bullish than almost anything we have seen since the summer selloff. There is only one top stock that still looks beyond great and that is RICK.

From 1999-2000, all those past big winners racked up huge gains in a very bullish market. But considering the top stocks in 2000-2001 did so well, as you will continue to see the next two weeks as they are posted each day, you have to wonder why we don’t have any now. My only guess is that it is because the VIX is almost in half of what it was back then giving us less stocks that can run from hot charts and produce big gains. Notice some of our recent really green charts are just chilling and relaxing, taking their time to move up slowly. That is definitely due to the VIX.

Still it is amazing to see stocks act better, look better and greener, and be as steady in their uptrends, when the market was breaking in half. This market, from October to November, fell 11% and is now down only 4% (using the Nassy) and I am sitting here wondering why the hot stock charts of FFH, NNDS, EGN, and DAR are either making little gains, slow gains, doing nothing, or are pulling back slowly wasting my time. Why are there not more RICKS? The VIX. And it is driving a lot of traders mad.

I guess we should just continue to pray that we keep “guessing” the right one like HRBN. Yes, that was a nice chart. But do you honestly think that I thought that stock was going to move like that? Heck no. Nobody did. This market is very rough. It is going to knock as many players out as it can. Heck I come from the days of momo dogs and scam artist. I wasn’t either. I have always used my charts and ethics to build strong relationships. I can honestly say that I don’t know ANYONE on a personal level anymore from those days. I am the only one that remains. NO ONE I knew back in 1999 that traded for a living does it today except me. That is about a 1 for 150 ratio, folks. If you do not think this makes me very sad, you are very wrong.

Do you have what it takes? This is something to ponder as we come upon a new year full of resolutions and wishes. I hope yours comes true and that you succeed in EVERYTHING that YOU want.

God bless you all, one more time: MELE KALIKIMAKA and HAU’OLI-MAKA’HIKI-HOU! Aloha and I will see you in the chat room!

SIDENOTE: There will not be any commentary for Friday’s market session.