Each weekend when I do my big search for stock market ideas, my first search is by relative strength and weakness. I of course notice this during the week as well, but I try to really key in on names of stocks, sectors and groups on the weekend for further study.

On July 30th the market had what technicians refer to as a 'follow-through day', which is simply a strong rally on heavy volume at least three days after a market bottom is put in. It should ideally occur between days five and seven, and although this one occurred on day ten, it's still not something to ignore. In my case two things happen when follow through days occurs. First and foremost, I get out of my shorts. This is important, because while a follow through day certainly is not a promise of a bottom, no market bottom of any significance has ever occurred without one. I next will look at what sectors and stocks are leading the move up. In the case of this most recent rally, the leadership has primarily been in areas that had been gravely beaten down in the bear move - not a good sign - and some areas of healthcare and biotechnology. Very narrow leadership.

Altra Holdings, Inc. (AIMC) manufactures a wide variety of power transmission and motion control products such as clutches and breaks, enclosed gear drives, engineered belt drive, couplings, engineered bearing assemblies and a variety of related products. The products are used in various high volume manufacturing processes as well as in elevators as well as commercial and residential lawnmowers.

As I have explained before my process starts with technical analysis. In the case of AIMC this has been a strong stock, refusing to decline, even during the bear phase the market has gone through most of this year. One of the strongest buying patterns is a long, sideways type price "basing" move, which we see has been forming in Altra since early May. The stock has been on my radar for a few months, and I think that it's now getting close to an entry.

I just finished reading Trader Mark's article “The Last Days of the Long Investor?” on Seeking Alpha, and while generally I've enjoyed his stuff and don't find too much to disagree with, in this case I have to disagree with a good portion of it.

One point I do agree with is that managed money is good work if you can get it. Even though sites like turnkeyhedgefund and others will let you start your very own fund from your mother's basement for $5000, it's doubtful that you will get many investors, so it's not the easy gig that some think it is. In the past, raising money was about who you know; now its becoming more and more about who knows you.

American Stock Markets started off lower on Tuesday after the Conference Board's Consumer Confidence Index fell sharply to 75, following an 87 reading in January. Next came the Core CPI, the Core CPI excludes food and energy costs since none of us really needs food and driving is bad for the planet so we should not do that either, which rose to 0.4% which was double the expected 0.2%. By late morning though the market was looking better after IBM announced a share buyback program and a talking head from the Fed had some dovish remarks suggesting they are less worried about inflation. This makes a lot of sense, because as I pointed out earlier obviously we don't need food, and Oil is evil and bad anyway. The Nasdaq gained 17.5 points, closing at 2344.99, the Dow Industrials gained 114 points, closing at 12,685, while the more broadly based S&P500 gained 9.5 points, closing at 1381.29. Volume was slightly higher on both exchanges, up about 1% on the NYSE and a bit over 8% on the Nasdaq. For the first time in awhile New Highs led new lows on the NYSE, though on the Nasdaq New Lows still outnumbered NH.

Investors Business Daily has already called the market as being one that is now in a confirmed rally. This suggests that Investors and Traders should be looking to add exposure to the long side of the market to partake in a bullish phase. While I've been a bit more cautious overall I can not ignore that the market has now started to rally on bad news, often the best signal of strength. I'm still heavily invested in cash, which is appropriate I feel until we see how the markets handle the inevitable pullback after this rally. Should that pullback be one that occurs with light volume then the obvious play is to be a buyer of strong stocks. I will at that point start building larger positions in leading names to take advantage of an up market.

Markets were strong across the board on Wednesday after news that Warren Buffet might be riding in on a white horse to save some insurance companies. January retail sales came in at a dismal +0.3%, but it was enough to cheer up traders who had been expecting a fall of about that much after December's drop of 0.4%. The markets also showed pleasure with Washington finally passing the bill should stimulate China's economy when Americans go hold wild with their $600 checks that the Government will take out a loan from China to give them. These consumers will then likely go to Wal-Mart (WMT) or some other type store to buy goods made in China. Score China +1!

The Federal Reserve's Head Idiot at the helm was set to testify before the Senate Banking committee yesterday. Several of the Regional Fed Heads have been openly talking about the risks of recession being high. Fed fund futures are currently showing a 50% chance of another drop in Fed lending rates in March. Selfishly, I wish they would just stick to baseball – at least then they can not be tinkering with something they know nothing about and screwing me, you, my children, yours and several generations of American's to come. Of course, we should not worry about the very real infection that has taken hold of our minds and economies, Obama is a hope monger and makes us all feel warm and fuzzy inside!

The Price to Earnings ratio is a simple measure that takes the price a stock is trading at over the year's EPS. As an example, if a stock is trading at $10.00 per share and has earnings of $1.00, its price to earnings ratio would be 10. As a general rule, short term traders, momentum investors and others are taught that the price to earnings ratio does not matter. I think that this can be a mistake, and the longer out your time frame goes the bigger that mistake can become.

Stocks with high price to earnings ratios are generally over owned and over loved by institutional investors; this can become particularly dangerous in a market route, such as we have seen over the last few weeks, when everyone heads for the same exit at the same time. Many times a stock with a low multiple is one that is not heavily owned yet for any number of reasons: it's average volume might be too small, its sales not high enough yet, market cap considerations and any number of other reasons.