Comment: The market finished more or less flat for the second day in a row, with the Industrilas doing a little better. It was a choppy, directionless day with volume up a little on the previous day. It looks like the market is getting ready for Bernanke’s testimony on Wednesday. Anything could happen depending on how the soothsayers read the runes.
NewHighs/NewLows. 412/20. Ratio: 95.4%. NL Technical Comment on the SP500 (closed at 1669.16)
Indicators:
MACD Histogram. Below zero. Negative. MACD. Above zero. Positive. RSI.9 is at 767.4. Overbought. Stochastic. 95. Overbought and back above its signal line. CCI.14: 114. Overbought. Possible negative divergence setting up.
Support and Resistance:
Horizontal Support: 1593.4. 40-Day TMA: 1586.4.
The market is now overbought and indicators have set up small negative divergences. That’s not a sell signal – just an indication that the rate of upward movement is slowing – something which must happen before a move down. That’s not a sufficient condition. We need to see a break below the short term up trend line.
The chart has hit the upper level of the Standard Error Channel for the first time in this run-up from mid-November, 2012. So the market is becoming a little overheated. A pull-back or consolidation is on the cards. I still can’t see much in the way of topping action – except for the overbought conditions and negative divergences. But we’ve seen that before in this American market.
Factors affecting Australia: US$ Gold gave back most of the big up move from the previous day, -1.66%; Industrial Metals, -0.47%; Oil, -0.96%; Coal, +0.64%; AUD, -0.1%, BHP, +1.62%, Westpac, -1.17%. The two big commodity producing countries were both up strongly last night, Toronto, +1.03%; Brazil, +1.01%. BHP went along for the ride. Given that metals and oil were down last you’d expect that the Materials and Energy would be down in Australia today – but that’s not showing up in BHP, Canada or Brazil. So I don’t think that’s much of a guide today. Our Gold Miners will give up a fair bit of their gains from yesterday. (It’s never a good idea to enter a trade on a big up day. ) So today might be a bit of a lottery. Until we break the flag formation shown on last night’s chart, one way or the other, we’ll remain directionless.
(20min delay)