1) Stocks are acting very strong technically. Over the past 3-4 weeks, I have suggested to slowly scale into this market. The majority of stocks that I recommended have worked out well and they are now either barely correcting or they are pulling back orderly on light volume. Examples include $GMCR $ISRG $NETL $LULU $IPXL $NFLX $CLNE $ATHR $CAGC $BCSI.

2) The major indexes continue to climb on strong volume and consolidate on light volume, a positive sign in my view.

3) The big institutions continue to put money to work. If you are a large mutual fund or hedge fund, your universe of growth stocks is limited. In other words, you have to buy Big Cap stocks with liquidity. Even if you do not trade these names, it is worth observing them to see what the big boys are doing. The price action in $AAPL $ISRG $GOOG $BIDU $AMZN $PCLN $V $GS is very constructive. The majority of these stocks are breaking out or building new bases to possibly break out over the next 4-8 weeks.

4) The stocks that continue to show up on my fundamental and technical screens cover a wide range of sectors showing me that this recent rally is broad based. Examples include: Tech, Retail, Energy, Semis, Restaurants, etc.

5) Everyone seems to fall into one of two categories. They either hate this rally or they are a cautious bull. I would consider myself the latter. My point is that VERY FEW people are in the crazy bull camp and feel this market has any legs left in it. Keep in mind: “The markets tend to fool the majority.”

A word of caution: I realize the markets have had a nice run over the past few weeks. I am not saying to jump in right now if you are not invested because we could see a pullback. If you did get in recently, hopefully you have decent entry points on your stocks and you have “room” to let your winners ride. If you did not get in, don’t chase extended stocks but rather look to buy them on pullbacks to logical support areas. Overall, I remain positive on this market because of the strong signs listed above.

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1) Big Caps: I have said all along “watch the action of the Big Caps.” Why? Because the large institutions traffic in this area and watching these stocks usually shows us what they are doing. Last week $GOOG rose on strong volume and $AAPL $ISRG $PCLN $AMZN $BIDU all pulled back on light volume, a sign that the large funds are not selling their shares yet.

2) $AAPL: After reviewing RIMM’s earnings Thursday night, I don’t see how Apple doesn’t obliterate their upcoming quarter’s earnings. In their last conference call, Apple said they “couldn’t keep up with demand.” In this economy, there are FEW companies who can say that. I think you can trade Apple as a “buy the rumor, sell the news” play. In other words, buy it here at $195 (it should have support in the 186-188 range) and sell it into a potential run to $220 by its earnings in late January.

3) The Dollar rally is over! There is INSANE speculation in the $UUP 23 calls for Dec, Jan and Mar. There’s a reason why the specialists closed it Friday RIGHT ON $23! If you don’t understand this, don’t worry about it. All you need to know is that the market tends to fool the majority. In other words, when the entire world speculates the same way, it almost never happens. I don’t expect the UUP to close above $23 anytime soon. Therefore: Dollar Decline = Stock Market Rally.

4) $CML: Compellent Technologies. Strong technical Daily and Weekly chart, hot sector, 16 quarters of revenue growth…sounds “compelling” to me! The entire Storage sector is strong ($STX $WDC $CAVM). You can buy CML here at 22.50, it should have support in the 20-21 range. I’m expecting the stock to be up 30-50% in the next 12 months.

5) Internet Security: This entire group acted very well this past week. Stocks to watch include: $RAX $ARST $BCSI $FIRE $FTNT (recent IPO).

6) India: Many Indian-related stocks showed great relative strength this week. Ideas include: $WIT $RDY $CTSH $INFY $TTM.

7) China Water/Infrastructure stocks: $RINO $TRIT $HEAT. China plans to more than double its spending on environmental protection in the five years from 2011-2015. They plan to invest $454 billion during this period, compared with the $205 billion allocated for the five years between 2006-2010. I expect this increase in spending to benefit these stocks and I look for continued announcements of government contracts to help their strong earnings and sales growth.

8) Miscellaneous ideas: $HGSI (continues to trade in a very tight range, a sign that institutions are not selling shares) $LULU (46% of its float is short) $SWM (strong chart, added to Goldman’s Conviction Buy List recently).

9) One final note, if I am dead wrong about my call for a market rally, it doesn’t bother me at all. Why? Because I trade with stops and I don’t have an ego when it comes to trading. Remember two VERY IMPORTANT trading rules: “Always cut your losses,” and “Separate your ego from your trading.” The market doesn’t care if you have to provide food for your family or if you have 10 kids to put through college. In other words: respect the market, take what it gives you, and ALWAYS protect your portfolio!

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Although I was a bit cautious last week, I’ve said all summer that the NASDAQ Composite is headed to 2400 with sharp, nasty corrections along the way. Don’t get me wrong, I reduce my equity exposure when we have these pullbacks in case the market doesn’t rally back. However, when the NASDAQ bounces nicely off its 50-day moving average and I see stocks like $BIDU $AAPL $FIRE $CDE and $CERN breaking out on strong volume, it’s hard not to feel positive about the market.

Another thing I observed last week was the strong action of Big Cap stocks such as $BIDU $GOOG $GS $AAPL $PCLN and $AMZN. My feeling is that many large institutions are significantly under-performing the major indexes. Since their universe of growth stocks is limited, they have no choice but to “plow into” these stocks when they are “chasing” performance. Combine that with the abundance of liquidity, a Fed that will NOT raise interest rates this year, and zero inflation and you have a recipe for higher prices into the end of the year.

Here are some trading ideas:

Big Caps: $AAPL $BIDU $PCLN $AMZN $GS $GOOG $ISRG. When I highlighted $BIDU last week at $382, I got a reply telling me how “crazy” I was to recommend such an expensive stock. $BIDU finished the week at $427 highlighted by a Citigroup analyst who raised his target to $480. I like being the crazy guy whose stocks go up $45 points in 4 days!!!

Gold stocks: $CDE $IAG $GOLD $AEM and $GLD (the gold ETF). These stocks continue to go up on strong volume and correct on lighter volume, a positive sign. According to Marketwatch.com: “The Hulbert Gold Newsletter Sentiment Index (HGNSI) which reflects the average recommended gold market exposure was unchanged recently at 25.2%. This is important because the HGNSI is nowhere close its record high of 90% and…the HGNSI saw peaks of 64.3% and 60.9% at gold’s highs earlier this year.” (click for article) As I mentioned two weeks ago, Gold could quickly surge to $1,100-$1,200 since many seem to be “doubting” or even ignoring the move. If we do see higher prices, the gold stocks mentioned above should benefit.

China stocks: $EJ $HMIN $CTRP $PWRD $KONG $UTA $DGW $WATG

Internet Security: $BCSI $FIRE $ARST $RAX $SWI. This entire group is strong and worth watching.

Biotech: $DNDN $HGSI

Miscellaneous ideas: $GMCR $GFA $QSII $NEU $PALM $HITK

All of the stocks mentioned above have decent support around their 20-day moving averages. Please keep in mind that the purpose of this blog is to help people with idea generation. If you trade some of these stocks, PLEASE, PLEASE, PLEASE use stops. In other words, if some of these stocks turn against you and the market doesn’t cooperate…protect your portfolio! Thank you. Good luck trading!

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The result was a healthy volume accumulation day on Tuesday that saw many leaders breaking out. I especially like the strong volume in the Big Cap growth names: $AAPL $BIDU $AMZN $GS $GOOG $PCLN. These are all institutional quality stocks, which shows me that the big funds are putting money to work. Remember two things: 1) many funds are chasing performance and 2) their universe of growth stocks is limited; so if they have to plow into names, these are prime suspects.

Here are some trading ideas (followed by a bunch of quick notes, so please excuse the grammar):

$BIDU – Weekly chart looks amazing. Great support around 368-370. A big institutional stock. Jesse Livermore used to love trading stocks breaking through round numbers such as 50, 100, 200, etc. because “a fast and straight movement almost invariably occurred after such points were passed.” Therefore, watch for $BIDU to break 400 and possibly take out its all-time high of 429 soon.

$AAPL – Held up extremely well during last week’s decline. With the holiday season coming up and possible announcements that the iPhone will be available on Verizon, T-Mobile or China Telecom’s networks, I am expecting more upside from now until year-end. A “must own” stock for big institutions. Support around 178-180.

$GMCR – Acting phenomenal technically. Great earnings and sales growth. Their traditionally conservative management guided higher last quarter so I am expecting a solid upcoming quarter. Strong support around 65-66. Approx. 32% of the float is short. Shorts will get punished, expecting new highs soon.

China stocks – $PWRD (support in the 44-45 area, one of my favorite China plays) $EJ (great weekly chart, huge support at 20, short interest tripled in the past month -click here for data- looking for further upside soon) $HMIN (huge earnings growth last quarter, I mentioned yesterday that I was looking for a break above 30.40, we got that today on strong volume, could see 35 soon) $DGW (thinly traded, cup w/handle formation with a great shakeout in the handle 3 days ago, support at 33, could breakout soon) $KONG (acting strong, great Weekly chart) $CTRP & $UTA (China online-travel ideas) $NTES (waiting for more volume strength, not buyable yet).

Gold – I read over the weekend how every time gold dips below $1,000/ounce, people seem to forget about it (a very true statement because I’m also guilty). My feeling is that gold might surprise everyone and breakout to $1100-$1200 when no one’s expecting it. Stocks to watch include $CDE $IAG $GOLD $AEM and $GLD (the gold ETF).

Biotech – $DNDN (very strong support in the 24-25 area, major institutional accumulation recently) $HGSI (bouncing nicely off the first test of its 10-week moving average).

Internet Security stocks watch list – $BCSI $FIRE $ARST $RAX $SWI

Miscellaneous ideas – $SXCI (support around 44, major acceleration in earnings the past 4 quarters) $ININ (support near 18, looking for a breakout above 20.5) $GFA (major increase in earnings expected next year, strong technical chart with support near 28) $WFMI (support near 28, highly shorted) $ISRG (support around 240).

Please keep in mind that the purpose of this blog is to help people with idea generation. If you trade some of these stocks, PLEASE, PLEASE, PLEASE use stops. In other words, if some of these stocks turn against you and the market doesn’t cooperate…protect your portfolio! Thank you. Good luck trading!

Follow me on Twitter @jfahmy