First, I have to give credit to Jim Gobetz (@aiki14 on Twitter). In his Pre-Market Take on StockTwits TV Monday morning, he said to buy the open and that we would finish positive on the day. You know why that scenario made complete sense? Because as Jim said: “It was not the real popular opinion.” In fact, he said he took abuse for making that call. Congrats to Jim for making the contrarian call, and ultimately the correct one!

This morning reminded me of February 18, 2010. After the close that day, the Federal Reserve surprised the markets by raising the Discount Rate. I remember tweeting that: “One possibility is that the market shakes off the rate hike news and continues to show incredible resilience.” The same thing happened to me. I got angry emails and replies telling me that the market was going to crash. The next morning, the futures were barely down and the market finished strong that day. A very similar event happened this Sunday night. After the HealthCare Bill passed, everyone expected a huge market selloff. Once again, the futures were slightly down on Monday morning and the market proved its resilience by finishing strong!

I would like to stress 2 points: Don’t fight the tape and don’t think like the majority! We’ve had several excuses to selloff over the past 3-4 weeks but the market continues to march higher. Part of this resilience is due to the masses thinking this rally is going to end any day now. I still expect higher prices over the next 3-6 weeks, as the market will most likely continue to fool the majority.

Some stocks on my watch list include: $AAPL $PCLN $CERN $GMCR $VECO $BUCY $DNDN

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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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