Thursday, March 29, 2007

Markets Reverse Course

I boarded a plane shortly after the market turned negative on Thursday, and it was looking ugly, especially for tech stocks. So tonight, it was surprising to learn that buyers stepped in, reversed direction and drove the indexes into a positive close.

Leading stocks held up well on Thursday, as the IBD100 gained 0.4% and most component stocks technically remain in good shape. However, 4 IBD100 stocks were brutally decapitated Thursday on heavy volume, marking the worst selling the IBD100 has seen since following-through on Mar 21. This troubled Jonah Keri at Investors Business Daily, though a review of all 100 stocks tonight showed the damage is still very contained.

On one hand, the market faded a strong upgap 37 points lower into negative territory, which is not what you want to see the day after a distribution day. On the other hand, the markets then bounced off important, 5-month support to close higher on stronger volume.

It's a real tug of war, and tonight the market remains a riskier, more volatile place than it's been in months. The once languishing VIX -- in a stupor for months around 10 -- is now 50% higher, closing on Thursday at 15!

The pros also are culling the herd, offering an excellent time to build watchlists. Stocks advancing on big turnover -- like steel and agriculturals did on Thursday -- could outperform once the market settles down and starts trending again. Also, take note of anything hanging in there on quiet trade. It's a good sign. Use caution with stocks selling off on heavy volume.

End of week, end of month, end of quarter and a naughty Iran. Tomorrow could be an interesting day.



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