From last weekend’s Report:
All evidence points to an imminent sharp move. I am favoring down and I am positioned that way, but you most certainly do not want to get stubborn if this extremely coiled market decides to spring up.
The “imminent sharp move” was spot-on. The direction, not so much.
While the SPX and RUT did break sharply up out of mature multi-day Balance Areas, they remain below multi-week KRAs (Key Reference Areas).
The NDX continues to hold up the entire US stock market and while I (and everyone else) keep saying this can’t continue, it is continuing.
Has a new bull market begun?
Below are the four US primary trading indices and highlighted are the rallies of each since the October low. The rally as of Friday’s close has been in effect for 32 weeks. The dramatic under performance of the RUT coupled with the dramatic out performace of the NDX is the nagging flaw for the new bull market case. Strength above 1813 in the RUT is necessary to help validate any idea we are in a new bull market.
Here are the same indices as they traded off the 2002 bear market lows.
And off the 2009 lows.
The SPX is flirting with the critical upside 4200 area, but internal momentum, so far, remains extremely weak. A tiny number of large cap tech stocks are holding all the indices up, and driving the NDX strongly higher. EVERYONE knows this. It should be viewed in the context of what happens when it changes, and it will.
It is dangerous to assume the change will resolve in a bearish manner. IF the big money institutions that ultimately determine direction decide the coast is clear and start buying currently unfavored sectors the other three indices will likely shock to the upside similar to how the NDX has performed of late. You would not want to be short in front of that.
In the SPX there is nothing above 4200 until 4300.
Upper KRAs: 4200; 4300-4327
Lower KRAs: 4147; 4113-4098
The NDX has been in manic mode. The rate of change to the upside will not continue. If the other sectors of the market begin to see buying the NDX will probably underperform for a while.
Upper KRA: 14227-14354
Lower KRA: 13444-13389
It is so critical to watch the RUT. A close above 1813 is likely extremely bullish.
Upper KRA: 1813
Lower KRAs: 1766; 1731; 1695
The DOW is stuck in a range similar to the RUT.
Upper KRA: 33786
Lower KRA: 32937
Internals
The message here is breadth HAS to soon begin to expand or an important top is very likely in place.
30m Breadth/SPX
This provides an interesting perspective. On Tuesday’s wide range up day Breadth expanded to +1758. That is a rather tepid “kick-off”. Now it’s possible we will see another breadth thrust if the SPX can sustain any momentum above 4200. In fact, it is necessary if the broad market is going to join the NDX in an upside ramp.
A close below the 4155 area would be a concern for the immediately bullish case.
