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!