Market Holds Gain Despite Profit Taking

SUMMARY:
{ Market makes it 6 out of 7, holding a gain despite some afternoon profit taking.
{ Older economic news (GDP) is fine, but the newer information is not as
{ Second Fed member talks about inflation. Market may be assuming QE 3 but the Fed has started dropping bread crumbs.
{ A solid week, a bit extended, but more tape painting provides a path for gains up to . . . the Jobs Report.


MARKET SUMMARY

A bit of profit taking late in the session but nothing to change the week.

The stock market performed as expected on Friday with a continuing recovery rally. It lasted at least through lunch, and then it made the pullback that we anticipated into the afternoon and the close. There was a bit of profit taking, but it was not anything spectacularly negative. It was just a little fade ahead of the weekend following a good six out of seven upside sessions. NASDAQ, +0.25%; SP500, +0.3%; Dow, +0.4%; SP600, +0.84%; SOX, -0.25%; NASDAQ 100, +0.2%.

Nothing negative at all about the action. It was just a day where the momentum continued until the afternoon when some profit taking occurred. We felt that was going to happen, and we were part of the profit taking. We bagged a few nice gains here and there on another run to the upside. With the market being this choppy over the past few weeks, having a nice run and banking some gain is a very good outcome. Moving into next week, the question is whether the tape painting ahead of the end of the quarter will continue, and will it continue into the Friday jobs report? Friday will wrap up the quarter, and it will be interesting to see if the market moves right up to the quarter or if there is an anticipatory pullback.

New money has been coming into the market on new months (excepting this month). Overall we have had good upside moves to start each month and each quarter as fresh money is put to work. There is no doubt that new money is coming into the market, but there are some issues ahead we have to examine before we can conclude that the market can continue to the upside after this end-of-quarter rally.


OTHER MARKETS

Dollar: 1.4078 Euro versus 1.4171. The dollar scored a nice gain. It undercut the November low, and now it has reversed and recovered that level. We may get that familiar false breakdown. A stock X or currency in this case X will break lower only to reverse just as people think it has broken a significant support level and is heading lower. Often we have seen a stock or currency reverse after that and make a good move to the upside. We will see if it is a good move. The dollar is in a three-month downtrend. It is just now approaching that downtrend line, and the 20 day EMA acted as resistance on the last bounce. It is coming to an important area, and we will see how it is handled. The reversal may be worthwhile. The Fed was out again on Friday saying that we have to consider the removal of the liquidity and start focusing on inflation. With that, we have two of them speaking that way. There may be some credence to it given that there is more than one shooting from the hip. Thus the dollar was warranted a rise, particularly after other currencies have had a good run against it. Maybe this is nothing more than a bit of giveback. We will see.

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Bonds: 3.44% versus 3.41% 10 year Treasury. Bonds lost a little ground. A good rally up off the lows, a higher low and a higher high. Now they are coming back to test the 50 day EMA, the gap, and the late-February peak. Also sitting right on top of the December-January consolidation. A great place to hold and bounce if it will do that, but why would bonds be moving up if the economy is improving and everything is fine in the world? Well, everything is not fine in the world, thus I believe that is one reason that bonds in the US are acting somewhat as a safe haven again. Money is working its way regardless of the gains in the stock market because there is a bit of a fear trade in bonds. That is helping push bonds higher and yields lower, although they there are still elevated yields from where they were just a few months back.

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Gold: $1,426.30, -10.10. Gold had a tougher day. It did not make the surge it has in the past. There are various closes of gold, but the point is it has had a good rally. It bounced up against the early-March peak and it is having a struggle at this point. We did not like the action in one of our silver plays, so we took the gain off the table. It could be that these precious metals are double topping here. I do not think it would be any kind of major pullback X more of a modest pullback to test these prior peaks or just below them before moving back up.

It does not appear that gold is in a lot of trouble, although there are those out there saying it is ready to crash. Others are saying it is going to $5,000. I am not in either camp, although I do think it will go up.

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Oil: $105.39, -0.03. Note how this pattern is very similar to gold, at least in the double-top aspects. It is holding steady on the session after mirroring what happened on Thursday when it tapped that prior high and showed a doji, unable to continue the move. We have calls out of JPM that oil is going to explode higher up to $130 average in Q2. That would not be good for the American consumer or businesses, of course, but it looks rather suspiciously double-toppish right here. It may pull back before it moves higher.

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THE ECONOMY

TO VIEW THE ECONOMY CLICK THE FOLLOWING LINK:

Flash: http://investmenthouse1.com/ihmedia/f/eco/eco.html


TECHNICAL SUMMARY

INTERNALS.

Volume. The internals were relatively lackluster on the day. The market moved higher, but volume fell 6% on the NASDAQ to 1.8B. That was below average. It fell 5% on the NYSE to 824M, and that was below average as well.

Breadth. Breadth was a modest 1.4:1 on the NASDAQ. It was a bit better at 1.7:1 on the NYSE thanks to the small caps outperforming the rest of the market. Not much excitement from the internals.


CHARTS

SP500. Six days out of seven to the upside on the SP500, and it rallied higher intraday. It never made it to the March peak and, of course, that means it did not make it to the February rally high. It showed an evening star doji. It gapped to the upside and showed a doji with that high candle. We will now see if it gaps to the downside. This is not necessarily death. If it hit the high, that could have been a real concern. It did not happen here, but it has had a good rally back to the upside. You always have to have a bit of concern when you see a good recovery rally that falls short of prior peaks and does not seem to have a lot of momentum. Yes, it moved up six out of seven days, no doubt, but the volume is pathetic. There is no trade. It has been below average for the last four days as the market moved higher.

You do not necessarily want to bet against this. The end of quarter is coming and the tape painting has been excellent. There would be more of that next week, which will see the last week of March and Q1 take place. It ends on Friday. Technically there is a lack of real push with strength at this point, but if money continues to flow, we will not get in front of it. I would anticipate another rise, maybe up to the early-March peak if it cannot make the February peak. There is still room to the upside, but I am not anticipating the market will break to a new rally high. If it does, I'll be pleasantly surprised.

NASDAQ. NASDAQ did not have a stellar day, but it had very similar action to the SP500. A gap higher, a rally, and then a giveback. It sold to give back most of the move. Still below the March peak and February peak, and right at the mid-January level. We have some problems here. There is a lack of momentum at an important area. It has been a good recovery. It has been a long-winded recovery, but technically we are concerned. We might get some more followthrough toward the end of the month and end of quarter. After that we have to watch. We have to be a bit careful; there may be some impetus to sell even if there is also a first-of-the-month or new-quarter push to the upside as some new money gets dumped into the market.

SP600. I do not want to say the small caps were more frightening than the others, but they have had more success and have rallied to key levels faster than the large-cap indices. On Friday SP600 moved through the March peak. It still left it below February, but it made an important break and it got thrown back in its face. Yes, it still gained almost 1%, but it lost a lot of ground as it came off of its high. We have a doji here, and it is at that March peak X it caught my eye. It is a bit disquieting, but then again, it is just a warning or an indicator. It is not anything carved in stone. It just says it got to that level and the sellers pushed it back.

There are reasons for that on SP600 as well as NASDAQ and SP500. A good run to the upside, a good recovery move, and then a weekend when there is a lot of geopolitical turmoil ongoing. After a good run to the upside with two days where the market will not be open, it is not surprising that investors were taking some money off of the table. That does not mean the move is over. It just means there was a bit of profit taking on Friday, and that was exhibited on the SP600 as well.
SOX. SOX was down on the session. It again tried to put some distance on its 50 day EMA and failed to do so. It is still ragged and still well below its March and February peak. It is actually struggling at some prior lows (the late-February low and a consolidation range from late-January). Semiconductors have a little issue here, a potential head and shoulders. It could be apexing right now. We will have to watch and see what happens.


LEADERSHIP

Retail. Retail had a decent day. FOSL had a very solid upside day on strong volume. PCLN resumed its move this week with a great surge off the 50 day EMA, putting together three very strong upside days. BC has a very nice day, breaking higher out of its pennant pattern as it does from time to time. Tremendous volume on this move. Nice action.

WFMI continues to the upside. It gapped with that breakaway move. It took its time, moving laterally over a month, but now it is making nice, steady gains once again. Retail is looking good in some areas. Some are not as hot, but it is showing consumers coming in again, and that is interesting. We had the positive Q4 GDP with respect to consumer spending, but we have had sentiment indicators that are not as positive. That is often the case; people say they will not spend as much, but they end up doing it anyway.

Energy. Energy had a decent day, although it was mixed. RPC had a great day on volume, moving higher. A great week as it really kicked in the continuation of its breakout move. NBL had a great week and it has resumed the move on Friday, kicking nicely higher. FTO is doing very well. Nice breakout from that flag pattern. Good action there. Volume could have been better, but we will not quibble over that. On the other hand, there are stocks that ran well but could not keep it together on Friday. LUFK posted a gain, but it showed a doji after a very nice two-week run. A little pullback would be normal.

Transportation. Transports continue to perform decently. TK posted a nice break on volume Friday. It started on Thursday, and it continued with a nice, strong move on Friday. CSX did not a lot, but it was a positive two weeks as it posted a new rally high, continuing its solid move. It is getting to a point now where it tends to come back and test the 20 day EMA. In the past when has moved up with these rather accelerated gains, it comes back to test that level. We may see it head back for some testing after that doji it showed on the Friday candlestick chart.

Industrials. CAT tested and it resumed the move upside with some nice volume. DE had a good day as well, bouncing to the upside.

Financial. Financials were not helping out at all on Friday (or Thursday, for that matter). JPM barely moved. GS actually declined on Friday on rising volume. WFC made a move higher, but it stalled at the 50 day EMA. Not that exciting.

Technology. AAPL had a nice day, gapping to the upside. It keeps getting prices raised. ORCL announced earnings after the Thursday close. It gapped to the upside, but notice that it gave back a lot of it. Good news, but ORCL trades like this on its earnings; sometimes it gaps and holds, and sometimes it gaps and gives back. This is just one of those 50/50s, and it gave back on this session. There are others out there. CRM made a nice bounce, gapping higher on Thursday. Now it is testing. That may give the entry point we are looking for. We did see some technology start to come back from selling, and we may get some buys out of it moving to next week.

Overall leadership perked up as you would have expected after this kind of move. Some of it is extended. Some energy stocks are quite extended, and some in retail have made a good move thus far. Of course CSX in the rails is way up. DE and CAT had a little pullback, but they have had a good bounce to the upside. Not necessarily where you would want to buy. The problem is finding stocks in position to move. Some have pulled back. Maybe now money will flow more readily back into technology after it has been beaten up over the past several weeks.


THE MARKET

VIX. The VIX has given back the move from the first part of March that ratcheted volatility up over 30 as the market sold back. As soon as the market rallied, it has dropped right back down, but not to the lows that started the move. Why? The indices have not made the highs they were at before the move. This is acting just as you would expect it to. In other words, volatility was not rising as the stock market rose. It only started to move up when the stock market turned volatile and choppy and started to sell off. Volatility, typically being the inverse of the stock market move, shot higher at the time. It would have been a problem if volatility was moving up as the stock market was moving up similarly. That was not the case. If it does happen, that is pretty reliable indication that you have a major correction coming. We did not have that X not yet. We had a substantial pullback as we had in August and November, but no major selloff. The market is rebounding and it still has work to do. We will see what happens. VIX was not flashing any very dangerous signs.

VIX: 17.91; -0.09
VXN: 20.78; +0.19
VXO: 17.66; -0.12

Put/Call Ratio (CBOE): 0.84; -0.05


Bulls versus Bears:

This is a reading of the number of bullish investment advisors versus bearish advisors. The reason you look at this is that it gives you an idea of how bullish investors are. If they are too bullish then everyone is in the market and it is heading for a top: if everyone wants to be in the market, then all the money is in and there is no more new cash to drive it higher. On the other side of the spectrum if there are a lot of bears then there is a lot of cash on the sideline, and as the market rallies it drags that cash in as the bears give in. That cash provides the market the fuel to move higher. If bears are low it is the same as a lot of bulls: everyone is in and the market does not have the cash to drive it higher.

Bulls: 50.6% versus 52.2%. Even as the market pushed higher investors were a bit more skeptical. Good to see. Bulls peaked in late December on this upside leg and have made lower highs since. Still high overall but not necessarily bearish. Hit 55.1% in January and 58.8% on the December high on this leg. Still at a high level in a string of high readings but below the 5 year high at 62.0. Fading back from the level considered bearish, i.e. where so many are in the market and believe it is going up that the ammunition to send it higher runs low. This is where you start to be careful and watch for breakdowns, but there is also a lot of liquidity being pushed into the market and that can continue the move despite excess bullishness. The crossover level at 29% bulls is long gone, but it did its job. The high on the last leg was 56.0% after starting at 35.6% on the low in February, the lowest it has been since July 2009 . . . until this last leg. 35% is the threshold level suggesting bullishness. Again, to be seriously bearish it needs to get up to the 60% to 65% level.

Bears: 22.4% versus 22.3%. Bears increased before bulls started to decrease but now the bulls are moving a bit faster. Up from 19.5% to start March. Moving back up toward 23.3% hit mid-February, still well below the 28.3% in September 2010. The 37.7% peak at the height of the crossover is well in the rearview mirror but bears remain well below the 35% level, above which is considered bullish for the market overall. Hit 18.7% on the low in April. Hit a high of 27.8% level on the prior leg in February. For reference, cracking above the 35% threshold considered bullish. Hit a high on the prior run at 47.2%. For more reference, bearishness hit a 5 year high at 54.4% the last week of October 2008. The move over 50 took bearish sentiment to its highest level since 1995. Extreme negative sentiment. Prior levels for comparison: Bearishness peaked at 37.4% in September 2007. It topped the June 2006 peak (36%) on that run. That June peak eclipsed the March 2006 high (33%) and well above the 2005 highs that spawned new rallies (30% in May 2005, 29.2% in October 2005). That was a huge turn, unlike any seen in recent history.


NASDAQ

Stats: +6.64 points (+0.24%) to close at 2743.06
Volume: 1.806B (-6.21%)

Up Volume: 1.05B (-560M)
Down Volume: 742.81M (+401.67M)

A/D and Hi/Lo: Advancers led 1.37 to 1
Previous Session: Advancers led 1.8 to 1

New Highs: 141 (+29)
New Lows: 20 (-4)

NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg

NASDAQ 100 CHART: http://investmenthouse.com/ihmedia/NASDAQ100.jpeg

SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg


SP500/NYSE

Stats: +4.14 points (+0.32%) to close at 1313.8
NYSE Volume: 823.97M (-5.15%)

Up Volume: 528.83M (-143.95M)
Down Volume: 284.48M (+95.79M)

A/D and Hi/Lo: Advancers led 1.69 to 1
Previous Session: Advancers led 2.09 to 1

New Highs: 242 (+68)
New Lows: 23 (+7)

SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg

SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg


DJ30

Stats: +50.03 points (+0.41%) to close at 12220.59
Volume DJ30: 130M shares Friday versus 131M shares Thursday.

DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg


MONDAY

As if the rest of the issues in the world were not enough, the data parade renews itself next week with a torrent of economic reports culminating Friday with the March jobs report. There may be more news over the weekend as problems arise in Syria now, and more stirring in Saudi Arabia. I do not want too be dramatic here, but the spread of this unrest is getting to be quite dramatic. Bear with me while I digress a bit.

I am sure a lot of people want to throw off the yoke of oppression they have endured for decades, and no one other than the yoke owners have issue with that. The problem is that some people are using the uprisings in North Africa and the Middle East to score politically here in the US. They are trying to piggyback on the uprisings, but the themes are not the same at all. We do not know all of the motives of those overseas, but we can assume there are many who just want freedom. That is natural. We wanted it and it is an innate desire in everyone. Of course they do not necessarily know how they would govern themselves, and it quite possibly would not be a democracy, but they just want freedom from what is imprisoning them now. They know they are not going to get anything if they continue to acquiesce, so we are seeing uprisings.

Over here it is not the same thing. We have relative freedom, although it is being stripped away piece by piece over the years. But we do have freedom. Some of these groups using the uprisings overseas as a comparison to their actions are simply trying to perpetuate some bad decisions made in the past. Both sides have legitimate arguments. If you have a contract and you set up your life in reliance upon that contract, it is very difficult later in life to have that reneged upon and have to renegotiate the terms. It may, however, be a situation where there is absolutely no alternative because the money is not there. There has to be a compromise made at some point because too much was promised, with good intentions, but it is more than we can deliver.

The question is how we are going to make up that promise. Do you put it all on the other members of society who are not a part of these pension contracts and other retirement deals that were made? Do they have to shoulder the shortfalls all themselves because the governments may have been too profligate or they just overpromised? Some of the contracts were just unreasonable and unrealistic; there was no way they could be fulfilled but it was done for votes, expediency, etc. Nonetheless, they were promises made and reliance has occurred. Or is it fair to put it all on the taxpayers and tax more from them to pay for others unrealistic contracts? Maybe it would be fair to work at it from both ends? Perhaps some of the benefits should be cut back and then maybe some more revenue brought in from elsewhere or redirected. These are issues we will have to deal with, but it is not the same as what people are experiencing overseas.

Educate yourselves on it, and you will see what the truths are. Do not be led to believe anything X not by what I say or what anyone else says. Just read, listen to everyone, and then make rational decisions. Wouldn't we all be better off if we did that? What novel thoughts.

Back to the market.

Whether we want to face it or not, those are the realities that the market has to deal with every day as an overlay to what it normally factors into the equation, e.g. be income and spending, profits and losses, manufacturing, orders, confidence, etc. And we have a week full of those factors. Personal income and spending is on Monday along with pending home sales. Case/Shiller on Tuesday along with consumer confidence, and then Challenger and ADP on Wednesday. Then we have initial claims, Chicago PMI and factory orders on Thursday. This all leads up to the granddaddy of them all: Nonfarm payrolls on Friday. That is expected to fall back a bit to 185K, which is still a pathetic number.

The Unemployment rate is expected to stay at 8.9% after dropping unexpectedly to that level the prior month. Will it bounce up or not? The way they count unemployment now, it is hard to tell. It is no longer if you are working or not. It is whether you are working or trying to or out of the market, et cetera. In any event, it is still bad, but it may be improving as the weekly jobless claims are showing.

We will get a lot of data next week, no doubt. What has happened this past week when we have gotten a lot of data? The market went up, even though a lot of the news was negative from overseas and with the US economic numbers. The market said, what the heck, we are going higher. That led everyone to believe it is painting the tape or anticipating some further Quantitative Easing in the form of QE III.

We have been playing the devil's advocate on all of the theories we have put out lately, whether it is tape painting (likely some of that) or the anticipation of Quantitative Easing III from all of the bad data and bad news in the world. We have come back and poked holes in all of that. It could be pretty much any game at this point. Why? The government is involved so deeply in businesses, monetary and fiscal policy, and in our lives and how we run our businesses. They are making sure GE pays no income taxes whatsoever from the stimulus money it received and all the other loopholes it can find. There are many things the government has to be involved in order to make everything work the way it wants to. It is a tough job indeed.

In the technical picture, we see a market that has rallied six out of seven days. We also see a rally that has a bunch of big-money players that may have missed out on some of the move and want to get in and drive the market higher. Not just to drive it higher, but to get in these stocks they want to have in their quarterly reports. They only have a few days to accomplish that, and as they pile in, they push the market to the upside.

Friday was not a particularly strong day, but for reasons discussed earlier, it was not that weak either. We do not want to put too much into the two doji on the candlestick chart the indices showed in the week. What we anticipate is a further move to the upside. That means some stocks that are already extended will get more extended. That will not make them good buys. There will be stocks out there still in good shape we can try to pick up. We have to realize we may only get three to five more days of upside before more profit taking hits at the end of the quarter or right at the beginning of next quarter. That would get us through Friday, April 1st X watch out for April Fool's Day. Early the following week we may see some pullback.

The question is how much? For now, all you can say is there is likely some more profit taking. We just have to play this buy ear because, technically, it has made a good move back up but has not been that powerful with the low volume. We do not want to chase too many positions here. I know some do not want to hear me say that, but we have picked up a lot of good positions over the past few weeks and started taking some gain off the table. We will use a further rally to primarily take more gain off the table versus initiating a bunch of new positions.

It is all about the risk/reward. We need good entry points where we have a close and logical stop point at hand. We need something that, upside, gives us enough return if we are right to warrant the risk. We do not want to go into 1:1 plays where we are risking a dollar to make a dollar. Those are not odds to continually win. We will have to look for very good risk/reward plays, and those are simply harder to find right now. They are out there. I see them right now when looking through the market, but they are just not as prevalent as they were two weeks ago. The market was sold off then and stocks were falling back towards support and that 50 day EMA that so many of them were hitting and holding.

We have to just throttle back on new positions, let continuing positions run, and take gain as we have to opportunity. If we get a few good plays to the upside that we can buy into, so be it. We can hopefully get some that run decently for us in a week or a week-and-a-half and that give us a nice return.

I do not want to get you discouraged in thinking we will have a slow week ahead in terms of bias. We may. Things may turn around and all of a sudden money may flood into the market. Then we could buy more and ride the wave higher and just keep our stops close at hand. We will play it by ear. We will find some plays and, if we need to, we will make those plays. The intention will be to make money. You do not want to trade either just to trade or in the hope you will make money. We want to know going in that the odds are in our favor and that we expect to make money on the plays. If we do not have that feeling about it, we might as well not be entering that particular trade.

Keep abreast of what is going on. We will let our positions run and look for opportunity. The market always gives us opportunity no matter what. While we may not be taking ten or twelve positions next week, we may be taking two, three, or four. They can make us nice money nonetheless. I will see you on Monday at the start of a week full of data.

Have a great weekend!


Support and Resistance

NASDAQ: Closed at 2743.06

Resistance:
2762 is the February low
2796 is the February gap down point
2802 is the early March peak
2825 is the 2007 closing peak.
2841 is the February 2011 peak
2862 is the 2007 peak

Support:
2729 is the 127% Fibonacci extension of the August 2010 run
The 50 day EMA at 2715
2705 is the February 2011 and consolidation low
2686 is the recent January 2011 closing low
2676 is the January 2010 low
2645-2650ish from December 2010 consolidation
2580 is the November 2010 closing high
2569 is the November gap up point through the April 2010 peak
2550 from May and June 2008 peaks
2540 is the gap up point from early November
2535.28 is the April 2010 intraday peak
2530 is the April 2010 closing peak
2518 is interim peak from April 2010
The 200 day SMA at 2479
The November 2010 low at 2460


S&P 500: Closed at 1313.80
Resistance:
1313 from the August 2008 interim peak
1325-27 is the March 2008 closing low and the May 2006 peak
1332 is the early March peak
1344 is the February 2011 peak
1364 is the March 2007 low
1370 is the August 2007 low

Support:
The 50 day EMA at 1295
1294 is the February 2011 and the consolidation low
1275 is the January 2010 low, early January 2011 peak
1255 is the late December 2010 consolidation range
1249 is the March 2011 low
1235 is the mid-December 2010 consolidation low
1227 is the November 2010 peak
1220 is the April 2010 peak
The 200 day SMA at 1190
1185 from late September 2008
1174 is the May 2010 high, 78% Fibonacci retracement of April peak
1173 is the November 2010 low
1170 is the prior March 2010 high
1156 is the Sept 2008 low
1151 is the January 2010 peak
1133 from a September 2008 intraday low
Bottom of the January 2010 consolidation 1131 to 1136
1129 to 1131 is the June and August 2010 peaks


Dow: Closed at 12,220.59
Resistance:
12,283 is the March 2011 peak
12,391 is the February 2011 peak
13,058 from the May 2008 peak on that bounce in the selling

Support:
12,110 from the March 2007 closing low
The 50 day EMA at 11,976
11,893 from March 2008 closing low
11,867 from the August 2009 high and peak on that bounce in the selling.
11,734 from 11-98 peak
11,555 is the March low
11,452 is the November 2010 peak
11,258 is the April 2010 peak
11,205 is the April closing high
The 200 day SMA at 11,119
11,100 from the 7-08 low
10,963 is the July 2008 low
10,920 is the recent May high
10,730 is the January 2010 peak


Economic Calendar

March 25 - Friday
GDP - Third Estimate, Q4 (08:30): 3.1% actual versus 2.9% expected, 2.8% prior
GDP Deflator - Third, Q4 (08:30): 0.4% actual versus 0.4% expected, 0.4% prior
Michigan Sentiment - Preliminary, March (09:55): 67.5 actual versus 68.0 expected, 68.2 prior

March 28 - Monday
Personal Income, February (08:30): 0.3% expected, 1.0% prior
Personal Spending, February (08:30): 0.5% expected, 0.2% prior
PCE Prices - Core, February (08:30): 0.2% expected, 0.1% prior
Pending Home Sales, January (10:00): 0.3% expected, -2.8% prior

March 29 - Tuesday
Case-Shiller 20-city, January (09:00): -3.3% expected, -2.38% prior
Consumer Confidence, March (10:00): 65.0 expected, 70.4 prior

March 30 - Wednesday
MBA Mortgage Index, 03/25 (07:00): +2.7% prior
Challenger Job Cuts, March (07:30): 20% prior
ADP Employment Change, March (08:15): 210K expected, 217K prior
Crude Inventories, 03/26 (10:30): 2.131M prior

March 31 - Thursday
Initial Claims, 03/26 (08:30): 383K expected, 382K prior
Continuing Claims, 03/19 (08:30): 3700K expected, 3721K prior
Chicago PMI, March (09:45): 69.5 expected, 71.2 prior
Factory Orders, February (10:00): 0.4% expected, 3.1% prior

April 01 - Friday
Nonfarm Payrolls, March (08:30): 185K expected, 192K prior
Nonfarm Private Payrolls, March (08:30): 203K expected, 222K prior
Unemployment Rate, March (08:30): 8.9% expected, 8.9% prior
Hourly Earnings, March (08:30): 0.2% expected, 0.0% prior
Average Workweek, March (08:30): 34.3 expected, 34.2 prior
ISM Index, March (10:00): 61.4 expected, 61.4 prior
Construction Spending, February (10:00): -0.7% expected, -0.7% prior
Auto Sales, April (15:00): 4.61M prior
Truck Sales, April (15:00): 5.61M prior

By: Jon Johnson, Editor
Copyright 2011 | All Rights Reserved

Jon Johnson is the Editor of The Daily at InvestmentHouse.com

Technorati tags: stock trading stock market investing Jon Johnson InvestmentHouse.com

Market Continues 2-Day Bounce

SUMMARY:
{ Market continues a 2-day bounce as geopolitical events again intervene on its behalf.
{ G7 surprises, gets aggressive to weaken the yen.
{ UN finally does what it was designed to do as it sets up a no-fly over Libya.
{ China raises reserve requirements 50BP but with everything else happening no one paid any mind.
{ Consumer Sentiment takes a dip.
{ A bounce but the technical action was not convincing enough to start more upside.


MARKET SUMMARY

Some good news helps stocks continue the rally but in the end the bounce remains dubious.

There was good news out on Friday that helped buoy the market and continue the bounce from Thursday. The G7 gave a surprise announcement that it would intervene against the yen, and the UN established a no-fly zone over Libya. That was able to quell some worry with respect to the natural disaster in Japan as well as the unrest in Northern Africa and the Middle East X at least with respect to the killing ongoing in Libya.

The market was able to continue its bounce. Looking at an intraday chart, stocks gapped at the session open, getting a good move upside right out of the gate. The first 15 minutes of the opening move was the zenith for the gains on the session. Every index and, of course, most individual stocks showed the same kind of action we see on the SP500. There is the initial surge followed by a trend lower for the rest of the day. Lower highs and lower lows.

That did not mean they gave up all the gains, although that proved to be the case with NASDAQ 100. The stock market did lose a lot of the nice gains built on the day. Indeed, NASDAQ lost almost -12 points off of its intraday high at the close. SP500 was down -10 points off its high as it closed. The Dow lost almost -75 points. They pared back their gains tremendously.
NASDAQ +0.3%, SP500, +0.4%; Dow, +0.7%; SP600, +1.2%; SOX matched NASDAQ in its inability to move the ball forward; NASDAQ 100, -0.2%.

A look at the daily chart is more telling than the intraday. Usually it is the other way around. In this case, there is a gap higher and the surge right off the open, and then the reversal gave away most of the gain accrued during the session. It also tapped at the 10 and 50 day EMA and reversed. There is the old tombstone-type of doji. If you see something like this after a strong run, that is more indicative of a top and rollover. Here it does not suggest a major selloff. It does suggest the bounce experienced off a Wednesday low and the gains on Thursday and Friday could be rather short-lived. We will look at that as we move forward.

What drove the action on Friday? It was a continuation of that Thursday bounce, no doubt, and it was expiration. That will affect the tape, but looking at the chart on the intraday action, there was not that much volatility. It all occurred at the open, and then it was a slow whittling away of the gain.

OTHER MARKETS

Dollar: 1.417 versus 1.4017 Euro. The dollar did dip. It was definitely weaker on the entire week. It tried to bounce and hold some support over the past couple of weeks, but that failed and it rolled over, continuing this short downtrend. Now it is getting more severe. First it rolled over at the 50 day EMA, and now it has rolled over at the 20 day EMA. On Thursday and Friday it was bouncing up to the 10 day EMA and rolling over. Looks like it is getting more aggressive.

It made a new closing low (not intraday) for the past year, and that is very important. You can tell it is at a very important level. It is trying to hang on. There are three other levels on this trendline that will be very important ahead as far as support levels, including the November and December 2009 low. A very bearish pattern right now, and the dollar is struggling even with intervention to weaken the yen.

http://investmenthouse.com/ihmedia/dxy0.jpeg


Bonds: 3.27% versus 3.24% 10 year Treasury. Were weaker on the Friday session, but stronger on the week overall. There was a gap breakout by bonds as they moved over the recovery peak and then the higher low. This is an important test that has come back on Friday to test the gap. We will see if it continues to the upside. Bonds rally when there is concern in the world and people rush into US Treasuries. If the economy is apparently weakening, bonds become a better investment. There is something out here again. Bonds are near the level they were when the bond market was sniffing out the Egyptian and Tunisian problems, and that was the tip of the iceberg of political unrest in North Africa and the Middle East.

http://investmenthouse.com/ihmedia/tlt.jpeg


Gold: $1,416.10, +11.90. Gold had another up session after being down on the week. It is recovering. It bounced off the 50 day EMA this week. It tested and bounced, tested and bounced, and then it found footing and moved up on Friday. This may be the test that breaks it back to a new rally high. We will see. It may give an opportunity. We might get a test back in the first part of the week. If that holds, that would be an opportunity to pick up gold. I said this earlier in the week on this test. If you do not have gold, you might a want to pick up a bit. Do not load the boat, but take some of your profits and buy a bit of gold at this point. You can either do physical gold or something like the GLD.

http://investmenthouse.com/ihmedia/xgld.jpeg


Oil: $101.07, -0.35. Oil finished lower at the early close on Friday. It was either up or down slightly, depending on what market you follow, but overall the picture is that oil was unable to surge. It did rally even though the Libya no-fly zone accord was reached at UN. One would have thought oil would weaken because maybe we get oil flow. The problem is that Gadhafi is likely winning out over the rebels. What do we do at that point? Do we sanction Libya and not buy its oil, or do we buy the oil and use other sanctions that only impact the citizens of the country? That is a dilemma we find ourselves in because we never learn from history how to respond to these problems.

Oil is still holding its gain. It bounced off a test of the breakout, and it is still well higher in its range. It does not show any signs of weakness other than a bit of a pause on Friday on the no-fly zone. If it was going to really weaken on that news it would have cratered. The fact that it rallied and still held its move overall shows that it is really not worried that much about Libya. Maybe it had a tangential effect on the price of oil, but oil is moving where it is for other reasons that are bigger than Libya itself.

http://investmenthouse.com/ihmedia/xoil.jpeg


TECHNICAL SUMMARY

INTERNALS.

Volume. You can tell it was expiration Friday. Volume jumped 28% on NASDAQ to 2.5B shares, and it jumped 83% on the NYSE to 1.9B shares. Definitely expiration from the volume standpoint, but not from the volatility standpoint. That makes it interesting. There were simply a lot of positions being shuffled and rolled over because of the events that hit the market relatively late in expiration.

Breadth. Breadth was fairly strong at 2:1 advancers over decliners on the NASDAQ and 2.6:1 on the NYSE helped out by those small caps, posting that 1.2% gain.


CHARTS

SP500. SP500 rallied to the 10 and 50 day EMA on the high. It showed a tombstone doji of sorts on high volume as it faded off of that early rally. If this appeared at the top after a long run to the upside, you would not necessarily know it was the top. It would be a more important indicator. As it has occurred after a short bounce in what has already been some selling, it still suggests more near-term downside. Not necessarily a rollover to new lows, but it could come back down and test the recent low, and even down to the support level that was the next logical support level before the early to mid-December consolidation level. That puts it almost at the top of the November turnover or the November peak before the market started to sell off in that consolidation/correction.

We still have a near-term weak bias despite to upside days on SP500. Overall, there is still an ABCD pattern in place. If it was going to work, you would expect it to continue higher from here. It has bounced up and hit the B point. It has been unable to punch through right now, and that is an important point when an ABCD pattern is moving to the upside. It has not completely answered the question of the ABCD yet but, in my gut, I do not like what I see near term. It may have to test deeper and then maybe a new move to the upside. Overall it is not a tragedy of any sort on SP500. It is just taking a deeper correction. In length, SP500, NASDAQ, and the other indices have been just about as long as the August and November corrections.

NASDAQ. NASDAQ had a weak session. It gapped higher and rolled over. That was the second day in a row it gapped higher and rolled over. It has posted gains both sessions, but those gains finished well off the highs of the sessions. It is not showing the strong drive to the upside you would expect if a bounce had discovered renewed vigor and was going to carry itself back up to new rally highs.

In my opinion, NASDAQ has more selling to do. As with SP500, it does not look like a major selloff. On Wednesday it came close to the November peak on the low. I would expect it to sell back down to that level or in the top part of that consolidation where you see the gap point up in November. That point was tested later that month with a high and then a gap through that level later in that same month. It is a very important level at 2540 that you need to watch on NASDAQ as it continues this test. If it holds that and bounces, there is a very good chance of it having put in the low on this correction.

SP600. The small caps posted a very good session. It was a good session on the price, but that still leaves them below the 50 day EMA and at the late-February low. That makes it coincident with the late-January peak and the late-December consolidation. A very big level of resistance that the small caps are running into right now. They will definitely have to prove they have what it takes to get through this resistance range. Resistance and support are usually a range, and you can see where the highs have been hit, bouncing up and down in that narrow range. The SP600 looks good in terms of the bounce and the percentage it made, but it still has a lot of work in clearing some serious resistance immediately overhead.

SOX. The semiconductors are still thrashing about. They gained a bit of ground on Friday, but it was a modest bounce off the selling on the week. They are still below the 10 day EMA and still below some resistance from the January lows. They have a lot of prove at this juncture, and I think they have some more selling. There is at least more consolidation to get through before they can make a new and renewed move that challenges the prior highs.


LEADERSHIP

Financial. Financials are looking quite good, bouncing nicely. Looks like they might be trying to help out SP500. JPM gapped over the 50 day EMA after a tough week. GS bounced sharply off the 200 day EMA on a big surge of volume. We will see if that volume outlasts expiration. The financials are trying to step up. Not necessarily a beautiful pattern on JPM, but they are trying to step up and getting some money put their way.

Industrial. CAT had a big day on Friday. An ABCD pattern is helping it, and it is gapping to the upside. DE was able to gap. It did not hold its entire move, but it has its own ABCD pattern and is moving to the upside. No complaints about those areas or the transports.

Transportation. CSX hit a new rally high on a closing basis Friday. TK has a very nice pattern. It is not breaking down at all, showing solid volume increases. Looking at trucking, ODFL has broken to a rally high. It cleared a trading range. While these may not be in the best buy positions at the moment, these areas are showing good growth. They are from important areas X financial, industrials, and transports.

Energy. Energy has been a leader. It has not all broken down, but it is struggling. OIH, the oil service ETF, has been playing around the 50 day EMA lately. It is trying to break above it, but it had a tough day on Friday. You would expect that with the UN action on Libya. XOM is struggling at the 50 day EMA itself. Great run, but it has a struggle going. Looks like it needs to base out a little. We took good gain off the table.

CHK rallied and almost got to a new rally high, but it has fallen over the past two sessions. We will have to watch that and see how it plays out. It has been quite strong to this point. BTU has been performing very well over the last week. Looked like it was broken down, but there was a nice reversal on big volume to the upside as we start looking around for other means to power our vehicle fleets and our economy.

Retail. Retail is a very mixed bag. ROST is holding up very well with a test of the 50 day EMA. KSS looked like it was making a break higher, but now it looks like it may be breaking down. BBBY looked to be in very good shape all the way into January and even February, but it put in a broad top with a triple peak and a lowering MACD. It has broken down. A lower high, and now it is bouncing up to the 10 day EMA and having trouble there. PNRA is a leader in the restaurants, and it is still holding up just fine at the 20 day EMA. UA gapped to the downside on big volume in sympathy with NKE and its poor earnings outlook on Friday. It said it will have inflation issues with cotton, labor, and transportation prices.

Cheaper retailers are on the mend. DLTR is bouncing off of a rounded bottom and moving higher. HD is holding but struggling, and there is a little head and shoulders. On the other hand, LOW is holding at the 20 day EMA. There is a clear back and forth from the retail sector.

Metals. Metals are mixed once more. FCX is still moving higher, although it gapped and finished basically flat on Friday. It is making a bounce, and we will see if it can continue that move. RS looks toppy. A head and shoulders, a breakdown, and looks like it is failing at the 50 day EMA. Metals are not grotesquely in trouble right now, but they are not looking that sharp.

Technology. There is not leadership to the upside here. It is more to the downside. FFIV is breaking down through an important gap point on Friday. It did so on volume, although that could have been related to expiration. AAPL is having a tough week. A sharp selloff on Wednesday on a downgrade, and then an upgrade on Thursday. Looked like it did not save it or pull its castanets out of the fire; it looks like it is heading lower to test this important support level. VMW is heading down to the bottom of a range, taking a deeper plunge. Maybe it can hold at that level. Definitely worth taking a look at. CRM is trying to hold its gap from November. It broke below the trading range, but it might give us a false breakdown and bounce to the upside. Even though there is weakness, you should always look for opportunity either upside or downside. Some of these are showing that potential. Techs overall are no doubt struggling.


THE ECONOMY

G7 Intervenes to weaken the yen in a surprise move.

UN and the US overstep their bounds while failing to live up to their primary purpose.

China Raises Reserve Requirements 50BP.

CNBC Consumer Survey is concerning.

To view the video, use the following link:
Flash: http://investmenthouse1.com/ihmedia/f/eco/eco.html


THE MARKET

VIX: 24.44; -1.93
VXN: 26.6; -1.81
VXO: 23.55; -1.94

VIX. Volatility spiked up over 30 on the intraday high on Wednesday, and it managed to hold at a high level overall. That is high relative to where it has been trading, and 30 is considered a more volatile level historically. By the end of the week it had fallen back to 24, down to the mid-range of what is historically considered the 20-30 range for volatility. That puts it at a moderate level of volatility, but it is on the rise thanks to this selloff. Volatility did not show there is any major aggressive selloff in progress, but of course it does not always factor in (as bonds do) extraneous events that could be in the works that hit the market overall. That is why we see that big spike higher after the Japanese issues.

It has pulled back. It has broken out of one range, but it does not mean it will explode higher in major selling. It is likely to find resistance near the 30 level. That is a key level from back in 2007-2009 X times when there were not a lot of negatives facing the market overall. You might say are a lot of negatives out there with all the geopolitical issues, and you are right. There are negatives, but the volatility market is not necessarily showing that. Again, fall back on the bond market some. It is showing another issue could possibly erupt. It continues to price in higher bond prices versus higher yields.

Put/Call Ratio (CBOE): 1.02; -0.06

Bulls versus Bears:

This is a reading of the number of bullish investment advisors versus bearish advisors. The reason you look at this is that it gives you an idea of how bullish investors are. If they are too bullish then everyone is in the market and it is heading for a top: if everyone wants to be in the market, then all the money is in and there is no more new cash to drive it higher. On the other side of the spectrum if there are a lot of bears then there is a lot of cash on the sideline, and as the market rallies it drags that cash in as the bears give in. That cash provides the market the fuel to move higher. If bears are low it is the same as a lot of bulls: everyone is in and the market does not have the cash to drive it higher.

Bulls: 52.2% versus 52.2%. Holding steady after bouncing from 50.6%. Below the recent high of 53.3% three weeks back and 55.1% hit in January and the 58.8% high on this leg. Still at a high level in a string of high readings but below the 5 year high at 62.0. Fading back from the level considered bearish, i.e. where so many are in the market and believe it is going up that the ammunition to send it higher runs low. This is where you start to be careful and watch for breakdowns, but there is also a lot of liquidity being pushed into the market and that can continue the move despite excess bullishness. The crossover level at 29% bulls is long gone, but it did its job. The high on the last leg was 56.0% after starting at 35.6% on the low in February, the lowest it has been since July 2009 . . . until this last leg. 35% is the threshold level suggesting bullishness. Again, to be seriously bearish it needs to get up to the 60% to 65% level.

Bears: 22.3% versus 21.1%. Growing skepticism among bears, up from 19.5% to start March. Moving back up toward 23.3% hit mid-February, still well below the 28.3% in September 2010. The 37.7% peak at the height of the crossover is well in the rearview mirror but bears remain well below the 35% level, above which is considered bullish for the market overall. Hit 18.7% on the low in April. Hit a high of 27.8% level on the prior leg in February. For reference, cracking above the 35% threshold considered bullish. Hit a high on the prior run at 47.2%. For more reference, bearishness hit a 5 year high at 54.4% the last week of October 2008. The move over 50 took bearish sentiment to its highest level since 1995. Extreme negative sentiment. Prior levels for comparison: Bearishness peaked at 37.4% in September 2007. It topped the June 2006 peak (36%) on that run. That June peak eclipsed the March 2006 high (33%) and well above the 2005 highs that spawned new rallies (30% in May 2005, 29.2% in October 2005). That was a huge turn, unlike any seen in recent history.


NASDAQ

Stats: +7.62 points (+0.29%) to close at 2643.67
Volume: 2.493B (+27.88%)

Up Volume: 1.57B (+330M)
Down Volume: 1.09B (+353.58M)

A/D and Hi/Lo: Advancers led 2.11 to 1
Previous Session: Advancers led 1.54 to 1

New Highs: 50 (+10)
New Lows: 45 (-18)

NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg

NASDAQ 100 CHART: http://investmenthouse.com/ihmedia/NASDAQ100.jpeg

SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg


SP500/NYSE

Stats: +5.48 points (+0.43%) to close at 1279.2
NYSE Volume: 1.91B (+83.65%)

Up Volume: 1.34B (+510.21M)
Down Volume: 556.1M (+358.73M)

A/D and Hi/Lo: Advancers led 2.61 to 1
Previous Session: Advancers led 2.69 to 1

New Highs: 69 (+16)
New Lows: 25 (-11)

SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg

SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg


DJ30

Stats: +83.93 points (+0.71%) to close at 11858.52
Volume DJ30: 355M shares Friday versus 182M shares Thursday.

DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg


MONDAY

Last week was big on economic data with some geopolitical issues thrown on top of Friday to ice up the week. We still have important data this week to go on top of the strong PPI, the strong CPI (in my opinion), and the decline in housing starts that I think was a good decline. There is other data regarding housing. Monday brings existing home sales, and new home sales are out Wednesday. Very important to see how they are playing out. We have to find a bottom somewhere, but prices need to bottom first. Inventories have been falling, and that is a help. We will have to see how much of a help. Great things are not expected, I will just put it that way.

Initial claims are out Thursday. Durable orders are important. Then there is the final Q4 GDP. Some data has suggested it could come higher, but it is not expected to rally much off of the right down to 2.8% on the second iteration. Finally there is Michigan Sentiment. We will see if it shows any improvement or if it tracks the CNBC poll that came out.

How do we approach the coming week? We did not have a lot of confidence in the bounce. We did not want to take any positions on Friday to the upside even though some of our plays were bouncing through buy points. They were just not showing the kind of strength that you want to see. There was no point in trying to be a hero on Friday. There is a tombstone doji on the SP500, even in the overall ABCD pattern. We think there could be a pullback to start to week that takes us down into this late-December or early-December consolidation range. Logical support levels. If you remember the review of the Fibonacci chart, it has been holding at the 50% retracement level, at least on a closing basis. It could come back and test that early-December consolidation and come back to the 61% level. That would not be anything horrible. It just needs a consolidation.

Near term looks a little bearish to us even though it has two days to the upside. That is one of the reasons we were not putting new money to work on Friday. There were just too many factors out with expiration and the geopolitical actions ahead of the weekend. We will see how things play out this week. We will have to be ready for both downside and upside. There are still stocks setting up. If this turns out to be the bottom near this 61% level and the consolidation point from December, then we will get a decent bounce off of that. It is not that far away.

You might be able to get an upside play from the leaders that are holding support now, or those that have come back down in a trading range to a key support level (such as CRM). Not to mention those that have been holding up well all along and are ready to move to the upside. They are out there, believe me (DE, JOYG). There are great stocks out there that are still in position to move back to the upside. We need to be ready for those when the selling stops.

Near term, maybe we can take some positions to the downside on the SPYder. We had a gap and reversal on Friday, and that could take it down to the November peak or this consolidation range as we were talking about. That is a good drop that would make us some money. Then we look for a turn back to the upside. Maybe for the NASDAQ, you could play the QID. You can see how it has gapped higher, it is testing, and it looks like it wants to move higher as well.

That would be the flip side of the QQQQs which have gapped to the downside, bounced a bit, and now they look weak and like they want to test somewhere in this November range. It may not be a huge move if our theory about a relatively mild consolidation plays out incorrectly. Why would I think that would be case? A lot of bad news has hit the markets, but it has not tanked them. They were ready to sell. They got a little choppy, no doubt, after that long move to the downside. MACD was waning and they needed a consolidation. That was the technical reason that the market has been selling. It was a technical reason, and the geopolitical events put a label on it and gave even a reason to sell.

Even with all of those issues, the markets have held up well, just putting in a relatively normal consolidation. With a normal consolidation, even with all of the heavy-weight geopolitical actions, our thesis that the market is just undergoing another normal correction looks decent to us. If the economy tanks or if new data comes out that shows the economy is really rolling over, then that goes out the window, of course. This rally has been predicated upon liquidity from the Fed and a modest economic recovery.

Whether liquidity alone can do it is questionable at this juncture because the Fed is toward the end of its Quantitative Easing II period. If the Fed does not announce another Quantitative Easing program and the economy starts to slip dramatically, then likely the liquidity alone cannot hold the market up. That would change the game somewhat. If the economic data does not improve and actually takes a turn for the worse, do you think the Fed will not come out with Quantitative Easing III? At some point, the Quantitative Easing will not make a difference, but Quantitative Easing III would still make a difference in this economy.

We will have to be ready for both situations, upside and downside. That is the market we have right now. It has not finished this transition period, and that is the game we have to play. Do not be a hero and take huge positions; take a lot of base hits. Just hit singles, doubles, and triples, and we will all be happy at the end of this.

Have a great rest of the weekend!


Support and Resistance

NASDAQ: Closed at 2636.05

Resistance:
2645-2650ish from December 2010 consolidation
2676 is the January 2010 low
2686 is the recent January 2011 closing low
The 10 day EMA at 2693
2705 is the February 2011 and consolidation low
The 50 day EMA at 2718
2729 is the 127% Fibonacci extension of the August 2010 run
2735 from late 2007 interim peak
2762 is the February low
2796 is the February gap down point
2825 is the 2007 closing peak.
2841 is the February 2011 peak
2862 is the 2007 peak

Support:
2580 is the November 2010 closing high
2569 is the November gap up point through the April 2010 peak
2550 from May and June 2008 peaks
2540 is the gap up point from early November
2535.28 is the April 2010 intraday peak
2530 is the April 2010 closing peak
2518 is interim peak from April 2010
The 200 day SMA at 2464
The November 2010 low at 2460


S&P 500: Closed at 1273.72
Resistance:
1275 is the January 2010 low, early January 2011 peak
1278 is the 127% Fibonacci extension of the August 2010 run
1294 is the February 2011 and the consolidation low
The 50 day EMA at 1294
1313 from the August 2008 interim peak
1325-27 is the March 2008 closing low and the May 2006 peak
1344 is the February 2011 peak
1364 is the March 2007 low
1370 is the August 2007 low

Support:
1255 is the late December 2010 consolidation range
1235 is the mid-December 2010 consolidation low
1227 is the November 2010 peak
1220 is the April 2010 peak
1185 from late September 2008
The 200 day SMA at 1183
1174 is the May 2010 high, 78% Fibonacci retracement of April peak
1173 is the November 2010 low
1170 is the prior March 2010 high
1156 is the Sept 2008 low
1151 is the January 2010 peak
1133 from a September 2008 intraday low
Bottom of the January 2010 consolidation 1131 to 1136
1129 to 1131 is the June and August 2010 peaks


Dow: Closed at 11,774.59
Resistance:
11,867 from the August 2009 high and peak on that bounce in the selling.
11,893 from March 2008 closing low
The 50 day EMA at 11,949
12,110 from the March 2007 closing low
12,391 is the February 2011 peak
13,058 from the May 2008 peak on that bounce in the selling

Support:
11,734 from 11-98 peak
11,452 is the November 2010 peak
11,258 is the April 2010 peak
11,205 is the April closing high
11,100 from the 7-08 low
The 200 day SMA at 11,050
10,963 is the July 2008 low
10,920 is the recent May high
10,730 is the January 2010 peak


Economic Calendar

March 21 - Monday
Existing Home Sales, February (10:00): 5.05M expected, 5.36M prior

March 22 - Tuesday
FHFA Housing Price I, January (10:00): -0.3% prior

March 23 - Wednesday
MBA Mortgage Index, 03/18 (07:00): -0.7% prior
New Home Sales, February (10:00): 288K expected, 284K prior
Crude Inventories, 03/19 (10:30): 1.745M prior

March 24 - Thursday
Initial Claims, 03/19 (08:30): 384K expected, 385K prior
Continuing Claims, 03/19 (08:30): 3700K expected, 3706K prior
Durable Orders, February (08:30): 0.9% expected, 3.2% prior (revised from 2.7%)
Durable Orders ex-Transports, February (08:30): 1.8% expected, -3.0% prior (revised from -3.6%)

March 25 - Friday
GDP - Third Estimate, Q4 (08:30): 2.9% expected, 2.8% prior
GDP Deflator - Third, Q4 (08:30): 0.4% expected, 0.4% prior
Michigan Sentiment - Preliminary, March (09:55): 68.0 expected, 68.2 prior

By: Jon Johnson, Editor
Copyright 2011 | All Rights Reserved

Jon Johnson is the Editor of The Daily at InvestmentHouse.com

Technorati tags: stock trading stock market investing Jon Johnson InvestmentHouse.com

Despite Quake, Tsunami, Market Did Not Sell Off

SUMMARY:
{ Despite quake, tsunami, EU bond yield surge, weaker sentiment, and morning pundit predictions the market would selloff, it didn t.
{ January retail sales rise in line at 1%, but driven so to speak by gasoline price increases.
{ Michigan sentiment takes a hit on gasoline prices. Inflation expectations jump.
{ Business sales hit a 12 month high at 2%
{ SP500 looks just like November and SP600 as well. NASDAQ and SOX, however, have to make a comeback.


MARKET SUMMARY

You hate to ask what more can happen, yet the market is holding up for now.

It was another day loaded with news. Unfortunately there was some tragic news with the earthquake and tsunami in Japan. Our thoughts and prayers go out to the victims of that natural disaster, as well as those rushing to their aid. The US Navy and many other branches of the service are rushing to give supplies and equipment to Japan to help the relief effort.

In addition to that terrible news, there were other worries out. There was an EU bond yield surge. We cannot forget the debt crisis (with the US included) that still has to be dealt with. Bond yields were surging, and there was weaker sentiment in the US. There were a lot of predictions by the pundits that the market would sell off as the day wore on. You would expect that looking at the futures early on, but that is not what happened. Indeed, we were looking at the futures and the charts. We put out a premarket alert saying that the market would bounce. It was merely a technical bounce; there was no solid foundation or reason for it to do it other than a technical situation. Sure enough, that is exactly what happened on the day.

The futures were down but, almost to the minute that the bell rang, the market turned positive and rallied throughout the session. It came back a bit late in the day, but overall quite solid. NASDAQ, +0.5%; SP500, +0.75%; Dow, +0.5%; SP600; +20%; SOX +1%. It has a long way to come back. It has been beaten up this week, but it managed to post a gain even though it looks to be a relief gain at best.

It was not a huge day to the upside, but it was not a day to complain. It was a relief bounce on some of the indices and individual sectors. SP500 still looks quite solid. The slight undercut of the 50 day EMA on Thursday and a recovery on Friday sure makes it look like November. Of course looks can be deceiving, so we cannot bank everything on the fact that February and March look like November of 2010.

You do have to take what the market gives you, and it was bouncing nicely. There were great stocks moving very well on Friday. It was not just a relief move. Retailers were moving quite nicely. Old standbys such as CHS were rallying nicely. BONT tested and looks to be ready to bounce back up after breaking from a triangle. This was common. There were energy stocks moving back up well, particularly the refineries such as FTO. Some technology stocks were performing well. A had a nice reach lower and reverse. These are solid stocks in solid patterns performing nicely even as some sectors show wear and tear. We will discuss more of those in the leadership section.


OTHER MARKETS

Dollar: 1.3911 Euro versus 1.3790. You might wonder why the dollar would sell off with an earthquake and tsunami in Japan. The reason is that the yen really surged. It surged against everything because insurance claims in Japan will have to be paid in yen. They would be buying yen and selling other assets to acquire more yen. Insurance companies would be doing this to make their payments. Therefore you would see a stronger yen even though there was a devastating natural disaster on the Japanese economy.

The dollar has rallied back from a support level. It was a setback on Friday given the extraneous circumstance, and we will see if it can bounce from here and continue the move up to test this range of resistance from November into January.

http://investmenthouse.com/ihmedia/dxy0.jpeg


Bonds: 10 year 3.40% yield versus 3.36%. Bonds sold on the session. There are two interesting side notes with respect to the bond action. The first is that bond yields are surging in Europe. That is the part of inflation you get when you have a weak debt picture. When your balance sheet is very weak, it requires those buying your debt to demand more return. In other words, they demand more yield for the bonds they are buying. Then the bonds drop in price and the yield goes up. Then you have a point where no one wants them and the yields spiral out of control.

Another interesting thing was that CNBC had the CEO of WFC on today. Mr. John Stumpf said WFC was really into the game as far as lending. He said it was a "myth" that WFC and other banks were not lending. He even went onto say that they were really pushing those loans, but the small business demand was not there. They started a campaign of a "second look" where they would look at loans that they had fallen short before, and then would do whatever they could to make those loans.

Wow, that sounds almost like they are really trying. I bank with WFC and know a lot of small businesses do as well, and they could not get money out of them if they wanted to. Several of them I talked to said when they went to WFC, they would not even grant them a sit down. They immediately said they would stick them into the small business plan without even looking at them. They did not get a first look much less the second look. I talked to many of them today, and they said they were not getting any calls from their bankers and loan officers saying they were getting a second look.

It is a bunch of crapola. I'm sorry, but that is the way it is. I have contacts inside this bank way up, and they say they are not catering to small business at all. They are going for people with extremely high net worth X hundreds of millions in net worth. That is who they are making loans to and catering to. I am not just picking on WFC, but they are a big bank in our neck of the woods, so everyone knows them. When the CEO says this kind of nonsensical drivel on CNBC, it is almost fraud. It is incredible. I would love to put him under oath and have him say that to Congress because he would be committing perjury. I guess you have to know if you are committing perjury X pure stupidity does not cover it. In any event, I do not want to pick on just them, but what the hell.

Bonds are trying to rally here in the US, and that is not a necessarily a great thing. There has been a lot of unrest in the world overall, so you would think bonds would rally in a flight to safety in the US. That is what we are seeing. There is no major turn. Inflation will be a big issue. The fear factor right now has helping push bonds higher and yields somewhat lower, although on Friday yields did bounce up.

http://investmenthouse.com/ihmedia/tlt.jpeg


Gold: $1,421.00, +8.50. Gold was not in play today, but it did bounce to the upside. It is still holding its gains over the trio of highs in late 2010. It is testing and looks like it could still make the move back to the upside.

http://investmenthouse.com/ihmedia/xgld.jpeg


Oil: $101.13, -1.57. Oil is the big story X how everything will be impacted by moves in oil and how disasters such as in Japan impact oil. Japan is the world's third largest oil importer. You would expect oil to be weak if Japan was hit with a big natural disaster since that would quell demand. Oil did decline rather sharply intraday. It reached almost all the way down to the 20 day EMA and this pennant consolidation (the first consolidation after breaking to a new high on this rally). It recovered from trading below $100 during the session, however.

Oil was also weakened by Sheikh Alwaleed bin Talal in Saudi Arabia. He likes to play the market and speak on CNBC. He used to be a big share holder in Citibank X maybe he still is. There were a lot of questions bandied back and forth, and one was whether oil is justified at $100 a barrel. He said it is not. He said it was all being driven by fear right now, and that if things quiet down oil prices will decline. That is the point: "If things calm down." Everywhere you look, something bad has happened. You cannot swing a dead cat without hitting a problem. Natural disasters, political unrest, protests, violence, churches being burned X you name it. It is not that great out there.

I hope no one gets mad because I said "swing a dead cat." That is a colloquialism in the southern United States from Tom Sawyer times. Indeed, it was from Huckleberry Finn. I am just throwing out a bit of Americana, but every time I say something like that I get emails from people getting upset. Please, cat lovers, I am just trying to liven it up and getting a little colloquial with my terminology.

In any event, looking at the pattern on oil, there is nothing that suggests it is about to sell off. Indeed, it is coming back and making a very nice test. It may snug up a bit more near the $100 range. I bet that is where it holds and tries to bounce back to the upside.

http://investmenthouse.com/ihmedia/xoil.jpeg


THE ECONOMY

Retail sales up but gasoline prices are the cause: burning dollars in the tank.


Michigan Sentiment tumbles on rising gasoline prices and expectations of inflation.

To view the Economy Video follow the link below:

Flash: http://investmenthouse1.com/ihmedia/f/eco/eco.html



TECHNICAL SUMMARY

INTERNALS

Internals were not that strong considering the upside moves. That suggests it was a relief bounce from the Thursday selloff. Frankly, that is what we were expecting.

Volume. Volume declined 18% to 1.88B on the NASDAQ. It fell 20% on the NYSE to a mere 921M, falling just below average.

Breadth. Breadth was a yawner. Advancers lead 1.1:1 on the NASDAQ and a bit better at 1.8:1 on the NYSE. One reason is the rebound in energy. Also the small caps are performing better. They have not broken their 50 day EMA, and that makes it more interesting.


CHARTS

SP500. SP500 did bounce on that lower volume, but it retook the 50 day EMA. It is not a carbon copy of November, but it is close. We had a strong initial selloff on the current test. It was slower in November, but it did make this double bottom that ultimately led to the bounce. Notice how the second bottom was right on the 50 day EMA. The difference is it snapped off that level each session that it tapped it. It did not close near it.

On Thursday it closed just below the 50 day EMA. There is a bit of difference, but not as strong. That has people worried, of course, and it is always something to watch. Overall the pattern is still solid, however. One concern is that MACD is really hitting the toilet. Not only is it not high as it has been X not that bad because the SP500 has not rebounded up to those highs X but it is really hitting the skids and heading lower. It did do the same thing in November. Do not get too wrapped up in that. Look more for comparisons of price highs versus MACD highs. When it made this last high, SP500 and MACD both put in a high. Here it is putting in an overall higher high, and that is a relatively good indication. SP500 continues to look just fine, all things considered.

NASDAQ. NASDAQ is struggling, on the other hand. It gapped below the 50 day EMA on Thursday. It recovered on Friday after gapping lower at the open and immediately reversing. It did post a gain, but the problem is it tapped at the 50 day EMA on the high and tapped at these prior resistance levels. These were the February lows and the gapping lateral range from January. It tapped them and it faded to the close. It still managed to hold a gain, but the close off of that key level shows it had no guts to take it on. Therefore, I do not know if it will have the guts to continue. Can it be dragged back up by SP500, or will it drag SP500 lower as SOX dragged the NASDAQ lower?

SP600. SP600 still looks good. It has yet to break its 50 day EMA. It did it pretty much on the Friday open, but it bounced right back up and closed over that level. Very solid action. Again, will it survive the gravitational tugs from NASDAQ and the SOX as they head lower? We will have to see if those indices do head lower. They do not look that healthy. SP500 has gotten the snot knocked out of it this week. It was trying to put a decent consolidation together, but it broke lower and gapped sharply lower on Thursday. It gapped and came back up on Friday. You could almost say this is an engulfing day, but volume was not that great overall. It did not quite take out that peak on Thursday.

You could say maybe that it's an ABCD, but it is a really jagged pattern. If this was just a clean sweep up from this level without the big dip, that would be much more meaningful. Right now it has on the ropes and it has to prove itself.

SOX. Even though it may bounce near term, it looks like the path of least resistance will be more selling right now. I hate to be a pessimist, but that surely is the way it looks.


LEADERSHIP

Financial. JPM barely missed a beat on the Friday action. It sold Thursday, but held up its pattern very well over the 50 day EMA. Still looking solid. EWBC looks good, continuing its trend higher. It is below the 20 day EMA, but it also broke below the 20 day EMA in late February and continued to the upside. GS is holding support, doggedly so. It will not give it up.

I am not necessarily ready to dive into it. I am not totally comfortable with it. It has something of a triangle trying to set up, but it is not hitting enough points. That is always a concern. STT is struggling. It is slowly winding its way lower. Not all financials are strong, but they are looking solid overall.

Retail. Retail continues to look good. HIBB had a nice surge on earnings. It could not quite hold it, but it is a great pattern. ZUMZ announced its earnings as well. It gapped down but rallied back. It will likely not collapse here. I am going out on a limb there, but it looks solid despite the action on Friday.

RL had very nice action. JCP is looking okay. It had a doji on Friday, but it has had a great week, surging to the upside. AMZN might be ready to roll back to the upside. Do not forget the strong ones like LULU. It looks very appealing as it sets up a very nice pattern.

Energy. A lot of energy stocks held at the 50 day EMA and were bouncing back on Friday, although they started lower (such as HAL). FTO did very well with a nice break to the upside on volume. XOM held the 50 day EMA and is trying to bounce. That was pretty much the story of the sector.

Technology. Tech has been lagging, but AAPL held the 50 day EMA and bounced. Cannot complain about that kind of action from AAPL. It has held the 50 day EMA many times on this run. FFIV, similar to AMZN, may be trying to roll back up with a nice bounce. We will have to see if it can play out. SOHU is finally starting to make the move we anticipated X a great break to the upside on Friday. Strong volume as it made that move.

NTES may be able to break higher to the upside out of this pennant it is forming. BIDU is starting to break to the upside. Interesting action. We have a nice rally and then it sold off. No ABCD because it kept making higher lows. It put in a bit of a triangle and started the break to the upside. That makes BIDU quite interesting for us. I hate that it is up almost 3.5% on the day. Maybe we will get a pullback Monday. We will see if we can get something out of that.

Metals. Metals are suddenly improving. STLD had a nice break to the upside. It looked like it was selling off, but it is not out of the woods. These are worth considering and keeping an eye on. We have been watching SCHN, and it did not hold as we wanted it to. It gapped lower, but it is trying to come back. We will see what happens. AKS is the same situation as STLD. It sold off, but now it is making a comeback. Very interesting indeed. FCX is trying to bounce after that sharp selloff that made us some very good money to the downside.

Industrial. CAT held the 50 day EMA and bounced back, and maybe it has an ABCD pattern. It looks negative. There is the lower high and lower low, but you have the ABCD. There is a nice rally here, and it is holding at a logical point. It has not given back off of the move because it is holding above this consolidation range. That makes it quite interesting. JOYG has similar action, although it is getting close to the bottom. It did not take it out. There is an ABCD pattern.

I wanted it to hold at the 50 day EMA and make the bounce higher. That would have been cool, but we do not have a problem with a further shakeout either. If it can make the move, then it makes the move. We do not care necessarily what it looks like as long as the pattern is true. There were stocks under stress, but there are also stocks in very good position to move higher. They are still getting money and looking solid. They could lead the market right back up.

Semiconductors. Semiconductors are not necessarily bouncing right back up. XLNX sold off hard. It is trying to bounce, but it stalled out on the way back up at the 50 day EMA. LRCX is trying to bounce, but it is not showing that power to the upside that you would like to see. ONNN has bounced modestly, but it does not look all that strong. It has a broad top here and it rolled over. It has to come up and attack that 50 day EMA and see what it can do at that level. There are leaders in trouble, and leaders that have more to do. They may even want to sell more. At the same time, there are other sectors doing well. Strange as it may seem, retail continues to look as if it wants to move to the upside.


THE MARKET

MARKET SENTIMENT

VIX: 20.08; -1.8
VXN: 22.49; -1.78
VXO: 20.62; -1.3

Put/Call Ratio (CBOE): 1.07; +0.02

Bulls versus Bears:

This is a reading of the number of bullish investment advisors versus bearish advisors. The reason you look at this is that it gives you an idea of how bullish investors are. If they are too bullish then everyone is in the market and it is heading for a top: if everyone wants to be in the market, then all the money is in and there is no more new cash to drive it higher. On the other side of the spectrum if there are a lot of bears then there is a lot of cash on the sideline, and as the market rallies it drags that cash in as the bears give in. That cash provides the market the fuel to move higher. If bears are low it is the same as a lot of bulls: everyone is in and the market does not have the cash to drive it higher.

Bulls: 52.2% versus 50.6%. Bouncing right back up despite the market chop, moving toward the 53.3% three weeks back. Below the 55.1% hit in January and the 58.8% high on this leg. Still at a high level in a string of high readings but below the 5 year high at 62.0. Fading back from the level considered bearish, i.e. where so many are in the market and believe it is going up that the ammunition to send it higher runs low. This is where you start to be careful and watch for breakdowns, but there is also a lot of liquidity being pushed into the market and that can continue the move despite excess bullishness. The crossover level at 29% bulls is long gone, but it did its job. The high on the last leg was 56.0% after starting at 35.6% on the low in February, the lowest it has been since July 2009 . . . until this last leg. 35% is the threshold level suggesting bullishness. Again, to be seriously bearish it needs to get up to the 60% to 65% level.

Bears: 21.1% versus 19.5%. Bears remain skeptical and grew in number even as bulls grew in number as well. Still below the 23.3% hit 5 weeks back and below the 28.3% in September. The 37.7% peak at the height of the crossover is well in the rearview mirror but bears remain well below the 35% level, above which is considered bullish for the market overall. Hit 18.7% on the low in April. Hit a high of 27.8% level on the prior leg in February. For reference, cracking above the 35% threshold considered bullish. Hit a high on the prior run at 47.2%. For more reference, bearishness hit a 5 year high at 54.4% the last week of October 2008. The move over 50 took bearish sentiment to its highest level since 1995. Extreme negative sentiment. Prior levels for comparison: Bearishness peaked at 37.4% in September 2007. It topped the June 2006 peak (36%) on that run. That June peak eclipsed the March 2006 high (33%) and well above the 2005 highs that spawned new rallies (30% in May 2005, 29.2% in October 2005). That was a huge turn, unlike any seen in recent history.


NASDAQ

Stats: +14.59 points (+0.54%) to close at 2715.61
Volume: 1.882B (-18.12%)

Up Volume: 1.27B (+904.93M)
Down Volume: 563.59M (-1.436B)

A/D and Hi/Lo: Advancers led 1.12 to 1
Previous Session: Decliners led 5.79 to 1

New Highs: 33 (-1)
New Lows: 73 (+6)

NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg

NASDAQ 100 CHART: http://investmenthouse.com/ihmedia/NASDAQ100.jpeg

SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg


SP500/NYSE

Stats: +9.17 points (+0.71%) to close at 1304.28
NYSE Volume: 921.06M (-19.91%)

Up Volume: 722.66M (+609.16M)
Down Volume: 184.04M (-845.96M)

A/D and Hi/Lo: Advancers led 1.84 to 1
Previous Session: Decliners led 4.71 to 1

New Highs: 54 (+9)
New Lows: 21 (-10)

SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg

SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg


DJ30

Stats: +59.79 points (+0.5%) to close at 12044.4
Volume DJ30: 143M shares Friday versus 181M shares Thursday.

DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg


MONDAY

Next week brings a plethora of economic news starting with a lot of regional manufacturing reports. New York comes in on Tuesday. We will have the rate decision by the Fed on Tuesday as well. It probably will not give us any kind of change of plan, although we need to start looking for the pullback. Even though there was Quantitative Easing II, it will run out by the summer. The Fed will have to start telling us what it will do after that X whether it will go to Quantitative Easing III, as some are suggesting, or if it will do a complete pullback. If it starts talking pullback, that is when the market will start to panic and drop. Some are saying that is why it is doing it right now; it is starting to factor in the Fed eventually backing off from this massive liquidity pump.

There are also housing starts and building permits. There is the PPI, the CPI, and the Philly Fed on Thursday. There is nothing scheduled on Friday. We have plenty of data to keep the market occupied X as if it needs it. We also have the bond issues in Europe and the riots there. We have the protests, riots, and church burnings, etc. in North Africa and the Middle East. There is continuing turmoil in Libya. It is an unbelievable denial what the Libyan government says versus what is showing up on film. That is always the way when dealing with a totalitarian society. Sometimes it does not even have to be totalitarian, as we know.

There are also the natural disasters. Then we have our own issues in the US with the state capitals and the disagreements between those wanting collective bargaining in the public sphere and those wanting to take away some of the luxurious punch bowl that has been doled out and cannot continue. That is an interesting story itself. All of this will have to work its way out.

It is one of the most interesting years we have had in quite some time. Of course I keep saying that about every other year. That just shows you how the world has to adjust to get along with each other better in a time where the global economy is truly becoming global. There is also a fight to maintain elements of sovereignty that you have to in any country. There are some ways that we do not want to be like other countries. They do not necessarily want to be like us. It is a good thing we keep our identity, but we have to figure out how to work together as we do it. We are having some growing pains with respect to that.

In any event, there is a lot of activity, and that is all an overlay to the technical picture. We have talked a lot about the SP500 and the SP600 looking fine in their patterns. You can even throw the DJ30 in as well. I liked the DJ20 a few weeks ago, but as soon as they hit that new high they were sold off. There is an issue there as well. Nonetheless, we had these consolidations, and we will see if the SP500, SP600 and the Dow can offset the likes of the SOX. It is in a lot of trouble at this point, and NASDAQ is below the 50 day EMA and not looking like a spring chicken either.

Friday we got a bounce we were looking for. Come Monday, I hope we are not kicking ourselves in the behind for not closing more upside positions with this bounce. We will see how that plays out. Again, there are many good upside stocks. There are good sectors doing well and stocks within those sectors performing well. That keeps us heartened that money is still moving into these areas and others in the market. Some leaders like the semiconductors and energy, however, need some air let out of them. They have had tremendous runs, but it looks as if oil will continue higher. If it does, that should help prop up a bunch of the energy stocks that pulled back to their 50 day EMA.

BHI had a very solid day. It bounced sharply off of its 50 day EMA. It is not a lost cause by any means. There are some chips that even still look good, although they are getting few and far between. It is getting difficult to find a lot of good stocks even in the technology sector. They are out there, but it is harder to find some of them so you look in other areas.

We have been mining some of the retail areas. They have looked good. Even some of the technology stocks have come around and started to look better after they have consolidated. We will continue to look for the upside plays because we have some key indices that are still in their uptrends and still look as if they want to hold them.

We will also be looking at some of the downside. They made us good money this past week with X, FCX, etc. But it has been a tough go making money to the downside because the bid under the market bounces it right back up. We may get some improvement again in the metals. They are trying to come around. It will still be a market where we look for the upside plays. We will look for downside plays in sectors that are corroding and starting to crumble. We can play it both ways, almost having our cake and eating it, too. It is a bit choppier and tougher to do, no doubt.

We will keep our play sizes down for now. Do not try to be a hero. There is no point to that in these kinds of transition stages. Even if it does not change the trend, it just rotates and becomes very choppy for awhile before resuming the move. We have made money doing it, sure. We have been banking gain now and then with three or four plays here and there. It is not the steady four or five plays a day. It shows you there is chop going on. You should not take as big of trades, and you should not overweigh your portfolio with any one of these plays in particular. Take even trades and take smaller ones. Do not be greedy, and just let the plays work.

If they do, that is great. If they do not, you can get out of them and move on. You are not going to win the game in this kind of market, but this kind of market can help you lose the game if you are not careful. You do not want to take big risks at a time when it doesn't warrant you taking big risks. Narrow the size, narrow the goal. Be happy with smaller gains and do not let losses get out of hand.

Enjoy the weekend. We will hope and pray for the people in Japan and other places affected by the tsunami. We hope that everyone in the world can settle down and see the big picture. Then maybe some of this hostility will end. I know it is pollyanna, but there is power in positive thought. If you get enough people thinking positive thoughts X like in Kelly's Heroes, "Stop with the negative waves, Moriarty!" Let us start having some positive vibes, and you would be surprised how things happen.

If you do not think it will happen around the world, at least do it for your portfolio. Have confidence in your trade, because that makes a huge amount of difference. Be confident and positive, and you will act quickly and decisively. You will get out of trouble faster, and you will let other plays run that are working for you if you are confident and bold in your actions.

Enough of my pep talk. Have a great weekend!


Support and Resistance

NASDAQ: Closed at 2715.61

Resistance:
The 50 day EMA at 2730
2729 is the 127% Fibonacci extension of the August 2010 run
2735 from late 2007 interim peak
2762 is the February low
2796 is the February gap down point
2825 is the 2007 closing peak.
2841 is the February 2011 peak
2862 is the 2007 peak

Support:
2705 is the February 2011 and consolidation low
2686 is the recent January 2011 closing low
2676 is the January 2010 low
2645-2650ish from December 2010 consolidation
2593 is the November 2010 high
2580 is the November 2010 closing high
2569 is the November gap up point through the April 2010 peak
2550 from May and June 2008 peaks
2540 is the gap up point from early November
2535.28 is the April 2010 intraday peak
2530 is the April 2010 closing peak
2518 is interim peak from April 2010
2511 is the lower range of the November gap up point
2482 is the recent October peak
2460 is the November 2010 low.
The 200 day SMA at 2456


S&P 500: Closed at 1304.28
Resistance:
1313 from the August 2008 interim peak
1325-27 is the March 2008 closing low and the May 2006 peak
1344 is the February 2011 peak
1364 is the March 2007 low
1370 is the August 2007 low

Support:
The 50 day EMA at 1297
1294 is the February 2011 and the consolidation low
1278 is the 127% Fibonacci extension of the August 2010 run
1275 is the January 2010 low, early January 2011 peak
1227 is the November 2010 peak
1220 is the April 2010 peak
1185 from late September 2008
The 200 day SMA at 1179
1174 is the May 2010 high, 78% Fibonacci retracement of April peak
1173 is the November 2010 low
1170 is the prior March 2010 high
1156 is the Sept 2008 low
1151 is the January 2010 peak
1133 from a September 2008 intraday low
Bottom of the January 2010 consolidation 1131 to 1136
1129 to 1131 is the June and August 2010 peaks


Dow: Closed at 12,044.40
Resistance:
12,110 from the March 2007 closing low
12,391 is the February 2011 peak
13,058 from the May 2008 peak on that bounce in the selling

Support:
The 50 day EMA at 11,974
11,893, from March 2008 closing low
11,867 from the August 2009 high and peak on that bounce in the selling.
11,734 from 11-98 peak
11,452 is the November 2010 peak
11,258 is the April 2010 peak
11,205 is the April closing high
11,100 from the 7-08 low
The 200 day SMA at 11,025
10,963 is the July 2008 low
10,920 is the recent May high
10,730 is the January 2010 peak


Economic Calendar

These are consensus expectations. Our expectations will vary and are discussed in the Economy section.

March 11 - Friday
Retail Sales, February (08:30): 1.0% actual versus 1.0% expected, 0.7% prior (revised from 0.3%)
Retail Sales ex-auto, February (08:30): 0.7% actual versus 0.6% expected, 0.6% prior (revised from 0.3%)
Michigan Sentiment, March (09:55): 68.2 actual versus 76.5 expected, 77.5 prior
Business Inventories, January (10:00): 0.9% actual versus 0.8% expected, 1.1% prior (revised from 0.8%)

March 15 - Tuesday
Empire Manufacturing, March (08:30): 17.0 expected, 15.43 prior
Export Prices ex-ag., February (08:30): 0.9% prior
Import Prices ex-oil, February (08:30): 0.8% prior
Net Long-Term TIC Fl, January (09:00): $65.9B prior
NAHB Housing Market , March (10:00): 17 expected, 16 prior
FOMC Rate Decision, March (14:15): 0.25% expected, 0.25% prior

March 16 - Wednesday
MBA Mortgage Index, 03/11 (07:00): +15.5% prior
Housing Starts, February (08:30): 570K expected, 596K prior
Building Permits, February (08:30): 573K expected, 562K prior
PPI, February (08:30): 0.6% expected, 0.8% prior
Core PPI, February (08:30): 0.2% expected, 0.5% prior
Current Account Balance, Q4 (08:30): -$110.0B expected, -$127.2B prior
Crude Inventories, 03/12 (10:30): 2.52M prior

March 17 - Thursday
Initial Claims, 03/12 (08:30): 387K expected, 397K prior
Continuing Claims, 03/05 (08:30): 3750K expected, 3771K prior
CPI, February (08:30): 0.4% expected, 0.4% prior
Core CPI, February (08:30): 0.1% expected, 0.2% prior
Industrial Production, February (09:15): 0.6% expected, -0.1% prior
Capacity Utilization, February (09:15): 76.5% expected, 76.10% prior
Leading Indicators, February (10:00): 0.9% expected, 0.1% prior
Philadelphia Fed, March (10:00): 28.0 expected, 35.9 prior

By: Jon Johnson, Editor
Copyright 2011 | All Rights Reserved

Jon Johnson is the Editor of The Daily at InvestmentHouse.com

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