March 12, 2013

Logical Market Update: DJIA Seven Up Days! Many Overbought Readings

DJIA makes it seven in Row (Most successive up days in a year) – Is This Reason to Jump Into the Game? – No, but continue to seize the Opportunities as long as they are available!

Here’s how one news service put it:

Stocks started the week by chugging higher again, as the Dow Jones Industrial Average recorded its seventh straight advance.

Chugging higher is very accurate. The market is correcting, but as previously discussed they are small and short, but do provide the breathing room to push higher. However, across the board I am seeing over bought readings, the broader indexes, equities, and short treasury ETF’s. The precious metals ETF’s continue their sideways churn, which has left the oscillators in neutral readings.

So what does it all mean, more than likely much of the same for the coming week. With Friday being options expiration I suspect the broader indexes will continue to push higher to squeeze even the “unsqueezeable”. With resistance levels moving into unchartered territory for the DJIA, S&P 500 and the Russell 2000, it becomes a guesstimate as to what will eventually turn the tide.

The bond market continues to languish at lower levels, which bodes well for the equity markets to continue higher. Remember as money is pulled out of bonds it is being put into the equity markets. It may not be the smartest move but money managers can’t allow it to sit idle. So until rates actually do head higher I suspect the rotation will continue.

Unfortunately, though stronger two-way trade has been slowed which does hinder trading at least on an intraday basis. The pattern in progress though, point towards another market correction being close by. It is these corrections that I continue to point to as points where momentum be it upward or downward gathers and seems to clear the board for the larger advance to pick up in earnest again.

Traders should remain in play though as the markets continue to provide numerous trading opportunities to intraday and short term traders. Diversified Trading Systems (DTS) via its three (scalper, swing, and trend) systems offer a complete and unique system to trade with.

Observations from this Monday’s trade:

The Russell 2000 joined the DJIA and S&P 500 in reaching new all time highs on Monday. The correction process is not deep and not long as the patterns in progress finish. Without an outside or stronger reason, the markets will likely hold higher levels and “chug” higher through Friday’s expiration.

As for trading opportunities, the important factor remains to follow the trend and not your emotions. Trading opportunities should remain plentiful. Equities, treasuries, and the US $/Euro remain very active.

Here is an updated list of the markets that DTS (all three birds) are producing numerous signals and have been very profitable:

• US$/Euro
• GS (Goldman Sachs)
• AAPL (Apple Computer)
• GOOG (Google)
• LNKD (LinkedIn)
• NFLX (Netflix)
• E-mini S&P 500
• TLT (Treasury Bond Long ETF)
• TBT (Treasury Bond Short ETF)


Expectations for Tuesday (3/12/2013)

Some weakness will come as the markets shift into smaller corrections, but again without a strong down draft I don’t suspect much depth or velocity.

DJIA (basis the June Dow future): is now finding support at the 14350 area. I know that feels strange to have support at record high levels, but such is the case. Further support comes in at 14300 and 14250. Resistance remains at the 14400 level for starters and then 14600.

SPX (basis June future): the S&P 500 is also finding support at high levels. Thus far 1546 is containing selling pressure. A break there will follow through drops support to the 1541 to 1540 area. A clean break above 15451 now should clear the path for a sustained move to the 1555 to 1558 area before a more sustained correction would be expected.

Russell 2000 (basis the June future): Bounced off of 935 on Tuesday morning as if it were red hot. The trading action from the past day is not all that supportive that the Russell has much steam left to head over 940 this time around. Look for support at 935 and then 930. Stronger support lies below at 926 to 925. Resistance remains at 940 and then 946 to 950


The treasury markets continue to recover after sliding lower last week. Tuesday morning’s highs may be all she wrote – before the next leg down takes over. It is getting ugly out there but the trading is brisk and two way so park any feeling about rates at the door and participate. Support 140’14 may seem light, with stronger support at 139’16. Resistance is now lowered to1141’15 to 141’20 and then 142’15 to 142’20 .

10yr –note (basis the future) has support at130’25 to130’025 and the lower end of the zone is the more likely area to contain additional selling. Resistance at 131’15 to 131’22 and then 132’11.

TLT – support at 116.90 to 117 failed overnight as did 116.70 to 116.35. The pattern in progress appears to need additional downside, but there may be a small breather before resuming. Support now drops to the 114 area. Resistance begins at 116.35 to 116.70 and then 116.90 to 117.

TBT – support at 66.50 to 66.35. Resistance may be light at the 68 area, and quickly zips up to the 69 area once broken.