Tuesday, March 13, 2012

Market Madness Daily Market Update - 3/13/12

Market Update for March, 13th
The "Market Madness" moniker is certainly appropriate today.

There were some market driving events and headlines today and it made for a wild ride but at the end of the day it was the best day for markets this year. In a year with a lot of good days so far.

The FED's FMOC met today which was one driving event of course. Though the outcome of the meeting was mostly unchanged wording the FED did report that they see a "Slightly improving economy."
From Reuters: "Fed holds steady course, offers few clues on future."

Treasuries also fell sharply with yields rising to 2012 highs. The highest yields since October 2011 actually. No surprise there with the strength seen in equities today. In other indices the DOW rose to its highest level since 2007, closing at 13177 for a roughly 1.7% gain, the least of all major indices but still impressive. The Composite breached the 3000 level again but this time leaves a little room for pullback and is in a better position to challenge higher levels than previously. Assuming a continuing strong market, of course.

On to our charts for the day. The SPX started the morning with a strong gap up to 1378 and then spent most of the day after that gently drifting upwards until late afternoon. The final hour of the day saw some fireworks though and it was buy buy buy from then until the close, where we finished the day at just over 1396. A gain on the day of over 1.8% and 24.9 points. Its best day since mid-December. It was enough to trigger a MACD crossover signal back over into green and the SPX : RUT relative strength measure continued to improve as well. We are no doubt approaching some overhead resistance at these levels and the area between 1400 and 1420 is probably going to be tougher to cross than the preceding 40 points or so. We should probably expect to see a mild pullback early on tomorrow but whether or not sellers can hold the day is in question.

The final hour burst, by the way, was probably brought to us courtesy of JP Morgan with a huge stock buyback program and some helpful leaking of positive "stress test" results.

The small cap RUT index continued to show marked improvement today. Both in absolute terms (obviously) and relative terms vs. other indices. Technicals improved across many measures and MACD in particular appears to be headed for imminent crossover into the green for the first time in a month. Our RUT : COMP relative strength proxy also inched up a bit today, with underlying indices mostly tracking closely across the board.
We had reversed course and gotten more bullish on this index late last week and, indeed, still feel that it has some room to run left. More so than other indices in many cases. However, it's important to note that it is now sitting right below prior channel support of over a months duration. If it can clear this small hurdle then it has some room before running into the next significant technical resistance.

And it was another day of "VIX Gone Wild!" viewing pleasure. We started the day with a gap down from the already low level of 15.6 to a mind-bending 13.99 low! A plunge of over 10% and the first time hitting those level since June of '07. This early morning plunge, however, was followed promptly by a rebound. A rebound of over 14%. From an intraday low of 13.99 to the intraday high of 16.08, or +14.94% from bottom to top. After some large, erratic swings later on it settled down a tad before the closing bell to finish at 14.8, a drop of a bit over 5%. Incredible day for the VIX.
We believe the bottom is probably in for volatility and further, that it is unlikely to move sideways for any extended period. We'd love to hear you views.

Stay safe out there folks!

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