A small gap up this morning brought out the sellers like the last two days. As SPX was testing the lows from the last two days it rebounded suddenly. A mysterious rumor from anonymous sources said an oil production freeze agreement might be reached at this weekend's meeting. That sent oil and stocks higher all day. Notice the volume increase. People piled in on the news. The breadth was +77%. New highs came in at 125, well below the prior rally high of 222. In the afternoon SPX got above the highs of the last two days, but failed to stay there.
The futures ended the day back above the 20 SMA, but have not confirmed an upside break. Will they be able to stay there this time?
The red count fell considerably today, but is still above the green count. Both are below 50.
The MCO has reached positive territory. The 10 DMA lines are still positive.
The short term bull pressure crossed back positive today.
The slight short term oversold condition of the MCO and the red count has been worked off. All my market internals but the green count are positive. In theory that should be enough to indicate the market goes higher. The odd thing is we had three days in a row of positive breadth (two of those days very strong) and yet SPX did not clear what looks to be only minor resistance. What is up with that? We have had invisible hands working in both directions. It is not clear to me in the price action that the bulls have won. They need to show up tomorrow and keep pushing higher. We have cleared the slight oversold condition. If the bears come back tomorrow they could be more aggressive then they have been the last few days. Overnight news might be the deciding factor.
The entire premise of this rally from the Feb. low seems to be that the Doha meeting this weekend will lead to an oil production freeze. That is why the rumor this morning sparked a bunch of buying. I am pretty suspicious that is not going to happen because there seems to be a serious lack of trust in the players. No agreement seems very likely to send oil and therefore stocks lower. It is possible an agreement has already been priced in so there may not be much upside even if it happens. If all this is not enough we have started earnings season which did not work out very well for AA and JNPR. The longer term direction will likely be determined by what the companies say about the future more then the price of oil. We don't have any clarity on either of these issues so it seems unlikely we will be breaking out to the upside of this recent trading range just yet.
Bob
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