Today is make or break for the breadth indicators. The breadth weakness was virtually wiped out by yesterday's bullish action and the market now has a new base to launch from to even higher highs and higher momentum. We are approaching the morning with no gap. Meanwhile around the world:
ASIA
Japan caught the fever. It rallied all day long from low to high. China had a large gap opening only to loose about half and sit flat all day and then sell off hard in the last hour to go slightly negative, but the open to close was down closer to 1.5%.
Europe
About a .5% rally in Europe this morning. Both the FTSE and DAX had gap openings and are trading lower than the open. For Economic numbers from Eurozone the German CPI was inline and Industrial output was better than expected. This might help dampen any US Dollar rally.
Homeland
We have economic numbers today. All about retail this morning. Watch those number. Initial jobless claims continue to move down.
From the jobless claims chart you can see we tied last week so we would like to keep this line moving in the right direction (down) and get a number below that 434K from the last two week. A nice 420K would be great. We definitely don't want to be back up above 500K and that would be highly unlikely.
Don't forget business inventory at 10am. The Bulls would like that 0% number that is setup as expectation. We are at the lowest level of inventory in years and is seen as potential growth. A low number or even negative number should be bullish for the markets.
The Sentiment Charts
10 Day High - Low
This chart scores neutral from yesterday's -6. The rally form the weak open to the strong close moved us back up into positive and we made more 10 day new highs than new lows yesterday. A second day of strength here could be signaling another run for the top.
40 DMA % Index
The bears biggest gain in a while (driving that RUT below the 20 DMA) failed yesterday as it returned back into bull territory. This chart scored a +6. Bullish.
52 Week new highs:
This chart scores neutral. The 52 week new highs all made higher bars but not high enough to reset the momentum indicators. Today if we get more new highs than yesterday that should be enough to change this chart to bullishness once again. For the NYSE that would mean about 170 new highs in the first 30 minutes.
Conclusion
Our sentiment charts score a +6 which is weakly bullish but a nice move from yesterday bearish score. We are more or less back into neutral here waiting for a breakout. The advantage is definitely to the bulls.
The game plan for the bulls is to drive the price today above the 1148 number and a close above 1143 would be very bullish. The bears need to beak that trendline which at the close will sit at 1134. Extra credit for the bears is hitting a price below 1128 today and closing below 1140.
Box
My box is 18 points today because of the neutral setting and expanding volatility over the last two day. We should go no higher than 1150 and no lower than 1131. Breaking 1148 confirms a new high and keeps the Santa Claus rally intact. I have some intermediate levels marked for trading.
Have fun out there.. Watch the markets.
Marlin aka: RedlionTrader
