Tuesday, March 20, 2012

Market Madness Daily Market Update - 3/20/12

Market Update and Index Charts for March 20, 2012

Due to a nasty cold we're going to attempt to keep it very brief today.

US markets pulled back a bit today with the DOW losing about -.5% to close at 13170 and the S&P 500 giving up just over 4 points, or -0.3% to close at 1405. The tech composite (COMP) shed a mere 4 points -(0.14%) to close at 3074. All closed well off the lows of the day after a morning gap down followed by steady improvement through the rest of the day.

The SPX pulled back from the top of its ascending wedge formation this morning but fought back up to close well within Monday's range. That's a plus. On the negative side, however, the narrowing of losses throughout the day was not enough to prevent some technical weakening. MACD flattened out, the SPX : RUT relative strength ratio turned up, and stochastics started to turn out of overbought territory. None of this is damage that couldn't be undone with a strong day or two.

The small cap Russell 2000 index (RUT) saw the worst of it and did not recover from the morning gap down nearly as well as other indices. For the day it posted a loss of over 1%, or 8.53 points to close at 829.24. Right back inside that long-standing channel. The big question now is: will this level now provide some support? Technicals took a fairly sharp turn for the worse today with MACD turning down and the
RUT : COMP ratio continuing its decline. Stochasitics also rolled over steeply today but are not yet all in agreement. We should get more clarity very soon.

Is the VIX bottoming thesis dead? (long live the VIX bottoming thesis?)
Well we report you decide but it looks like a distinct possibility. Personally we would need to see a fairly sharp move up to above the red line there around 19. And we would need to see it relatively soon. Like by the end of next week tops.Failing that occurring we would be very cautious on drawing any conclusions at all from VIX action in the near future. The VIX gained about 4% again today with .56 point rise to close at 15.60. That is a rise of about 14% from its lows but at these extreme lows moves of that magnitude--in both directions--are not uncommon at all and really do not impart any useful information.

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