As the NASDAQ and NDX posted new 2007 highs today, the bulls finally let the cat out of the bag. Maybe not tomorrow, but today's action suggests the markets are headed higher.
A combination of positive earnings news, a 20-month crude low, and GDP-positive trade data saw tech and financial stocks on the move today. While the pure-play US Tech Index notched a fresh 6-year high, the Brokers dinked a new all-time closing high.
Market internals have been poor for weeks. This has caused popular breadth indicators like NASI, BPI and High-Low to generate IT Sell signals. Meanwhile, the indexes themselves have hung in there, reluctant even to fall to their 50-days. Waiting for the other shoe to drop has created a bearish sense of dread among investors, and investor sentiment has been awful.
Today's action showed that these conflicting signals have most likely been caused by sector rotation. Paradoxically, as the indexes ran up today, Advancers were weak while Buy Volume was strong. Institutions were shifting gears with precision, surgically moving money out of yesterday's winners -- like commodities -- and into new-cycle stocks, like tech and financials. As the theory goes, breadth damage eventually heals itself as value investors scoop up abandoned stocks, while growth investors continue buying the winners. Regardless of the future, by the end of today, market internals had improved.
The NASDAQ climbed steadily to the top of the Bollinger bands today while volume accelerated 5%. Sitting just 0.4% below a new 6-year high, this is a good-looking chart tonight. It's the best the Composite has looked in almost two months.
Unsurprisingly, the NDX outpaced the broader indexes yet again today. Its Bollinger bands are already starting to spread apart, and the rest of the technical indicators look excellent. Like the NASDAQ, this is a strong chart. For the more aggressive investor, consider looking into QLD, the double-strength QQQQ ETF.
As the Tech Index notched a 6-year high today, six of the seven tech subindexes moved up. They were led by Hardware, which also hit a new 6-year high. AAPL sits on the Hardware subindex, and that stock had an amazing follow-through day, tacking on another 4.8% to a new all-time high. As CSCO sued AAPL tonight over use of the iPhone name, it will be interesting to see how much the stock gives back tomorrow, if any. Below are the Tech Index, Hardware and AAPL.
It's a good sign that the Brokers are involved in this action, and the XBD below is printing an all-time high tonight. The Brokers all reported their quarter before the holidays, and if you recall it was fantastic. The exchanges also are strong, and ICE, NYX and CME are three great examples. The Brokers and exchanges are good adds to any watch list.
Meanwhile, the bear market in energy stocks continues. Below is XLE, which confirmed below its 200-day today on big volume. Most energy stocks are portraits of misery right now, and are not for the feint of heart.
Finally, as one would hope, the TOF Ratio avoided a poison kiss today, even though option investors stayed in puts all day. They're not buying this move yet, which is good. As always, it's best to keep the option pit subdued.
The IBD100 had a strong day, gaining 0.7% as 59 of 100 stocks moved higher. Another twelve stocks either broke out or moved to new highs, as the appetite for the fundamental leadership remains strong.
There was more good earnings news after the bell, including DNA. So far, futures are higher tonight, AAPL lawsuit or not. New NASDAQ highs are easily within reach, so tomorrow should be interesting.
Until then, have a great night.