The markets held-up well again this week despite lots of bad news on many fronts.  While there were several bouts of selling, each time buyers were there to prop things back up.

Here were some of the news items the market handled last week. 

• Housing had a tough week.  New home sales were the worst in nearly 50 years, while existing home sales dropped and average selling prices declined.
• Businesses are still feeling the recession as Initial Jobless Claims rose again, while orders and shipments of durable goods slipped.
• Consumer Confidence fell more than 18% according to the latest Conference Board Survey.

And then there is the economy and the deficit …

So, let's use some technical analysis to see where the markets stand.

Three Views of the Market – and All Say the Same Thing.

Sometimes simple is better.  What follows is a top-down look at the Dow Jones Industrial Average.  It starts with a monthly chart for the bigger picture.  That is followed by a weekly chart, and then by a daily chart.  In all three the key level is just above where we are.

Here is the weekly chart.  It shows price re-testing the upwards sloping trend-line from below.

Here is the daily chart.  A sustained move above the orange line would be bullish.

Does the Euro Help Predict US Equity Market Moves?

This video suggests that the Euro is worth watching as an early indicator of likely movement in the U.S. Equity Indices (like the S&P 500 Index).

That is something I will keep an eye on to see how it works.  In the mean-time, here is a recent chart of the S&P 500 and the Euro.  It is showing a negative divergence because the Euro is continuing to show weakness while the S&P 500 rallied in February.

Time will tell.  Hope you have a good week.

Business Posts Moving the Markets that I Found Interesting This Week:

• Bernanke Reaffirms "Extended Period" of Low Rates. (NYTimes)
• Recovery Focus: Which Banks Are Worth Betting-On? (WSJ)
• U.S. New-Home Sales Drop 11.2% – to 1963 Levels. (WSJ)
• Intel, VCs Investing $3.5 Billion In U.S. Technologies. (InfoWeek)
• Economic Annual Report of the President – An Interesting Read. (White House)
• More Posts Moving the Markets.

Lighter Ideas and Fun Links that I Found Interesting This Week

• Putting a Face to a Name: The Art of Motivating Employees. (Wharton)
• Sleepy
  Heads: How Rest Helps Memory & Prepares the Brain to Learn.
  (Economist)
• U.S.
  Would Lose Cyber-War Says Former Intelligence Chief. (InfoWeek)
• Get
  Ready Sports Fans, Pole Dancers Eye an Olympic Stage. (Newser)
• Why the Olympics Might Not Be Televised in 2014. (InfoWorld)
• More Posts with Lighter Ideas and Fun Links.

The markets held-up well again this week despite lots of bad news on many fronts.  While there were several bouts of selling, each time buyers were there to prop things back up.

Here were some of the news items the market handled last week. 

• Housing had a tough week.  New home sales were the worst in nearly 50 years, while existing home sales dropped and average selling prices declined.
• Businesses are still feeling the recession as Initial Jobless Claims rose again, while orders and shipments of durable goods slipped.
• Consumer Confidence fell more than 18% according to the latest Conference Board Survey.

And then there is the economy and the deficit …

So, let's use some technical analysis to see where the markets stand.

Three Views of the Market – and All Say the Same Thing.

Sometimes simple is better.  What follows is a top-down look at the Dow Jones Industrial Average.  It starts with a monthly chart for the bigger picture.  That is followed by a weekly chart, and then by a daily chart.  In all three the key level is just above where we are.

Here is the weekly chart.  It shows price re-testing the upwards sloping trend-line from below.

Here is the daily chart.  A sustained move above the orange line would be bullish.

Does the Euro Help Predict US Equity Market Moves?

This video suggests that the Euro is worth watching as an early indicator of likely movement in the U.S. Equity Indices (like the S&P 500 Index).

That is something I will keep an eye on to see how it works.  In the mean-time, here is a recent chart of the S&P 500 and the Euro.  It is showing a negative divergence because the Euro is continuing to show weakness while the S&P 500 rallied in February.

Time will tell.  Hope you have a good week.

Business Posts Moving the Markets that I Found Interesting This Week:

• Bernanke Reaffirms "Extended Period" of Low Rates. (NYTimes)
• Recovery Focus: Which Banks Are Worth Betting-On? (WSJ)
• U.S. New-Home Sales Drop 11.2% – to 1963 Levels. (WSJ)
• Intel, VCs Investing $3.5 Billion In U.S. Technologies. (InfoWeek)
• Economic Annual Report of the President – An Interesting Read. (White House)
• More Posts Moving the Markets.

Lighter Ideas and Fun Links that I Found Interesting This Week

• Putting a Face to a Name: The Art of Motivating Employees. (Wharton)
• Sleepy
  Heads: How Rest Helps Memory & Prepares the Brain to Learn.
  (Economist)
• U.S.
  Would Lose Cyber-War Says Former Intelligence Chief. (InfoWeek)
• Get
  Ready Sports Fans, Pole Dancers Eye an Olympic Stage. (Newser)
• Why the Olympics Might Not Be Televised in 2014. (InfoWorld)
• More Posts with Lighter Ideas and Fun Links.

It seems like everywhere I look, there is bad news about the economy. Recently, however, venture capital and M&A activities have been picking-up.  Both of those are early indicators of economic optimism. In addition, here are two other signs that economic winter may soon give way to spring.

First, a Bankruptcy Partner in a major Dallas law firm just told me that he sees fewer filings in the pipeline. In addition, he says that credit has started opening-up to corporations, which is giving them the lifeline they need to start making progress again.

 Second, speaker bookings for corporate meetings seem to be picking-up again. I suspect that this is an indicator that corporations are willing to spend money on motivation, teamwork, and culture. In Maslow's hierarchy of needs, that's certainly a tier above food and shelter. In other words, when money frees-up for these types of activities, it suggests that corporations are starting to feel more comfortable about the short-term … and more optimistic about the longer-term.

From a technical analysis perspective, optimism shows itself in the charts.

Where Are We?

In last week's commentary, I indicated that a
holiday-shortened options expiration week was a likely time to expect a
bounce. Well, even though the Fed announced a surprise discount rate hike to banks,
the markets did rally.  While impressive on some levels, it happened on
low trading volume and takes us to a resistance level.

It is
decision-time for the S&P 500 Index. The weekly chart, below, shows
the downward sloping trend-line from the 2007 highs, as well as the
rally off the 2009 lows. More recently, we've seen a nice rally off the
high volume reversal bar from several weeks ago (marked by the yellow
highlight in the green circle).  Nonetheless, the bigger issue is whether price will be
able to rally and hold above the down-trend line (marked by the
red arrow)?

If the markets do sell-off soon, then many eyes will shift to the 200-day moving average (similar to the 40-week average marked in blue) as a likely support level.

It Is a Matter of Perspective … But the Real Story is the Lack of Selling.

I read an article that claims to outline the three basic causes of the market rally since March of 2009.

1. The first is that the Fed has recently chosen to pump liquidity into the financial systems during options expiration week.
2. The second is that markets closed higher on approximately 75% of Monday's since the recent market low (with 80% of the gains, since those lows, happening on Mondays).
3. The third is that virtually all of the Q4 2009 market gains occurred in the overnight futures session, when US markets are closed. 

The chart, below shows the gains and losses that occurred during the normal trading session versus during after-hours sessions.

My first reaction was that this probably was the result of government
action or manipulation by some unseen hand. Pushing the market higher
during light futures trading periods (like weekends or after-hours)
resulted in bigger gap-up openings.

After a little thought, however,
these actions make sense. Even if these after-hour pushes were the
result of the government, it was easier, took less capital (and thus
cost less to do it) after-hours than it would have during periods of
thicker trading. So, it was smart to do it that way.

More importantly,
this is a free market; so if the market "disagrees" with the push
higher, then sellers can freely take their profits or positions. The
bigger issue is that even though the markets have been pushed higher, we
still haven't gotten to the point that triggers selling volume.

Business Posts Moving the Markets that I Found Interesting This Week:

• Fed Raises Rates to Banks; Signals Pivot to Normal Policy. (NYTimes & MarketWatch)
• Which Banks Are Worth Betting-On During the Recovery? (WSJ)
• Bailout Hustle: Banks Pocketing Trillions & Re-Creating
  Conditions
  For Crash. (Taibbi)
• Fund Flows: Equity Investors Find the Exits Again. (BusinessInsider)
• M&A Picking-Up: Google Buys Aardvark. (InformationWeek)
• More Posts Moving the Markets.

Lighter Ideas and Fun Links that I Found Interesting This Week

• Utah Mulls Eliminating 12th Grade to
  Save Money. (Newser)
• Herbal Medicines Can Be Lethal, Pathologist
  Warns. (MedicalNews)
• Dan Ariely: Bonuses Boost Activity,
  Not Quality. (Wired)
• Evil
  Kneber Malware Seeks to Mine Financial Data. (TechNews & PCWorld)
• MetaCritic – Interesting idea.
  One Place to Go for Reviews. (MetaCritic)
• More Posts with Lighter Ideas and Fun Links.

It seems like everywhere I look, there is bad news about the economy. Recently, however, venture capital and M&A activities have been picking-up.  Both of those are early indicators of economic optimism. In addition, here are two other signs that economic winter may soon give way to spring.

First, a Bankruptcy Partner in a major Dallas law firm just told me that he sees fewer filings in the pipeline. In addition, he says that credit has started opening-up to corporations, which is giving them the lifeline they need to start making progress again.

 Second, speaker bookings for corporate meetings seem to be picking-up again. I suspect that this is an indicator that corporations are willing to spend money on motivation, teamwork, and culture. In Maslow's hierarchy of needs, that's certainly a tier above food and shelter. In other words, when money frees-up for these types of activities, it suggests that corporations are starting to feel more comfortable about the short-term … and more optimistic about the longer-term.

From a technical analysis perspective, optimism shows itself in the charts.

Where Are We?

In last week's commentary, I indicated that a
holiday-shortened options expiration week was a likely time to expect a
bounce. Well, even though the Fed announced a surprise discount rate hike to banks,
the markets did rally.  While impressive on some levels, it happened on
low trading volume and takes us to a resistance level.

It is
decision-time for the S&P 500 Index. The weekly chart, below, shows
the downward sloping trend-line from the 2007 highs, as well as the
rally off the 2009 lows. More recently, we've seen a nice rally off the
high volume reversal bar from several weeks ago (marked by the yellow
highlight in the green circle).  Nonetheless, the bigger issue is whether price will be
able to rally and hold above the down-trend line (marked by the
red arrow)?

If the markets do sell-off soon, then many eyes will shift to the 200-day moving average (similar to the 40-week average marked in blue) as a likely support level.

It Is a Matter of Perspective … But the Real Story is the Lack of Selling.

I read an article that claims to outline the three basic causes of the market rally since March of 2009.

1. The first is that the Fed has recently chosen to pump liquidity into the financial systems during options expiration week.
2. The second is that markets closed higher on approximately 75% of Monday's since the recent market low (with 80% of the gains, since those lows, happening on Mondays).
3. The third is that virtually all of the Q4 2009 market gains occurred in the overnight futures session, when US markets are closed. 

The chart, below shows the gains and losses that occurred during the normal trading session versus during after-hours sessions.

My first reaction was that this probably was the result of government
action or manipulation by some unseen hand. Pushing the market higher
during light futures trading periods (like weekends or after-hours)
resulted in bigger gap-up openings.

After a little thought, however,
these actions make sense. Even if these after-hour pushes were the
result of the government, it was easier, took less capital (and thus
cost less to do it) after-hours than it would have during periods of
thicker trading. So, it was smart to do it that way.

More importantly,
this is a free market; so if the market "disagrees" with the push
higher, then sellers can freely take their profits or positions. The
bigger issue is that even though the markets have been pushed higher, we
still haven't gotten to the point that triggers selling volume.

Business Posts Moving the Markets that I Found Interesting This Week:

• Fed Raises Rates to Banks; Signals Pivot to Normal Policy. (NYTimes & MarketWatch)
• Which Banks Are Worth Betting-On During the Recovery? (WSJ)
• Bailout Hustle: Banks Pocketing Trillions & Re-Creating
  Conditions
  For Crash. (Taibbi)
• Fund Flows: Equity Investors Find the Exits Again. (BusinessInsider)
• M&A Picking-Up: Google Buys Aardvark. (InformationWeek)
• More Posts Moving the Markets.

Lighter Ideas and Fun Links that I Found Interesting This Week

• Utah Mulls Eliminating 12th Grade to
  Save Money. (Newser)
• Herbal Medicines Can Be Lethal, Pathologist
  Warns. (MedicalNews)
• Dan Ariely: Bonuses Boost Activity,
  Not Quality. (Wired)
• Evil
  Kneber Malware Seeks to Mine Financial Data. (TechNews & PCWorld)
• MetaCritic – Interesting idea.
  One Place to Go for Reviews. (MetaCritic)
• More Posts with Lighter Ideas and Fun Links.