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Market Stage
(3/5/2010)
On Thursday, we wrote that 'SBV oscillator readings are still at high, positive levels which put the odds slightly in favor of a further up-move or side-ways trading.' - Today, the major indexes once again moved higher.
60-day charts with a 20-period SBV are presently showing flat SBV oscillator readings on the Nasdaq 100 while the oscillator is rising on the S&P 500 and the Dow. The following SBV values were registered at session's end: Plus 22% on the Nasdaq 100; plus 26% on the S&P 500; plus 9% on the Dow. Advancing SBV oscillator readings are bullish and would favor a further advance. We will continue to monitor this chart setting in order to determine at which point SBV oscillator readings start to decline; this might then suggest increasing odds for a coming correction.
1.5-year charts with a 10-period SBV are presently showing flat SBV oscillator readings which suggest a weakening of the current upswing. Because SBV values on this chart setting remain at high, positive levels, we might however still see some more upside.
It is noteworthy to point out that the indexes are now close to their January 2010 highs. The Russell 2000 is an example of an index that is however already trading clearly above those levels. Since the January 2010 highs are sensitive for many investors (who entered at or near those levels and are now approaching the break-even level), we might see some sideways trading action near those levels.
Market Status
(3/5/2010)
Market Performance:
� | Last | Change | Volume | A/D Ratio | | S&P 500 | 1,138.57 |  | 15.76 (1.40%) |
| 3,332,898 | 17.37 | | NASDAQ 100 | 1,888.56 | | | 28.84 (1.55%) |
| 728,148 | 15.50 | | DJI | 10,565.67 | | | 122.21 (1.17%) |
| 778,073 | 14.00 |
To say the market has been bullish recently might be an understatement. One needs only to look at a chart of the Russell 2000 index for instance, which has been skyrocketing at an incredible pace: it is trading well above its January 2010 highs and has closed green for a remarkable 17th time in 20 sessions. Meanwhile, the major indexes are also approaching their January highs; the NASDAQ 100 has closed up 8 sessions in a row; the S&P 500 (which saw 90% of its components gain ground today) is also up for a fifth consecutive session.
NASDAQ 100 - 3/5/2010.
1-day Intraday, Modulated Volume.
Volume Analysis:
9:30 - 16:00: On the way to its eighth consecutive up-close, the Nasdaq 100 rallied non-stop today, opening near its low and closing virtually at its session high. From a volume analysis perspective, the index displayed we call a 'delayed volume reaction'. This is a scenario where an index fails to show any appreciable or sustainable reaction to even a large accumulation of volume (in this particular case: a buildup of bullish volume). On today's one-day chart, note that index generated a very large amount of bullish volume (which appears in green on the SBV oscillator pane), but in spite of this failed to correct to any meaningful way during the session. After the appearance of the session's first two noticeable bullish volume surges (which peaked at 9:50 and 10:50, approximately), the index did lose some of its early bullish momentum and proceeded to level off somewhat, moving sideways in a tight trading corridor for the remainder of the session. However, this channel had a modest upward slant, so the index simply kept rising at a reduced rate for the rest of the day. Two further pronounced bullish volume spikes peaked at 13:15 and at 14:50, but these volume surges also did little to deter the bulls who kept pushing the index higher, thus confirming today's delayed volume reaction. In retrospect, a five-day chart of the index shows clearly that today's session generated a surplus of bullish volume.
Short Term (lasts a few hours to a few days): Yesterday, we suggested there might be 'a brief push to modestly higher levels' but that 'further short-term upside potential is fairly limited'. Today's action was however more sustainably bullish than we had anticipated. For some statistics on the market's incredible strength in recent days, consult the Market Performance section above.
As noted, the three major indexes are now approaching their January 2010 highs (the Russell 200 is already trading well above its January highs). While we think some of the indexes (the Nasdaq 100 and perhaps the S&P 500) have a chance to retest these levels over the short-term, we also think the incredible upside push we have been seeing in the broad market since early February is now close to being exhausted. For the short-term, we therefore see a chance for only modest further advances (perhaps a quick intraday spike to slightly higher levels) followed by a stalling of this exuberant rally. We are a little cautious as the recent buildup of bullish volume has become quite substantial (view 10-day charts), market sentiment is highly bullish and the market's fear gauge (the VIX index) is potentially showing investor complacency. All in all, we believe additional upside is fairly limited and the market is then ripe for a consolidation or pullback.
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Trend reversal
Large Institutional Money creates significant Surges in Market Volume when it enters and when it exits. Index values will always react to Buying Volume or Selling Volume surges, sometimes immediately, sometimes after a delay, and the greater the magnitude of a surge or Surge, the stronger the ensuing Reversal.
Financial Press Overview:
A huge wave of bullishness was seen today as the US Labor Department released the much awaited February jobs report. It showed that 36,000 more employees had lost their jobs in February and that the official unemployment rate remained relatively steady a 9.7%. The reason for the rejoicing mood on Wall Street was that these numbers (in spite of the fact that more jobs were being eliminated rather than new ones created) came in better than the 68,000 job losses that economists had been expecting. Also playing a positive role was the fact that the recent winter storms had not impacted these numbers more negatively (according to a note by the Bureau of Labor Statistics).
Over the past few days, we have been mentioning the remarkable performance of the Russell 200 index (which is well above its January 2010 highs while most other indexes are not and which gained an outsized 6.08% this week alone). This index is of importance because it is comprised of small-cap stocks. The recent surge in small-caps is an indication that investors are more willing to take larger risks; these stocks have a much higher volatility and lower cash reserves, but they have clearly been outperforming large-cap stocks. Market observers comment that increased risk taking shows investors believe (rightly or wrongly) the economy is on the mend.
Feeding bullishness further was a new government report by the Federal Reserve that said consumers started borrowing more again in January (largely attributable to an increase in the number of auto loans). The data is of significance because prior to this economic release, there were 11 consecutive months where consumer borrowing had declined. Economist hope that the new data reveals consumers are more willing to spend freely again.
Key economic data for the week starting March 8, 2010. Numbers shown are consensus estimates (market anticipates this value) and prior value.| Wednesday: |  | 10:00 AM WHOLESALE INVENTORIES M/M (Jan): 0.2% / -0.8%
2:00 PM TREASURY BUDGET (Feb): -$202.0B / -$42.6B |
| Thursday: | | 8:30 AM CONTINUING CLAIMS Feb-27: n.a. / 4500K
GOODS & SERVICES TRADE BALANCE (Jan): -$41.0B / -$40.2B |
| Friday: | | 8:30 AM RETAIL SALES M/M (Feb): -0.2% / 0.5%
RETAIL SALES (X-AUTOS) M/M (Feb): 0.1% / 0.6%
9:55 AM MICHIGAN CONSUMER SENTIMENT (Mar P): 73.9 / 73.6
10:00 AM BUSINESS INVENTORIES M/M (Jan): 0.1% / -0.2% |
Disclaimer: Individual
traders are responsible for making their own trades based on
our Market Outlook. |
