Wednesday, April 25, 2007


As stocks set records on Wednesday, bear blogs had a fresh twist on the famous seasonal axiom:

13K, now go away!

Unfortunately, if Q1 earnings and the economic data are any indication, it's unlikely to be that easy. Eventually stocks will come down of course -- and maybe even reclaim 12,xxx -- but short of some tectonic upheaval, those pullbacks are likely to be bought.

Stocks have had a bullish bias almost immediately after bottoming in March, and that continued today. Market internals were excellent, led by New Highs outperforming New Lows a whopping 602-69. On a day like today, a High-Low ratio of 9-to-1 is an encouraging, confirming sign. The market's appetite for risk is healthy.

The IBD100 returned to its leading ways, rallying 1.3% as 76 of 100 stocks posted gains. In another solid sign, 22 stocks printed record highs. It's worth noting that the IBD100 -- like the TOF Ratio -- continues to be one of those market indicators with an unusually high success record. Since IBD100 performance data isn't published, monitoring it is a hand-crafted process. As regular readers of these posts know, it's worth every minute.

The chart below shows that institutions are bringing the heat. Volume accelerated another 18% (on top of Tuesday's 16% pickup) as big money left their conspicuous footprints. As the NASDAQ printed a new 6 1/2-year high, all of the technical indicators point to further gains.

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While the NASDAQ looks great, it's worth noting that the NDX looks even better. Volume swelled an eye-popping 30% as the NDX outran every other index on Wednesday. More importantly, each technical indicator on the chart below looks noticeably stronger than its corresponding indicator on the Composite. This is bullish, and also very depressing for QID longs.

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Speaking of volume, the Composite volume chart below shows that the 50-day hit a new 5-week high on Wednesday. It's also begun accelerating again as the market climbs, a mandatory requirement for rally longevity.

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This week's investor sentiment surveys from both and AAII showed that the recent market strength finally made an impression on individual investors. Both surveys saw upticks in bullish sentiment. climbed to 43% bullish/43% bearish, an 8-week high.

However, the TickerSense blogger survey reveals that bloggers -- mostly pros -- tilted noticeably bearish last week. The TickerSense survey has a bearish slant anyway, but seeing such a marked shift on a week that saw record highs and a Dow Theory confirmation is very surprising. It's also contrarian bullish. I'm very curious to see how next week's survey digests the current action.

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Yesterday, option investors got spooked and fled heavily to puts. This relaxed the TOF Ratio, setting it up for today's near-perfection bounce-back. It's a little hot, but the Stoch (39) shows it has room to run further.

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Days like today reveal the virtues of following the ball. Investors make fun of the expression, but in truth it's very difficult to stay in a position until the market clearly tells you to exit. The market and the economy often give conflicting signals, which can really tweak one's thinking.

Soon enough, stocks on the IBD100 will start falling apart for no apparent reason. On a day that the NASDAQ slides 1.4%, the IBD100 will tumble 3.1%. By then, the TOF Ratio will likely be very shaky as well. Then it will be time to follow the ball in another direction.

Until then, have a great evening. Tomorrow we get to see how much mojo AAPL, BA and QCOM have, and whether MSFT can extend what INTC, GOOG, AMZN and AAPL have started. Employment numbers add to the mix of what could be another lively session.



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