Tuesday, January 09, 2007

Apple Gives Lift to Tech Stocks

While oil touched a 20-month low and traders treaded gingerly ahead of earnings, news out of Macworld sent shockwaves down Wall Street.

AAPL did some heavy lifting today. Not only did its shares rally 8.3% to a new all-time high, at 12:30pm, news of the iPhone sparked an intraday market reversal that kept a bid under tech stocks the rest of the day. The announcement also triggered some serious pin action, as competitors RIMM, PALM, NOK, MOT and ERIC all closed lower on the news.

As if seven weeks of consolidation wasn't a clue, the slowdown has investors unusually spooked about Q4 earnings. Even though stocks closed well off their lows, it still felt like a tie, and you could see this clearly in the market internals. Combining totals from both exchanges, the internals finished even.

On the other hand, the IBD100 continues to maintain its bullish slant, and today it sported a fresh twist. At first blush, the IBD100 was no standout, closing the day down -0.2% while just 49 stocks moved higher. However, a look inside reveals that 7 stocks broke out today on huge volume, and there were 11 new highs as well.

The Composite continues to look like it's winding up to make a move. The higher lows and string of hammers give the chart below a bullish tint, but not by much. The Bollinger bands haven't been this tight in 18 months, and when this chart finally breaks, it's going to mean something.

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Renaming itself simply "Apple", the company unveiled the long-awaited iPhone, iTV and other devices consistent with their legacy of paradigm-defining consumer technologies.

If it was just about a cool, new cellphone, the chart below wouldn't look the way it does. The iPhone is really three things in one, accessed through a clever, multi-touch interface. With iTV, they're leveraging iTune's 80 million customers to beat the competition to market with secure downloadable movies and TV shows, distributed from your computer to your TV with 802.11 wireless technology. Regardless of what you may think of AAPL and their products, the important thing to recognize as an investor is that this is a remarkably innovative company. Innovation sells. AAPL releases earnings next week, and the news should be good.

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The first five trading days of 2007 are in the can, and it's clear that tech stocks are leading. Just as it did from Jul-Nov, the NDX is outpacing everything once again, while commodities have taken their toll on both the NYSE and the RUT. Five of the seven tech subindexes closed higher today, and dozens of tech stocks looked poised for more gains. As I've mentioned before, Internet, Software, Hardware and Networking are great places to look for watch list candidates.

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Even though the market is shaky, the Financials are definitely not rolling over. The Brokers were strong again today, which was a good sign. The XBD chart below also shows the most common way that divergences are healed: MACD needs to break above its downtrend line.

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Lowrisk.com published their new Investor Sentiment survey today, and like most others, it remains very bearish. It's difficult to find many investors who are bullish on the market short-term. Meanwhile the NASDAQ closed just 1.1% below a new 6-year high. Of course, that's contrarian bullish, but who knows? Maybe this time it'll be different, and everyone will be on the right side of the boat at exactly the right time.

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If you'll recall, NASI and Bullish Percentage indicators have been on an IT Sell since before Christmas. Even though price has held, these indicators have remained bearish nonetheless. Today, another one of them -- the High-Low Index -- flipped to a Sell. This is one of dww's favorites, and when the 10-day moves below 70, it's time to reduce exposure. All three of these -- NASI, BPI and High-Low -- are lagging indicators, but it's careless to ignore them.

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Finally, if you like suspense, then this is obviously your market. The TOF Ratio thankfully saw call buying today, but NASDAQ price didn't do much, and those SMA's have inertia behind them. As a result, the two lines are poised for a critical, poison kiss, even as Stochastics edged above 50. TOF's EMA version is in much better shape, so it's important to bear that in mind.

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Investors are showing little conviction to buy OR to sell, and the resulting cross-currents are everywhere. Alcoa kicked things off tonight with very strong numbers, but futures reversed and are now lower, so who knows?

Even though various indicators are weak, a lot of stocks -- especially technology -- look very encouraging. It's a stockpicker's market and your results will be based on what you own. That said, it still seems prudent to wait for the break and go with what that tells you.

Until tomorrow, have a great night.



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