What a day. Bulls owned techs even as NDX still finds resistance at 1998 highs. But YM (DOW futures) took the real hit, at one point trading below its 20 DMA. It recovered into the close but did sell at its 10 DMA (12715), now resistance. Iran is cited, but I think it's more about rising yields (see TNX chart)and the threat to earnings going forward with the CPI numbers still fresh on everyone's mind. My reasoning is simple: traders flock to the safety of blue chips in a crisis. They are not doing so and that means that rates are the concern, not Iran. The speculative money is working the Nasdaq now, while prudent fund managers are going to cash, hence the drop in the DOW. Those guys typically don't own Nasdaq stocks anyway. The drop is not dramatic and therefore no alarm bells have sounded, but my criteria is now very simple and straightforward: as long as NYSE struggles with 9455.30 and OEX with 670, I will stay away from the long side with the DOW and even SPX. Let them prove to me that the selling at NYSE 9455 was not coincidental. OEX puts keep climbing, and everyone knows that smart money shorts OEX when they think we are going to tank. It happens every time, including March 2000. If you played contrarian with OEX option sentiment back then, you lost everything. However, and this keeps nagging the bears, equity pc ratios remain high enough to indicate a "wall of worry" support, although it certainly is not reflected in the cheap risk premiums of the ultra low VIX. A continuing puzzle, which is why I tend to shy away from too much option sentiment analysis. It's a useful tool, but it's only a two day rally away from a complete reversal.
The bullish story is the strength in the semis and if you want to know where support is coming from, look no further. The SOX has closed back above the 23.6% 2002 floor from 2000 (481), now support. INTC is still a disaster waiting to happen, but it keeps holding on to that intermediate trendline support, now at 20.82. Will I ever get my H&S projection target at 19.10?
Bulls would like the financials along for the ride and with yields rising, they are backtracking. A mixed bag, once again and another leap of faith many are not willing to take.
Overnight traders note that YM daily pivot is the same as weekly pivot (12717).
This entry was posted
on Thursday, February 22, 2007 at 2/22/2007 07:29:00 PM.
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