Coolhand's Market Analysis

While the S&P posted significant gains today, the broader market was a bit more subdued. At the close the S&P saw a gain of +1.34%, while the rest of the market (the Wilshire 4500) posted a gain of only +0.58%. The DOW closed with a +1.39% gain, while the Nasdaq closed with a +0.73% gain.

It's only one day, but it sure looks like traders are favoring larger issues over smaller ones, and commodities over technology. But again, it's only one day and hardly indicative of a trend.

One of the reasons for the big gains in commodities is oil, which had a big 3.5% gain that drove the price back over $100 to settle at $101.42 per barrel.

There was also many data points released this morning, but they didn't seem to affect trading.

Initial weekly jobless claims came in at 385,000, which was almost on target with expectations, while initial claims the previous week were revised higher to 401,000.

February consumer prices jumped 0.5%, which was a bit higher than the 0.4% that had been expected. Excluding food and energy, that number dropped to a more modest reading of +0.2%, which was still a bit higher than expectations.

The March Philadelphia Fed Index hit a 25-year high of 43.4, which was well above estimates.

February Leading Indicators were up by 0.8%, which was a bit lower than expected, while industrial production dropped by 0.1%. That number was well below the estimated 0.6% analysts were looking for.

If you hadn't noticed, the Yen/dollar pair saw some very significant activity the past couple of trading days, obviously in response to Japan's disasters. The Yen has spiked rapidly higher to record levels, which is now causing speculation of Japanese currency intervention. Here's a bit more information regarding this event USD/JPY.

So we bounced, which was not unexpected, but caution is still warranted considering the volatile nature of current global events.

Here's today's charts:



NAMO and NYMO both moved higher today and fell just short of triggering buys for these two signals.



NAHL and NYHL also moved higher with the former flipping to a buy, while the latter remained on a sell.



TRIN and TRINQ both spiked back into buy territory, but may be suggesting a bout of weakness as the market is overbought in a very short time frame. Given tomorrow is Options Expiration (OPEX) though, anything can happen.



BPCOMPQ was down, but only a tad. It remains on a sell.

So 4 of 7 signals remain on sells, which keeps the system on a sell.

With OPEX on tap tomorrow, there's really no telling which way the market may trade, but volatility may be the name of the game tomorrow. It's what happens next week that's of more importance. Will traders be willing to hold stocks over the weekend with Japan's nuclear woes still unresolved? What if the situation gets worse? And what about rumors of a possible military strike against Libya? Is all this priced into the market? Is betting that the Fed can turn the market around a risky bet given those factors?

I certainly don't know the answer to those questions, but I'd be much more inclined to trust the Seven Sentinels sell signal if Central Bank intervention wasn't a factor. Liquidity can trump an awful lot of things or at the very least stem the damage. Who knows where market prices would be if QE2 wasn't a reality.

But I'm out of IFTs and fully invested with more than 2 weeks left to the month. It's gut check time and I've decided to hold my position for the moment.