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Where's the money coming from\?

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Today's move is being supported by some nice volume, so where's the money coming from? The first place is the money coming out of defensive sectors.

Pharmaceutical Index -1.99%
Healthcare Index -1.25%
Oil Index -0.90%
Utility Index -0.78%

Nasdaq 100/Dow Relative Strength Comparison

Looking at a relative strength comparison chart of the Nasdaq-100 versus the Dow echoes the fact that more buying is starting to find its way into technology than old economy big caps. With Intel's news, this doesn't exactly come as a shock. What would be a shock is if the Nasdaq-100 could break the trend of the Dow outperforming the Nasdaq.

30-Year Treasury Bond Yield 60-Minute Chart

One of our favorite indicators is bond yields. This morning we were seeing some nice selling in bonds, as reflected by rising bond yields, but that came to an end around 10:30. That's when the surprise rate cut was announced and bonds took off. I'm guessing the rest of the buying came from money sitting on the sidelines, tax refunds, new Roth IRAs, etc. Another big factor was bears that were sent scurrying to cover their shorts. I'm anxious to see the next batch of Commitment of Trader Data when it's released. The last report, as of 4/10/01, showed that bears still had the upper hand in S&P 500 futures contracts. Commercial traders, or "smart money," had added 12,294 short positions. This brought their totals to 394,235 short positions, compared to 332,762 long positions. If the next report shows commercials bears being shaken out of their short positions, this rally might have legs.

Jeffrey Canavan
Assistant Analyst

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