THE MARKET:
As noted, the indices closed at session highs, working on making a higher high after the recent higher low. It is a long process of rebuilding, and as of yet the upside has not shown clear cut power. This move looks promising in certain respects, i.e. not giving up the late April and early May follow through (though it certainly tried) and working on a that higher high. It still moves in fits and starts, however, suffering distribution right after a good upside run.
That shows it is still entrenched in its consolidation with the buyers and sellers still at each other on a daily basis. But, with the indices currently in bases (NASDAQ since January, SP500 since March), that is the action you would expect. They are trying to put in bottoms here with the higher lows, and that is the starting point for working on the rest of the base and the upside move. The lukewarm volume on this move leaves open the door to another test as we have described before, but the overriding point is that while the downtrend is still basically intact (NASDAQ is peaking through the trendline), the base is under construction and some foundation is being laid for a move higher.
As we all know, however, foundation building or base building is one thing. Actual breakouts are another. The market can work hard as it has here in putting together a foundation and then have a big wave hit it and wash it all away. It managed to handle the PPI Tuesday, but that was minor league. The CPI will tell a lot more about the strength of this attempted base building as it confronts the roughest of all problems, i.e. the Fed rate hikes.
MARKET SENTIMENT
Bulls versus Bears: Last week bulls ran up to 44.2% last week, up from the 43.5% level a week earlier. Bears fell to 28% after hitting 30.4%. That was the highest bearish level since August 2004.
VIX: 14.57; -1.11
VXN: 18.28; -0.49
VXO: 13.83; -0.93
Put/Call Ratio (CBOE): 1; +0.21
NASDAQ
NASDAQ broke through the 200 day SMA and out of its 'handle.' Volume was up but no blowout session.
Stats: +9.72 points (+0.49%) to close at 2004.15
Volume: 1.569B (+8.68%). Volume moved higher Tuesday as NASDAQ tested lower and reversed for a decent gain. That is good action though hardly blowout. Following the higher volume reversal attempt Friday, a day that now looks more like a reversal, it was not bad. It was not the kind of volume you would really want on a breakout; some better volume but not great. In short, improving after some distribution last week, but still working on the base.
Up Volume: 885M (-134M)
Down Volume: 641M (+237M)
A/D and Hi/Lo: Advancers led 1.18 to 1
Previous Session: Advancers led 1.54 to 1
New Highs: 42 (+4)
New Lows: 77 (-23)
The Chart: The Chart: investmenthouse.com^ixq.html
NASDAQ broke higher from its lateral consolidation or handle that formed after the April double bottom. It moved through the 200 day SMA (1996) and is now challenging the early April high (2022). We were not expecting NASDAQ to move through the 200 day given the light trade, but it showed a bit more volume Tuesday. A challenge of the April high is a logical resting point on this lower volume move. Again, it is building its base, making a higher low. If it does break through that high, that would force a bit of volume in due to short covering as NASDAQ moves to a new high. That is how a move builds on itself.
NASDAQ 10 moved through the 200 day SMA as well as it too is ready to challenge the early April high at 1500. That is the next key resistance point, but the large cap techs are showing some rejuvenation.
SOX was up off of its 200 day SMA as well. After hours AMAT reported results that were initially a disappointment. It rebounded on some of the conference call comments but it is setting up a shaky start for Wednesday with respect to the chips, and there will be some carryover to the large cap techs as well.
SP500/NYSE
The NYSE indices moved on rising volume as well, but still well below average. Back up into the recent range, however.
Stats: +8.11 points (+0.7%) to close at 1173.8
NYSE Volume: 1.481B (+1.25%). Better price/volume action with rising volume on a gain. Volume was still well below the distribution volume last week, but that was no great shakes either. The biggest volume was on a down session, but a down session that also recorded something of a reversal off the lows. In short, decent action but needs some improvement to take it to the next level, i.e. a break above the May high and the early April high.
Up Volume: 1.35B (+3M)
Down Volume: 467M (-46M)
A/D and Hi/Lo: Advancers led 1.71 to 1. Small caps were solid again, joined by the large caps, and that helped the A/D line once more. Well off the Monday level, however.
Previous Session: Advancers led 2.54 to 1
New Highs: 59 (+15)
New Lows: 62 (-4)
The Chart: investmenthouse.com^spx.html
The SP500 continues its basing as well, extending the move through 1164 and to the 50 day SMA (1173.49). A higher low this past week and now looking for a higher high over the May high (1179) and then the April high at 1192. As with NASDAQ it will need a boost to get it over these levels; they are natural resistance points as SP500 continues to work on its base as well. Logical point for a pause and even a turn back down is the early April high. That depends upon the strength it shows as it makes the move. Right now it does not appear to have the strength to make that move, but in a base a stock or index rises to resistance, fades back, and then takes it on again. Eventually it either works out the sellers and breaks higher or it runs out of buyers.
The small cap SP600 still has not made its 50 day EMA (314) yet as it bounces laterally along its 200 day SMA (308) the past 5 weeks. That 50 day EMA and then 316 is the next level of resistance. Unlike in the prior years, the small caps are following now. Setting up a decent base over the 200 day SMA, but following.
DJ30
The blue chips posted a gain as well with rising though below average volume as well. Still below the 200 day SMA (10,387) and the bottom of the March/April range at 10,405. A higher low the past week and as with the other indices trying to make a higher high as well above the early May high at the 200 day SMA and then the April high at 10,557.
Stats: +79.59 points (+0.78%) to close at 10331.88
Volume: 241 million shares Tuesday versus 217 million shares Monday.
The chart: investmenthouse.com^dji.html |
