Archive for March, 2010

Sunday, March 21st, 2010

This past week was filled with drama from the FOMC meeting to health care. We are heading into the spring/summer home selling season. As the tulips bloom the housing market should take on a new life and see some positive numbers. There are lots of houses on the market and inventory levels are high. Home buyers that want to move need to start looking now so that they can close and move before school begins in the fall. This season, we could even see some trading down, out of the expensive house to something more reasonable. There are tax incentives for first time buyers and swap buyers alike. Every possible gift, including rock bottom mortgage interest rates are available. This will be a very telling season indeed. If housing can’t perk up here, who knows how long it will take.

People continue to have trouble paying bills. In spite of all the economy expanding talk, very little has filtered thru to the middle class worker who continues to have trouble paying bills. This is a nation of shopaholics who, every once in a while, relapse into shopping and run out the door to buy something. We are addicted to shopping and nothing makes us feel as good as buying something, so, although most of us are on extreme budgets, every once in while the demon reappears and we have to go out and shop. Seasonally springtime we tend to upgrade and fix the house, perhaps for a sale or just to spruce it up for the Easter/Passover Holidays. Shoppers are emerging from the winter’s hibernation to ferret out that new Easter outfit for the children or something to spruce up last year’s holiday outfit to make it look newer. Thus, the adults will spend on little things to upgrade last year’s style. Could be a hat, or a scarf, a new ties or a new pocketbook to match the shoes. Something small just to make the outfit feel new and current.

On the Jobs front we do see some small improvements. There are openings for some entry level jobs. On the other hand, we do see cut-backs on middle management and upper management jobs in troubled firms.

Tuesday: February existing home sales are released at 10:00.
Wednesday: February durable goods are released at 8:30, and February new homes sales are released at 10:00. Thursday: Federal Reserve Chairman Bernanke testifies on the Hill and mutual fund sales and redemptions are released.

The US Dollar Index enjoyed a robust two-day rally last week in the Thursday and Friday sessions. The rally, in two days took back all that was lost in the previous six days. Yes, we know that the market rallied on the 15th. We seem to be in a trading range with 81.43 at the top and 79.61 at the bottom. All of the indicators that we follow continue to issue a buy-signal on the US Dollar index. All have plenty of room to the upside. The 5-day moving average is at 80.295. The top of the Bollinger band is at 81.126 and the lower edge is seen at 79.79. We have just gotten a parabolic SAR buy on the US Dollar index. As you know a parabolic SAR is a stop and reverse signal which just covered the short and went long. Naturally, we are above the Ichimoku clouds for the daily time-frame, but we are in the clouds for the weekly and below the clouds for the monthly time-frames. Remember, as the US Dollar index gets stronger, it does have an impact on dollar based commodities which, should decline as the US Dollar appreciates.

The S&P 500 June futures declined in the Friday session. We can attribute the decline to the fact that the March futures went off the board at the opening of trading on Friday. It is also likely that many of the futures traders took the day off after the expiration in the morning. This lack of attention led to a decline in the market. The 5-day moving average is at 1149.86. The top of the Bollinger band is at 1173.31 and the lower edge is seen at 1082.63. We are above the clouds for both the daily and the weekly time-frames. We have seen this market grossly overbought for most of the rally since February 16. The Friday session yielded a sell-signal from all but the Thomas DeMark Expert indicators. The Thomas DeMark Expert indicator is going sideways at overbought levels. Friday’s retreat did not break the uptrend line which is at 1151 for the Monday session.

The NASDAQ 100 looks worst than does the S&P 500 does. Why? Because the NASDAQ 100 made a fresh high in the Friday session and then proceeded to remove the low and left a bearish engulfing candle on the chart. We do have a sell-signal from the stochastic indicator, the RSI and our own indicator. This alone is not enough to make us bearish. At the moment there is no break in the trendline on the indicators and until that occurs, we will just watch the action of the NASDAQ 100. We are above the Ichimoku clouds on both a daily and weekly time-frame but we are below the clouds on the monthly time-frame. We would have to break 1903.75 to become bearish. Right now, we believe that we will back and fill, perhaps trading a little lower. That should resolve into a continuation of the uptrend that is, unless we close below 1903.75. A close below that level will be negative for the market. We have signs of exhaustion in this market.

It looks as though the Russell 2000 is taking the lead on the direction of Mr. Market. This index, declined in the Thursday session while both the S&P 500 and the NASDAQ rallied. All the indicators that we follow continue to issue a sell-signal with plenty of room to the downside. We actually saw this market close below the 5-day moving average which is at 673.88. The top of the Bollinger band is at 695.42 and the lower edge is seen at 614.67. We are above the Ichimoku clouds for both the daily and the weekly time-frames. We would be concerned if this index closes below….666.

Crude oil looks as though it will trade lower. All the indicators that we follow herein continue to issue a sell-signal with plenty of room to the down side. The 5-day moving average is at 81.91. The top of the Bollinger band is at 83.59 and the lower edge is seen at 78.48. We continue above the Ichimoku clouds on a daily time-frame but we are in the clouds for the weekly time-frame and below the clouds for the monthly time-frame. The past two trading days have been difficult for crude oil and seems to be linked to the US Dollar strength. We can expect to see this continue for a while longer.

Gold retreated in the Friday session. Gold is trading inside the clouds for the daily time-frame. The 5-day moving average is at 1114.16. The top of the Bollinger band is at 1143.43 and the lower edge is seen at 1092.54. Gold looks as though it is stuck in a trading range and until a break to either the upside, above 1145.80 or a break below the downside 1088.5 we will remain on the sidelines. We are inside the Ichimoku clouds for the daily time-frame but remain above the clouds for both the weekly and the monthly time-frames. We believe that there is more room to the downside and will buy should the low of 1088 hold.