Monday, April 1, 2013

Morning Market Analysis

The general news trend for the US economy continues to be positive.  Last week, durables goods orders increased (with a big lift from transportation order), the Chicago national activity index increased and 4Q GDP was revised slightly higher.  As I wrote last week, there is evidence to support the thesis that the economy is doing better than we think. 

The one drawback to the recent uptick in the market is the sectors that are leading: the healthcare, utilities and consumer staples sectors led for the week and are the leading sectors for the the weekly, monthly and three month time period.   However, this might not be a sign of defensiveness, but instead a big stretch for yield among investors.

The 60 minute chart (top chart) shows the market consolidated between 154 and 156 between March 15-27.  We also see a decline in market momentum and a bit of a volume outflow during this period as traders take profits and distribute shares to new market participants.  The daily chart (bottom chart) shows this consolidation as well.  The technical indicators on the lower chart are solid: we see a rising EMA picture, shorter EMAs above longer EMAs and prices using the EMAs as technical support.  However, the momentum reading is weakening, although we see a stronger CMF.

The health care (top chart), utilities (middle chart) and consumer staples sectors are the three top performing sectors last week.  All three have very strong "on the chart" indicators -- rising EMAs etc...  The big underlying technical indicator to look at is the incredibly strong CMF reading for all three.  This indicates we're seeing a net volume inflow into the market.  The utilities and consumer staples sectors are showing solid MACD buy readings.  The health care sectors reading is a bit weaker, but still positive.