Wednesday, May 06, 2009

IBD Indexes Lag, Along With The Nasdaq, As The Market Starts To Feel Toppy On The Short Term; Individual Stock Charts Look Great And A Low Volume Pull

By Market Speculator

Today was owned by the banking sector as the "Bank Stress Tests" were released today. By in large this stress was viewed vastly different from all sides of the aisle. Regardless of anyone's opinion, the market's opinion was positive as banks roared higher pushing the NYSE composite Index and S&P500 higher. Lagging behind was the NASDAQ composite index and the IBD indexes. It shouldn't be a major surprise seeing the banks leading for one day as the stress tests showed most banks can withstand further downside, but we'll need to see leadership from the IBD indexes. Once again, we did see major support for the NASDAQ and other indexes showing there is a bullish tint to this market.

It would be fabulous if we could simply settle and consolidate at these current levels. This market has made a long run from its lows and its time we head sideways for a week or two. However, this Friday we'll see the latest employment figures from the government and it is sure to set the market in one direction or another. At this point, if we could simply get quiet action with the NASDAQ holding its 200dma it would be quite constructive. It would allow the IBD 100 and IBD 85/85 indexes to retake the lead in this market.

The fever over the banks is quite a picture to look at. Taken into context the ENTIRE FINANCIAL sector was essentially blown up since November of 2007. They have been due for a rebound from the constant downtrend. At this rate, we'll see bank stocks running towards their 200dma.

What is has been largely overshadowed by the banking sector are the Chinese related stocks. We are seeing some very nice action coming from stocks who are in China. Remember, China had VAST RESERVES (aka Savings) to prop up there economy. Savings is what drives innovation and production not DEBT. Therefore, the action we are seeing from China is driven by a sound economic position. This surge we are seeing from their investment from savings is sustainable unlike the United States which is using DEBT to spur investment. Unfortunately for Americans, we'll fall further behind the Chinese as they benefit from their savings.

The market will be looking towards Friday Employment figures and should provide us with a little breathier tomorrow. However, anything is possible and we are ready for anything to happen.

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