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And, up again. Top of the range.

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Stocks opened higher yesterday and taking its queue from oil once again, rallied sharply for most of the day. The Dow gained 165-points and the back and forth chop continues. It's just a matter of time, but this consolidating market is likely about to make a big move. The question is, which way?

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The IMF cut its estimates on the global economic growth rate again. They had lowered it last July and again in October, but it didn't seem to bother investors yesterday. It seems to all be about oil again.

The price of oil was up over 3% yesterday and this rally was significant because it is the first time the WTIC closed above the 200-day EMA since mid-2014. This may all be a rally on the rumor of an OPEC deal with the Saudis, Russia, and Iran to cap production. This Sunday there will be a meeting to decide, and the question is, has the cap now been priced in, and will there be a sell the news reaction, or is this just the beginning of a new leg higher for oil after a multi-year bear market?

"There is hope" that an agreement can be reached regardless of Iran's position, said Dmitry Peskov, the Kremlin's press secretary. OPEC members will meet with other major producers, including Russia, to discuss capping production in the Qatari capital on April 17.

The S&P 500 (C-Fund) moved toward the top of its recent trading range between 2040 and about 2065 or so. The 20-day EMA has been holding as support, which you like to see in a bull market, but we saw a similar trading range above the 20-day EMA back in December just before the volatility picked up again. If you remember, that was a result of the interest rate hike. What will the catalyst be this time? Well, we have earnings season starting, and of course there is the OPEC meeting this weekend, so they might qualify.

The Small Caps (S-fund) continue to trade within the 20-day EMA and the 200-day EMA. Traders are buying at support and selling at resistance. One will eventually give.

The Dow Transpiration Index has backed off the March highs and now finds itself back below the 200-day EMA with a small bear flag formed just above the 50-day EMA.

The EFA (EAFE Index / I-fund) rallied strongly on Tuesday and has remained between 55 and 58 for almost 7-weeks. There is an open gap below 56.

The AGG (Bonds / F-fund) dipped below the short-term rising support line (red-dashed) so it wouldn't be overly surprising to see this pullback to test the breakout level and the longer-term rising support line near 110.

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Thanks for reading. We'll see you back here tomorrow.

Tom Crowley

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  1. JTH's Avatar
    SPX looks like the perfect place for a flag to compress up against the upper long-term trendline.

S&P 500 (C Fund)
DWCPF (S Fund)
Dow Jones U.S. Completion Total Stock Market Index (^DWCPF)
EFA (I Fund)
iShares MSCI EAFE Index (EFA)
AGG (F Fund)
iShares Lehman Aggregate Bond (AGG)