Futures Are Higher Before the Open

SPX is breaking to new highs hitting 832 as it continues the current trend up since the March 6 low. Stay with the trend until the end... BMO - ES +10 and NQ +20 future are trading higher with a little more than an hour to go before the cash markets open. If the cash markets open higher, watch if the they break Wednesday's highs for indication that the short term up trend is likely to continue. On the downside the key short term support is still the S1 level of Monday's large white candle. We'll have Great Questions, Great Answers this morning so check back... At the Open on Thursday SPY – hanging man, buyers at 50 DMA MS – hanging man above 200 DMA ESS – doji on 30 DMA GS – hanging man at 200 DMA SNDA – large white candle, +5.29% OSG – bull flag CTSH – bull flag LEAP – bearish engulfing above 200 DMA X – spinning top after reaching $25.08 double bottom price target DLB – bull flag at 200 DMA CRM – hammer, bull flag AMED – double bottom, bullish divergence stochastic

Great Questions, Great Answers (email us at chartsignals@yahoo.com with your technical market questions) Eric asks… Seems like the price action today (Wed March 25) is a cautious one, knee-jerk short covering and then a leg in back to the short market. Also seems like everyone is waiting for tomorrow’s big GDP day. As we come closer to the end of the quarter, what should I expect with this quacky market? If it were totally bearish, I’d expect the fundies to dump some bad performing stocks. And if this now seen as a slightly bullish market, I would expect some end of the quarter buying in some of the good names. In either case I expect some selling to start on Wed of next week. Need some sanity in this insane world…sanity check please. Am I getting close or totally off base? Dave answers… Wednesday’s action I’m sure included both shorting and short covering…however if one really studies the short data that is released every two weeks it should be clear that short activity was likely a small minority of total activity. It is much more likely real cash buyers and sellers created the majority of the buy and sell transactions on Wednesday. Since the DJIA volume increased to 454.1 million shares up from 379.5 million shares on Tuesday, it is clear that not everyone was waiting for Thursday…someone may be, but not everyone. While it is true that the market has been more volatile during the past twelve months than it was during the prior four years due in large measure to the economic and financial challenges in America and the world, this market does not appear quacky to me, but rather it seems is quite similar to past bear market lows in 1974, 1987 and 2002 – 2003. Panic selling seems to have pushed this market to oversold lows and as financial and economic data has been released over the past two and a half weeks, showing that economic estimates had become excessively pessimistic and inaccurate, that cash laden investment firms have been taking advantage of extremely low stock valuations to buy. In 32 years I have never heard a financial professional use the term “fundies” so I’m guessing you mean mutual funds, if so, it seems that they have been “dumping” for 18 months and likely completed the majority of their “dumping” by March 6. While funds are always buying and selling and some “window dressing” always occurs at the end of a calendar quarter, I would expect this to be a minor factor after 18 months of aggressive selling. If by good names you mean stocks that are in up trends, it seems that mutual funds are not waiting for the end of the quarter but actually became aggressive in their buying beginning on March 10. I like your confidence in picking next Wednesday as the day selling will start. From my view I think sellers were in control last Thursday, Friday, Tuesday and part of Wednesday (yesterday), but that on balance buyers have been in control for two and a half weeks. While it would be presumptuous for me to pretend that I can tell you or anyone else, what day sellers will overwhelm buyers and this market will pull back, I do know that when sellers do take control, prices will break support and then fall to a lower support level where buyers will take control back from the sellers. I know what that looks like on a stock chart and I am prepared for that every single day. I hope you and every reader of Chartsignals will be too! Aloha

Break of the High of the Low Day...

DJIA + 379.44, +5.80% SP500 + 43.07, +6.37% NASDAQ Comp. + 89.64, +7.07% Russell 2000 + 24.49, +7.13% Exchange NYSE NASD Advancing 3,459 2,356 Declining 398 465 Oil $45.71 -$1.36 Gold $895.90 -$22.10 SOX 205.84 +15.37 VIX 44.37 -5.31 The VIX moved down confirming the move up in the SPX on Tuesday. Strongest Sectors: XLF +14.86%...XLI +7.55%...XLY +6.15% Weakest Sectors: XLU +1.32%..XLP +1.85%...XLV +3.61% Sector Watch Up Trending: Sideways: XLE, XLY, XLV, XLK Down Trending: XLF, XLP, XLI, XLB, XLU Technically today was the break of the high of the low day for many stocks and represents a short term entry opportunity. Stock already in an uptrend may also be presenting intermediate term entry opportunities. The strength of Tuesday's move suggests that it is more probable to continue in the short term, so watch the short term support and resistance levels. Everyone has known this market was oversold. What no one knew was; where was the bottom of irrational selling? Selling has been driven been by uncertainty in the banking system. The news that C was profitable for the first two months of 2009 was enough to drive C up 38%. The Financial Sector XLF rose14.86% as financial stocks BAC, MS, PNC, JPM, MET, PRU, WFC, STT, IVZ, SPG, TROW, GS and AFL all rose more than 15%. All of these stocks are in down trends except STT and IVZ which sideways and MS and GS which are in up trends. Support bounce in a down trend is a counter trend move and in an up trend is a bull flag support bounce. A sideways trend is a horizontal support bounce. Gold and oil were down today. Gold stocks many of which broke the low of the high day yesterday were down again on Tuesday as financials moved up. Dave’s Insight: Trend is the most important factor in every trade. Know the short term and intermediate term trend in each stock you trade. Know if you are trading the short or intermediate term trend in each trade. If you are trading up in a down trend make sure you are aware that this is a counter trend move. AMZN gapped up on the open and closed above its 200 DMA, a hold above the 200 DMA is long term bullish. PCLN formed a bullish harami at its 20 DMA in a bull flag, confirmation of the harami would be short term bullish. Trading just below its 200 DMA BIDU gapped up and closed above recent resistance…is nearing the 169 chart price target we calculated in last week’s Advanced Technical Workshop. Index Commentary The SPX and DJIA confirmed Monday’s inside days and Friday’s bullish harami while breaking the high of the low day which was Friday. The Nasdaq gapped up and formed a large white candle that confirmed Monday’s inverted hammer and Friday’s hammer and closed above the high of the low day which was Monday. The RUT gapped up and formed a large white candle that confirmed Friday’s bullish harami and closed above the high of the low day which was Monday. Great Questions, Great Answers (Email us at chartsignals@yahoo.com with your technical question.) Bruce G asks… Last night I asked the question about "swing" vs. "trend" and I understood your clarification, and need for precision that will lead to better rules, and ultimately, trading / profits. After thinking about it though, I still am unclear on the fundamental issue of when or how do you decide whether to trade the short term or intermediate term trend? As I am formulating a better set of rules, I see both entries very often being the same, but the exits will be different. Does selecting the appropriate time frame depend upon overall market conditions? What tools do you use to determine this? Thanks again, Answer… The entry for a short term and an intermediate term trade can indeed be the same and the exits are almost always different. I have covered this exact point by walking through the difference in the reasoning process that a trader uses in a short term trade versus an intermediate term trade in my live Technical Analysis Workshops. Let’s clarify that in my view a short term trend on the daily chart is two days to four weeks. An intermediate term trend is four weeks or longer. The choice of which to trade is entirely personal to the trader. One trader may choose only to trade short term, a second only intermediate term, while a third trader may choose to have both a short term and intermediate term trading system. Certain traders may choose to trade both short and intermediate term on the same stock at the same time; exiting the short term trade for a short term profit while continuing to hold the intermediate term trade in expectation of a larger profit. In all circumstances it is important to predetermine which trend is being traded and then to manage that trade based on the selected trend. A short term strategy should be usable at all times. A trader that chooses to trade intermediate term would generally do so when they expect a trend to last longer than four weeks. When the broad market is trending up or down there will be more individual stocks trending in the same direction on which a trader can trade the intermediate term trend. At the Open on Wednesday Counter Trend SPY – confirmed inverted hammer, rose 5.26% NSC – confirmed Friday’s bullish harami, rose 4.68% SCHN – confirmed Monday’s inverted hammer, rose 14.45% Up Trend HANS – broke out of horizontal resistance and pulled back to close just above, rose 1.37% SGP – rose another 4.72% following MRK recent buyout offer CF – support bounce in bull flag, rose 4.37% Sideways Trend OSIP – confirmed Monday’s inside day, rose 3.51% RE – continued to rise from Friday’s bullish engulfing, rose 3.28% FWLT – rose to 20 DMA and pulled back, rose 6.99% Down Trend SYNA – rallied through 20 DMA resistance, rose 5.71% ISRG – did not confirm Monday’s shooting rose through 20 DMA in bear flag pattern, rose 4.39% LZ – did not confirm Monday’s shooting star/bearish harami in bear flag pattern, rose 6.34% Learn the Discipline As we posted on Saturday our Model Portfolio was all in cash. We entered eight positions during the first hour on Tuesday following our pre-stated guidelines of approximately $2,000 per trade in stock: 1,200 shares UYG 1.75 600 shares FAS 3.32 62 shares ICE 62.20 25 shares PCLN 81.19 41 shares WMT 48.27 38 shares MCD 53.25 55 shares HANS 36.47 50 shares NFLX 39.39 We entered six additional positions during the last 30 minutes of the trading day: 66 shares DLB 30.20 85 shares VPRT 23.63 25 shares MYGN 81.49 100 shares PWR 20.58 52 shares JEC 38.15 30 shares AMZN 65.39 Approximately $28,000 of the Model Portfolio is now invested. Stocks to Watch on Wednesday Leading Stocks: Holding Above 30 DMA BIDU, CLB, PCLN, BKC, NFLX, DLTR, HANS, ICE, ALGT, MOS Moving Above 30 DMA = 8 DLB, JEC, MYGN, PWR, VPRT, AMZN, MON, WMT Moving Below 30 DMA = 0 Staying Below 30 DMA GMCR, GME, JCOM, SLGN, WRC, FLS, ICE, CPLA, ESRX, GES, PSYS, CHL, DECK, GIL, MHS, TDG, SPWRA, AMED, APEI, BIIB, GPRO, GXDX, PCP, RBN, AAPL, CTSH, DV, ESI, VAR, SYNA, WCG, ATW, BLUD, JW.A, MUR, ORCL, RCI, SWN, GR, FSLR, HLF, EBAY, AMX, STRA, PCR, RIMM, BDX, BYI, CAM, PPD, ACN, NIHD, SNHY, JOYG, K, JOSB, PETS, NTLS, BAP, HDB, CBST, SNA, AFAM, EZPW, WAB, AXYS Tuesday’s Action (=> +0.70 or -0.70) Moving Up: BIDU, FSLR, GS, MA, POT, NUE, MON, MS, SOHU, STRA, MOS, SCHN, V, NDAQ, X, AGU, CF, PNRA, CNX, ESRX, KRE, PCLN, SINA, INFY, IPI, COH, BRCM, KMT, NIHD, BTU, ANR, KBE, GRMN, FWLT, CLF, ADM, AFAM, EBAY, ZION, LAMR, MEE Moving Down: GOLD, NEM, GLC, AEM, GDX, GG Intermediate Term Market Trend: Neutral – Nasdaq; Down – DJIA, SPX, RUT Short Term Market Trend: Up

SPX, DJIA Form an Inside Day...

DJIA - 79.89, -1.21% SP500 - 6.85, -1.00% NASDAQ Comp. - 25.21, -1.95% Russell 2000 - 7.79, -2.22% Exchange NYSE NASD Advancing 1,110 803 Declining 2,699 1,969 Oil $47.07 +$1.55 Gold $918.00 -$24.70 SOX 190.47 -4.54 VIX 49.68 +0.35 The VIX moved up confirming the move down in the SPX on Monday. Strongest Sectors: XLF +1.29%...XLE +0.18%...XLI -0.90% Weakest Sectors: XLK -3.15%..XLU -1.90%...XLV -1.84% Sector Watch Up Trending: Sideways: XLE, XLY, XLV, XLK Down Trending: XLF, XLP, XLI, XLB, XLU SP and Nasdaq futures and cash indices rallied at the open from a move down in the overnight futures market to within four points of Friday's high. The indices then reversed and down trended to support throughout the trading day. Oil prices rose while gold prices fell. Bank stocks and financials were stronger and tech stocks were weaker. Index Commentary The SPX and DJIA formed inside days and the Nasdaq formed an inverted hammer while the RUT formed a near inverted hammer spinning top. With confirmation these are bullish candle patterns, but in a down trend they would represent a counter trend move at this time. AMZN closed near horizontal support as it traded in a 3.88 range. PCLN did not confirm Friday’s hammer as it formed a large black candle and fell to gap support. BIDU formed a shooting star as it fell to horizontal support in a 10.57 trading range. Great Questions, Great Answers (Email us at chartsignals@yahoo.com with your technical quesiton.) Scott A. asks… Had a question on when you are deciding to take a trade during the day versus end of day. I now understand that you look at: 1. Strength of the move (what is stock price doing that morning, and how is its volume confirming etc.) 2. Overall market direction (that it is confirming the same direction as the stock ) How important is it that both of these are in our favor or is it just enough to have one in our favor. Thanks ….. Answer: These two points are guidelines with the word or in between them. If both conditions are met that is a bonus. Mitch W asks… If the VIX is such a contrarian indicator to the S&P, how come the chart pattern of the VIX does not more closely mirror the pattern of the S&P? Thanks for all your help – Answer: The VIX is an inverse indicator or moves in the direction opposite of the SPX. The VIX is not directly calculated from the SPX itself, but rather from the prices of the derivative SPX options. There is a very high correlation when the SPX moves up the VIX moves down and when the SPX moves down the VIX moves up. However the magnitude of the moves will not be identical since the VIX is calculated from option prices and not directly from the SPX. At the Open on Tuesday Counter Trend SPY – an inverted hammer NSC – at support did not confirm Friday’s bullish harami SCHN – at support, potential double bottom, inverted hammer Up Trend HANS – at resistance, break out or bounce down? SGP – gaps up after bullish engulfing like pattern after MRK buyout offer CF – large white candle support bounce off 20 DMA in bull flag Sideways Trend OSIP – inside day after broke the high of the low day RE – spinning top after bullish engulfing FWLT – large white candle after breaking the high of the low day Down Trend SYNA – sells off at 20 DMA resistance, spinning top after hanging man ISRG – shooting star at 20 DMA in bear flag pattern LZ – shooting star, potential bearish harami in bear flag pattern Stocks to Watch on Tuesday Leading Stocks: Holding Above 30 DMA BIDU, CLB, PCLN, BKC, NFLX, DLTR, HANS, ICE Moving Above 30 DMA = 2 ALGT, MOS Moving Below 30 DMA = 2 DLB, VPRT, AMZN Staying Below 30 DMA GMCR, GME, JCOM, SLGN, WRC, FLS, ICE, MYGN, CPLA, ESRX, GES, PSYS, CHL, DECK, GIL, MHS, TDG, SPWRA, AMED, APEI, BIIB, GPRO, GXDX, MON, PCP, RBN, AAPL, CTSH, DV, ESI, VAR, SYNA, WCG, ATW, BLUD, JW.A, MUR, ORCL, RCI, SWN, GR, FSLR, HLF, EBAY, AMX, STRA, PCR, PWR, RIMM, BDX, BYI, CAM, PPD, ACN, NIHD, SNHY, JOYG, K, JOSB, JEC, PETS, NTLS, BAP, HDB, CBST, SNA, AFAM, EZPW, WAB, AXYS Monday’s Action (=> +0.70 or -0.70) Moving Up: POT, MOS, AGU, PNRA, MON, CF, IPI, FWLT Moving Down: PCLN, BIDU, GS, GLD, AEM, GDX, GG, NEM, GOLD, SOHU, BRCM, AFAM, NUE, ESRX, MS, SINA Intermediate Term Market Trend: Neutral – Nasdaq; Down – DJIA, SPX, RUT Short Term Market Trend: Down