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Written by Marc Eckelberry
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Sunday, 17 April 2011 13:26 |
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 Bears got the upper hand last week, breaking below the range support which was defined by the long term NDX 38.2% level of 2330. However, the drop did not take out the 20 weekly moving average (2291), now key support and must hold, or we drop further and close an NQ (futures) gap at 2265, followed by a potential retest of the 2007 highs. That area was the January support, also 76.4% July/this year high (see chart). The VIX has dropped hard on a relative basis, but the skews we get from option expiration tend to give us unreliable indications. Keep it simple now, the NDX 20 weekly needs to hold. Resistance is ES (SPX futures) 1320, a level to watch tonight and tomorrow.
Addendum: an update was provided the following Monday to subscribers, and posted as well on Minyanville:
 "Looks like a capitulative move early in the morning, with lower lows on lower volume for ES (SPX futures). The key closing level to grab is 1297, but the fact that the March gap at 1292 has held so far is very encouraging. NQ (NDX futures) needs a close above 2282. Keep in mind that the overnight session often does a retest, and that reaction will be the tell for tomorrow. So far, bears have not been able to gain traction off the opening spill."
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Written by Marc Eckelberry
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Sunday, 10 April 2011 12:42 |
 For the past eight trading days, NDX and by inference the broader market, has been unable to build much on the late March gains. This type of consolidation can lead to significant upside breakouts, however the bottom of the range must hold. On Friday, we made a new low and closed below the 50 day moving average (red line) for the first time since 3/28. The action on Monday will be critical and a true test of the bull's resolve if bears start pressing their slight advantage. There are some bearish divergence, notably the NDX vs SPX recent lag, but keep in mind that the former is comfortably above its 2007 highs and that bullish macro trend should eventually translate into the same milestone for the broader market. One nagging concern is the Investor Intelligence percentage of bulls (57.3%) and bears (15.7%). This has been going on for some time, but has been tempered by the persistent pessimism on the retail investor side. Oil is starting to really put some pressure on equity bulls as we approach key area of resistance between 113 and 115, levels to watch as well. This is still a powerful bull with still many non-believers in the media, which keeps on publishing article after article as to why we should not go higher. This is keeping smaller investors on the sidelines, in the "safety" of bonds and other markets such as emerging. This could be a strategic mistake on their part. Time will tell. For the coming week, bulls need to get NDX back above 2331 (January high) on a closing basis. |
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