It’s In The Hole! It’s In The Hole!

This normally reserved crowd at Augusta is on their feet for this Cinderella
boy… tears in his eyes here as he approaches his final shot… he’s got about
110 yards to go here… a former greenskeeper, soon to become the new Masters
Champion.

(Carl swings his hoe like a golfclub at the line of
flowers)

… It looks like a miraculous… IT’S IN THE HOLE!
IT’S IN THE HOLE!!!

The flat out earnings miss by Texas Instruments after the bell yesterday would
have given traders a perfect opportunity to take profits after the recent run
up. However, it was not to be. The Texas Instruments CFO stated that the
“demand driven slowdown” the semiconductor industry is experiencing
will not just go away like many hope. That the demand-driven issue at present is
significantly different from the supply driven slowdowns seen in

the past. The latter of which being remedied by time and inventory moves.

However, this is a new Nasdaq that has experienced a radical shift in
psychology. A psychology that has now focused on the potential benefits to
corporate earnings 9-12 months down the line that the recent (and any potential
future) Federal Reserve rate cuts may have. Don’t forget that the market is a
discounting mechanism that “sees” far into the future. Whether the
current discounting action is right or wrong remains to be seen. All we can do,
as traders, is to react.

The Nasdaq Composite, March Nasdaq futures, and the QQQs exceeded Friday’s highs
by the smallest of margins and subsequently closed slightly off those levels. At
this point, with literally all eyes on the Nasdaq’s potential breakout
here, caution reigns paramount. There are literally dozens of schools of
technical analysis that are saying something different at this stage of the
rally. As a trader, I look for low risk setups by weighing the risk vs. reward
scenario. As I pointed out yesterday, incorrectly might I add, I still do not
see the upward explosive move that many are calling for.

The technical damage from last year’s fall from grace as well as the multiple
failed rallies and lower highs over the course of the past 10 months should pose
too great of a hurdle of overhead resistance to be overcome that easily.

Dare I call this a bear-market rally?  I do, and hereby state that it is
one of the fiercest I’ve ever seen and probably in the history of the
Nasdaq.  At this point in time, it seems like the Nasdaq will never go down
again.  Ever.

Individual names like Brocade Communications have rallied for 10 straight sessions,
making moves of 70-80% or more off their Jan. 3 lows.  The tragedy is, many
out there have never seen a bear-market rally and are fearlessly chasing price
here with the “guarantee” by our CNBC friends and analysts that the
3,000 level is our next stop, if we stop at all.

One thing is for certain, if and when we get a reversal down, the retail
investor will be the last to know.  There will be a scapegoat to put the
blame on, there always is. In the meantime, the Bulls are running and the music
is getting louder.

Above the regression line, point (a) poses the next hurdle for the Nasdaq. This
(a) area is a window that failed as support last month and may now be
resistance.