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Thursday, March 6, 2014

Daily update 3/6

Happy anniversary Mr. Bull Market.  It was March 6, 2009 when SPX made its bear market intraday low.  How much longer will it last? 

It was another mixed day.  The QQQ and IWM were down on the day while most indexes were positive.  The transports were strong.  They are still below their high, but are getting close.  The Dow closed above last Friday's high.  It still has a way to go to the Dec. high.  Here is the SPX daily chart.


We gapped up this morning and ran a bit further.  We spent the afternoon bouncing up and down but stayed below the early morning high.  There were 261 new highs today which is a bit of a drop off from the thrust day up.  We have not seen any real selling pressure on this break out to test its quality.  People have been willing to chase price up some.  You never know how much further we go before they quit buying though.  This move is getting long in the tooth without a consolidation or pullback of some sort.  Will that happen before the Dow and transports make new highs?  Here is a peak at the SPY 60 minute chart.


The volume picked up a bit in the afternoon.  We can see a couple of elevated red volume bars.  The afternoon sellers were back today, but were not aggressive. This chart has turned down a little bit. Will the bulls rush in to buy the dip or will there be a little more profit taking?

Tomorrow is the much watched employment report.  It is always subject to pretty big revisions so it does not really tell us much.  However, it does move the market.  What does the market want?  Here at the highs do we need good news to go up?  Will bad news be taken as a sign the FED might stop the taper?  I don't have a clue how the market will react.  I am pretty sure the FED will not stop the taper with the market at the highs.  They do not change policy directions quickly.  Right now they have the perfect cover for continuing the taper.  The weather is being blamed for the weakness.  The question is what happens in the second quarter.  That quarter has tended to be extremely soft for several years now.  I suspect the much higher heating costs from this winter will be a bit of a drag for several months after the weather warms up.  People need time to build some savings back up.

The next several trading days are critical for this market.  The SPX break out is suspect until both the Dow and the transports make new highs.  They are close enough that can happen quickly.  It is also possible it does not happen at all.

All bull market tops and bear market bottoms are different.  There is no formula for recognizing them.  Every major turning point is recognized by a few people.  However, it is not the same few people at each point.  There are always things wrong at each major turning point.  They just are never the same things.  In early 2000 biotech stocks were running like crazy.  Low volume single digit stocks were making huge daily moves.  People were all gaga over internet stocks.  Sound familiar?  Instead of tech stocks being wildly over valued it is small caps.  Buyer beware.

Bob

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The information in this blog is provided for educational purposes only and is not to be construed as investment advice.