Dow Industrials -0.95% Dow Transports -0.35% SP500 -1.02% Russell 2000 -1.73% Nasdaq100 -1.36% Comment: We rarely see 1% down days in recent weeks. 6 March was the exception. Last night the Dow 30 just missed the magical -1% down, but SP500 was just over. Breadth was poor with the R2K down very strongly. Volume was about average. I mentioned the gap up in Apple yesterday and said that a gap up day is usually followed by a down day. And that is what happened. Apple down -0.8%. Nothing serious and it filled the gap. Now – if the stock has follow through selling tonight, that could be serious.
A good friend pointed out to me yesterday an article about Lagarde from the IMF urging America to contribute more to the bailouts in Europe. That’s been followed up this morning by an article in Market Watch reporting that Bernanke met with senior New York bankers last week and urged them to do more to assist with the European debt crisis. Is this major storm brewing? Or just a storm in a tea-cup? Markets sometimes are slow to react to such generalised sentiments – but if the current down swing gathers a bit more momentum, we could be in for rough times. http://www.marketwatch.com/story/bernanke-met-with-bank-execs-last-week-report-2012-04-04?siteid=bigcharts&dist=bigcharts
NewHighs/NewLows 30/48. NH>NL. The ratio of NH/(NH+NL) is at 38.5%. Dropped sharply out of the Do Not Sell Zone above 80%. That’s a serious increase in New Lows. We haven’t seen a number like that in over three months. I usually have a figure of 50 NLs as a benchmark for the start of panic selling. Last night was close. Caution. Prominent in the NLs were Gold and Energy stocks. That’s not a welcome sign for the Australian market.
Technical Comment on the Dow 30:
The Dow finished at 13074.8. Indicators: Stochastic: 60.1. Below its signal line. Negative. RSI.9 is at 44.4. Negative. MACD Histogram. Marginally below zero. Neutral. MACD. Now clearly below zero. Negative. CCI.14: -82.4. Negative. Indicators have given a simple sell signal. Confirmation is needed by the Dow 30 breaking below support at 13002.8. Near term support/resistance: 13000/13300 (round figures.)
Last night, the Dow 30 broke marginally below an important uptrend line. It is marginally above the 30-Day EMA. That has been a bench mark for the Index for some months. Any minor breaks below have been quickly recovered. This trend is now getting old – so we could be seeing the final weakening of the trend. But, so far, we haven’t seen a decisive move.
Today in Australia, we’ll probably open down.
On yesterday’s XJO chart the day looked like a classic reversal down/up day. But it wasn’t clear. For a classic reversal day I want to see intra-day a clear down move and then an up move. Yesterday wasn’t like that – lots of whipsaws showing overlapping small intra-day moves. That’s a traders market, not a smart money market. It seems to me just “accidental” that the day finished on an up move. The market has since moved quickly down from that finish point, negating any positive sentiment which might have been read into the intra-day move.
Today is another day. Our market still has to decisively break below 4310 to confirm my negative bias.
I’m still watching the AUD/JPY. Horizontal support continues to hold. A break below that would be a signal to the “risk on risk off” trade to sell out. We could then see some serious selling. The chart is getting into oversold territory with some positive divergences appearing, so a sell-off may not occur. A break upwards would put the “risk on” trade back in the game.
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