March 24, 2011
Weekly Market Outlook
By Keith Schneider
According to Venezula President, Hugo Chavez, life on Mars was destroyed by Capitalists. He believes that those same guys moved here and are going to do the same thing. He could be right, if one looks at the market's behavior today and trusts that a modicum of logic should prevail while trading.
Today we had so much bad news that it is mind boggling to see the market close as strong as it did. Bad housing starts, continued unrest in the Mid-East, a terrorist attack in Israel, higher oil prices, record setting gold prices, and food embargoes because of nuclear contamination all were headlines today.
The icing on the cake was that the 9.0 earthquake that devastated Japan will cost upwards of 300 billion (dollars... not yen). Food is unsafe to eat in large areas of Japan, including Tokyo. The US Equity Market closed up across the board with good volume. As a student of the markets, I call upon the old adage, "Horrible news/good action=Bullish." This, however, is extreme.
SPY (S&P 500), DIA (Dow Jones), IWM (Russell 2000) and QQQQ (NASDQ 100) Indexes
The market phases of the key U.S Equity indexes are quite divergent. The NASDQ (QQQ's) and the SPY (S&P 500) are the weakest and are in warning phases, while the DIA (Dow Industrials) and IWM (Russell 2000) are back into bullish phases after flirting with warnings. We turned from a 1% morning decline in the weakest index to a modest +.47% gain in spite of several pieces of news that should have brought this market down big time. At this point in time we are now down since the start of the year.
Market Internals
VIX (sentiment): This sentiment indicator flashed a sell signal after moving above the 200 day MA for a few days and then with the rally off the panic low, moved back into bullish territory, but in an overall weaker position before the Mid-East crises began. This indicator is cautiously bullish.
Accumulation/Distribution Volume: The market responded to all the news with several bearish distribution days and is currently on a sell signal with over 4 days of distribution in all key indexes. However to add another piece of data to the mix is that last week's 240 plus decline in the Dow had the earmarks of a selling climax.
Sectors
Gold (GLD): Gold's closing price is on new all-time highs today, and looks poised for another big leg up. If we can take out the 5 month intraday high, we could move up another $100-$125 quickly.
Oil (OIL) and Coal (KOL): The Mid-East unrest and current disruption of Libya oil production along with the viability of nuclear power in question put continued pressure on energy prices. This includes coal, crude and natural gas.
New Economy Stocks: The most interesting charts playing out in terms of leading stocks representing the web economy are both NFLX and BIDU. BIDU is at all-time new highs and NFLX keeps roaring. Other leaders such as AMZN GOOG and AAPL performed well today but have been a drag overall on the NASDQ indexes. All look a bit oversold, so they could bounce.
Opening Range Strategies
Today we featured an energy play BTU in our live trading room. It was a fairly classic pattern with the daily chart pattern very strong and we bought an OR breakout but waited for the stock to clear R1 (a floor trader pivot number) before entering. By the end of the day we achieved our first profit target as the stock ended up over 3%.
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