My Perfect Scenario From Yesterday Comes True As Stock Indexes Rally Higher And Close At Their HOD After A Bullish Intraday Reversal
October 24, 2007
Well it doesn’t get much better than that. After opening higher, the major market indexes all reversed and started moving lower giving up the morning gap. But then, if as the market was listening to me (don’t I wish), the market did just what I asked of it last night and rallied higher the rest of the day closing at the HOD. What made it better was that the Nasdaq led the way among the major indexes and did so on a very nice surge in volume. And today’s volume was in no way options related like the volume on Friday’s extreme selloff.
Volume was lower on the NYSE but the gains were still very strong as the NYSE still put in a 1.1% gain. Also, if anybody gets IBD, you should look at the “stocks on the move” section on page B1. It will clearly show you that there was plenty of strength in leading NYSE stocks to confirm the rally despite the lack of volume. In fact, you might say that it is more bullish for us that the Nasdaq was not only up more than the NYSE but had higher volume. That means that the speculative juices are flowing and that is always good for us trend followers.
For those that did not notice, the Nasdaq 100 rallied a powerful 2.2% as the big-cap tech stocks enjoyed today’s gains the most. Leaders like AAPL, BIDU, GOOG, and RIMM all hit new 52-week highs today. How in the heck can you be bearish on this market when the top four high-tech growth stocks are hitting new highs and doing it on higher volume. Are they all in climax runs? Yes they are. But you have to understand that if this is anything like the rally in 2000 where JDSU and QCOM went up over 2000% from their lows in 1998 to its 2000 top, these stocks could have one or two more “crazy climatic” legs like they are having now. So calling tops here is where the majority of traders end up getting out of top stocks and miss out on huge gains.
Besides the Nasdaq 100 clearly being the leader and top index recently, the IBD 100 is still the top dog amongst all indexes in the market. The IBD 100 rallied a stunning 4.4% today, clearly showing that those long leading stocks are enjoying massive gains right now. 85% of my very large portfolio was up today, on a day where breadth was only 2 to 1 positive on the NYSE and only 3 to 2 positive on the Nasdaq. Something that should be quite noticeable today was that despite the IBD 100 being up 4.4% and the Nasdaq 100 up 2.2%, breadth was only positive on the Nassy by a 3 to 2 margin. That clearly shows that this market is running low on broad strength and that only a few very big leading stocks are making a big impact on this market.
However, in saying that, somehow I am long a ton of stocks that are doing very well or still holding above cut loss levels. So I am not sure if that says something about my stock picking skills or if I am just lucky because after reviewing the internals it is obvious there are as many bad stocks as good stocks out there despite the markets near or at new highs. There were more new lows (86) to new highs (83) on the Nasdaq, despite this index leading the market higher. Thank God for BIDU, AAPL, GOOG, and RIMM. I guess we can throw ISRG in there two, yes!
Obviously another important stock that is part of the Nasdaq is AMZN. It reported after the bell and from what I can see it was not good. The Nassy futures are down 18 as I write this and I have a feeling that the recent behavior of the market will continue. That is that the bears will come out and see “here is the top.” Then the market will sell off further in the morning followed by a round of dip buyers that take stocks off the lows. Somehow, something tells me to not bet on another HOD close. Getting two in a row is a rare enough treat in itself that asking for three is too much. But of course it would be nice to have that happen.
The best thing that can come from this is that people step in and buy that very very bullish AMZN chart pattern as they perceive the overnight selloff as an overreaction. However, anything can happen and we must be prepared for the possibility that AMZN is the stock that tops the market in the short term. But, if the leading stocks and my stocks are any clues as to the future of this market, then this selloff will be bought. The AMZN chart is very bullish and a weak performance tomorrow would be bearish short-term. But with RIMM AAPL GOOG and BIDU all hitting new highs, I am not sure how much of an impact AMZN will really have.
I guess we will find out tomorrow during the market hours. Aloha and I will see you in the chat room!
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