Tuesday started strong due to better economic numbers from China and Germany.
But as the day wore on, stocks sagged under the weight of selling in the
financial sector and the euro took back some early gains, putting pressure on
U.S. stocks. At the close, the Dow Jones Industrial Average was ahead by 60
points at 12,482, the S&P 500 gained 5 points at 1,294, and the Nasdaq rose 17
points at 2,728. The NYSE traded 810 million shares and the Nasdaq crossed 469
million. Advancers were ahead by 1.6-to-1 on the Big Board and by 1.2-to-1 on
the Nasdaq. Click to Enlarge Despite threats of a eurozone breakup and more
Greek financial tragedies, U.S. stocks just keep chugging along. Yesterday's
new intraday and closing highs by the S&P 500, as well as a matching high in the
Relative Strength Index (RSI), confirm that the breakout into a zone with the
potential for a very heavy overhead of sellers is no fluke. And yet all of the
news is against higher stock prices. Even the U.S. dollar rallied to close
higher versus the euro a pattern that last year would have driven stocks lower.
And one well-known technician studying the AAII bearish investor percentages was
surprised that bearish investors are at 17% for the second week in a row. He dug
further and was stunned when he found that since the 2000 market peak there have
been only 12 other occurrences of this, and the last time was almost six years
ago. And yet stocks are making new highs in the face of this extremely bearish
indicator. Another "expert" on CNBC opined that for the last three years the
market has been down in the last two weeks of January. But yesterday the market
ignored him, too. When the stock market shrugs off bad news as effectively as
this, something is in the wind. Backroom talk of QE3 and a type of quantitative
easing inEuropecould be behind the strength.
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