Tuesday, January 16, 2007

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.

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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.

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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.

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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".

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

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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.

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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.



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