Tuesday, April 03, 2007

Tuesday Rally

Market Action:
Basically the market went straight up from the opening bell for about 90 minutes and then traded at those levels most of the rest of the day.  The early morning action seemed to be from overnight strength in the rest of the world markets as well as some news on one subprime mortgage lender.  At the 30 minute mark, the pending home sales were reported to be up and that kept the dream alive for the buyers.

The market was up strongly on Tuesday and seemed to decide that the housing situation, such as it “was”, is now behind us and the new world brings us to new heights of glory.  We are a little cynical this evening just because, while we knew the market could go up, really don’t like the way it went up.

We have considered the highs put in about two weeks ago to be the important overhead resistance to watch.  Of course, we didn’t think they would ever be tested and Tuesday did test them.  The Dow went above, which we don’t have strong feelings about anyway because it is, after all, the headline number that everyone watches.  The Dow closed right at the high of two weeks ago. That high was 12,510.81 and Tuesday’s close is 12,510.30 almost a direct hit.  The Dow did trade higher than that previous high so the test failed but, again, we don’t have strong feelings about the Dow.  

The SP500 traded higher as well and this break bothers us.  It’s not the end of the bearish case, just the first question mark in it.  We are still about 24 points from the highs of February which is our ultimate breaking point.  

The NASDAQ indexes did Not fail as the highs from two weeks ago held, at least for Tuesday.  This is a good sign since we have said that the NASDAQ indexes should be the leaders of any downside move.  Since the Dow failed to hold its high and the NASDAQ’s highs held, that makes for better writing this evening.  We are still concerned with the breaks in the other major indexes but we will give this thing another day or two.

You may recall that we have mentioned that the first corrective wave has the tendency to carve out a large portion of the first wave drop.  The reason for this action is that there still exists much bullishness.  When the next wave down occurs we will reduce the bullishness and that in itself will set us up for a bigger rally but from much lower levels.  

One thing to keep in mind is that the volume was not that powerful again on Tuesday.  The bulls should be paying some attention to that low volume.  The market can not power ahead without some strong volume.  So, we bears still have some technical items to bolster our position.  

What we expect is a much more subdued day on Wednesday with trading occurring at the highest prices in a while.  This means that the buyers will be buying from those that bought on Monday.  We like to call this distribution.  Keep the public as bullish as possible so we can sell them stocks at the highest prices.  But, we will see.

As an aside, the NDX, NASDAQ 100, decided it couldn’t quite leave the 1800 level behind just yet and traded there again on Tuesday.  We will not feel too bad when we can see that index leave 1800 for good.

Dow Industrials:  12,510.30  +128.00
VIX: 13.46
HUI:  349.41 (strong day especially considering gold was down)
QQQQ:  44.16
QQQRS: 1.55 bid
QQQRT:  2.12 bid
RYVNX:   16.71
RYAIX:  21.39
RYCWX:  35.62
TLT:  87.99
BEGBX:  13.83

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