AheadoftheNews.com

On Wednesday morning, I wrote the following: ... Futures traders look for weekly S1's to get hit at some point: NQ 1769, ES 1410.75 and YM 12305. Thursday's low for NQ was 1770.25, Friday low for ES was 1418 and for YM it was 12315. Energy held up ES (SPX futures) a little more than I thought, but NQ (NDX futures) and YM (DOW futures) hit my targets.

What now? If the next move by oil is down, it could set up a monster NQ (chart) rally to channel resistance at 1840 and well into the February gap. That is the ultra rosy scenario and is dependent on bulls getting a close above 1802, 10 DMA, which has been resistance Thursday and Friday (blue line). The major obstacle, however, remains the 50 DMA, now at 1807.50. That is the moving average funds are looking at, whether COMP, DOW or SPX, but we get our heads up with futures. In fact, SPX is very close, so watch ES 1440.
The bearish scenario is an escalation with Iran, oil above 70 and a general freak-out with a visit to March lows. As traders, I want you to focus on NQ's weekly pivot at 1794.50. Forget all the noise and just let the action speak for itself. A move on volume above 1794.50 will set up an NQ break of 1802. A consistent inability of NQ to hold above 1794.50 sets up a re-test of 1775, now channel support and monthly pivot at 1776 as well as 38.2% 2007 (that is a solid confluence and can act as a magnet one more time next week). If that holds, it could be a strong buying opportunity going into earnings. If it breaks, look out below. It will be a rocky road, but until all the numbers come in, the markets could be in a range with big spikes both up and down. Having a cushion from extreme entries could be very profitable (it's always my favorite early week set-up), but for the most part stick to buying support and selling resistance. Any break of either, on volume, is to be respected. Stay disciplined, keep your emotions in check and you will be fine. Remember that this is a daytrader's market until a solid trend develops.

Note: for those new to this blog, click on the charts for a full size view.

NEW YORK (Reuters) - A potential record U.S. corn crop inspired by the ethanol boom might yield more of the renewable biofuel this year than the country can use and is unlikely to pressure gasoline prices lower, experts said.

U.S. ethanol producers currently have capacity to make 5.6 billion gallons per year and are expected to expand that to about 8 billion gpy in 2007 as the Bush administration offers them millions of dollars in incentives. link


March 30 (Bloomberg) -- Corn prices fell the maximum allowed by the Chicago Board of Trade after a government survey showed U.S. farmers plan to sow 15 percent more grain this spring, the most since 1944 and above analysts' estimates.
Large speculators, who must report positions to the Commodity Futures Trading Commission, held 321,903 more long positions than short positions on March 20. Net-long positions reached a record 395,081 contracts on Feb. 27 after corn prices hit the 10-year high.
link

And you thought COT was a reliable indicator and the big guys always right. The herd is the herd.

Traders should go flat over the weekend. There are too many geo-political movements and you don't need a nasty surprise on Sunday night, either short (situation resolved) or long (situation unresolved). That includes gold and oil, unless of course you have a nice cushion.

The reason for the equity sell-off is clear, as the dollar collapses:

March 30 (Bloomberg) -- The U.S. Commerce Department decided today to levy new duties on imports from China to compensate for Chinese subsidies to exporters, reversing more than two decades of practices.link


March 30 (Bloomberg) -- The dollar declined against the yen and euro, erasing earlier gains, as the U.S. Commerce Department decided to levy new duties on imports from China to compensate for Chinese subsidies to exporters.

``It is pure protectionism,'' said Michael Malpede, a senior currency analyst in Chicago at Man Global Research. ``The measure raises fear that China may retaliate. They may not keep buying Treasuries.'' link

Noon update:

NQ gets 20 DMA back after an NDX test of Jan 2006 highs (1761.46). Bulls are still holding the fort for now, but keep your alarms set at QQQQ 43.31 and NDX 1761.50, just in case. We are seeing some end of quarter volatility, trade it, don't love it.

Gold spikes up to a higher high (673.90), it will be important to hold 670 going forward (June contract). If it does, gold bulls win a key test after yesterday's scare.

Mid-morning update:
The Yen catches a bid and the party is over. YM tests 12400 and NQ is at overnight lows. Gold perks up, now at 669.50. A close above 670 (June contract) would get more gold bulls on board. That one is an accumulate on dips if 666 holds. Target 685.

NQ will need to hold 1781, 20 DMA and YM 12369 38.2% or things could get nasty.

YM (Dow futures)closes the gap (12486) and now falters below 50% 2007 (12472). Bulls need to get back above that. Oil plays around with the 66 level and gold is barely holding on to 50 DMA at 666. Lots of hesitation on the part of market participants, even though the Yen is at lows.

Trading is primarily affected by oil prices as it is obviously related to any further dip in consumer confidence. As such, any news on Iran and the hostage situation will be market moving either way. If nothing is resolved by the close, markets will remain under pressure.

Random musings:

- Remember Gilder, Mr tech Bubble himself? He's back: link

- WASHINGTON (MarketWatch) -- U.S. corporate profits fell in the fourth quarter of 2006, signaling the end of one of the greatest profit cycles in post-war era, economists say. link


- I posted the following a few days ago on another blog, in reference to traders getting whipsawed and experiencing loss of capital on a regular basis:

I have a recommendation for most (future's) traders in a funk. Find a trade in a sector you think should go up, i.e. take a long somewhere, quit trying to short something (how many of you went long copper today, instead of being blown out of your NQ short?). That already increases your odds of success. It gives you a focus with the added benefit of learning about different sectors. Shorting is a full time job, regardless of the sector you are hitting. Pros like it because it's fast, but conservative traders know that the steady money is finding longs that run a few days or a week. As an example, the better trade ahead of the Feds was to go long gold instead of risking a short in equities (or even a long). Gold had a win/win set up. The same with oil, once we were done with contract rotation (crack spread was a huge heads up). Once you get your rhythm back, play both ends of the game on the index you know well, but you will find that the discipline of finding a long makes you a more rounded future's trader. Find the bull somewhere. Once you have money in the bank, you will have the guts to do the only short trades that works: hitting bounces and rallies, which is not easy to do when you are scared. Marc Eckelberry link

YM traders (DOW futures) need to be mindful of today's rejection at 50% 2007, 12471. Bullish above, bearish below.

DELL getting hit after hours:

March 29 (Bloomberg) -- Dell Inc. said it found evidence of misconduct and errors in its accounting as the world's second- biggest personal-computer maker concludes an investigation into its financial results.

The computer maker will miss an extended deadline for filing its annual report, Round Rock, Texas-based Dell said in a statement today. The company has no further comment beyond the release, spokesman Bob Pearson said.

Wild ride today with NQ (NDX future)plunging down to weekly S1 after an initial scare at 20 DMA where the COMP found support (2400), enabling the markets to reverse at the close. Gold held its own, after a test of 50 DMA. The bearish outlook for the tech sector that started yesterday is not cleared out as the COMP and NDX still close under their respective 10 DMA's. Nevertheless, bulls averted a major sell-off in the face of 66 oil. It will be important for the markets to get an NDX close above 1780/1783 by tomorrow. The bulls are not out of the woods, we will see how the closing NQ doji resolves (chart). Bears also need to understand that as long as the Yen stays red, bulls will buy the dips. That could all change next week, but for now Japanese investors are redistributing capital ahead of Q1 close.

Contract rotation is finished for gold and the forces dragging down the April contract should now be over. As long as 665 holds, June should be back on the way to 685. We have a major confluence of moving averages, a virtual wall of support between 661 and 666.70. It will take a huge jump in the dollar for gold to fall apart. I don't think that is likely. Inflation is still a threat and will be even more so if rates are lowered.

Some milder inflation news in the GDP report has brought on some profit taking for gold overnight, although 50 DMA support should still hold given oil's continued bid above 64. Watch YG 665/666 (June contract). Equities are also getting a lift from the falling Yen, but NQ 1801 is still 10 DMA resistance for now. Support is 1795.75.

The Yen is dropping overnight so US equity futures are catching a bid. ES resistance is at 1433.75, NQ at 1796 and 1797.75. If this spills into tomorrow, we could see a bounce in equities.

March 29 (Bloomberg) -- The yen snapped a two-day advance against the dollar and euro as Japanese investors resumed buying overseas bonds to benefit from their higher yields.

The yen fell against the world's 16 most-actively traded currencies as a government report showed domestic investors bought more foreign debt than they sold in the week to March 23, ending seven weeks of net sales. The currency also dropped on speculation newly created funds will start buying more assets overseas when the fiscal year starts on April 1.

EIA report (petroleum inventories): link

In oil markets, much of the attention on the weekly data is focused on the change in inventories for crude oil, gasoline, and distillate fuel, as well as, demand. Two additional statistics that knowledgeable oil analysts should closely watch over the next several weeks are crude oil inputs to refineries and total gasoline imports. Both statistics will help analysts gauge the relative tightness of the U.S. gasoline market, which, now that spring has arrived, is one of several major factors likely to determine near-term oil price direction.

If 63.25 holds, next level of resistance will be 66.55.

Heavy technical damage was inflicted on the markets today. All major indices lost their 10 DMA's and NDX closed at lows while also losing 50 DMA support. This comes on the heels of a strong rejection for the DOW at 61.8% 2007, a significant event. It has been a stealth sell-off, but very real to your portfolio. Add the SPX chart I showed yesterday (Nov 2000 highs resistance) and bulls are in real trouble. The entire Fed rally is pretty much erased. The next big test will be 20 DMA for NQ (NDX future) at 1780. It needs to hold, but it does look like the bounce off March lows has ended in orderly fashion (61.8% is a classic retrace)and we could see new 2007 lows in the coming weeks. There are no compelling reasons to buy stocks right now. I had mentioned a few days ago that we needed earnings to justify further gains, they didn't even bother waiting for that to pull the plug. If you bought gold and oil as I have been suggesting, you should be just fine.

VIX is hitting upper bands, but VXN still has room to grow (chart). Maybe one more low overnight and bulls should get a bounce. It will be counter-trend if NDX can't close above 1783, 50 DMA.

INTC closed at the lowest level since August of last year, although it is at 50% projection February and possible support (18.86). INTC will be a buy very soon, I have no doubt, but the break of 19 is a red flag and we could see lower 18's.

EIA report was not kind, oil keeps a bid and stocks lose support. All major averages are now trading below their 10 DMA's.
Futures traders look for weekly S1's to get hit at some point: NQ 1769, ES 1410.75 and YM 12305.

NEW YORK (Reuters) - Federal Reserve Chairman Ben Bernanke said on Wednesday uncertainties surrounding the U.S. economic outlook have increased somewhat recently, and that future Fed decisions will depend on what happens to both inflation and economic growth.

KEY POINTS: - "To date, the incoming data have supported the view that the current stance of policy is likely to foster sustainable economic growth and a gradual ebbing in core inflation," Bernanke said in testimony prepared for delivery to the congressional Joint Economic Committee. - "The near-term prospects for the housing market remain uncertain," he said, adding that developments in the subprime mortgage market had raised additional questions about the housing sector.

Key support levels are holding ahead of Bernanke. That would be NQ 1800, and ES 1433.75, although it is really by a hair. The Yen is still bidding and oil is above 64.50. Tough job for bulls, but they will at least try and close the gaps.
EIA (oil inventories) report due at 10:30.

Overnight futures traders watch ES 1433.75, monthly pivot. YM already lost it (12495) as did NQ (1809.50).

Was SPX 1438.50 the top? It is compelling. The November 2000 high was resistance in January of this year (closing high), top of the red body in February and March high so far. Three more trading days for bulls to invalidate this monthly triple.
The importance of the 11/2000 high (1438.50) is clear as it signaled the de facto end of the bull market with a huge 8% drop in a single month, marking the loss of the 10 monthly moving average for the following 29 months.

Even though it was a false alarm, equity futures are still down as oil is trading solidly above 63. There is an added element of fear and the realization that the rally could fall apart any minute. ES (SPX future)is now trading below 61.8% 2007 (1438.50). Overnight action will be interesting, but it looks like NQ's (NDX future)loss of 1819.25 is spilling over to the broader market.

The Yen is on a major bid overnight and I would use extreme caution with equities at this point. We could have very well see this highs from this corrective bounce off March lows should ES be unable to regain 1438.50.

Crude shot up right after the close on some Iran rumor. NQ dropped to 1796 and ES 1430, but have made up most losses. It seems it was just a rumor, oil is closed, we will see where it re-opens.

WASHINGTON (Reuters) - The U.S. Navy on Tuesday said it had no information to substantiate a market rumor that Iran had fired at a U.S. naval vessel in the Gulf.

"Navy has nothing to substantiate that report right now," a Navy official said. "At this juncture, there is no validity to it."

"We have no information at this time that indicates any incident taking place," said White House National Security Council spokesman Gordon Johndroe.

NYMEX crude oil futures shot up more than $5 to trade above $68 a barrel on rumors about Iran, traders said.

NQ (NDX future) closes right below yesterday's open. YM holds on to 12472, 50% 2007, but everyone is looking tired. NDX still has 50 DMA support at 1785, but if bulls don't get it together soon, we could have seen the highs on the Fed rally. Bulls need some good news. Either a price drop in oil, or a weaker Yen. But higher oil and higher Yen was just too much today.

End of quarter window dressing is skewing everything and making it a rough day to trade. If you must do so, play the range and take profits quickly.

NEW YORK (Reuters) - The U.S. Gulf Coast is facing a renewed threat of powerful storms during the 2007 hurricane season, private weather forecaster AccuWeather said on Tuesday.

Shorting oil and gold might be hazardous to your health.

Mid-day update:

Bears are in control, but can't seem to pick up traction. Watch YM 12471. It seems the Yen gyrations are pushing traders around. We could see an NQ flush to 1800 if bulls don't shape up soon. The support seems artificial.

March 27 (Bloomberg) -- Confidence among U.S. consumers slid this month from a five-year high as fuel prices rose and concern about home foreclosures spread.

The New York-based Conference Board's index of consumer confidence fell to 107.2 from 111.2 in February. The index averaged 105.9 in 2006.

The report also showed more Americans said jobs were plentiful than at any time in more than five years. Increasing pay may shield consumers from the brunt of the housing slump, helping to maintain spending and preserve the economic expansion.

NDX is holding up pretty well, so there seems to be no panic on the numbers, at least for now. Watch NQ 1819.25 resistance and 1812 support. A lot will depend on oil prices. QM is holding up above 62.

NYSE down .5% ahead of consumer confidence. It is unusual to see that index lower than most equity sectors. Obviously, some could be expecting the worst. Gas is above $3 in California, we'll see if it shows (although we always get revisions a month later....

March 27 (Bloomberg) -- U.S. stocks fell after Lennar Corp., the nation's largest homebuilder, said it will miss its profit goal and home prices declined in January for the first time in at least six years.

NYSE, which gave us the heads up on the February top (at least on this blog), is now less than 120 points away. As a reminder, the "magic" number was 100% projection 2000/2002 at 9455. NYSE closed today at 9341. Keep an eye on this index. Shorts will get more aggressive if we fail to get 9400 back.

This is from an OI reader who took my call to buy gold at 639 a little over a week ago. Targets are still valid, re-printed here for those readers of the blog who are long gold.

Hi Marc, Hope all is well. I took your recommendation to buy YG April @ 639 and rode it to 660. Nice call, especially on a 20 lot....hah. I re-entered YG June @ 663.50 today (10 lot) and am wondering where a good stop level should be placed? I'm thinking 660, but I put it in @ 659.25 to be safe. I'd like your thoughts on this as I'm afraid I might have put it in too low.
Thanks, Dan

Good move Dan. Quick math, you made $27,000 on that trade. Not only that, you made a perfect re-entry on the June contract (you're up $2300 there). I would put my stop at 663, a little over a point below 50 DMA support. Targets on the trade are 675, 686.60 and 694, if we breakout above 675 (Feb gap open). If you are trading multiple contracts, take some off at each resistance level. Consumer confidence tomorrow will dictate further gains. As you now, I am expecting 850 by the summer, but that might be too wild for some. (I think 750 is very, very likely). Oil could go out the roof on a major hurricane season (80+). Global warming is going to be freaky.
For now, 663/664 must hold (June contract, for April that would be 657/658).
Marc.

Note to the readers: I am trading the June contract, as I took the rotation early on the pullback.

Trading should remain rangebound ahead of consumer confidence tomorrow at 10:00 AM.

Solid reversal off lows and it's as if nothing happened. NQ (NDX future)is back at 1819, 61.8% 2007, while holding its 50 DMA (1813)in the final hour. MSFT sparks a short squeeze, but the writing was on the wall when copper stayed bullish the entire day, even with the housing news (see earlier comment on the warning I gave bears to not expect a collapse).
Bulls had some fun knocking a few bears, but they should not get too complacent either. Earnings season is coming, warnings and all, and that is going to be what counts, not Fed tea leaves reading.

Mid-day update:

NQ did indeed hold 50% last week (1794.25). The copper bid was a heads up for bears to not get too greedy, at least for now.

Keep in mind that longer term, I think gold is signaling stagflation and I would still use rallies to get out of stocks and keep buying the metal on pullbacks. We are both traders and investors, know when to switch hats.

Mid-morning update:
We had a nice morning drop but some traders stepped in at NQ 50% last week and 10 day exponential (1794/1796). HGX (housing index) needs to hold 226 at the close, but I noticed that copper (HG) held a bid all morning, which is normally a bullish divergence. You don't buy copper if you think housing is dead. My guess is that today's news, although really bad, was partially discounted and funds are sticking to the regular homes sales numbers of last week, which shows inventory clearance. Don't forget that new home sales is a lagging indicator in a housing recovery. I am not that bullish, but I am pointing out to traders what is going on out there so that you may not get stuck in a bias.
If copper turns red and NQ loses 1795, then bulls really lose it. Until then, trade the range.

This bit of news just came in and it is really scary. Bulls have a tough job ahead:

March 26 (Bloomberg) -- U.S. foreclosure filings last month jumped 12 percent compared with a year ago as homeowners struggled with declining home values and higher adjustable mortgage rates.

More than 130,000 homes entered foreclosure last month, according to a report from RealtyTrac, an online listing of foreclosed properties. That's the second-highest since RealtyTrac began collecting data in January 2005.

March 26 (Bloomberg) -- New-home sales in the U.S. unexpectedly fell in February to the lowest since June 2000, dimming prospects for a quick revival in housing.

Purchases declined 3.9 percent to an annual pace of 848,000 last month from a revised 882,000 rate in January that was lower than previously reported, the Commerce Department said today in Washington. The supply of unsold homes at the current sales pace rose to the highest in 16 years.

While builders are offering more incentives to unload homes already built, the actual number of homes in inventory may be more than the government reports because it doesn't include cancellations, economists said.


The DOW was signaling some concern ahead of this report and YM is now testing 12500. NQ broke below its 50 DMA at 1813.

Copper is on a bid which is a heads up for bears to not expect a complete collapse(normally a bad housing number would bring copper down), although we certainly are having some decent selling so far.

Dell gets an upgrade, giving a pre-open bounce to techs, counter-acting a big jump in crude. Watch NQ 1819.25 resistance, 61.8% 2007 and 1813.25, 50 DMA support.
VIX and VXN are really stretched to the downside, sitting at the lower bands for three days. It should set up a deeper pullback for stocks soon.

March 24 (Bloomberg) -- Federal Reserve Governor Frederic Mishkin, the newest member of the central bank's board, said inflation is poised to recede only ``gradually'' given the recent rise in fuel and energy prices.

The Fed's most closely watched measure of inflation should slow to about 2 percent from the current 2.25 percent, Mishkin said during a speech in San Francisco. Moving it below that would be difficult without a shift in monetary policy, he added .

In other words, the better than expected housing numbers (which might not last given credit tightening fallout) might have put a lid on lower rates dreams. Hence my argument that the markets could be in a lose/lose situation for a few more weeks (if Feds lower, it would indicate real fear for the economy). Earnings will have to justify further gains.

I had suggested that we might get an NDX run up to the February gap should Feds hint at a cut. After an initial euphoric reaction, the markets could come to the realization that the Feds are not going to cut because of a lower risk of inflation. It will be out of concern for the economy. As such, financials which would normally benefit from lower rates could be under pressure along with the rest of the market. The winners will be precious metals and agricultural commodities according to Boockvaar: video
The bullish argument is that housing has bottomed. But if the Feds believe that, they will not cut, putting their focus back on inflation and in the process endangering an already fragile recovery. A lose/lose for the markets near term? We need more economic data.

NDX action was slightly bearish today, printing a lower low and lower high, unlike the DOW and SPX, both helped by higher oil which is actually an albatross longer term.

In the meantime, it might be wise to think defensive again, unless NQ breaks out above 1831 (NDX 1812). There is still the possibility that YM (DOW future) tags its February gap at 12684, so watch the tape for divergences. Price is the ultimate arbiter, trade accordingly. The economic calendar is loaded next week, starting with home builders.

And now, for something completely different: John Cleese Compaq ad

HGX (housing index)has now turned negative and stocks are struggling. The action is starting to look toppy. Watch DOW 12473.20, must hold at close.

March 23 (Bloomberg) -- Figures showing a surge in sales of existing homes over the last 90 days require ``a cautious reading:'' The ``true test'' will come with March and April data, according to economists at FTN Financial.

Gold is dropping on the rising yields, but inflationary pressures are building once again and it should be supportive at some point. April contact needs to hold 655/657.

Update:

The initial bounce fizzles, but HGX, the housing sector index is now up, which is normally supportive. This is not a good day to trade other than scalps. Higher oil and Iran fears might just be too much overhead. It is looking more and more like NQ 1831 is the top for the week. NQ 1815 is a must hold for bulls.

YM (Dow future) traders like round numbers and 12599 was sold pretty quickly on the spike. The trading range is dismal, the price we have to pay for lower volatility once again. What a bore. Note that we are very overbought on the daily charts and due for a pullback of some kind.

The Yen is back on an uptick and the old carry trade fears are creeping in.

Gold is seeing some weakness on some IMF news in which they are demanding transparency from central banks. As long as XAU holds 137, it will just be profit taking. link

WASHINGTON (MarketWatch) - Sales of existing homes unexpectedly rose 3.9% in February to a seasonally adjusted annual rate of 6.69 million, the National Association of Realtors reported Friday. The sales pace is the highest since April. The 3.9% gain was the largest since March 2004, exceeding expectations of a decline to about 6.35 million. Sales have risen three months in a row for the first time in three years. Sales are down 3.9% compared with a year ago. Inventories of unsold homes rose 5.9% to 3.75 million, representing a 6.7-month supply. Inventories are not seasonally adjusted. The median price of a home fell 1.3% year-over-year to $212,800, the seventh straight monthly decline

The markets are holding on to support and looked poised for more gains. If rising crude and news from Iran fails to bring the markets down, you know there could be more upside. However, we could see some fear ahead of the weekend as we approach the close. If the DOW moves above 12473, 50 DMA, bears should be careful. Techs appear relatively weaker.

Oil is on a tear and hopefully you followed my advice on Wednesday: link
Now trading at 62 in the overnight session. Lots of air above. Stops should be moved up to 59.90 and enjoy the ride.

Another NQ chart (NDX future) showing the projection from last week's high/low which, surprise, has 100% at 1831, the exact high overnight. Add 1828.25 gap open and it's little wonder we saw some profit taking, but as long as 1815 holds, bulls are in control.

The market is very emotional now, wavering between the dip buyers (who have suddenly found religion) and those that remember the pain and are using this rally to offload some stocks. I find it interesting that so may have switched sides on a dime even though the Fed dovish stance was pretty much a given. I don't trust this rally and I think the macro conditions are still of deep concern. We have gas prices moving up to levels we saw last summer, even though crude is not even close to 70 (the crack spread is inflationary, no doubt). Re-examine your portfolio and shed the losers, just in case. These post-Fed rallies are usually a one or two day affair, then some reality sets in.

Gold traders be aware of the switch from April to June contracts which for non-physical deliveries will take place tomorrow, hence downward pressure on the April contract as traders rotate out. We could have seen the highs for today.

March 22 (Bloomberg) -- A closely watched gauge of the future direction of the U.S. economy fell by the most in a year last month as consumer sentiment weakened and builders scaled back construction plans.

The Conference Board's index of leading economic indicators fell 0.5 percent after a 0.3 percent drop in January that was initially reported as a gain, the New York-based group said today. The gauge points to the direction of the economy over the next three to six months.

I love those revisions. Makes you wonder. Is there a Cramer in the government?

BOSTON (MarketWatch) -- KB Home reported Thursday that first-quarter profit dropped 84% and cautioned that problems in subprime mortgages and imposition of stricter lending standards may put more stress on what's already a wobbly market.
"It is hard to predict when the housing markets will stabilize," said Chief Executive Jeffrey Mezger.

A little denial right now but we have to cycle through the process of offloading more stock inventory. Bad news is being spinned as good news because of an "upcoming rate cut". We also have some stronger than expected labor data, which is giving the dollar a boost (and doubts about a cut...): link
All in all, probably some chop as everything gets digested. A bit of news for everyone, but the trend is still up until proven otherwise.

NQ did indeed find resistance at Feb gap open, let's see if bulls can get back in there. Support is at 1815, 50 DMA, don't fight the tape if it wants to go up.

Oil is up above 61 and that was the easiest trade to get into last night.

QM (e-mini crude future) has found consistent support at its 50 DMA the past two days and managed a bullish break back above 60 today. Rotation last week drove the April contract down as well as maintenance shut down of refineries using WTI (West Texas Intermediate Crude, what QM price is mostly based on), but May held on very well, not dropping below 59. Should it hold 59.50, we could be headed for higher highs soon. The Gulf and Midwest refineries will be coming back from maintenance and demand should increase (the main reason May held up so well).

Energy update from EIA: link.

This is why you must follow NQ, NDX futures. The high today was the gap open from February, obvious resistance. Should we enter the gap (1828.25), the potential for a gap close is very real, at 1858, which is right near monthly R1 at 1856. That is the bear's nightmare scenario. I must caution bulls that these types of gaps do not necessarily fill 100%, in fact we could stall half way in there at around 1844. Nevertheless, keep this chart handy. Failure for bulls to pierce that gap open at 1828.25 on a 15 mn candle closing basis could start a pullback, but once we are in the gap, anything can happen. I don't have to add that a move above 1858 sets up new highs for the markets. NQ trades at a 20 point premium to NDX (this week).

MOT issues a warning after the close and now we can definitely tag resistance at NQ 1828.25, Feb gap open.

Financials were leading today in what could be a knee-jerk reaction to possible lower rates. I'm not sure lenders are out of the housing mess, but for now no one is asking questions. If you love the long side, I would stick to techs. SPDRS

The Feds lighten up and we have a monster rally. NDX does indeed move up to the February gap, just above 1800. We are having a slight pullback now as NQ struggles with 61.8% 2007 at 1819.25. Gold is on a solid upswing, with support now clear at 660.

I am very sure that Bernanke knows that tough language on inflation will mean a stock market collapse and further consumer loss of confidence. It is highly unlikely that the Feds will want that to happen, regardless of CPI data last week. Expect some kind of language taking into account the weakness in housing.


Don't forget that huge NDX February gap which start at 1800, almost 40 points higher from where we are now (3/19 post). This is the upside risk bears face. On the other hand, the VIX is at lower bands (see chart) and that tells me any rally could be short-lived.

NQ (NDX future) resistance is 50% 2007 at 1797.75. For gold, weekly R1 is at 633.10 and has pretty much been hit. Everyone is lining up and placing their bets, but the main thrust is a belief that the Feds will soften their language and announce an upcoming cut. Anything less will produce a sell-off.

For bulls, the all clear will only occur when the NYSE regains its 50 DMA at 9187.30. Otherwise, the bears will take the reins back.

Speaking of manipulation, the entire rally yesterday was on low volume and meant to hit more shorts and pull in some easy money. The big guys were not buying. They never gamble on FOMC events.

We are in a tight range now, with NQ support at 20 DMA (1783.25) and resistance at previous March highs, 1787.75. Note that I am often quoting NQ since NDX is the leading indicator of this rally. Bulls will make their stand at 1782/1783 as long as it holds. Fear will creep in below.

Note that QM (crude future) is trying to hold its 50 DMA at 59.30. We are now trading the May contract.

This bizarre interview of Jim Cramer, con man extraodinaire, is widely circulating over the net today: video
In it, he casually admits to routine market manipulation and openly suggests hedge fund managers do the same if they want to survive, even though it's illegal. We all know it goes on, but it's still sickening to watch, no matter how cynical you are.
A reminder to never believe anything you read or hear from the financial press.

Thank you Jim. I always knew you were kind of sleazy, but at least you're honest about it.

The dollar keeps dropping. Unlike equities, no optimism there when in comes to the housing numbers. Who do you believe, the Wall Street huckster or banks who handle currencies? In any case, we need to see 83.28 soon, or we will get a test of 2006 lows and maybe even 2004. Will the Feds support the greenback tomorrow by making another optimistic statement on the economy? If they do, rate cut dreams will evaporate, gold and equities could fall. Stay tuned.

WASHINGTON (MarketWatch) -- A weekly gauge of consumer attitudes fell 7 points to negative 5 this past week, matching the largest one-week decline in the 21-year history of the ABC/Washington Post consumer comfort index. "Spiking gasoline prices - up 41 cents in the last seven weeks - are the likely suspect," said pollster Patrick Moynihan in a press release on Tuesday. Attitudes about personal finances remained buoyant, but consumers weren't confident about the national economy, with 49% saying the economy is getting worse, up from 42% last month. Just 15% think the economy is improving

Gas is back up at $3 a barrel in good old Southern California.

ORCL hit some good numbers it seems, we are having a post-close pop.

Sometimes we need to pay attention to that little voice in our head that says "lookout". On Sunday, I mentioned the following:
I want to caution market bears one more time. Regardless of whether the markets "should" correct further, always take note of how many traders are leaning on the same side. Right now, it is becoming uncomfortably crowded on the bear side. We have had multiple days of ISEE readings below 100, indicating huge put buying (ISEE is calculated inversely to standard pc ratios). Investor Intelligence bear sentiment numbers are still relatively low, so we do not have enough bears yet to call a bottom, but a strong short covering rally could be right around the corner.

Indeed.

Bulls punch through resistance and are challenging March highs. Don't argue with price, shorts are getting clobbered today. The tide shifted when the Housing index (HGX) turned bullish. Traders are thinking the worst is over with housing and they are bidding stocks. Unfortunately, this might mean no rate cut.

INTC, GOOG and BRCM are not joining the party, which is odd and also a heads up. These stocks have been beaten down recently and should be participating. Let's see if that changes. Volume for QQQQ is very light.

Bulls pick a fight and they run NQ up to 1787.50, 20 day moving average and week of March 4 high. We will see if they can manage a close above, which would be quite bullish and set up a test of NDX 1800. It's a tall order and I doubt they can swing it before the Feds, but one never knows. Price is king, so don't get married to any bias. Traders are ignoring the Yen rise (...), but the onus is now on the bulls at this critical juncture. The trade might be to find a good short ahead of the announcement, but only hold one that has built a cushion going in, otherwise you will get whipped around.
ES (SPX future) traders will note 38.2% resistance at 1718.25.
The advice to buy gold the past week has served many well and I don't see any reasons to alter that. 660.70 is a key level, a close above that sets up a test of 2007 highs.

Gold breaks out to the upside on the housing data, tagging 20 DMA at 660. Stocks retreat, although initially jumped up. NQ resistance at weekly R1 still seems to be holding. The headlines were deceptive: link

March 20 (Bloomberg) -- Japan's central bank kept interest rates unchanged as consumer prices threaten to drop, making it hard to justify a second consecutive increase.

Governor Toshihiko Fukui and his policy board voted unanimously to keep the key overnight lending rate at 0.5 percent, the lowest among major economies, the Bank of Japan said in a statement today in Tokyo. The bank doubled the rate last month.

Financials are still in a steep downtrend and the current bounce looks like another bear flag, stumbling at the 10 DMA. That is one group that is not signaling a rate cut.

Housing starts on deck pre-open: link