Waiting for Follow-through

The Bears look like they're trying to cross the stream, but they continue to demonstrate curiously lame follow-through.

Even though earnings season has produced a bumper crop of lower guidance -- and there's no hope of a rate cut anytime soon -- the Bears remain unable to string together two straight sell-offs. I suspect they'll get another crack at it next week, but it's curious nonetheless.

Despite all of the turbulence, the RUT and MID actually closed higher for the week. The NASDAQ lost just -0.7%, and remarkably still sits above its EMA 50-day (though it's already slipped below the SMA 50-day).

Mostly because price has hung in there so long, the secondary indicators are sending conflicting signals. For example, the TOF Ratio and NASI are on a Sell, but OBV, High-Low and even 5-10-20 say Hold. TA dictates that as long as price doesn't break below support, a chart like the one below still deserves the benefit of the doubt. Yeah, from the sidelines - LOL.

The daily chart below does not inspire confidence, and the weekly looks shaky as well. If the crappy MACD and bearish ADX aren't enough for you, a case can be made for head-and-shoulders, or even the beginnings of a descending triangle.






When stocks starting acting peculiar, check the bond market. Yields broke out this week, and are now back where they were on the famous NASDAQ Aug 15 follow-through. So far, stocks have ignored this development, but this may be the fuel the Bears need to drive stocks lower. Of course, it's also a classic sign of economic strength, so it's hardly money-in-the-bank either way.






I'll do my best to check in when I can next week. Until then, the odds favor a cautious approach.

best

dk

Dangerous Signs

Lately, it's the signs themselves that have been causing most of the damage.

The year started with signs suggesting investors should be long technology and short energy. Then, the signs reversed, leaving once-comfortable investors feeling very uncomfortable.

On Thursday, discouraging housing data saw Wednesday's jubilant rally reversed in one dramatic move. The NYSE actually saw two days of gains wiped off the books. Overall, the selling was heavy, and every major sector closed lower. NDX breadth was telling: 93 of 100 stocks declined. On the IBD100, 88 of 100 moved down, and 34 of those logged distribution days. That's very weak action from the fundamental leadership.

The big question now is whether or not the Bears will demonstrate the one thing they haven't since last summer: follow-through. The major indexes all remain above important support. Until that support fails, the Bears aren't going to gain any lasting credibility. For those investors loaded up with bushels of QID, it's about time for the Bears to improve their image.

In the meantime, watch out for those signs.

best

dk

Bears on the Run

The chief Bear is definitely up a tree tonight, but it may be just a house cat that has him there.

Positive earnings news ignited oversold tinder to produce a remarkable session on Wednesday. The Dow, SPX, MID, NYSE, and WLSH all notched record highs, and market internals were of near-centerfold quality. On the Composite, breadth was strong, but an impressive 82 out of every 100 shares traded was a buy, and News Highs outpaced New Lows 439-59. The IBD100 outperformed as well, beating the broader indexes with a 1.9% gain, as a stunning 88 out of 100 stocks moved higher.

The only problem with Wednesday's action was that the market showed mixed volume. On one hand, SPX volume was up 4%, NASDAQ trade was up 9%, and NDX volume accelerated a whopping 19%. But as the NYSE notched a new all-time high, its trading volume fell 5%. The MID hit a new high, but trade slipped 6%, and volume on the S&P600 slid 8%. As the Dow hit its 25th all-time high since October, volume fell a noticeable 10%.

But the real puzzler was the IBD100. While price and breadth were excellent, volume wasn't. Of the 88 stocks that moved higher, just 19 did so on higher volume. As the IBD100 gained 1.9% on Wednesday, 69 of 88 stocks moved up on lower volume. Considering the size of the price move, this is a disconnect. The fact that it's corroborated elsewhere is worth noting as well.

Of course, there's no way of knowing if Wednesday's skimpy trade means anything or not. In the short run, it's doubtful. Oversold conditions and excellent internals clearly point to more upside ahead, and EBAY's earnings are the perfect fuel for the fire. Also, call buying nudged the SMA TOF Ratio back in positive territory, and the NASDAQ's 5-10-20 Indicator is still on a Buy.

However, new index highs on lower volume still creates a question mark. Institutions have been cautious the past 7 sessions, and the bullish enthusiasm wasn't as widespread as it appeared. Heavy volume advances are the perfect remedy for most problems, but until that happens, it's a good idea to keep both feet on the ground. If the Bear figures out that it's just a cat, watch out.

Have a good day, and pay particular attention to the volume.

best

dk



Blue chip volume problems or not, the NASDAQ looks like it wants to move higher.

Blue Chips Shine

The broader market -- and energy stocks -- caught a nice bounce today, but technology had little success holding onto its gains.

Breadth on the NYSE was solid, as oil, materials and metals enjoyed a nice updraft. In fact, the NYSE nearly notched a new all-time high as volume accelerated a respectable 12%. However, things were very different on the NASDAQ. On the bright side, Composite breadth was positive, volume picked up 6% and New Highs increased. However, Down Volume still outpaced Up Volume, and the results of this were most visible on the NDX. Not only did it close lower, it closed below its 50-day, as only 48 of 100 stocks posted gains. Tech continues to have difficulty finding buyers.

Like the NYSE, the IBD100 had a good day as well, adding 1.1% as 68 of 100 stocks moved higher. However, volume was questionable. Roughly the same number of stocks on the IBD100 posted distribution days as did accumulation days, which means that lots of leading stocks rallied on lower volume. This isn't what you want to see on a 1.1% up day.

Looking ahead, the indexes are very oversold, and today saw positive breadth. When oversold conditions are combined with positive breadth, you have a recipe for more ST upside. Good numbers from YHOO and SUNW aren't going to hurt tomorrow either. However, for this move to be more than an oversold bounce, the market needs a longer-term catalyst. So far, earnings and guidance aren't enough.

That said, the Bears continue to wimp-out on downside follow-through. Ghastly divergences are everywhere -- ripe for the picking -- yet index prices continue to hang in there. Long or short, if you pick your positions wisely, you can outperform the meandering broader indexes.

Below is the NDX. While the SPX and Dow actually look pretty good, the NDX isn't printing a particularly constructive chart formation. However, sideways-to-lower action would help a lot, possibly setting up a very positive double-bottom. It's hard for the market to go far without the NDX, and it's at its healthiest when the NDX is leading.

Have a great night.

best

dk

Looking Shaky at the 50-day

The best thing that the Bulls have going for them may be the Super Bowl.

I'm just joking of course, but as the story goes, an old-school team in the Super Bowl is good for the Dow. Even though this year there are two old-school teams, in real life, earnings are far more important. This is unfortunate, because the slowdown has finally hit earnings, and more importantly, guidance. This has made buyers scarce, and Super Bowl or not, the indexes are weak as a result.

Volume eased today on the NASDAQ's slide, which ordinarily is good. Also, the Composite bounced off the 50-day, which is usually another good sign. But the market internals were awful again today. 4 out of every 5 shares traded on the NASDAQ was a sell, and out of 3,000 traded stocks, just 84 hit new 52-week highs. This is very weak action, and when it occurs at the 50-day, it's rarely a good sign.

The IBD100 had a rough day, but the NDX actually did worse. Interest in tech stocks is waning, and it can best be seen in the NDX breadth. Like last Thursday, only 17 stocks on the NDX closed higher today. The IBD100 did only slightly better, with 28 of 100 moving up.

Perhaps the worst thing about today's action was that the weakness was so widespread. 24 of the 25 sector indexes I track closed lower today. Not just tech stocks, but retail, transports, energy, REIT's, healthcare, utilities. metals and bonds moved lower. This is not rotation, it's investors sweeping chips off the table.

The chart below is still above support, but it certainly doesn't inspire confidence. The negative divergence is the most glaring problem, and it's not just in MACD, but also in Money Flow.

Maybe not tomorrow, but the market looks like it wants to break lower. Stay cautious.

best

dk

Troubling Market Rhythms

Sorry for the lack of an Update, but this has been the weekend that wasn't. Multiple projects with colliding deadlines have me preoccupied.

Regarding the markets, the indexes stayed above important support this past week, but two new patterns appeared: leading stocks took a pounding, and investors started selling earnings news. Until the indexes break below support, they deserve the benefit of the doubt. However, weakness in leading stocks and sell-the-news are changes in rhythm for this market. The meaning is unclear, but this new syncopation deserves at least as much respect as price support.

TOF, your comments on the SMA TOF Ratio are duly noted. I found myself using the SMA version because it's more sensitive and lags less than the EMA version, but it's largely just personal preference. Nonetheless, the SMA Ratio triggered a Buy right at the Day 21 follow-through in mid-August, and started forecasting the current stall weeks ago. Since you're recommending being in cash while the SMA version is too, that's good enough for me - LOL.

Looking ahead, neither the Bulls nor the Bears have stepped up to decisively take care of business. Based on the weekly charts, the Bears have their work cut out for them, however, the winds of change may be in the air.

This should be an interesting week, and I'll do my best to check in when I can.

best

dk

Sell Signals Abound

Based on the performance of technology stocks today, you'd think the world's going back to the abacus.

Tech stocks were crushed as the impact of the slowdown has finally hit guidance.  Tepid outlooks from INTC, AAPL and LRCX spread across technology, sparking downgrades and massive selloffs.  NDX breadth says it all:  just 17 of 100 stocks closed higher today.  NVDA, KLAC, BRCM, RIMM, MRVL, SUNW, YHOO, DELL and 28 others -- 36 in all -- closed off more than 2%.

As a result, NASDAQ internals were miserable, and the worst was the Up/Down Volume.  An eye-popping 83 of every 100 shares traded on the NASDAQ today was a sell.  This is unusually lopsided, and strongly suggests the selling isn't over.  

Corroborating this is the most troubling indicator of all:  the IBD100.  It gave a clear Sell signal today, as investors abandoned the market leadership with extreme prejudice.  While the NASDAQ fell 1.5% and the NDX lost 1.9%, the IBD100 tumbled 2.6% on heavy volume.  Also, breadth was worse than any broader index, as just 12 of 100 stocks closed higher.  In most cases, IBD100 selloff days like today are like roaches:  there's never just one, and that's not encouraging for the broader markets.

As you contemplate catching a bounce of your favorite tech stock, remember that it will take time for this weakness to work through the system.  For two months the signals have been ambiguous, and tonight, they're not.   The most glaring pathology in the chart below is the MACD divergence.  The problem is that it's not just a technical weakness anymore, it's being accompanied by selling in stocks with the very best fundamentals.  This technical/fundamental convergence is ominous, and it suggests that this time the 50-day isn't going to hold.







For clarity, below is a chart of the "other" exchange.  Though price held up OK today, the NYSE unfortunately makes a much clearer case for a double top.  Also, it never made it back to the upper band, and the recent commodity selloff has created the queasiest-looking divergence of them all.  The most promising forecast would be for this chart to hold at 8950 to put in a nice W bottom (don't hold your breath).








"I'm a Mac..."                                                                                      "....and I'm a PC."








Tech is in a world of hurt tonight, and most of the subindexes sustained technical damage that will take weeks to repair.  Note the glaring MACD divergence on the Tech Index, and the crossing ADX lines confirms a change in trend.  It appears that the 50-day will fail here also, which is one reason supporting the failure of the NASDAQ 50-day at some point.  Interestingly, of the seven tech subindexes, Telecom continues to hang in there, and actually closed higher today.








The SOX has been the tech laggard, and as so often is the case, laggards get hit the hardest.  The semis took out their 50- and 200-days in one ugly move today.  This is rarely a good sign.








The precious metals certainly aren't offering much of a safe haven these days either.  The XAU failed at its 200-day as well.  








Commodity investors have little sympathy for today's tech victims.  They've experienced the heartbreak for months, and today oil continued to try and find a bottom.  Below is the crude ETF, included because of it's massive show of volume (note that price doesn't match the crude contract).  The heavy trade offers a snapshot of the vigorous debate which grips this commodity.  Until the forward contract breaks below $50 and really shakes everyone out, the bottom isn't in.  








Every cloud has a silver lining, and today was no exception.   Oddly enough, amidst all the carnage there were several silver linings.

The Banks held up well, but whether they're delaying their inevitable doom -- or pointing to a shallow selloff overall  --  it's too early to tell.








The economic slowdown was supposed to hurt the consumer but favor business and tech.  Meanwhile, the RLX hit a new all-time high today while tech imploded.  








Housing data was at it's strongest in almost a year, which corroborates the strong consumer discretionary action today.  








The BTK held up OK, but Drugs notched their 5th straight gain today.  Pharma typically outperforms in a slowdown, and healthcare overall is worth serious consideration.  








Not to end on a down note, but the SMA version of the TOF Ratio flipped to a Sell today.  It's a bit more sensitive than TOF's EMA version -- which as TOF pointed out is still OK -- but this version is worth noting nonetheless.  It's been shaky, and now the cat looks like it's out-of-the-bag.








It's OE so you never really know, but it appears that the markets have finally hit their long-awaited soft patch.  The hard selling in the IBD100 today was a new and bearish development.  If you'll recall, two months of broader shakiness had left this leadership index largely unfazed.  That changed today, and it's worth noting.  

Also, I'm not happy that the SMA TOF Ratio slipped to a Sell either.  It needs follow-through, but that's a very reliable indicator.  Throw in today's distribution day, and the signs point to caution.

Until tomorrow, have a great night.

best

dk

Inflation Fears Trigger a Selloff

The market got a one-two punch today, as higher inflation and shaky tech news created real selling on the NASDAQ.

Composite volume picked up 7% to produce the first true distribution day in weeks. Market internals were lousy too. The IBD100 fell 0.8% -- the same as the NDX -- but only 31 of 100 stocks moved higher (40 NDX stocks moved up). That said, until the IBD100 falls farther than the broader markets, it's not yet flashing a critical warning sign.

Today's weakness wasn't just the fault of INTC and CSCO either. The FCC put the kybosh on the XMSR/SIRI merger and LVLT got downgraded to a Sell. In fact, a look inside the NDX shows that 18 of the 20 worst performing stocks were tech stocks. For a variety of reasons, tech is being repriced. Following the volume on a stock-by-stock basis is the only reliable way to tell what's just going on sale -- and what's actually headed out to pasture. As you ponder your portfolio, bear that in mind.

We get even more potent inflation buzz from tomorrow's CPI number, so be prepared. Investors remain obsessed with a rate cut that's unlikely to happen anytime soon. Soft landings have a dark side: they don't come with rate cuts.

Overall, investors haven't been too impressed with Q4 earnings either. As expected, AAPL reported a blow-out quarter, but guided below estimates. That won't make you many friends on Wall Street, and Apple may get its stem twisted tomorrow. Also, a lot of banks and financials are reporting this week. This is important, because we finally get to see how bad the yield curve inversion hurt these guys. This could be another source of negative pin action.

Like yesterday, the chart below points to more selling ahead. This week's OE may prove to be the most exciting expiration we've seen since last spring. The next two days could be a wild ride.

Until tomorrow, and have a great night.

best

dk

Leaders Rally While the Broader Market Pauses

While the NASDAQ paused and blue chips were mixed, leading stocks continued to rally.

The IBD100 was unfazed by today's wobbly action. It gained 0.6% as 53 of 100 stocks moved higher. Adding to this strength, 25 stocks(!) on the IBD100 notched new highs today. This is an unusually high number, and it was echoed in the broader markets as well. New Highs on both exchanges increased to outpace New Lows 480-39, even though A/D and Up/Down volume were both slightly negative. As long as the appetite for leading stocks remains strong, the broader market isn't likely to move significantly lower.

Not that the NASDAQ isn't overbought. The CSCO downgrade, INTC sell-the-news, option expiration -- there are plenty of reasons for the market to move lower this week. However, volume on the major indexes was unchanged, and for now there are few signs it's a setup for something more serious.








Even though tech was mixed today, Networkers and Hardware continue to hang tough, Both are printing bullflags, and considering the CSCO downgrade, the Networker's flag is particularly noteworthy. Below are charts for both.










The commodities fell again today. Crude slid to $51, just spitting distance away from a "4". The Transports are making the best of lower oil -- and today's LUV upgrade. The Transports have quietly been on the move, and have posted gains in 8 of the 9 trading days so far in 2007.








Both the lowrisk.com Sentiment Indicator and the Ticker Sense Blogger Poll produced similar results this weekend. Both indicators saw a big shift into the neutral camp, while bullish sentiment remains scarce. Ticker Sense summarized it well: "opinionated but not decisive".











The abundance of new highs has seen the High-Low Index regain some footing, though NASI and BPI are still works-in-progress.



Finally, today's action spooked the option players, and they ran heavily to puts. OE week can produce some strange options trading. Unfortunately, this expiration is poor timing for the struggling TOF Ratio.







Now that the indexes are overbought, investors are having second thoughts about tech stocks. How you choose to play it has a lot to do with what you own and your personal risk tolerance.

INTC didn't report a big upside surprise, so it's seeing profit-taking. However, lots of stocks continue to hold up very well. AAPL reports after the bell tomorrow, and those are some highly-anticipated numbers.

Tepid sell volume and a strong IBD100, mean that the bears have a lot of work ahead of them if they're going to wrestle the market below support. It's possible, but they'll need help.

Until tomorrow, have a great night.

best

dk

NASDAQ Follows-through to 6-year High

While the NASDAQ closed above 2500 for the first time since Feb 2001, today marked the 23rd all-time high for the Dow since October.

Stocks did some heavy lifting today, and it was an unusual show of strength going into a 3-day weekend. What happened today was not impulsive, reactionary buying either. Like yesterday, the action was controlled accumulation, and the pros never let the trading get overheated. As a result, the major indexes all printed perfect white candles, but no index gain exceeded 0.85%. This steady, patient behavior is a good sign.

Investors didn't labor over NASDAQ 2500 either. After an initial approach and pullback, the Composite crossed 2500 and stayed there. The importance of 2500 is more psychological than technical, but the immediate conversion of resistance into support was a positive sign nonetheless.

Even though NASDAQ volume slid 7%, the market internals remained excellent all day. 60% of stocks moved higher, seven of every ten shares traded was a buy, and New Highs trounced New Lows, 391-41. Selloffs in two big winners -- VOL (-16%) and SNP (-8%) -- stung the IBD100 today, limiting it to just a 0.4% gain. However, a solid 63 of 100 stocks moved higher, and an above-average 17 stocks hit new highs. Money continues to pour into the best of breed.

The NASDAQ closed literally at its high of the day -- 2502.82 -- which is rare and bullish behavior. It's also made the chart ST overbought, but that's what the strongest rallies do: they move a chart to overbought and then keep it there for a while.

It all depends on your investing style of course, but many investors have now started the phase of investing that actually makes them the money -- the sitting phase - lol. Generally, once you're positioned, the worst thing you can do with a chart like this is to try and outsmart it. I don't set targets. Up or down, I usually just sit back, keep an open mind, and wait for the next signal. However, that's just me.







Below is a performance chart thus far for 2007. Investors are selling things on the right and buying things on the left. You can see the weakness in oil, gold and bonds, and the strength of tech. Who would have imagined the lowly USD outperforming the SPX?

As the story goes, the action in this chart sets the tone for the rest of the year in the so-called January effect. However, it lacks sufficient economic science for my taste. Instead, I prefer Super Bowl outcomes, election year seasonality and Bradley turn dates - lol.






It's Friday and time for some weekly charts.

The Composite weekly looks excellent, and every indicator points to further upside. One of the key strengths of this chart is that it saw just two distribution weeks since the July breakout. This showed that investors had little interest in unwinding their positions, and was the earliest signal suggesting more buying ahead. Note the healthy pullback to the 50-day before this week's breakout.







The strength of Biotech can really be seen in its weekly chart. The BTK is climbing nicely out of a high handle, and stocks from this group look ready to outperform in 2007.







Brokers did particularly well this week, as the the appetite for deal-making in 2007 shows no signs of abating. Historically, when the Brokers do well, so does the broader market.







Retail sales data today corroborated yesterday's employment data. Both conspire to tell the story of a consumer who is using his paycheck -- not his home equity -- to continue to buy stuff. This is also the best indicator yet that the economy continues on track for a soft landing.

Christmas season may not have been epic, but it was hardly a weakling either. As a result, Consumer Discretionary is showing amazing strength. Electronics and high-end are outperforming.








Investor sentiment is sending contrarian bullish signals almost as if the bulls had sent them a script. First, Mark Hulbert points out that his Newsletter Sentiment Indicator has fallen 20 percentage points since Nov, while the Dow has actually climbed 200 points since then. A 2% gain made investors 27% more bearish, which is a perfect reaction.

Secondly, the AAII Bull Ratio below reacted to this week's breakout by falling. Instead of making investors feel confident, the broad market move higher actually spooked them. What's encouraging is that various sentiment indicators are saying similar things, namely that skepticism remains healthy.







Finally, the TOF Ratio backed off today, which was perfect. The SMA lines are tight, but still seperate. They're also not that way on the EMA version. The strengths and weaknesses of the SMA vs EMA versions of the TOF Ratio are making themselves known in this market, and eventually it will be worth further discussion.







Earnings season is heating up, and so far it's been better-than-expected. Also, the economic data has surprised to the upside this week. Things are setting up for the market to continue doing well, and next week is OE which should add a touch of drama as well.

Until then, have a great three-day weekend.

best

dk

Tech Stocks Break Out!

After a 2-month consolidation, the NASDAQ finally lifted off to a new 6-year high today.

It was a meaningful break out of Snap's famous box, and the heavy volume was accompanied by spectacular market internals. 70% of all stocks moved higher, 7 of every 10 shares traded was a buy, and New Highs outpaced New Lows, 414-66. Market internals rarely get better than that.

Today's action also validated the accuracy of a few tools used to help decipher cryptic market behavior: the IBD100, investor sentiment and the TOF Ratio. If you'll recall, while the markets have been cagey all week, the IBD100 has been very strong. It had big gains, breakouts, record highs and bullish internals, while the broader market just wobbled.

Investor and blogger sentiment readings by lowrisk.com, AAII and the Birinyi Group had grown very bearish over the past many weeks, even as the indexes barely could slide down to their 50-days. This is contrarian bullish of course, though few would admit they thought the markets were setting up to move higher.

Finally, there's Richard's TOF Ratio. We all have much to thank Richard for, but as a TA practitioner, dividing the NASDAQ by the Put/Call Ratio was a stroke of genius. A few headfakes aside, the TOF Ratio hasn't steered me wrong since I first started following it years ago at Clearstation, and this week was no different. Thanks, Richard.

The chart below cuts a fine profile tonight. It's important to recognize that seasoned pros are very much in control of this market, and today's intraday behavior showed a very deliberate accumulation pattern. Whenever price started to get overheated, the buying would stop and price would slide back down to regroup. This constant back-filling is an indicator of strategy and tactics. There's very little irrational exuberence present in this type of market behavior, and it's no accident today wasn't some runaway 2% up day.






The winner today wasn't even tech stocks, it was the RUT. While pros and amateurs alike keep trying to write off small-caps, in real-life they continue to show amazing resilience. The chart below is technically challenged, but outperformance on a NASDAQ breakout day is a positive step forward.





DNA threw down big numbers last night, and Biotech had a great day today. Tech stocks are likely to outperform in 2007, and this group is a key part of that universe. It's also the riskiest part of the tech space. When the BTK is rallying, it's a sign that the market is healthy. The BTK closed just 1.9% below a 6-year high, and 4.9% below a new all-time high of 811.






The Tech Index followed-through on its second straight 6-year high today. Meanwhile, the SOX struggled and actually closed lower. This is why the Tech Index underperformed both the NASDAQ and NDX today.

The tech universe has changed dramatically since 1999. The fact that the NASDAQ and NDX can break out to record highs without the help of the SOX is a testament to the diversity of today's flash-memory universe. Tne NASDAQ needs the SOX, but not like it used to. Below are both the Tech Index and the SOX.






Meanwhile, MSFT had a fantastic day. Vista was named CES Product of the Year, and there's buzz they'll beat Q4 estimates. Money is flowing into tech stocks, and it's noteworthy that AAPL, INTC, MSFT, YHOO, LVLT, DELL, CSCO, MRVL, NVDA, JNPR and numerous other tech names are having strong weeks. Today was no headfake, and the signs are everywhere that this rally has legs.





Tonight, the media is all over the rotation from commodities into technology, but regular readers of these Updates know that this rotation started in July and resumed last week. The chart below tagged a 5-year high today, and it continues to put in its best performance since the 2002 bottom. Crude closed below $53 tonight, and seems destined to reach into the 40's before it's all over. That will only drive this chart higher, which is good for the broader market.





Strong employment data was part of the reason stocks rallied today. Amazingly, steady rumors of the consumer's demise continue to be disproven almost with every report. As a result, Consumer Discretionary stocks have returned to sit just below a new all-time high.





You know the market has some pep when it can break out at the same time that yields do! Yields sit near historic lows, and even though investors whine for a rate cut, a cut is a sign the economy is weakening. It's much more healthy when rates move like they did today: in parallel with stocks.





Speaking of economic strength, the Transports haven't given up the ghost either. Some of this is fuel cost relief of course, but that isn't enough to make a lasting difference. Investors have bid up the $TRAN since it touched its 200-day three weeks ago, and it will be interesting to see if they're on to something.





Finally, the trusty TOF Ratio flipped its red arrow to orange today. The call buying and NASDAQ price strength drove the two lines apart, which is good for the market. This chart has room to run.





Even though the market demonstrated important strength today, lots of investors remain very skeptical. It's almost as if the market did a bad thing today - lol.

I read one blogger who insisted today's break upwards was bearish behavior. "This is bad, this is bad! The market needs more time...more consolidating". Another blogger complained in Nov and Dec that the market was weak because the NASDAQ wasn't confirming the NYSE. Today, the same guy said the market was weak because the NYSE wasn't confirming the NASDAQ. I assure you, when everything starts moving in the same direction is when you need to start worrying!

It's good to know the wall of worry is still strong and sturdy. Doubtful sentiment is good of course, and it's helpful that large numbers of investors remain unconvinced. That said, anything can happen, so always keep your eye on the volume.

The IBD100 and the TOF Ratio don't hurt either!

Have a great night.

best

dk