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Tuesday, February 23, 2010

Does The Average Joe Get It?

The Conference board released their consumer confidence numbers at 10 am eastern, and boy did the market react. Perhaps it is the correction that began last month, or maybe just the average Joe isn 't as dumb as the mainstream media would have us believe, but it seems that belief in this recovery is slipping quite a bit. AAs usual, the economists missed it badly, From the there, it was all the way down to our intraday support level at 1094 (undercutting it briefly). A weak rally in the afternoon resulted in another drop just before the close, which was at (where else) 1094. In the bigger picture, I have a resistance level at 1112, a pivot point at 1094, which would put the next support level at 1076. Whether or not the exponential 5dma will make a difference or not is unknown, but is hasn't recently.

The price relative on the Dow is is a slow, steady uptreand, so for whatever reason the Dow is outperforming. It has a confluence of exponential moving averages here which could be support. Most retail traders do not follow the exponential averages, but instutional, and especially program, traders, can, and frequently do, switch between the simple and exponential averages to key off.

For the past couple of years, the Nasdaq composite and the NYSE composite have had a relationship where when the Nasdaq leads, the market is in an uptrend, when the NYSE leads, it is in a downtrend. Since March of 2009 that correlation has weakened, but is still there. the Nasdaq is leading, although not decisively so.

The Russell 2000 has also resumed leading, and today did what it has been doing so well for the last couple of weeks: reverse early morning weakness into afternoon relative strength.

If you take the highest recent close on the dollar index as resistance, then today was a breakout in the dollar. I thought this has a good chance of getting to 80.90, which it actually gapped above last Friday before coming down. It hit it again today, and appears to be strengthening.

It may seem contradictory, but today was a better day in my opinion than if we had gone up another hunfred points.Frankly, these V-shaped corrections we have been getting are not particularly healthy, and another month of range bound trading with some downside testing will give time for leadership stocks to build proper bases.

I will have the new highs update shortly.

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