Monday, April 2, 2012

Morning Market Analysis

To review my view of the market:

I am concerned about the rally at this point for the following reasons.  The Chinese market is dropping; it is not a precipitous drop, but it is clearly moving lower.  It is taking the Asian rim with it.  The reason for the FXI drop is a slowdown in Chinese economic data.  In addition, the EU region is also slowing, and is probably in a shallow recession.  Finally, Brazilian Russian and Indian markets are also moving lower, making the US the only equity market rallying.

The question becomes this: can the US enter a period where the economy is self-sustaining?  That's something I'll look at throughout this week.  However, let's take stock of various indexes:

The 30 minute QQQ market sums up the equity price action for the week.  Prices rose in the earlier part of the week, but fell starting on Wednesday and closed the week out weakly.  Overall, prices rose from the 67.2 level to the 68.4 level -- a gain of 1.78%, but fell to the 67.5 level.

The 60 minute QQQ chart shows a few important trends.  First, prices broke an important uptrend last week.  Secondly, momentum (the MACD) is dropping.  Third we see a price cluster around the 67 level, indicating this is an important area of technical support.

The daily QQQ chart shows that prices are still firmly in an uptrend.  The EMAs are bullishly aligned and volume is flowing into the market.  However, momentum isn't rising.  In addition, the Bollinger Bands are widening, indicating we're entering a period of increased volatility.

The Russell 2000 is still mired around the 83 price level.  Also note the declining momentum.  This is the risk based part of the market, indicating traders are concerned about risk at this time.

The transports have the same problem as the IWMs, although the transports resistance area is around the 96.5 area.

The above charts are not fatal by any stretch.  However, remember that we'd like to see a wide swatch of the equity indexes participate in a rally.  That's not happening.  Most importantly, the risk based part of the market -- the IWMs -- are struggling to move higher, as are the transports.