Let’s get the party started.. Futures soared last night and are sitting up 28 or more points as I write this piece. The charts from Wednesday have turned toward the bullish side putting in a +12 score for the high minus low and new 52 week new highs. The 40 DMA % Index was neutral but is always slower to trigger a “buy” making this indicator a great confirmer when moving from a bottom.
I mentioned in one of my post yesterday that although Wednesday’s price action was very disappointing for the bulls, with a nice triple DOW point run up only to be crushed to red at the close, the broader markets were telling us a different story. You could see hints in the broader indexes like the Russell 2000 closing green.
In the trading room we have a live advance / decline line (AD) for the major indexes that we watch carefully every 
day. The dashed line, in the chart, is the zero line. Any value above the dashed line is a positive AD line (there are more advancing stocks than declining stocks), the solid yellow line is the traditional 2:1 ratio marker. Values above the top solid yellow line indicate there are more than 2 stocks going up for every one going down, below the lower solid one is the –2:1 AD line. You can see from Wednesday’s close that the lighter narrow indexes, the S&P 500, Nasdaq 100(green) and DOW (magenta) all closed with negative AD lines with the DOW and Nasdaq 100 closing even below the –2:1 line. Bearish A/Ds. But the broader markets, Russell 2000 (Blue), Nasdaq market (Orange), NYSE(Red) and All US stocks (brown) closed with positive A/D lines. This divergence is telling us that the broader markets are behaving stronger then the lighter markets and is a good bottoming indicator.
This bullish divergence also showed up in the 40 DMA % index chart putting in a stronger day than yesterday.
But what about today?
That 1091 area remains the target for today.. If our gap holds through the GDP numbers and what have been some pretty disturbing new claim numbers at 8:30, we should open up near that area. And like the previous days if we can get up and over that 1091 it should be a fairly quick ride up to 1105 with maybe some psych resistance at 1100. A close above 1100 would be great for the bulls.
On the bear side crushing the opening gap and breaking below 1066 would certainly finish off the market. Every day the close stays above 1066 is a good day for the bulls and thus far we have put in 4 days with improving breadth.
Watch out for the afternoon sell-offs which are a trademark of bottoming markets. I have enclosed a bonus chart this morning showing the daily pattern at the bottom of the February sell-off: Three days in a row.. Notice that 2nd day were we gapped open (familiar?) the gap was tested, went to highs and drained off the rest of the day. That could be a reasonable template for us today although our gap is larger.
The ultimate all-clear confirmation we are looking for is two back to back trend days. The 2nd day can be weaker. When we get that with a 40 DMA % index confirmation we will really turn bullish. The markets are jittery and news is unscheduled so trade carefully.
My best guess.. After testing the morning gap we finally break 1091 rally to 1100 and fade into the afternoon perhaps even closing below 1091.
