The market maxim "don't fight the tape" certainly applies to this market. Investors have continued to profit as stocks move up despite rising oil prices, a weak GDP report and some unimpressive earnings reports. Many readers have asked me how this market has continued to hold up, given all of the negative underpinnings of the economy, such as slower growth, higher commodity prices and an extremely weak housing market.
I see only two answers to that question:
- The market sees slower growth and the current underlying problems as temporary and expects a strong recovery in the second half of this year.
- Speculation has increased because of the tremendous amount of liquidity that the Fed is pumping into the market, the attraction of strong emerging-market growth and the decreased supply of stock generated by the numerous mergers we've had.
It's not possible to know the real answer right now. What we do know is that the market is responding to negative news and that stocks continue to get a steady bid from institutions. I learned a long time ago that this is one force you don't want to stand in front of. If you have any doubt about the aggressiveness of money managers, just look at
General Electric(GE Quote - Cramer on GE - Stock Picks) and
Microsoft(MSFT Quote - Cramer on MSFT - Stock Picks). These are two stocks that have been dead money for years, and Friday there was a mad rush into the shares as they both gapped higher on massive volume.
Institutional managers usually only go after these large, liquid names when they need to put a tremendous amount of money to work in the market in a short period of time. There is a lot of money sitting out there on the sidelines, and I think Microsoft's 65% increase in profits lit a fire under managers.
At the start of the month, I
examined four stocks that had strong technical setups and looked ready to move higher. Since then, all of them have done just that, but it looks as though they all still have more potential. They continue to get heavy institutional support so let's revisit them today.
Agrium
Agrium(AGU Quote - Cramer on AGU - Stock Picks) had moved up a little more than 8% since I last wrote about it -- until it got whacked by a downgrade from Citi. Now it's experiencing selling that has pushed it down, near the 50-day moving average. The Money Stream and on-balance volume are also turning down, so this one bears watching.
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| Source: TC2000 |
Earnings estimates for the company continue to remain neutral and are projected to come in slightly lower next year. However, those estimates will be affected by demand for agricultural commodities, which I expect will continue to be strong. If the stock continues to hold above the 50-day moving average, I see more upside potential for it.
Corrections Corp. of America
Corrections Corp. of America(CXW Quote - Cramer on CXW - Stock Picks) continues to accelerate higher. It has moved up almost 9% since my last column on it. Institutional money flow has dramatically picked up over the past few days, and it looks as though the stock is going to continue to make new all-time highs.
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| Source: TC2000 |
It is slightly overextended, however. A correction back down to the $54-$55 level could provide a good opportunity to add to positions. A break below that would be cause for some concern.
Netgear
Netgear(NTGR Quote - Cramer on NTGR - Stock Picks) has been one of the strongest performers of all four stocks, moving up more than 23% since I last wrote about it.
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| Source: TC2000 |
After the closing bell last Thursday, the company reported strong year-over-year earnings growth of 42%. The stock made a breakaway gap, moving up almost 11.5% on tremendous volume to a new all-time high. Although Netgear is extended, in the short term it looks as though this stock is going to work its way higher.
Priceline.com
Priceline.com(PCLN Quote - Cramer on PCLN - Stock Picks) has moved up a little more than 8% since early April and continues to steadily stair-step higher.
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| Source: TC2000 |
The stock is at a new six-year high, and as long as it can continue to hold above its 50-day moving average, it looks as though it will continue its current uptrend. Money Stream and OBV continue to hold at their highs.
Although most of these stocks are slightly extended, they continue to exhibit exceptional relative strength. As long as they continue to hold above their 50-day moving averages, investors could look to add positions on any light-volume pullbacks.
Mark Manning
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