THE MARKET:
Last week the buyers and sellers slugged it out on rising volume session after session, and in the end the upside enjoyed a slight margin. Monday they eked out another gain but on very low volume, basically Fed watching. It was positive to see stocks recover from afternoon selling and rise into the close, but with the low volume and potentially big news out Tuesday afternoon it was not much to get revved up about.
Indeed, the move left SP500, the putative leader of the recent move with its short double bottom formation the past two weeks, trying to break past the neckline of its head and shoulder breakdown almost three weeks ago. If it can make the breakout above that level on some improving volume that supports a more substantial rally. All of the back and forth swings on volume last week indicated an attempted shift in character, and now SP500 is going to have to show it.
We cannot overlook the SP600, however. It undercut its 200 day SMA Thursday, made a further drop Friday, but then recovered. Monday it led the market higher with its 1.3% gain; no other index was close. It too has formed something of a double bottom, not an uncommon pattern after the past three weeks, and with its strength Monday it too could provide some leadership. It has been sold hard, something it is not used to, but this could have shaken out the quick sellers and set up a bounce. If both the large and small caps can lead, that is a much more powerful combination.
MARKET SENTIMENT
After spiking up last week during the back and forth action, the sentiment indicators settled down on the second consecutive upside session.
VIX: 15.12; -0.19
VXN: 20.8; +2.26
VXO: 14.44; -0.74
Put/Call Ratio (CBOE): 0.96; -0.05
NASDAQ
Low volume as NASDAQ gapped higher, tested, and then moved up to the 10 day EMA. Still very much in the downtrend with a lot to show before it can claim it is making some change of direction.
Stats: +7 points (+0.36%) to close at 1928.65
Volume: 1.599B (-24.54%). No volume to support the index as it bounces higher to the 10 day EMA following a high volume Friday reversal. That is not too big of an issues; after the reversal we won't really look for confirming strength until Wednesday, after the FOMC results are announced.
Up Volume: 867M (-546M)
Down Volume: 679M (+31M)
A/D and Hi/Lo: Advancers led 1.19 to 1. Very modest breadth.
Previous Session: Advancers led 1.5 to 1
New Highs: 29 (+3)
New Lows: 140 (-84)
The Chart: The Chart: investmenthouse.com^ixq.html
After hitting a new 2005 low intraday Friday and reversing on strong trade, NASDAQ melted higher Monday on low volume. It was back and forth all session with a modest positive bias. On the high it tapped the 10 day EMA (1932) and backed off to close. This keeps it locked in the downtrend that really got underway in early March when it failed to hold a break over the 50 day EMA and started trending lower below the 10 and 18 day EMA (1945). A weak stock or index trends lower below those levels. Thus NASDAQ's reversal suggests it could try to break up the downtrend, but it will have to show a strong break through the 18 day EMA. If it occurs the timing will be fortuitous as a follow through session could occur as early as Wednesday. We don't want NASDAQ to be a lone wolf, however. Other indices need to show the follow through as well to give it some breadth. Right now, however, it is still in the downtrend, testing the downtrend resistance on low volume. There are signs of change but there has not been any character change yet.
NASDAQ 100 rallied over its 10 day EMA as well but faded to close below that level with a modest gain. The 0.2% gain was lower than overall NASDAQ; the large cap techs were not in much demand either.
SOX actually closed lower. It undercut its trading range low at 380 on Friday, rebounded, but it too stalled at the 10 day EMA. Similar to NASDAQ it showed something of a double bottom with its Friday sell off and rebound; now it has to show something more or its just continues the downtrend.
SP500/NYSE
SP500 moved through the 18 day EMA and up to the neckline of its head and shoulders base. This is where it has to show some guts over the next few sessions, and we don't mean spilling its guts.
Stats: +5.31 points (+0.46%) to close at 1162.16
NYSE Volume: 1.564B (-16.73%). Volume fell off sharply on NYSE, coming in below average as the large and small caps continued their upside recoveries. That lower volume says fewer buyers. That will have to be rectified with the next strong price move, preferably when it moves through the neckline.
Up Volume: 1.291B (-319M)
Down Volume: 638M (-78M)
A/D and Hi/Lo: Advancers led 1.86 to 1. Thanks to the small caps the breadth was decent.
Previous Session: Advancers led 1.99 to 1
New Highs: 69 (+25)
New Lows: 51 (-86)
The Chart: investmenthouse.com^spx.html
SP500 used the 200 day SMA (1156) as support on the low and managed to recover with an afternoon rally that took it through the 18 day EMA (1161) and up to the neckline in the head and shoulders pattern (1164). It may be able to push up through that level on low volume, but holding the move without strong volume will prove difficult. Likely it will stall around this level waiting for the Fed's decision. After that it will have to show a volume break through this level sometime from Wednesday to Monday to give the short double bottom some legs. As with NASDAQ, we want to see some more indices show a follow through as well.
SP600 led the market Monday with a move back up through the 200 day SMA (306), stalling below the 10 day EMA (308). A double bottom of its own, and given this rebound it is better shape to move with the rest of the market. Still key resistance at 310 (18 day EMA at that level as well) before it even reaches the recent highs in the 'hump' of the potential double bottom (313). It is definitely potential at this stage.
DJ30
Rallying just over the 18 day EMA (10,248), stalling just below the recent highs at the 'hump' after the mid-April bounce (10,264). Decent second straight move though volume fell way off the table, coming in well below average. Trying to piece together a relief move up to the 200 day SMA (10,375) that also marks the late March/early April lows in that attempted, but failed, lateral consolidation.
Stats: +59.19 points (+0.58%) to close at 10251.7
Volume: 239 million shares Monday versus 303 million shares Friday.
The chart: investmenthouse.com^dji.html |
