Rally Fades, Indices Hold Above Support

DJIA - 26.63, -0.23% SP500 - 5.25, -0.41% NASDAQ Comp. - 18.28, -0.77% Russell 2000 - 0.99, -0.13% Exchange NYSE NASD Advancing 1,656 1,421 Declining 1,317 1,455 Oil $109.71 -$5.25 Gold $810.50 -$24.70 $SOX 352.82 -2.45 Strongest Sectors: XLY +1.97%...XLF +1.40%...XLP +1.10% Weakest Sectors: XLE -5.49%...XLB -2.52%...XLU -1.22% Oil was the key driver again on Tuesday. We posted this morning, “if oil continues lower, expect stock prices to continue to trend higher.” Oil which opened lower from electronic trading Monday and over night found a low near $105.46 had begun to rally by the open and then moved higher during the day to close at $109.71. As oil slowly climbed throughout the day the broad indices fell. Since futures started up this morning and the market finished down, this again proves the point that you cannot rely on early morning futures prices to show you the direction of trading for the day. It’s important to understand the driver…in today’s case oil. Notice that advancers led decliners on the NYSE and were essentially even on the Nasdaq. We view three of the four broad indices as moving sideways at this time and we have changed our intermediate and short-term trend status to neutral. Technically the RUT is in an intermediate term up and short-term neutral trend as of today’s close. It is unlikely for this one index to carry this market higher by itself. Should the other indices break their horizontal support levels, for the DJIA 11,300, the SPX 1,260 and the Nasdaq its 50 DMA at 2,334, it will shift our trend status to down. Watch closely these key support levels. Until the market breaks support, trade with a neutral status in mind. If oil continues its downtrend to its chart target of $98.50 don’t be surprised if stocks bounce off support. In either case trade the charts. From a neutral trend the market can pivot up or pivot down so it is important to pay close attention to the nearby support and resistance level. Be prepared for a move in either direction. Stocks that are moving sideways can be very challenging to trade, so look for those stocks that are already trending down or up. Commodity related stocks, oil, gold, coal, steels and Ag-related continued their down trends. I happened to watch a few minutes of a Saturday morning cable business show and one of the analysts was still high on fertilizer stocks and specifically mentioned CF as his favorite. I though to myself, “doesn’t this guy look at charts?” CF took a huge hit dropping over $14 or 9.44%. Again shows that one should rely on their own research and not the opinions of the talking heads. Airline stocks which closed below their highs of the day still finished with gains between 3% and 12% on Tuesday: AMR, CAL, DAL, LCC, UAUA. Sector Watch Up Trending: XLI, XLK, XLP, XLV, XLY Sideways: XLB, XLF Down Trending: XLE, XLU Index Commentary The DJIA closed at its 30 DMA and formed a large outside day. The SPX also closed at its 30 DMA and formed a large outside day. The Nasdaq bounced down at its 200 DMA and closed below its 20 and 30 DMA while forming a large outside day, that was outside of eight of the last nine trading days. The RUT formed an outside day that closed above its 20, 30, 50 and 200 DMA again. If other indices break support expect this index to follow. Tuesday’s Action Moving Up: PCLN, STRA, DECK, UAUA, WRC, AMZN, NIHD, LAMR, NDAQ, FRE, FNM, GS Moving Down: FSLR, CF, X, POT, MOS, BTU, CLF, BUCY, MEE, ANR, CNX, BIDU, DRYS, MON, AEM, AGU, SCHN, IPI, FWLT, NUE, MA, GDX, AAPL, IBM, RIMM, LDK, MTL, ONXX, CELG, FMCN, HANS, PNRA, SOHU, JASO, V, EBAY, MER Intermediate Term Market Trend: Neutral Short Term Market Trend: Neutral