We are setting up to close the quarter here and professional money managers will do what they need to lock in profits for the quarter. This adds more volatility over the next few days. Looking at the charts you can see
that there should be mixed results depending on how the 10% pullback was handled.
If your money manager had you in small caps throughout the period.. congratulations.. if on the other hand you went more blue-chip you are barely green for the month with NYSE actually putting in a loss. (This is a chart we use in our live trading room http://ttthedge.acrobat.com/traders to show progress from the January highs of January 11th I think.. So the beginning of the year was a little lower but you get the picture).
Since most money managers tend to be measured against the S&P 500 you can track from the chart (yellow) the progress of the SPX which is up around 1% for the quarter.. so most money managers should be in that space.
My point here is expect some jostling around as those underperforming mangers need to get above that 1% number before the end of the quarter and those out performing are desperate to lock in their performance, particularly on small caps (the RUT 2000). These cross currents produce turbulence.. add in an overbought bull market and we should have some interesting days ahead.
Mean while around the world:
Asia
Asia remained unfazed over our little turmoil yesterday racing to over 1% gains on the majors
Europe
Eurozone is showing some slight weakness today but after a gap open is trading on the highs of the day.
United States
Economic news
Looking for little or no revision on GDP this morning to keep the markets happy here.
Breadth Charts
40 DMA % Index
Our breadth charts have weakened substantially. In fact the RUT has crossed its 20 DMA and put in a -2 score today, the first time since January 19th when we began falling off for our 10% correction. Often times we pop back and forth on the crossing so you should be able to judge by the day where we are on the close. A weak day today will put all three over the edge and we will be in a sell zone. Today the chart is -2 which is a warning sign.
10 Day High – Low
Our 10 day High Low chart is scoring a neutral 0 today unable to out perform day – 5. Today’s day-5 is very weak and anytime of green closing will turn this chart bullish.
52 Week New Highs
This put in our strongest score as new highs rocketed into the open and set both higher bars and passed day minus 5. So the chart scores a very bullish +6.
Conclusion
| Chart | Score |
| 40 DMA % Index | -2 |
| 10 Day High – Low | 0 |
| 52 Week New Highs | +6 |
| Total | +4 |
So our charts are mixed today. This is a sign of topping action. The New Highs are mostly set at the open, which yesterday was very powerful, the 40 DMA chart is set at the close which was weak today, hence the mixed signals.
I have been working hard in turning our charts into something a little more useful.. like a tradable signal.
There was a bug in the latest Worden product, which after working with them is now fixed and I am able to start work on my breadth cumulative score.
It still has some work and I don’t have the 52 week highs worked in yet but a preliminary look shows how the trend ups and downs are highlighted in red and green. When we detect a loss in upward momentum in the trend the bars begin turning red that a top warning sign. After a bottom is detected the bars turn green. I show you this today.. not to trade on it yet but to both let you know that something useful here may be coming and that yesterday the green trend ended an we painted a red warning bar.
The tops are very choppy here. Yesterday’s move were not out of characteristic for this market. The bulls are not dead yet but the bears are emboldened. After a couple of days of not finding any sellers that last new high flushed them out. Prepare to trade both sides until we start setting in lower lows.
$SPX
Let me start out by saying there there is no price in here that is unachievable today . The range is to the upside highs down to 1153 area. We could get fast moving market conditions. I have played around enough with this post this morning to now see the GDP numbers were mostly positive and we are gapping up about 3 points today.
We should open in that 1170 area so a good test of who is in charge is that demarcation line. Bulls above bears below. There is a good chance here that the bulls will return buying in a futile attempt to driving us higher into the green zone. If at the open we sell off the bull will wait for a pause most likely around 1153 are before giving an attempt to buy.
Bulls Plan:
Gap up and then up.. hold the gap and scare the bears into covering yet again to help rocket up the price. A close above 1176 will confound the bears.
Bears Plan:
Take back over the field. If we rally on weak volume start another sell-off to teach the bears a lesson. Not all dips are worth buying. Ride the elevator down to 1153 and close below 1167 today.
Be careful.. the markets are unstable.. light volume.. cross current and volatile in this fighting zone.
Come see us in the room at http://ttthege.acrobat.com/traders
Marlin aka Redliontrader
