What a difference a week makes in the weather in the New York area. Last week we were buried in snow and today, it is spring like. Naturally, we will opt for the later. It would appear that the markets smelled a whiff of spring in the Friday session. Remember, last year at exactly this time, March 6, 2009 to be exact, the S&P 500 traded at 665.75. From that date it rallied to a recovery high see in January. We had a slight pull-back on February 5, 2010 which took the 1040.75 low and then, off to the races we went. This past Friday, right after the “Jobs” data was release we watched the S&P 500 add another 14.25 points onto the S&P 500 March futures. We will have further upside bias as the roll takes effect this week and as shorts cover their positions boosting the market. Once this artificial levitation is over, we can look forward to the quadruple witch the following week after which we would expect to see some peace and quiet in the market.
It is interesting to remember that the US Dollar index made a high on March 4, 2009 when it traded up to 89.71. From that level, traded down to 74.10 on November 26, 2009 and from that low mounted a rally which took it to a high of 81.43 on February 19, 2010. This past week, the March options expired on the US Dollar index. This event went quietly into the history books and we look forward to the roll this coming week as traders move from the March contract to the June contract.
We continue to be confused as to why we have to use corn as a base for ethanol. We know that there are better and more efficient conversions available in the market so why is there always a push for corn based ethanol? Why not use palm oil or sugar or something else which will convert to ethanol cheaper, why corn….oh, forgot it’s the lobby dummy.
Tuesday: Chicago Fed President Evans speaks. Wednesday: January wholesales inventories are released at 10:00 and February treasury budget (are they serious calling that creative writing piece a budget?).
Thursday: January international trade is released at 8:30, California sells muni bonds (this will be interesting to see how much they have to pay to get people to buy their bonds),and New York Fed President Dudley speaks. Friday: February retail sales are released at 8:30.
The US Dollar index rejected the high in the Friday session and closed the session close to the lows of the session. It should be remembered that Friday, March options expired. Although we will have roll-over this week, the market looks as though it will trade lower. When we draw a trendline on the stochastic indicator and the RSI we notice that it is and continues in a downtrend. The uptrend for the US Dollar index is at79.96. The downtrend line is at 80.134. The stochastic indicator, our own indicator and the RSI all are issuing a continued sell-signal. The Thomas DeMark Expert indicator is issuing a buy-signal. The 5-day moving average is at 80.607. The top of the Bollinger band is at 81.04 and the lower edge is seen at 79.834. It is interesting to note, that the lower edge of the Bollinger band and the uptrend line are almost the same. We are above the Ichimoku clouds for the daily time-frame but we are below the clouds for the weekly and the monthly time-frames.
The S&P 500 rallied in the Friday session completing a run to the upside for a sixth day. Naturally, the stochastic indicator continues to remain extremely overbought and is giving us a sell-signal. The problem here is, that there are lots of cross currents seen in the indicators. The RSI continues to point higher at overbought levels, our own indicator is pointing higher at overbought levels and the Thomas DeMark Expert indicator is issuing a sell-signal. The 5-day moving average is at 1112.86. The upper edge of the Bollinger band is at 1139.06 and the lower edge is seen at 1055.35. We find the daily and weekly chart above the clouds and the monthly chart below the clouds. The indicators on the weekly chart are approaching overbought and are pointing higher. Remember that during roll-over the futures seem to have an upside bias. This will be a very interesting week.
The NASDAQ 100 is even more overbought than is the S&P 500. We have the same mix on the indicators that we saw on the S&P 500. All are overbought some issuing a sell some continuing to issue a buy-signal. The 5-day moving average is at 1837.69. The top of the Bollinger band is at 1885.99 and the lower edge is seen at 1731.85. The NASDAQ 100 is approaching the January highs and it won’t take a lot of effort for this index to get there. We are above the clouds for the daily and the weekly time-frames and are in the clouds for the monthly time frame.
The Russell 2000 is back to levels seen prior to the major break seen in September of 2008. That is a huge gain for this index which has outperformed all the other indices. We are and have remained grossly overbought since early in February. The stochastic indicator is going sideways at overbought levels. The RSI continues to point higher at overbought levels and the Thomas DeMark Expert indicator is pointing lower at overbought levels. Our own indicator is at overbought levels but not issuing any signal at all. Naturally, we are above the Ichimoku clouds for the daily and the weekly time-frames. The 5-day moving average is at 640.61. The top of the Bollinger band is at 665.30 and the lower edge is seen at 584.47. This should be an interesting roll-over. Fasten your seat belts and get ready to Mr.Toad’s wild ride.
Crude oile is inching is way higher and higher and looks as though it could easily challenge the 84 level. The stochastic indicator is overbought but continues to point higher. The RSI is not overbought and is pointing higher. We are above the clouds for the daily and monthly time-frames but in the clouds for the weekly time-frame. The 5-day moving average is at 79.73. The top of the Bollinger band is at 83.22 and the lower edge is seen at 72.23. We believe that crude oil will continue to slowly make its way to higher levels. The move will be gradual and because of that will not attract a lot of attention in the press.
Gold looks as though it could retreat a bit further. It is currently in the Ichimoku clouds for the daily time-frame. Both the weekly and the monthly charts show gold above the Ichimoku clouds. The 5-day moving average is at 1121.54. The top of the Bollinger band is at 1151.25 and the lower edge is seen at 1067.39. the uptrend line is seen at 1106.25 and the downtrend line is found at 1141.62. We would not be surprised to see gold back and fill here for a while longer before another rally begins.