Well today was the day I picked back in December to be the market top give or take a few. Today I am not feeling so sure but the top never seems like the top right?
First lets travel the world:
Asia
Nice finish by China from a weak start and Japan keeps pushing to new highs. China is on the road back to new high territory although it will be interesting to see how the surging dollar effects the China economy. It is a two edge sword, if the dollar is gaining strength because the US consumer is gaining buying power than higher dollar is ok. If it is based on economic and geo-political fears than it should have a detrimental effect. Something worth watching in the next few months.
Europe
Some red on the boards here in Europe. The FTSE is skimming red and the DAX is hanging in the green. It appears they are having their consolidation today like we had yesterday, the market is bouncing in a tight trading range. A weak European industrial orders Month over Month gave the dollar more reason to rally. We had been getting some stronger numbers from Europe lately, so we need to watch the next round to see if Europe's industrial base is slipping back in the wrong direction.
Homeland
Back here in the homeland (or is it Homeland?) we had a bullish day yesterday. We made new highs and consolidated and digested the previous day's positive thrust. Our futures currently sit:
Yesterday we boxed the futures in between that 1125 and 1131.50. We did a pretty good job, it peeked through in the morning to set the new high pulled back to the 0.5% numbers (which has been a good place to re-enter long lately) and rallied back into the close. I had expect a close not on the highs but around the 1129 number. I would have had to wait until 9:30pm to get that number. The Dollar rallied during the night and the Futures fell. They remained trap in our box.
News is pouring in today. We have already had the mortgage applications number (worse then expected). This confirms yesterday's weak housing number and puts two dots now showing that perhaps there is another housing weak spot to work through.
Challenger Job Cuts:
These numbers came in strong. We are down 73% on our announcement of layoffs compared to one year ago. That is good. We await the 8:15am report on the ADP employment numbers and then at 10am we get a reading on the Service Sector from ISM and Crude inventories. At 2pm eyes will be on reaction to any dissent or talk in the FOMC meeting minutes about raising interest rates soon with a recovering economy so watch for movement around 2pm.
The Charts:
40 DMA % Index:
Our 40 DMA % Index scores a +2 today moving down from a perfect +6. The Nasdaq and he Rut2k showed some weakness with a lower average. They are both above the 20 day moving average so are in bull territory and if the bulls are in control these should strengthen back to a +6 today.
10 Day High - Low:
Like the 40 DMA % Index, our 10 day High - Low chart moved away from the strongly bullish mode all the way down from a +6 to a -2. The NYSE and NAZ went to neutral corners but the Rut2K moved from +2 to -2 and is flashing a red bar. This is typically topping type action. Another red bar today will be a signal to start shorting the Rut.
52 Week New Highs:
I look at this chart and I think strength but when I grade the chart it scores a -2. Both the RUT and NADZ had day to day lower bars. The NADZ was able to put in a strong enough day to turn the 5 day momentum indicator bullish, the Rut not. So the RUT gets a -2 score for failing to build a higher bar or turn the 5 day moving average. The NADZ gets a 0 for while it turned the 5 day moving average upward it did so without making a higher bar than the day before. The NYSE which was the strength yesterday also scores a 0 because it was able to put in a higher bar than the day before but was not able to turn the momentum 5 DMA. Added together we get a minus 2. The numbers are so close though I would rate it a weak -2.
Added together and our charts score a -4 today. A weakly bearish signal. Today will establish either a trend (a more weak number) or we will turn bullish again.
Conclusion:
We scored a bearish number and I am counting on it becoming weaker. Today I have as an expansion day. Our intraday range will widen from .5% to over 1% today. I have the ESH10 boxed in between 1134 and 1120.
Since is the market top any new high would have to be sold. (he says with shaking conviction). I have planned for a close around the low of the day. We need the banks to stop their rally so watch GS and WFC for weakness. To set the new high we should rally from this weak open today.
In the trading room we continue to add more shorts as we gain conviction that a top is being put in place here. Today we need to see some more underpinnings of breadth falling apart.
Hope to see you in the room or in the markets.
-Marlin aka RedlionTrader
