Tuesday's Market Recap

Markets were down in Asia, Europe was in the red and the US futures pointed to a grim day or if you are short like I am a, well a rare good day. Then we got a slightly better than expected consumer confidence number and we had a snap back rally. We printed an almost exact opposite of the gravestone doji on the SPX, its a reflection of the battle thats being fought on the ground between the bulls and the bears and the bulls have been winning, taking small bits of ground and pushing their enemy back. During the two sessions, we have covered the ground from 1177 through 1196 but today’s close is less than a point higher than Monday’s open. A lot of noise but the market has accomplished little. 


We have also seen reversals; these occur much more frequently at market tops. In the last ten sessions we have had six reversals. Ten sessions ago we closed at 1178; only seven points lower than where we currently are.


The more interesting action today was in the dollar and bond markets. The yields in the short term maturities sky rocketed and in the longer term yields were up significantly (Long TBT). The dollar got bid up as the yen weakened on news of QE by the BOJ, was stronger against the euro as well. One would think that the commodity sectors would be down on the  back of this but most sectors were up. Nat Gas, oil, gold , silver and the Ag's. I think its the rotation to previous strength. Tech has also been incredibly strong and yesterday it printed a "Golden Cross", 5dma crossing above the 20dma". (usually a very bullish sign).


For the NYSE, relative to the previous 30 session average, volume was -8.44% below the average. Of the last 15 sessions 6 sessions ended with volume greater than the previous rolling 30 day average volume. T


The breadth numbers were not bullish. We had negative advancing issues and negative volume. New Highs were down sharply and it’s only the second time in a month that New Lows reached double digits. The broad NYSE Composite Index underperformed the SPX. And, the ten day average of Net Advancing has dropped below 200 for only the third time since this two month rally began.


I am holding on to my short-term bearish stance. The technical indicators I follow are all lining up for a pullback (futures are down a little this am as I write this). I believe we are headed to test 1160 and then the 150dma if the SPX takes out 1196 which is the 200wkma or the mother of all averages all bets are off.


There are reason why I don't think we go higher. The volume just isn't there on up days and is much higher on down days. The fund managers are only in 3% cash, where will the get the powder to blow this up higher. There are two many bulls, 49% to only 25% bears almost 2:1 bull/bear ratio as per AAII data. The expectation of the size and efficacy of QE2 are to high that if the FED should disappoint this will get really ugly for the bulls and quickly (i'm betting it will). Expectations are the seeds of resentment! (long FAZ, ZSL, DZZ, BGZ)


My longer term outlook hasn't changed. Short dollar, long precious metals (GLD, SLV), short bond with long TBT, long uranium basket  (USU, UEC, CCJ, URZ ), nat gas( UNG), long oil (USO, XLE), and Ag (DBA, MOO), and long EEM.