This is Not Your Father's '87 Olds

Traders with some years under their belt remember clearly living through the 1987 crash of October 19th. Wall St. is a superstitious bunch. Perhaps this Octobers similarities helped create just enough fear to finally cause this key reversal day.

The stock market came back with trumpets blaring today. In fact, the major averages all closed on their highest tick. Volume was very strong at 1.9b on the NASDAQ and 2b in the NYSE. Breadth also went from 3:1 negative to approximately 2:1 positive. The major averages managed to also surpass the highs of the recent dead-cat bounce which is a supportive of a continuation trend. Importantly, the semiconductors which were down 3% earlier in the day managed to close flat. Regular readers know how important we view the comeback of this sector.

If the Fed continues anymore jaw-boning they will have trouble chewing their dinner. We have mentioned in prior posts our belief that the constant chattering by the fed might be a contrarian indicator as to their real intentions. Perhaps with full knowledge that the end of their rate hiking campaign is in sight they feel compelled to use the only other instrument available to them to scare long-term yields higher. The stock market may finally be recognizing this fact as well.

We mentioned to our readers last night that we believe Intel (INTC) was wrongly perceived as negative fundamental news. In classic form INTC's initial sharp sell off post earnings was quickly reversed, marking the catalyst yet again for a key reversal day. INTC often is credited with sharp reversals in the stock market. Experienced traders also understand that when INTC raises guidance for Gross Margins, it usually bodes well for the stock in the intermediate-term. Indeed, INTC raised Gross Margin assumptions from 61% to 63% ish on their earnings call last night.

After the bell, Juiper (JNPR), VeriSign (VRSN), and Qlogic (QLGC) reported solid results but Ebay (EBAY) was slightly disappointing on their guidance. All in all, the parade of recent technology earnings reports is shaping up to be rather attractive for our Bullish thesis.

If You Held a Taser to Our Head:
Keep in mind that we are not out of the woods by any stretch of the imagination. October is still a volatile month and may have more in store for us. However, Your Friendly Neighborhood Kcap Team sees nothing at this point in time to throw us off of the Bullish posture we've been riding recently. In fact, we are hoping for a little more volatility to actually add more long exposure. Currently 100% net long.

Yesterday we told you to buckle up…today we started peeling rubber!

See You Tomorrow.

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