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DAILY TECHNICAL MARKET COMMENT
*These are preliminary numbers and will be adjusted tomorrow The DJIA lost 45 points and the S&P gained just over 1 point. Volume expanded over Wednesday coming in at 1.28 billion shares. The A/D line lost about 100 units. The new highs were flat and the new lows expanded. The Russell 2000 lost 1.11 points but did close well off its low and closer to its high. I am going to move to neutral from bearish for the short-term. The medium-term is neutral. The Value-line lost 1.34 points but like the Russell it closed well off its low of the day. I am moving from bearish to neutral on the short-term and remain neutral on the medium-term. The NASDAQ Composite gained 31 points and the NASDAQ 100 added 59 points. They traced out minor reversal patterns and closed near the high of the day. I am neutral short and medium-term but we should see some further gains. The DJTA lost 56 points. The short-term is neutral. The medium-term has just turned negative. The DJUA and UTY closed slightly higher. The short-term is neutral but on the cusp of going negative. The medium and long-term remain negative. Yesterday I mentioned that the five wave decline on the hourly chary of the S& meant we would most likely see lower prices. It was how we saw those lower prices that would be important. Well, we did in fact get those lower prices but the hourly chart is now a clear seven-wave or corrective pattern. The S&P moved slightly below the February 23 low and on the daily chart we can count the decline as wave .5 of iii. However, the corrective pattern on the hourly chart makes this nearly impossible. As such I am counting the decline into Thursday’s low as a “b” wave. It is either a “b” wave of a flat or a triangle. This also fits in well with the idea that wave .4 should be a complex pattern alternating from the very simple pattern seen in wave .2. This should also lead to a rally back towards Monday’s peak near 1272. The DJIA moved towards last weeks low but did not violate that low. The hourly chart from Monday, which was a five at Wednesday’s close is, like the S&P a corrective seven-wave pattern. I am approaching the pattern in the same light as the S&P at least for the short-term so we should see some further rally. The NDX moved to below Wednesday’s low stopping five points from my important support level. The hourly chart is a little sloppy but it is possible to count the decline from Monday as a five on the hourly chart with the fifth wave a diagonal triangle. Whether this five completes wave iii from January 24 is not clear but we should be set up for a bit more rally over the very near-term. Support: S&P; 1230-1231, 1222-1224, 1214, DJIA; 10,366-10,375, 10,180-10,200, NDX; 1920-1925, 1890-1898. Resistance: S&P 1249-1251, 1272-1274, DJIA; 10,544-10,551, 10,750-10,765, NDX; 2000-2008, 2100-2120. The market once again closed mixed but this time it was the DJIA that closed lower while the NASDAQ and the S&P closed on the plus side. The market rallied strongly in the last hour coming back from near the lows of the session and it did so on modestly expanding volume. This left a modest reversal pattern in place on the S&P and the NASDAQ. They also closed on or at their session peak adding a bit of weight to that pattern which should bode well at least for the early part of the session today. Breadth was slightly negative but that tends to be the case when the NASDAQ and the S&P lead. The new highs were about flat and we did see a modest expansion in the new lows. The latter also confirmed for the post January decline but are still diverging from their late December total. The CBOE put to call ratio moved lower. It was not excessive but the fact that it moved that much lower is not good. The OEX ratio was extremely negative. The breadth oscillator is neutral but close to oversold. The volume oscillator is oversold. The 3-day oscillator is neutral. The McClellan oscillator is slightly oversold. It also recorded a very minor net change of less than 2 points suggesting a big move is close at hand. The last minor change was on Tuesday and that one worked out well. The 10-day and open 10-day Arms are oversold and positive. The 5-day Arms is slightly oversold and the 21-day Arms is as well. The daily range oscillators are near oversold. The daily trend oscillators are negative. The market did have a decent session yesterday with all of the averages rallying sharply into the close. We saw minor reversal patterns from near the levels that supported the market late last week and that suggests that this area is taking on some added support. The late rally and modest expansion in volume suggests that the rally may carry on for a couple of more days and a move back to the levels seen on Monday seem a distinct possibility. Most of the momentum indicators remain oversold and that could help to support a rally. However, they have not yet reversed the sell signal from late January and are not close to turning positive but they are showing signs of improving. Short-term sentiment measures are still OK and could also support a rally. However, the drop in the CBOE put to call ratio yesterday is troubling. The 10-day moving average is not yet at levels seen near previous trading lows and we have yet to see even one day of very high readings near the 1.00 level such as we saw on October 18 or in mid December. The Rydex ratios are positive, however, the asset level in both Arktos and Ursa are still not close to levels seen at good lows. Things are improving technically and I am still of the view that the market is in the process of completing a good medium-term low that could lead to a solid bear market rally sometime early in the second quarter. However, there is still far too much complacency. We saw that yesterday with the put to call ratio. We most likely need to see a full- blown capitulation and that has not occurred. I would also expect to see some real improvement in the Investors Intelligence survey and that needs a lot more time. The late rally yesterday could lead to some follow-through buying. A test of the highs seen early in the week are possible, but that is the best I see at this time. The latter stages of a decline is tricky, there should be a lot of false starts. This is not unlike what we see but in reverse as the market is finishing off a top. More volatility is expected and the moves should become even more volatile then what we have seen so far. I remain neutral for both the short and medium-term. Long-term I remain bearish. The bonds continue to benefit from equity weakness and we saw that again yesterday. I am neutral short-term and remain bearish on the medium-term with the idea that we are close to completing a top. The XAU is either in a small fourth wave from February 15 or on a more bullish note a small second wave from February 22. The correction looks to have a bit more to run and once complete should be followed by a move above Tuesday’s high. How that rally unfolds will tell which count is correct. The downside appears limited and I remain bullish in all time frames. Stock index futures traders are flat. Stand aside for the morning. Rydex switchers are holding a 20% Ursa and 40% Precious Metals position. Make sure to call the Noon Pacific hotline for any changes.
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