Monday, June 11, 2007

Quiet Day

The picture on the left is the entire stock market on Monday; on the right is everyone trading AAPL.

The major indexes answered Friday's romp by closing mixed on a sleepy Monday. Sellers were scarce, and the NASDAQ slipped just 1 point on a 13% fall in volume. The blue chips even managed to edge a little higher. Since bond yields rose again and M&A announcements were few, Monday's action was a net positive for stocks.

Adding to the positive tone was that while the market dozed, leading stocks bolted decisively higher. The IBD100 gained an impressive 0.8% as 65 of 100 stocks moved up. Also, 14 stocks hit record highs, up from just 5 on Friday. The volume on the market leadership picked up as well. On a quiet day overall, a solid 25 IBD100 stocks saw Accumulation, while Distribution fell from 8 stocks on Friday to just 6 today.

Unfortunately, one of those 6 selloffs was AAPL, which pulled a "sell-the-news" during Monday's developer's conference. Arguably the NASDAQ's leading stock for the past 6 weeks, AAPL selloff mojo spread to the entire Composite, which gave up its gains by the close.

The chart below shows the significance of Friday's bounce to both bulls and bears alike. The NASDAQ rallied Friday off of triple support. The 3-month trendline, 8 week band support and the 50-day EMA all intersected at Friday's low. This is strong stuff, but the bears have stepped it up a notch as well. If they take out this triple support, it could be a long, hot summer for the bulls.

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The TOF Ratio is on the warning track. Unlike the IBD100, it's shown few signs of life as option investors see little reason to be bullish.

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While there's been little distribution for the past two sessions, the market is technically wobbly. In addition to Quad Witch, the market gets retail sales, Beige Book and key inflation data this week. Any of it can fuel volatility -- especially PPI and CPI.

The future isn't written and the uptrend remains intact, but for the now there are elevated risks are to the downside. Make sure you're comfortable with your exposure.

Until tomorrow, have a great evening.



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