Market Madness Market Update - 3/26/12

A spectacular day for US indices. Even though we're not doing market updates anymore today was too good to pass up.

The S&P 500 today took back all of its losses of prior days and more. The index closed at its highs of the day on some last minute buying acceleration to finish at 1416.5, a new high. Wedge resistance is coming up at around 1425 but it's getting narrow here and soon it will resolve and break on way or another. Probably for a correction downward. The market sure does seem to have one coming after a move this large, and this fast.

We were bullish on the semiconductors is some of our last updates and today it finally broke resistance at 440. If bullishness in the general market continues this index very well could be set for some great gains.

And by far the biggest winner of the day, the small cap RUT index. Bye bye you cruel channel. This is going to be the place to be if market strength continues. We've been saying that for awhile now and it has been true for awhile now. Even Goldman Sachs has picked up on it and jumped on the Market Madness bandwagon (OK OK, so maybe they came to their own conclusions based on their own analysis and aren't actually reading our blog...)

That's it. Just had to post those lovely charts and say a quick word. I'm NOT doing market updates anymore, I swear.

Market Madness Daily Market Update - 3/21/12

Daily Stock Market Update and Index Charts for March, 21 2012

US indices traded around their flat lines for most of the day today with the conclusion being mixed results at the closing bell. The DOW saw the most downside pressure with a close at 13124 for a 45 point, -0.35% loss for the day. The S&P 500 index (SPX) fared a tad better losing just 2.63 points to close at 1402.89, a -0.19% loss. While the tech composite (COMP) did even better finishing just on the other side in the green for a 1.17 point, 0.04% gain for the day to close at 3075.32. A relatively calm day today, our volatility measure, the VIX, gave up about half a point to close just above 15 at 15.13, a 2.89% decline.


Moving on to our charts today first up is the S&P (SPX). Unsurprisingly technicals deteriorated somewhat today with MACD further declining and both trend and momentum indicators losing some ground across the board. Our multi-stochastics indicator, however, has not yet confirmed its turn out of overbought territory. Right now most evidence seems to point towards this being a "cooling off" period before the next leg rather than a full-on profit taking situation. Of course, anything could happen tomorrow as we all know all too well.

The small cap RUT index "outperformed" today by actually gaining a little ground. A very very little ground. Now right back in its long-standing channel this index has a bit of work to do before undoing the technical damage caused by Tuesday's losses. Assuming it can overcome those obstacles the RUT should still be in a good position for relative outperformance. We'll need to see either this 820-830 area successfully tested as new support or a convincing break of its recent highs to get back on the bull side of this trade. Overall technicals did worsen for the index despite the meager gains.
MACD fell a bit farther today but the RUT : COMP ratio flattened out a bit which certainly could be a positive if followed through on. Our multi-stochastic measure, however, is on the verge of confirming its rollover out of overbought. Which could actually be a good thing--relieving that pressure--if this is the worst of it, or at least close to the worst of it.

The semiconductors truly did "outperform" today. The SOX index posted gains of 1.65 points to close at 437.19. A gain of 0.38%, besting its peers by a wide margin. We remain relatively bullish on this index if it can crack that resistance at 440. Technicals here were mixed today and provide little insight overall. MACD deteriorated a bit, stochastics continue to turn out of overbought, and the SOX : SPX relative strength measure showed improvement. Both trend and momentum indicators of a wide variety are showing mixed results and right now price action is the very best indicator for this index (well for any index any time, really).

Still not feeling well so that's it for today folks!
Stay safe out there!

Market Madness Daily Market Update - 3/19/12

Daily Market Update and Commentary for March 19, 2012


Another day in the green for the major indices today.

The DOW had the weakest showing with a paltry 6.5 point, 0.05% gain to finish at 13239 at the close.
The CBOE Volatility index (VIX) advanced today despite the gains in the SPX with a .57 point, 3.94% move up from its very low levels to close at just over 15.

The S&P 500 had a much better showing than the DOW and was up almost 10 points late in the day before settling down a little to finish at 1409.75. A respectable gain of about 5.5 points, or 0.4%. The index backed off its highs after approaching the top of our ascending wedge formation but it is quickly running out of room and this will resolve one way or another imminently.

Technicals further improved with MACD gaining more ground and the SPX : RUT moving lower once again. A positive for continuing market strength. Stochastics remain in overbought territory on the daily time frame but show no signs of rolling over yet.

The start of the show today was, of course, the small cap RUT index. We've been increasingly bullish on this index starting after the first week of March (see here, here, here, etc.) and its break today of that stubborn upper channel resistance may bring a new phase to this rally. It should, at the very least, now have a solid base of support around the 830-820 level. For the day the index saw a gain of about 7.5 points, 0.91% to close at 837.77.
A handy outperformance of its major peers.

We love this index under any conditions of continuing overall market strength and it has a high probability of continuing outperformance of its peers under this scenerio.

The semiconductors (SOX) also performed admirably today with 0.75%, 3.28 point gain to 438.69 at the close. We've been constructive on this index as well lately (here, here) but this one is now sitting right at technical resistance. If, however, it can break convincingly through that 440 mark it too should have some more room to run for relative outperformance. Technicals also saw improvement here today with both MACD and Stochastics registering gains.

Take care and stay safe out there!

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Market Madness Weekly Market Update - 3/16/12

Index Charts and Commentary for Week of March, 16, 2012

I hope everyone had a great weekend!

It was an outstanding week for US markets with new "recovery" highs for most major indices. Getting right to the charts today we start with the S&P 500 index (SPX) below. It now seems likely that even in the event of a pullback we should find significant buying support around those 2011 highs at 1370. That's about a 2 1/2 percent correction from here. Technicals improved this week with stochastics reversing higher and avoiding a confirmed turn out of overbought and with a strengthening in MACD. While we remain cautious on the macro fundamentals it is difficult to argue with this price action. From a technical standpoint most evidence points to a continuing rally for now.

The small cap Russell 200 index has been an interesting one to watch over the last few weeks with this week being no different. The improvement in technicals this week was pronounced despite a slow start and after regaining its channel it went on to move quickly back up to the upper bounds of that channel. This has been stubborn resistance and it has failed so many times now one would think it will soon resolve one way or another. Either with a convincing break through and a shot at its own 2011 highs or a failure and sharp break down to new lows of the year.
MACD flattened out from its decline this week while stochastics avoided confirming the turn out of overbought. These are just the sort of improvements we had written previously that we needed to see and this index has gone from ugly duckling to diamond in the rough in the process. A break of that channel resistance should position the RUT for outperformance under any scenario of continuing market strength.

Another potentially attractive area were market strength to continue is the semiconductor index (SOX). This index is just in great shape and with its recent successful test of 400 and subsequent strong rally could be getting set to run. Any cross over 440 should establish a nice base from which to continue the move on up to its March '11 highs at 474. Technicals also improved markedly with MACD advancing and stochastics turning around sharply.

And last up as usual we have the VIX. One way or another our VIX bottoming thesis is going to see a resolution imminently. It was a wild week for the VIX and at one point it even reached levels not seens in nearly 5 years, at 13.99 low. Indeed it finished the week not far from there at 14.47, a decline of  about 8.4%. We feel this may be the culmination of the bottoming process but it if is not then we should know that very soon. As we said, one way or another resolution is coming for this view. The white line tacked on below represents what we would probably need to see in the way of a breakout for confirmation of this. 

See you for our manic monday report! Stay safe out there!

Market Madness Daily Market Update - 3/15/12

Index Chart Updates and Analysis for March, 15 2012

S&P 500 Tops 1,400 On Economic Reports

U.S. stocks advanced, sending the Standard & Poor’s 500 Index above 1,400 for the first time in almost four years, as data showed manufacturing in the New York region unexpectedly increased and jobless claims declined.

Macro news continues to follow the market upward. The market has led the news this entire rally and the increasingly positive macro measurements are putting the bear case in serious doubt. That is, of course, if the numbers can be trusted and are not just being manipulated or propped up by expansionary policies. At Market Madness we don't consider that possibility to be all that far fetched, however.

Most major indices finished at or near their highs of the day for gains of around 0.5% With the small cap Russell 2000 index outperforming on a gain just under 1%. The VIX was basically flat for the day creeping up from 15.31 to 15.42 for .11, 0.72% rise.

The S&P 500 index (SPX) finished right at its highs of the day with a gain of 8.32 (0.60%) points to 1402.6
With another strong day for buyers this market continues to impress (and sometimes baffle). Technicals also further improved with MACD gaining some steam and a return to a declining SPX : RUT ratio. The "projected" lines on the chart below represent nothing more than a "most probable" outcome based on purely technical analysis and, without further supporting evidence, should be given little more weight than any other guess.

Semiconductors had a great day today with a 2% gain for the SOX index. We noted in our weekly market update of 3/2/12 that this it was approaching an important support level to the downside and to look for a bounce off that level (at 400). After that actually did come to pass we then voiced the view in our daily market update for 3/7/12 that this index could run faster, and farther than other indices on continuing market strength. It may now be approaching some overhead resistance around the 440 level and more caution is prudent for now until we see how price interacts with that level.

The RUT outperformed its peers today with a gain of 8 points for 0.98% to close out the day at 831.46. After this day of respectable gains for the RUT it is now right back up against that channel support. And once again it is clearing this level that is, and has been, the major hurdle for this index. This will be a chart to watch tomorrow. If it can finally break that barrier this index should be best positioned for relative outperformance in an environment of overall market strength.

As always Good Luck and Stay Safe!

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