Coolhand's Market Analysis

Another big move, different day.

Stocks gapped at the open and never looked back. It actually started in Asia where their major averages advanced well above 1% on average. And then Europe followed suit with average gains in the vicinity of 2% for their major bourses.

From there it spilled over into our market where another day of relatively strong earnings reports helped drive prices higher.

Oil spiked higher by 2.9% with a closing price of $111.45 per barrel.

A couple of days ago I was asked about the direction of the dollar, to which I responded that I thought a short term low may have been put in last Friday (the dollar rallied hard that day). It was a short term low alright, as the dollar fell well below its lows from last week. It never really challenged the resistance that was directly above it. It now appears to be on its way to the lows we saw back in 2008. Assuming the market bias remains up, the I fund might be the place to be in the weeks ahead.

On the economic data front, the March existing home sales report came in at an annualized rate of 5.10 million, which was a bit better than estimates.

Here's today's charts:



Yes, NAMO and NYMO look much better today than they did just 2 days ago, but I don't like the spikes we've been seeing since last month. I have a hard time calling this a trending market at the moment, but more a market of opportunity for institutional risk on and risk off trades. We have a pretty large gap on the S&P 500 after today too and it's almost certainly going to get filled before long. Another spike on tap?



With the kind of momentum we saw in the above chart it's no surprised that NAHL and NYHL also had big moves. Both are on buys.



TRIN flipped to a sell, while TRINQ flipped back to a buy.



BPCOMPQ made a decided turn higher today and away from that lower bollinger band. It remains on a sell as long as it remains under the upper bollinger band, but today's move gives it a bullish appearance. But fast action like we saw today can erase that appearance quick, so I'm not embracing any particular short term outcome here.

So 5 of 7 signals are back in buy mode, which keeps the system on a buy.

Now, I mentioned a bit ago that I didn't see this market as trending at the moment. The reason is the system gave its last buy signal on 30 Mar when the S&P 500 closed near 1329. Today, fifteen trading days later, the S&P 500 is sitting at 1330.36. About one point. Big deal. The current high for this year was set on 18 Feb, just over two months ago when the S&P closed around 1344, so we're still about 14 points below that. So where's the trend?

I've been expecting fresh 2 year highs for a few weeks, but the market has gotten more volatile over the last couple of months for numerous reasons. While QE2 is still very much active, it's not all that far from ending, and there will be many traders and investors who will be gone long before it ends. Many of those players are not active traders, and look at risk from a longer term perspective.

I don't know what the market will do over that time as nothing will surprise me, but without those liquidity injections I doubt this market can continue to levitate as easily as it has. But it doesn't have to crash either, so it's possible it just stabilizes to some extent. But there's a lot of other moving parts here such as inflation, higher commodity prices, geopolitical risks, etc., which makes it difficult to be optimistic.

Keep in mind too, we are fast approaching the historically weakest time of the year. So those fresh 2 year highs I've been looking for may or may not happen.