However, the market decided to ignore all of that news and instead seemed to focus more on relieving the oversold bounce and rewarding investors for the continued string of mergers & acquisitions. CSCO anounced, today, that they would buy WEBX. Which should help CSCO’s numbers a lot as CSCO is the old big dog while WEBX is the growing sensation. The big news, though, via the M & A scene was the announcement of ICE outbidding CME for BOT. This bidding war helped BOT shares jump 17%. Too bad I sold out all of my BOT with a .6% gain. There was no reason to sell all of my BOT and now I have learned another valuable lesson. Two in two days! Eleven years of experience and the market is STILL teaching me new tricks.

Back to the market action, the SP 600 led the way today with a 1% gain, the SP 400 followed with a .7% gain, the NYSE gained .5%, the SP 500 rallied .4%, the Nasdaq gained .3%, and the DJIA lagged to the upside with a .2% gain. Not too often you see every index this close but not the same with all their gains. The IBD 100 rallied .6% today, not leading the market to the upside but still keeping pace with the top two indexes.

Volume was much lower today on both the NYSE and the Nasdaq. Volume came in 27% and 23% lower, respectively. The lower volume sure did show that big institutional funds have no interest in this market at all, after that 2/27 sell-off. Advancers beat decliners today, on both the Nassy and NYSE. winners were over losers by a 2-to-1 margin on the NYSE and by a 3-to-2 margin on the Nasdaq. There were 117 new highs to 69 new lows. The strong breadth and good ratio of new highs to new lows is bullish on the short-term but the lower volume shows that it is just traders that are bullish here. The big funds are not. Even if they are, they sure are not putting their money where their mouth is.

The big winners of the day were the Internet-ISP group, with a 5.7% gain. This can be thanked to WEBX, one of the top stocks in the group, getting gobbled up by CSCO. The next best group was the Finance-Mortgage & Related index. That group rallied 3.1% on the back of LEND bouncing back 56% today. The funny thing about this stock is that in the chat rooms I monitor TONS of traders were going long LEND for what “had to be” the bottom for a potential home run. The next day the stock dropped 65%, destroying many peoples account. The worse part comes next. I then watched many traders short LEND yesterday (I guess because it went back over $5). Whoops! Never bottom fish and never short a stock that is sooooooooo faaarrrrrrrrrr away from the 50 and 200 dma. These traders got what they deserved. You should study history; not gamble.

Even though today was a horribly boring day, it still was day two of the attempted rally that was started yesterday. Remember, we are looking for a 1.7% gain on higher volume on day 4 to 7 with 10 days being OK. It doesn’t matter what we do tomorrow. What matters is what happens on Monday. However, if quadruple withching Friday has the amount of volume that we normally see on those days, it is doubtful we will be getting a 1.7% gain WITH HIGHER VOLUME on Monday. Those quad witching Fridays normally have a TON of turnover that skews the volume figures to the upside by a ton.

The other thing I would like to see, if we do get a follow-through, is the markets retake their 50 dma when they do follow-through. Right now, all of these indexes reside below this key line. The best follow-through days also come with the markets retaking this key line. Go study all of the follow-through days since October 2002, after a down trend, and you will see that when the indexes follow-through and continue upward, they do it on a big price and volume move and retake the key 50 dma.

Right now, I just wouldn’t expect one to work, even if we do get one–which I doubt. The battle between the bulls and the bears is very emotional now. How do I know that? Just look at the realmoney.com bullish/bearish poll. Every week we go from extreme bullishness to extreme bearishness. And now that is infecting the put/call ratio. It has gone from 1.52 to .66 to 1.47 to .89, from the closing bell on Monday to the closing bell on Thursday. That is about as wild as you can get on this ratio in this short of a time frame. Quad witching should be fun, tomorrow.

Besides an exciting day of options activity, we also have the ever important CPI. This will be the talk of wall street, tomorrow. So be prepared for that. Besides that we also have the FOMC meeting to look forward to next Tuesday. This will all surely be market moving events. They always are.

Cash is still the proper play here. A little bit of shorts, a little bit of longs, and a lot of cash. That is the best way to be looking at this market right now; with a lot of cash. I am sure there is more choppiness to come. Aloha and I will see you in the chat room.

At the close, the Nasdaq led the way with a .6% gain, the SP 600 followed with a .4% gain, and the NYSE, SP 500, and DJIA finished .3% higher. The good news is that the IBD 85-85 and IBD 100 outperformed to the upside with a 1% gain. This was the fifth day in a row of outperformance. But the past five days outperformance was nothing compared to how much these leading indexes led to the downside. It simply pales in comparison.

Volume was lower on the Nasdaq by quite a bit. It was so much lower that we have not seen volume that low since December 29. That was inbetween Christmas and New Years, which is normally a natural slow period. The reason why volume was so low today can only be blamed on the institutions not showing up. When they don’t bid stocks higher, it usually means the dumb money is pushing stocks up. That is not bullish. NYSE volume was a tad bit higher but still well below the 50 day volume average. That is clear evidence that the big boys are not buying this rally.

Breadth was positive on both exchanges with advancers beating decliners by a 5-to-3 margin on the NYSE and by a 9-to-7 margin on the Nasdaq. There were 164 new highs to 88 new lows. This is not bearish but it is not bullish either as new lows are still well above what they were a month ago. New highs also are no where near the point that they once were last month.

The biggest standout of the day, in my opinion, was the Homebuilding stocks. This sector got whacked today, with the XHB/AMEX Housing index falling 2.3%. Every stock in this group has put in a clear top almost nine months ago and have been in constant steady downtrends since. Only now are the EPS and sales starting to show that slowdown. Proving, once again, that TA always gives you sell signals before the fundamentals do. The chart is always ahead of the fundamentals, in most cases. The stocks in this group are either failing at the 200 dma (HOV MDC), breaking down through the 200 dma (LEN DHI KBH TOL), failing at key resistance (CTX), or falling right through strong support (PHM SPF MTH DHI-again BZH).

The other standout is NEW. NEW collapsing is evidence number 1,000,000 that buying falling stocks is purely gambling and a game for idiots and history-deficient gambling traders. The morons who tried to bottom fish this got exactly what they deserved for not learning from history that YOU NEVER catch a falling knife. NEW is down 96% plus since just this February. And you want to be long that? I know at least 10 daytraders who got F***** today hard by trying to guess the bottom of NEW. They snatched up these “cheap” shares and got the reward they deserve for playing that game: a one way ticket to the poor house. If only they would have paid some money to learn from traders that knew better than to do something this stupid. The Finance-Mortgage & Related group fell 2.8%, continuing the losses that have been nailing this sector for weeks now. I don’t care what anyone says I love watching people get their ASS handed to them when they fail to follow history and the rules history has clearly laid out for successful traders to follow. Greedy people and gamblers always get what they deserve. In my eleven years plus doing this, I still enjoy watching these morons blow up.

Today was day five of the attempted rally from the lows. I still clearly see this rally failing. There is NOTHING that makes me think this rally will have any real legs that produce any winners any time soon. The oversold rally, however, still has much longer to go, imo. We have not sucked in enough bottom fishing bulls who blindly follow the CNBC talking heads BS that this selloff was a one time great buying opportunity. These people who do not follow chart patterns will eventually suffer the wrath of the market which does not care what the talking fools on CNBC have to say. The dumb money is still not done buying. Did you see the put/call equity ratio? It fell to .66. That is the kind of complacency we need to see to actually have this rally fail. The high put/call was helping this rally hold up. But no more can a high put/cal be used as an excuse for the oversold rally to last. The fact is the dumb money has decided the selloff was just a one time event.

The only people I know that are making consistent money in this market the past two months have been daytraders of the solar stocks. Last month I mentioned that if I was daytrading these would be the stocks I would daytrade as they have that intraday movement and following that is needed for good daytrading stocks. However, these stocks continue to be wild, sloppy, and V shaped on daily charts, making for horrible swing longs. Daytraders, for the first time since October 2002, look like the smart crowd. They only look smart as the daytrading market will eventually give way to a real hard downtrending market and then a good rally for active investors to go back to making big money on. The big money is made in the holding, not the acting. Daytraders NEVER outgain Featured investors in the long run. Only in the short term, like now, do they actually make Featured investing look silly.

This low volume rally still looks good for some more BS gains that will, of course, suck in more dumb and impatient investors thinking they have bargains. However, the CNBC cheerleaders that are leading them to this conclusion are only helping to work off the oversold condition. Once that condition is worked off, you better hope I have a lot more beautiful green charts with beautiful basing patterns. Or else we are going lower. The typical chart patterns I see now are ugly, V shaped, high volume basing moves that lead to topping patterns that lead to short patterns eventually.

Impatience and ignorance will kill you right here. Don’t go thinking that you are smarter than the stock market. Trust me, you nor I, are not. We are both POWERLESS to what it wants to do. Never fight the trend and never invest in a crazy market like we have now. Hold your winners, cut your losers, and keep new buys very small unless they are perfect Featured candidates.

Aloha and I will see you in the chat room.