Tuesday, January 17, 2012

Morning Market

Let's start with what my qualifications for "liking" the current market rally.

1.) An uptick in copper
2.) A continuing rally in the dollar
3.) A sell-off in the treasury market

What I'm looking for in all three of these markets in confirmation that, not only is the stock market rallying, but other markets are either confirming the strengthening of the US economy or traders are starting to sell-off their safety assets.

On the daily chart, we see that the dollar is technically in an uptrend.  But prices are just barely above previously established highs and the A/D and CMF are both printing bearishly right now, while the MACD is moving sideways.

The weekly chart shows the dollar in a positive uptrend.

I'd give this chart a weak bullish rating.  While the price chart is still bullish, the underlying tecnhicals are weak.

Coppers daily  chart printed strong break-out last week.  Plus, the 10 and 20 day EMAs are moving higher with the 10 day EMA moving through the 20.  Additionally, the MACD is also moving higher as well.

The weekly chart shows a strong break-out on very strong volume.  The MACD and volume indicators all confirm the move.  This is a bullish chart.

However, last week the treasury market rose, largely in reaction to the EU situation.

Given my above criteria, the dollar, copper and treasury market situation now put me in the bullish camp.  However, from a fundamental perspective I still have concerns largely based on the EU situation and the possible long-term fall out. But if the equity markets are a leading indicator (and they are a component of the Conference Boards LEI index), then the data tells us the latest moves are in advance of anticipated economic action in the US.  That being said, let's take a look at the equity ETFs.

The IWMs have been inching higher for the last few weeks.  Right now, they are just below long-term resistance established in late October.  The MACD is slightly positive and has given a buy signal, while the volume indicators are both bullish.  The shorter EMAs are also moving higher.  I'd place a buy at about 77.50 on the above chart.

The QQQs are a bit more difficult to gauge.  Frankly, I'd wait to make a move here until we see prices over the highs established at the end of October; there is simply too much overhead resistance.

The SPYs have been moving up in stages; they gap higher and then trade sideways for a few days to consolidate gains.  I'd move in at current levels.

All of the above positions would be small; I'm still not thrilled by the market not the underlying fundamentals.  But the ancillary markets are now confirming the upside move so it's time to at least make a few preliminary trades.