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Market Stage
(3/8/2010)
On Friday, we wrote that 'Advancing SBV oscillator readings are bullish and would favor a further advance.' 0 Today, we saw a modest further advance (with flat closes) on the major indexes.
60-day charts with a 20-period SBV are presently showing rising SBV oscillator readings on the Nasdaq 100; values are however nearly flat SBV on the S&P 500 and the Dow. The following SBV values found at session's end: Plus 37% on the Nasdaq 100; plus 27% on the S&P 500; plus 22% on the Dow. SBV oscillator readings continue to be positive and therefore suggest the possibility of a further advance. However, the buildup of bullish volume on this chart has become quite pronounced suggesting we could see flat trading that might then grow into a correction. 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 up-side action.
It is noteworthy to point out that the major indexes are approaching their January 2010 highs. Given that these are sensitive levels for many investors, we think there could be some sideways trading at or near those levels, similar to what was seen in January 2010.
Market Status
(3/8/2010)
Market Performance:
� | Last | Change | Volume | A/D Ratio | | S&P 500 | 1,138.43 |  | 0.14 (0.01%) |
| 3,095,814 | 0.92 | | NASDAQ 100 | 1,890.89 |  | 2.33 (0.12%) |
| 654,572 | 0.90 | | DJI | 10,552.14 | | | 13.53 (0.13%) |
| 687,863 | 0.50 |
Today is the one-year anniversary of the market making multi-year lows with the S&P 500 reaching a low of roughly 666 points (the index is now trading at over 1,138 points).
The Nasdaq 100 extended its wining streak to a ninth consecutive session today although gains were slim. Overall, the major indexes paused and consolidated today after a very strong rally off the early February lows. The Nasdaq 100 is currently in the vicinity of its January high while the S&P 500 and the Dow are still trading somewhat below those levels.
NASDAQ 100 - 3/8/2010.
1-day Intraday, Modulated Volume.
Volume Analysis:
9:30 - 14:00: The Nasdaq 100 spent most of the session in a modestly rising price channel that was broken to the downside in the last hour of trading. On a one-day chart of the Nasdaq 100, you can see that as the index was rising, it accumulated predominantly bullish volume today (which appears in green on the SBV oscillator pane). However, as the index was temporarily slipping toward the bottom of its rising channel between roughly 11:10 and 11:35, the index built up the session’s largest bearish volume surge (bearish volume appears in red on the SBV oscillator pane). Because a strong buildup of bearish volume that occurs as the market pushes lower is often a sign that bearish momentum can no longer be sustained, traders were able to anticipate a potential upside reversal after 11:30. As you can see, the index did in fact continue its rally after the peaking of this bearish volume surge. Later in the session however, more bullish volume built up, and the day’s largest bullish volume surge peaked at 13:05. A strong buildup of bullish volume generated as the market pushes higher is often a sign that bullish momentum can no longer be sustained. Some sideways trading followed the peaking of this bullish volume spike, and roughly an hour later, the bulls could no longer sustain the advance.
14:00 - 16:00: With bullish momentum now spent, the bears took over and pulled the index lower, to a close roughly in mid-range. Despite this, the Nasdaq 100 closed higher for a ninth consecutive session today. A five-day chart of the index shows no clear volume bias for the day - a small surplus of bullish volume may have been produced.
Short Term (lasts a few hours to a few days): From Friday's report: '...we believe additional upside is fairly limited and the market is then ripe for a consolidation or pullback'. Today, of the major indexes, only the Nasdaq 100 managed some further upside (rising 0.12%) while the Dow and the S&P 500 declined modestly.
Our short-term outlook remains largely unchanged from the one we presented here on Friday. We cannot rule out a brief push to modestly higher levels (likely only on an intraday basis), but we do not like the reward-to-risk relationship for new long positions at this time, as downside risks may currently outweigh upside potential. The market has only just begun to “process” the strong buildup of bullish volume that has been building up since late February (view 10-day charts), and this could bring some further (but likely limited) downside pressure.
Analyst's Daily Tip:
Charts: Resizing Charts
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Delayed volume reaction
It is important to note that when a significant volume surge appears, an index will not always change its direction immediately. Quite frequently, the index will continue further along its prevailing trend, and in doing so, accumulate more and more Buying Volume or Selling Volume, as the case may be. For example, when an index is moving up and generating further Selling Volume as it continues its uptrend, the total accumulated Selling Volume grows (is ‘collected’). The greater the amount of Selling Volume that builds up over time, the longer and stronger we can anticipate the coming trend reversal to be.
Financial Press Overview:
No key economic data releases are scheduled until Wednesday of this week. Market participants are therefore taking their cues from other events. According to many in the press, we are seeing a new bull market. In conjunction with stories about the one-year anniversary of what has been called a “historic rally from the depths of the worst bear market since the Great Depression”, journalists are reporting that there are good chances we are seeing a new bull market, although this year's gains are likely to be much more subdued than those seen in 2009 (after the March lows). On an interesting side note, it has been pointed out that yesterday’s high on the Russell 2000 index coincided with the March 2009 low on the S&P 500 (both sporting values of roughly 666 points).
In spite of all the talk about a new bull market, trading was lackluster and eventless today, with the major indexes flat or only very slightly higher after a very strong and prolonged rally. From a news flow perspective, there were virtually no catalysts such as market-moving corporate headlines and economic data releases. Today’s trading also occurred on the year’s second lowest overall volume output (barely 900 million shares on the NYSE).
Some enthusiasm may have resulted from the news that AIG has sold another of its divisions its American Life Insurance Company to MetLife for $15.5 billion. AIG is in the process of repaying substantial loans to the US government and is therefore liquidating assets.
Tech stocks outperformed modestly today, with the Nasdaq 100 index barely keeping a 9-day rally alive - after Wall Street darling Research in Motion benefitted from a brokerage upgrade.
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. |
