Thursday, March 16, 2006

Big Reversal in the NASDAQ Comp

On Thursday, the market stayed on the course we have been talking about for a while now; only today, the disparity between the indexes was very pronounced. With the entire market opening stronger, it looked like a peachy day for the bulls. About a half hour into the session, the market broke fairly hard except for the Dow, that index dropped a little and then traded in a tight range the rest of the day.

The early morning pre-opening news may have been somewhat influential in the early going with both the CPI and the February housing starts being announced. The CPI was basically a non-event, as it showed no inflation or barely any and was close to expectations at that. The housing starts were expected to be down but they weren’t down nearly as much as forecast. So, here goes the twisted logic once again, ready?

The stock market thought, hey, the housing starts are down so the Fed is less likely to stop raising rates sooner rather than later so the early morning trading was up as usual. Then they started thinking about it and realized that the forecast was for lower housing and much lower than they got so the thinking turned around during the day to, hey maybe the Fed can keep raising rates for a while. Oh my… Realize this is my own twisted thinking on what the market might be thinking, given the fact that is thinking at all.

Friday is options expiration and may get some action due to that. The volume today was a bit higher than it’s been for a couple of weeks, ok, not that much higher. And, come to think of it, the volume has not been very high compared to that during the January momentum highs. We always keep our eyes on such things because all of these technicals can be helpful at times.

Right now, today (Thursday), the NASDAQ market got slammed while the big cap stocks continue to enjoy a bit of a rally. Everyone is excited about the SP500 making new highs the last day or two. We would emphasize that the big cap stocks Should Not be leading this market and of course the NASDAQ was down hard today. In last night’s post, we mentioned the high from two Friday’s ago, 2325, and that the NASDAQ should stay below that level. The Comp went right up to 2323, almost 2324, and fell from there to close just under 2300, a very bearish reversal.

One index we follow closely is the SOX, the Philadelphia Semiconductor Index. Two weeks ago on Thursday, March 2, the SOX traded just over 550. This day, the SOX closed down over 16 points at 496. This index has dropped over ten percent in two weeks. Who is paying attention to that? That would be the Wednesday Update.

Be careful out there…

Have a good weekend and enjoy the basketball tourney.

Dow Industrials: 11,253.24 +43.47
RYVNX: 18.74
RYAIX: 22.05
TLT: 89.12
BEGBX: 13.13

No comments: