By Gareth Soloway on March 24th, 2010 11:56am Eastern Time
The markets gapped higher today on the back of a downgrade of the debt rating of Portugal and a resulting surge higher in the dollar. While the gap down in the markets was solid, this is a common occurrence for the markets as they usually just get propped up on the open and trade sideways to higher all day. Today, however, could be different. The markets gapped lower only to trade back up towards the flat line in the first hour of trading. This looked normal, this looked like the floating effect that has kept the market near insane levels for almost two months was intact. At 11:00am ET, the markets started to drop. It was a swift drop on light volume. The markets hammered into the 200 moving average on the SPDR S&P 500 ETF (NYSE:SPY). After peircing the 200ma, the markets bounced.
The rest of the day will be interesting. Do we continue lower or will the propping of the markets come back in and lift them on light volume back to the flat line? As of now you must give the markets the benefit of the doubt to the float higher effect. Why? Because that is what has happened almost everyday since the February 5th, 2010 bottom.
Yesterday, many of the leading stocks were weak even though the markets stayed higher. Stocks like Goldman Sachs Group, Inc. (NYSE:GS), Amazon.com, Inc. (NASDAQ:AMZN), Exxon Mobil Corporation (NYSE:XOM) and even Google Inc. (NASDAQ:GOOG) were in that group. Today, many of those are weak again. When the leading stocks cease to charge higher, it does mean we must watch closely and be on high alert. While I would love to say it is a great indicator of a reversal coming in the markets, the light volume propping seems to be able to negate even the most obvious reversal signals.
The key now becomes the InTheMoneyStocks confirmation signal. Should we get a down day, watch the following day for a secondary down day with a close lower than the previous low. This should confirm a reversal in trend. As of now we have not had that since the bottom on February 5th. Join the Research Center to get more guidance, calls, education and all the key levels of this market to watch!
Gareth Soloway
Chief Market Strategist
InTheMoneyStocks.com
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JUST WHEN ALL EYES WERE ON GREECE, Fitch Ratings downgraded Portugal's Long-term foreign and local currency Ratings to 'AA-' from 'AA', while affirming Portugal's short-term foreign currency rating. EURUSD extends losses by 170 pips to $1.3333 (since NY Tues evening). The news help BROADEN USD RALLY against commodity currencies as risk aversion emerges, which is further weighing on GOLD and SILVER to $1089 and $16.62 (as per latest HotChart http://bit.ly/dhtUhL ) GBPUSD extends selloff as Chancellor announces the UK Budget projections on net borrowing and makes the case for an Internationally-backed bank tax. US durable goods orders weaker than expected at +0.5%. Our $1.32 EURUSD forecast for from mid February for end of March remains intact, while we reaffirm the case for $1.28 before end of June. Cable eyes $1.4820, followed by $1.45, while the days of +$1.53 are well behind us for at least 6 weeks as the pair makes its way for a preliminary support of $1.4840, followed by $1.45. Any recovery is expected to be limited at $1.5080, with subsequent gains capped at $1.5220. ASHRAF's SEMINAR IN MONTREAL (today) and TORONTO (Saturday) REGISTER HERE: http://bit.ly/acXvOHRead more…
EURUSD finally breaks below $1.35 over two consecutive sessions (US and Asia) for the first time since May 2009. CONGESTION STANDS between $1.3415 and $1.3465, with the former being the 61.8% retracement of the 1.2442-1.5129 rally, and the latter (more relevant support) being the 76.4% retracement of the 1.2885-1.5129 rally. Bottom line, traders will eye $1.34 as the next major foundation, before $1.3120. THE USD INDEX is POINTS AWAY FROM A GOLDEN CROSS FORMATION, whereby the 100-day MA 77.92 is to cross above the 200-day MA (78.07) for the first time since July 2009. Recall we ALERTED READERS back on Jan 19 http://bit.ly/8EZTO8 of the DEAD CROSS formation in EURUSD (50-day MA falling below the 100-day MA) 18 hours before it occurred, which triggered a 230pip decline the next day. Much is being said about rumours of an IMF-led deal for Greece, but the technicals suggest any bounce will be short-lived. UK BUGET ANNOUNCEMENT will seek to balance between announcing a reduction in the deficit with a combination of spending cuts and tax hikes (probably in capital gains), which will raise the question as to whether the BoE will be forced into prolonged QE.
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Euro increasingly vulnerable to the sub-$1.33 leg down as traders come to terms with the fact that 3 months have elapsed since the last credit downgrade of Greece and no credible solution on how it will obtain 56 billion for its short term obligations. It is now confirmed that German taxpayers oppose any assistance for Greece. Why would traders have hope for this weeks EU Summit when little agreement in the way of concrete resolution emerged over the last 3 weeks? See latest HOTCHART on Gold & Silvers Dead Cat Bounce http://bit.ly/dhtUhLRead more…
LATEST FED SPEAK Although the accommodative stance language can be expected to stay in the upcoming FOMC statements, traders are increasingly aware that such language is used as an offset for upcoming hawkish developments such as: i) the termination of the MBS purchases next week; (ii) start of some reverse repos operations (draining liquidity); and (iii) the looming increase in the discount rate. Bear in mind that the Atlanta Feds Lockhart (said last night that extended period phrase must stay) is not a voter at this years FOMC.
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