Monday, June 09, 2008

Time Machine

Stocks printed a forest of needle bottoms on Monday, as news spread that the new 3G iPhone is so awesome that it allows users to travel back in time and buy gas at cheap prices.

Even if Jobs is a liar, buyers refused to give up on stocks for at least one more day. Not only did stocks reverse course, NASDAQ volume declined for the second straight session. The Composite has notched just three distribution days during this 3 1/2-week correction, and Friday wasn't even one of them.

For all the oil-soaked drama last week, selling pressure -- especially for tech stocks -- has lacked the panicked intensity of a market rolling over. Selloffs often start slowly and build downside momentum, but so far, the bulls aren't making it easy on the bears.

The NDX below shows Monday's needle reversal off the 50-day EMA on lower trade. This is the hallmark of a bid pull -- not of crowded exits. The correction may continue, but Monday's action isn't the stuff of a market poised to retest the March lows.

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The blue chips are notoriously saturated with the laggard sectors, and so have deeper problems than the NASDAQ. The SPX has spent two-thirds of 2008 trading in a 60-point range. The bears need to seize this opportunity and push the SPX down out of the purple box below.

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Finally, there's a heavy dose of economic data this week, suggesting very intense trading ahead. In addition to the obligatory crude inventories, there is also the Biege Book, Initial Jobless Claims, Retail Sales, CPI and Michigan Sentiment. In light of the current climate, potent pin action is possible off of any of these data.

I'll check in when I can, and until then, good luck trading.



The dk Report Charts

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