Blue Chips Get Hit; Nasdaq Stages Another Bullish Intraday Reversal, Closing At Its HOD

February 22, 2007

Stock indexes gapped lower this morning as CPI data came in higher than expected. The CPI rose .2% as core prices had their biggest jump since June. That along with Fed minutes showing that the Fed is still targeting inflation was enough to send all the indexes lower. However, showing just how strong this market is, stocks crawled off their lows of the day and the Nasdaq even closed at its HOD.

When it was all over, the SP 600 led the way with a .3% gain, notching another all-time high. The Nasdaq, which was down at one point .5%, closed with a .2% gain hitting another six-year high. This was the third day in a row the Nasdaq has staged a bullish intraday reversal. Big caps lagged, as the DJIA closed .4% lower, the NYSE fell .2%, and the SP 500 fell .1%. Leading stocks kept pace with the NYSE, with the IBD 100 falling .1% and the IBD 85-85 falling .2%. It is positive to see leading stocks not lead the way down–the DJIA did.

Volume was lower on the Nasdaq and higher on the NYSE. The higher volume was in no way a distribution day as the market wasn’t down more than .2%. Also the intraday reversal has left another “tail” on the daily chart. This is a sign of support and a bullish chart pattern. So overall it appears to be a strong session, with dips buyers buying the early morning selloff.

Declining issues beat advancers by a 6-to-5 margin on the NYSE and breadth was even on the Nasdaq.

Today was pretty much the same story as has been the case for the past three days. The only difference is that is was more wild and choppy on the way up. But, just like yesterday and Friday, the pullback was quickly bought and stocks rallied off their lows. However, the big caps did not keep up this time but the inflation worries rest more on those stocks than the small caps. The Nasdaq, on the other hand, got some big help from AAPL MSFT and LVLT which make up a good amount of that index. The Nasdaq 100 rallied .3%, keeping pace with the small caps.

The only other news item of significance today, that I can see, was that oil crossed over $60 for the first time since December 29. Gold also jumped $23 to $684.

There is no doubt that I would love to see a pullback in this market. However, it looks like EVERYONE is looking for one and want one. That can only mean that the market will refuse to cooperate with us. The fact that everyone wants a pullback and that the put/call ratio of both index and stock options stayed above 1 all day and was at 1.27 at one point signals that we will probably not get a pullback. Too many people are betting on a pullback and that means stocks should keep rising. The fact that people are betting on a pullback to this magnitude in the face of stocks hitting all-time and six year highs is simply stunning to me.

Longs are in complete control and if you are going long stocks breaking out of sound bases on strong volume, chances are you are doing very well. If you are shorting every uptick trying to outsmart the market. Well you probably are not doing to well and you probably are not reading me. If you are reading me and you still feel a bit lost I recommend reading the last three daily market analysis to get reacquainted with the overall situation of the market.

Right now there is nothing to do but stay long, continue to buy beautiful chart patterns making sure to keep the buys smaller than before, keep cutting the losses and taking profits on the way up, and keep an eye out for a change in market condition. This is the overall most non volatile market I believe I have EVER seen. So if you are not making a killing but are still making money, be happy with that. Aloha and I will see you in the chat room at the opening bell.

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