April 3, 2011
Weekly Market Outlook
By Keith Schneider
The Ides of March began a wild ride as some big beta stocks sold off more than 20% from their highs before recovering and then some. Never mind and don't worry about a thing as the key indexes closed with a record quarter. IWM closed at it's highest levels since 2007. Could it be the market is riding high on Trumps magic carpet of a hairpiece and pinning it's hopes on his successful bid for the top job? If that happens, expect the Dow to be renamed the Trump Index.
SPY (S&P 500), DIA (Dow Jones), IWM (Russell 2000) and QQQQ (NASDQ 100) Indexes
All major market sectors are in bullish phase with the market action this week. In fact IWM is at highs not seen since 2007. NASDQ is the laggard and has not taken out the highs it put in this year. Other than the fact we have some overbought readings on some of the market internals which are short term in nature, the market has shrugged off really bad news and seems in gear again. We could see some sideways to slightly down price action to work off these readings, but otherwise as surprising as it is relative to the news, the market seems happy and bullish although some black swans have been seen floating around - but camouflaged for now.
Market Internals
VIX (sentiment): Vix did a round turn since the earthquake and Libya, generating a sell signal that quickly reversed as the market did a V bottom. After the dust settled, investors became more risk-inclined as this indicator dropped back to bullish mode. This indicator is back in the middle of it's trading bands and back to bullish. With the Mid-East situation still unfolding and the reactor in Japan still leaking radioactive waste, it seems the market is mispricing risk here. But you can't argue with the charts.
Accumulation/Distribution Volume: This indicator has moved back to accumulation mode with 4 accumulation days since the selloff. This has been one of the more rapid changes in market sentiment we have seen. We basically got a sell signal/warning early March for NASDQ and confirmed a few days later by the other key indexes and the bear signal lasted all but a few days, culminating in the blow-off to the downside March 16. One thing to note however, is that the selloffs on distribution days generate greater volume than the selloffs on accumulation days for the most part.
McClellan Oscillator: Our intermediate term indicator that gauges the breadth of the overall market is definitely in overbought territory with this rally off the V bottom. We are just hooking down after achieving overbought readings not seen since last December.
Sectors
Gold (GLD) and Silver (SLV): Gold and silver are widely divergent in their chart patterns. Gold again failed after taking out it's highs on an intraday basis and is having issues with the 1430 level in spot bullion. Silver is a different animal and looks poised to make further gains, although we would love a pullback and some short term technical pattern as an opportunity to take a ride on the silver express.
Oil (OIL) and Coal (KOL): The other leading sector continues to be oil and energy (except nuclear) related stocks. This is consistent with a global recovery, Mid-East tension, expanding money supply, and nuclear energy viability being questioned long term.
Swing Trades
With the V bottom correction of the general market, it was sort of a field day for those predisposed to some mini/swing trades over the past few weeks. This week one of our featured min/swing trades was JOYG (Joy Global) as it consolidated for a few days and then rocketed out of the pattern.
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