Wednesday, February 29, 2012

Market Madness Daily Market Update - 2/29/12

Some people sold some stuff today! A thing simply unheard of these days. How droll.

Before jumping into the indices we bring you our Financial Markets Headline of the Day:
Apple Is Now Worth A Staggering $500 Billion -- Can It Hit $1 Trillion?
Double from here? Bullish sentiment has gotten way ahead of reality me thinks. Of course, Apple could hit a trillion valuation...depending on Bernake's printing prowess.

Daily Market Recap - 2/29/12
Starting off our Daily Market Recap we take a gander at the SPX (S&P 500 index), which has had its best start to the year since 1991, on our standard daily candle chart.
Despite having a not so swell day itself, shedding 6.5 points (-0.47%), the SPX continued to gain in relative strength against the small caps. In fact the trend has only accelerated today, with a jump of over 1.2% in the SPX/RUT ratio. A fairly significant one day move for that measure. The VIX saw a modest gain of around 2.5% on the day after moving with the S&P for the bulk of it. Watch the VIX closely in coming weeks as it may signal a reversal before index prices do. It has been acting skittish lately.
(In after hours news, ES futures plunged as much as 7.25 points from its closing level immediately after the closing bell. As of this writing it has since fallen even further (after an attempt at recovery) and the /ES is now down about 14 points in total from markets close! On no apparent news that we could find. Very interesting.)

Moving on to small caps we find that they had a horrible day. Indeed it was the worst day for the small cap RUT index so far this year. Price is now sitting right at an important support level at 810 and if we see a convincing break of that level we think it will unleash some selling. So watch this closely in the coming days. MACD and Relative Strength also continued to weaken significantly today. Lots of warning signs here and somehow we doubt the selling (in there is any) will be confined just to this index when it comes.

Lets take a quick look at Tech and Semiconductors. Although the NASDAQ comp. had its 2nd worst day of the year it is still in pretty good shape and has not broken trend yet (thanks to Apple no doubt).
If selling is to break out it is unlikely in our view that this will be the index it breaks out first in. Barring an Apple share price shock of course. Semiconductors, in contrast, appear to be rolling over and poised for a sell-off. We don't follow this index religiously but it can sometimes act as a leading indicator, so we do recommend our readers watch it.

Before signing off we wanted to touch on the metals, which took a beating today. Yesterday we brought up the strong possibility that metals could encounter another "smack down" event. Our original thesis for this outcome was Central Bank intervention but the balance of evidence strongly suggests that the price declines were much more a function of Bernake (and CB friends around the world) suggesting there may be no QE to infinity. A jarring announcement to both QE cheerleaders and Gold Bugs alike. This seems most likely to have caused the sell-off. As opposed to the CB shenanigans we had previously contemplated.

Stay safe out there!
Market Madness

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