Thursday, March 1, 2012

Market Madness Daily Market Update - 3/1/12

It's that time of day once again people (and algo bots).

Daily Market Recap - 3/1/12
The big news of the day is probably the spike in crude. Light Sweet (/CL) topped $110 today before settling down a bit to a still crippling $108.70 as this is written. The impetus for this was apparently a pipeline explosion, with Bloomberg reporting "Oil Advances to $110 on Report of Pipeline Explosion in Saudi Arabia."

Another big mover today was our preferred volatility proxy, the VIX. The VIX binary options contract posted a large decline of over 6% on the day, back down to 17.26 from its 18.43 close of yesterday. This seems somewhat odd behavior given the day's action in the underlying index of the S&P. While the S&P did post a respectable gain today it was a relatively bumpy ride getting there. We would have expected a more modest decline, all else being equal, than that which we did see.

This will probably surprise well...none of you. But by market open this morning the /ES futures had more than recovered overnight from their 10+ point fall immediately following yesterday's close. Red futures, green indices is, however, par for the course this year so nobody should have been surprised.
The SPX spent most of its morning oscillating around that 1370 level of the 2011 highs before climbing as high as 1376 in the afternoon, falling rapidly back down to test that 1370 level, and bouncing just as rapidly back up to finish meaningfully above that level, at 1374. A gain of over 8 points for the day, or 0.62%. We mentioned yesterday that to be convinced this bull market has real legs we would have to see a couple things happen. Well one of those things mentioned was successful tests of the 1370 level as newly minted support. We can now log one successful test of that area as support. That is certainly a positive sign anyway.

Moving on to the small caps, RUT had yet another pretty ugly day. It also had the wildest ride of the major indices today, reaching as high as 823.79 before moving back on down to finish the day at 815.3, a 0.5% gain. This utterly fails to undo any of the chart damage done over the last couple days and technicals continue to weaken for this index. As we can see both MACD and our RUT/COMP ration readings are also experiencing further deterioration.
If you were looking to grasp at straws for a reason to be bullish on this index I suppose you could take some heart in the fact the the rate of decline in relative strength vs. both the SPX and COMP has slowed. That is decidedly weak, however, and I would hope buyers have better reasons than we could come up with.

And last on the list for today's recaps, the COMP index. This index had the best day of the majors with a 22 point gain, or 3/4%. We don't have much comment here today other than to say that this index remains the strongest of them (certainly on a strictly technical basis) and the one least likely to see the first signs of selling appear. If such a thing ever occurs, that is.

Until next time...
Stay safe out there!

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