Monday, February 6, 2012

Morning Market Analysis

I went bullish a little over two weeks ago and maintain that stance.  Last week, I noted the main thing to keep an eye on was technical support of all the equity averages.  The markets held their own last week and moved higher on Friday.   In addition, the underlying trends are moving more bullishly.  First, of the four major market areas (stocks, bonds, the dollar and commodities), stocks are now the top performing sector in the week, month, three month and six month time frames.  Commodities are now second in the week and month time frames, and bonds have shifted lower.  Put another way, inter-market analysis is clearly moving more bullishly. 

The SPYs held the 131 level and have now moved through the highs established on January 26.

The QQQs have moved through previously established levels as well, in addition to gapping higher on Friday.

The IWMs maintain their upward bias as well.

The good news for the market, however, lies in the long-term charts:

On the weekly chart, the SPYs are challenging their 2010 levels. The A/D, CMF and MACD are all bullish, and the EMA alignment is very powerful.  Also note the strength of last week's candle -- that is what a strong rally is made of.

 The QQQs have broken through key resistance and are also moving higher.  The same analysis of the SPYs applies here.

 Above is a weekly chart of the QQQs.  Notice they are at their highest level in 10 years. 

The treasury market, however, is still in a trading range, with the IEFs moving between 104 and 106.5 and the TLTs between 115 and 122.

Industrial metals formed a downward sloping pennant pattern and moved just below the 200 day EMA.  Prices have now moved higher printing a fairly strong bar on Friday.  However, ideally, we'd like to see this move above the highs established at the end of January.

Oil is caught between two divergent issues.  First, on the bearish side we have Europe, which is either in a shallow recession, or very near a shallow recession.  Additionally, US gas demand is down (which I'm guessing is due to consumers moving to a more conservation oriented posture):

 However, on the bullish side, we have the Iran situation.  Anytime we see Middle East tensions rise, oil prices move higher.  Obviously, the bearish bets are winning right now.  

Short version: I'm still bullish.