Markets Reverse and Finish Up Strong Another Bullish Sign

DJIA + 135.16, +1.18% SP500 + 17.00, +1.35% NASDAQ Comp. + 24.43, +1.07% Russell 2000 + 19.19, +2.75% Advancers & Decliners NYSE 2,225 923 NASD 1,960 961 Oil closed at $128.42 down $3.40 After Tuesday's market action you now know why we took all the time we did over the weekend to talk about the bullish technical evidence that appeared on the charts in the second half of last week. We emphasized the importance of the earnings, earning in financial stocks and the price of oil. These factors remain just as important if the market is to continue this rally and ultimately change from a short-term up trend to an intermediate term up trend. On Monday oil rose over weather concerns in the gulf. Today oil fell when it looked as if oil platforms in the gulf would not be threatened. It is important to understand what happened yesterday and today. Last week oil fell because it appeared that economic slowdown was dampening the demand for oil. Yesterday it rose due to weather, NOT demand factors. As everyone knows weather does shift continually. As the weather threat subsided price fell due to the same demand factors that drove it lower last week. So weather of course could change daily, however it appears the pullback in oil for demand factors is very real. Oil, USO and XLE have all fallen below their 30 DMA which of course is a down trend. Tuesday was an unusual day that increases probabilities of the bullish outlook we discussed over the weekend. AAPL and WB gapped lower this morning and then had an unusually fast recovery. Other stocks including PCP, AXP, RIMM, MA, V and BIDU among others experienced the same type of intra-day reversal. This reversal of fortunes led to each of the indices opening lower and then reversing with a strong rally to the upside. We will discuss at another time but what you have been seeing since late last week would qualify as a buying panic. Index Commentary All the indices reversed early morning losses and closed strong for the day on good earnings and falling oil. The DJIA stayed above its 20 DMA and just pierced its 30 DMA today at the close. It moved above the short-term resistance of its recent horizontal bear flag, the 11.500 area and has formed a higher high. The SPX broke through its 20 DMA today and closed in the area of recent horizontal support, now resistance in the 1,275 area. The Nasdaq which closed below its 20 DMA on Monday gapped lower in early trading, reversed and formed a bullish engulfing pattern and closed above its 20 DMA. The RUT formed a large white candle breaking it 30 DMA and piercing of its 50 DMA at the end of the day. If this 50 DMA breakout holds the RUT will be the first of the indices to reverse its intermediate term trend to up. Earnings Watch Monday AMC/ Tuesday BMO Earnings Moving Up: AMLN, STLD, BHI, BIIB, CAT, CME, DD, KEY, LMT, STI, WB Monday AMC/ Tuesday BMO Earnings Moving Down: AAPL, AXP, LOGI, SNDK, TXN, AKS, HAL, MICC, PCP Tuesday’s AMC Earnings After Hours Market Moving Up: ILMN, ISRG, YHOO Tuesday’s AMC Earnings After Hours Market Moving Down: BRCM, CHRW, LLTC After Hours: ISRG +32.77, ILMN +3.50, BRCM -1.40, CHRW -4.60 Stock Commentary Coal sector stocks after a one day bounce reversed down with oil...KOL, BTU, CNX, MEE watch for a break of support in what appears to be a new down trend. Ag-reltaed stocks AGU, CF, IPI, MOS, POT moved lower in sideways consolidation patterns. No lower low in these stocks yet but watch support levels closely. Steel stocks X, SCHN, NUE, AKS are falling from lower highs to lower lows. FSLR moved lower in a sideways consolidation pattern. RIMM gapped lower breaking it bear flag pattern and then rallied with the market back into it bear flag. GS moved higher with a large white candle and is above its 20, 30 and 50 DMA. MER broke above its 20 and 30 DMA and above its most recent high forming a higher high. MS moved back above its 30 DMA. LEH closed above its 20 DMA. MA gapped lower and had a strong support bounce and finished above its 20 and 3o DMA. V gapped lower and finished higher for the day. Tuesday’s Action Moving Up: GS, DECK, MA, PCLN, MER, UAUA, MS, V, GRMN, LEH, IBM, NKE, MON, SOHU, SBUX, ESRX, EBAY, CELG Moving Down: FSLR, CNX, MEE, POT, SCHN, BIDU, X, AAPL, BBTU, ANR, CLF, MOS, USO, AGU, DRYS, RIMM, IPI, MTL, NUE, JASO Intermediate Term Market Trend: Down Short Term Market Trend: Up