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 - 3/16/12

It was a relatively uneventful day for the major indices with flat finishes across the board with slightly more selling than buying taking place. Our Friday update will therefore be brief as usual and we'll see you back here on Sunday for our Weekly market updates and index charts.


Have a great weekend!


The standout winner of the day was Bank of America (BAC) with a 6% gain of 58 cents to close at $9.80. It was just four short days ago that this stock was at $8. That's a gain of  %22.5 in four days! Incredible. And there couldn't be a less deserving company (well OK, there probably could be a less deserving company out there somewhere...)


The DOW shed about 20 points to close at 13232 for a 0.15% loss for the day which tracks right with other indices. The tech composite (COMP) gave up a little less barely even registering a loss at -0.04%, or 1.11 points. The VIX on the other hand plunged again today, losing almost a whole point from its already historically low levels to close at 14.47. A loss of over 6%. As noted in updates of the last few days this has begun to put into serious question our view in prior weeks of a VIX bottoming process. Time to reevaluate.

Charting only the S&P 500 (SPX) and Russell 2000 (RUT) today first up is the SPX. Finishing barely in the green today with a 0.11%, 1.57 point gain this index remains quite healthy. If positive sentiment continues there is no reason why the index shouldn't go on setting new highs for the time being. There is certainly little technical resistance to doing so. MACD further improved on the daily frame while our MultiSlow-Stochastic readings appear to be turning in agreement with each other. That latter could be a sign of impending correction of some sort and indeed, we do find a modest correction down to the major trendline/2011 highs to be the most likely outcome.

We pointed out yesterday that the RUT was right back at its upper channell resistance yet again and that this has been a big challenge for the index. And once again, we pulled back off that resistance to close lower by 0.15%, or 1.28 points. Between the small magnitude of the loss and today's environment of overall market weakness we can't learn anything from today about the likely relative performance of this index going forward. Monday should provide more clarity on the situation.

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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Market Madness Daily Market Update - 3/2/12

Market Madness Financial Headline of The Day:
Yelp! IPO Soars 60% Despite Mixed Reviews
"Yelp! sold 7.1 million shares at $15 which was above the targeted $12-$14 range and valued the money losing venture at just under a billion dollars."
Market Madness recommends its readers stay far away from this turd.

Also worth mentioning before we get to the indices was the action in crude today, which has pulled back a bit from yesterday's level to trade currently at around $106.50, a retracement of over 2%. Market Madness believes crude may not be done with its move, however, and expects to see further upward price pressure in coming weeks.

Well, for the S&P 500 it was another day of oscillating around that 2011 high water mark of 1370. Not surprisingly, that's also where it ended the day, down about 4.5 points at 1369.63. Despite this decidedly mild selling, overall this index chart remains fairly healthy and technicals, while weakening, remain net positive. With that said, Market Madness advocates for a "wait and see" approach to this index as long as it continues to flirt with this important level.

Moving on to small caps we can see the profound weakness in this index with even a superficial look at its chart. In addition to losing its trendline support earlier in the month we now have a convincing break below channel support of the last several weeks. We have previously advised readers to keep a very close eye on this index and this is just the sort of thing that we were keeping our eyes out for. We feel that this is the most probable place for any significant selling pressure to appear first. And it now appears that may in fact be what is happening here. Though it is too soon to have much certainty.

One reading of particular note today is that of our SPX/RUT and RUT/COMP relative strength ratios.  These are found at the bottom of all our daily charts and as you can see small cap relative strength readings have plummeted dramatically since late last week. Another blog that has been harping on this disconnect here--even more than we have--notes this afternoon that the one-day reading of this divergence exploded today, with a reading of almost 4 to 1.

That posting apparently came a bit early, however, because by the end of the day that reading was actually almost 5 to 1! (-1.57% RUT/-0.32% SPX). This should not be comforting to buyers.

We wanted to touch just very briefly on the Semiconductors today. The semiconductor index (SOX) has had it nearly as bad as the RUT lately and if this keeps up it could have negative implications for tech indices. As it stands now it is simply something that bears watching but if we were to see a rapid deterioration from this level we would get much more cautious on the other indices.

Don't forget to check back on Sunday for your Weekly Market Madness Recap!
Have A Great Weekend Everyone!

Market Madness Daily Market Update - 3/14/12

Stock Market Update for March, 14 2012

Quick Headlines:

Commodities got whipped today with Gold and Silver taking an especially rough beating.

Big winners for the day included AAPL with a 21 point, 3.8% gain and BAC (ugh) with a gain of just over 4%

Major indices were both flat and mixed today with the one major exception being the small cap Russell 2000 index which gave up just under 1%. We'll get to that in more detail later on below with its chart. The DOW and the tech composite both managed to finish the day slightly in the green with gains of +0.03% and +0.12% respectively. Just holding on to the great gains of yesterday can be considered a big win for the bulls today.

Our first chart today is the SPX (which we prefer over using the SPY ETF as a proxy). The S&P 500 today shed just 1.67 points down to 1394 which, on a percentage basis, is exactly what the DOW gained, 0.12%.

This again can easily be seen as a win for the bull camp and in addition many technicals also continued to improve today. We feel that a correction down to the 1370 level is both probable, and important to building a new base from which to continue the bull run. A successful test and bounce up would be a strong sign of health while a failed test and break under would be more ambiguous. You can see our projection of the most likely progression from here drawn as the white lines in the chart below. Of course, it may also not even move to test that level and just continue on from here. We are also approaching the top of an ascending wedge formation. MACD confirmed its crossover today despite the minor losses but the SPX : RUT ratio reversed higher on the RUT's pronounced under-performance. 

Which brings us to the RUT chart. We had mentioned yesterday that of all the major indices the RUT faced the most immediate potential for resistance. The index had finished the day yesterday sitting right below prior channel resistance of the last 45 days. And as noted in today's intro this index had by far the worst day of the bunch losing almost 8 points, for a -0.94% decline. Now sitting in the middle of that channel it would be interesting if it simply resumed its sideways movement from here. Despite the losses of the day it wasn't enough to negate the MACD crossover into "buy" territory. However, the RUT: COMP ratio (as previously mentioned) obviously reversed sharply lower on today's under-performance. This reversal was of a large enough magnitude to put into question the previously developing turnaround in that RUT : COMP relative strength measure.

We want to touch only briefly on the tech composite today. This index also experienced an MACD "buy" crossover signal today while our COMP : SPX ratio continued to climb. We are now, however, bumping right up against the prior trendline but this probably won't pose much problem if overall market strength was to continue.

The VIX rose moderately today with a 3.5% gain of half a point to finish at 15.31 at the close. MACD averages are also getting quite close to crossing above the zero line for the first time since December. The white line tacked on to the end of the price action in the chart below represents what we feel would constitute a breakout. If this move were to develop it would almost surely drag MACD lines above that zero line and we believe it could easily move very quickly from there into the mid-20's. If this move fails to materialize over the next two-weeks then our bottoming thesis would be in serious question and would need to be carefully reevaluated.

Stay safe out there!

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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VIX UP Over 14% From Intraday Lows

As of the time of this writing the VIX, after gapping down to an incredible 5-year low of 14, has rebounded sharply off its lows to nearly 16 points. A move of over +14% from the morning lows.

Very interesting indeed. See you after the closing bell for our full daily market recap!

If you haven't read our recent VIX commentary you can it towards the end of our daily and weekly market updates including 3/12/12 market update, 3/9/12 weekly market update, and 3/02/12 market update. Among others.

Market Madness Daily Market Update - 3/12/12

 

It was a largely uneventful day in the markets with flat trading in most US indices. The DOW and the S&P both managed to finish just slightly in the green with other indices just to the other side in the red. The DOW gained about 37 points (+0.29%) and the S&P posted up a mere 0.22 points, or +0.02%.

Diving into some charts lets start off with the large cap SPX below. As you can see the rebound is "stalled" right at our 2011 high water mark, and just below the new high from two weeks ago. What we don't want to see here is another "correction" prior to breaking to new highs above those of two weeks ago, at a mere 7 points away. This would leave behind an ugly double-top formation on the charts and a lot of traders watch that. On the other hand, technicals, including MACD and the SPX : RUT ratio, continued to show some improvement today. Suggesting a strong possibility of topping those levels this week. Price/technical action is  currently presenting a bullish case while other factor argue for more caution. This has been a rough market to be cautious in, however.

Our most commented on index of late, the small cap RUT, finished the day down about 1/3% to sit right on our prior channel support at 814. Despite today's less than stellar action the technical improvements in this index over the last several trading sessions still leaves it in much better shape than it has been since late January. And we remain much less bearish on the index than we were prior to last week's action. MACD also continued to improve, while the RUT : COMP ratio pulled back slightly for the day (deteriorated). Watch for a bounce off this support level (810-814) tomorrow if indices overall show any strength.

But the big mover and shaker of the day was the VIX. And boy did it move! The volatility measure plummeted a whopping -1.47 points from an already low level of just over 17, to its close at 15.64. A drop of over 8.5% for an utterly flat day in the underlying index! What does this do to our bottoming thesis? Well this may be counter-intuitive (or just plain wrong) but we see this as a strong sign of support for our thesis. Capitulation if you will. The last time the VIX reached these levels was July, 7th 2011. This was followed immediately by a spike, first to the low 20's, and then on to the upper 40's shortly after that. While we have no reason to suspect any kind of jump back up into the upper 40's, we can easily see a spike into the mid-20's occurring in short order.
You can see more on this bottoming view here, here, here, and here. Among other places.

Stay safe out there!