S&P 500 Elevates, Stocks Stay Peppy and Oil Rises: February 21-24

Jumping right into the trading week on a positive note: the advisory trade, based on the Dow Jones, reached it’s profit objective. The 13,000-price area represents a potential resistance. With the confirmation of a top in place, it would require a close below 1355 on the S&P Futures. The Cook Cumulative Tick was showing overbought and hinting of a small correction soon. The Bonds probed below 141, but were rescued. Therefore we are seeing a short-term oversold condition. If the equities reverse and start a correction, the bonds are in a prime situation for a short-term bounce. The S&P is walking the edge of the precipice. A plunge from these prices would require some sell stops to be triggered. Mid-week rallies aborted, but selling pressure did not increase. The New York Stock Exchange didn’t generate adequate high minus tick to precipitate heavy selling. Once minus 1000 NYSE ticks trigger and hold in the minus column for extended periods of time, the environment has changed. Obviously, the correction is long overdue, but the complacency in this market is frightening. Young, inexperienced investors must realize buy and hold will not work indefinitely.

The distortion between the equities and bonds have become greater meaning volatility will likely arrive in the bonds soon. The bonds were the recipients of Fed monies resulting in a move above 142 from the short-term oversold condition.

The S&P had the slow ooze downward Thursday morning but was rescued. The rescuers created over a 10-point rally from the lows and mostly plus NYSE tick was indicated throughout intraday trading. It was a rare, inconclusive day as the overall trading was in a contained range. Keep your eyes peeled and on guard because sometimes when the beast is contained it gets mad.

The bonds played a waiting game for the 7 Yr. Note Auction announcement. It prompted a full one-point rally with volume and volatility. The government keeps issuing more U.S. treasuries. But there is no demand present amongst those with common sense.

The count of the recent ranges places the S&P 500 in the 1375 price area at a minimum. The initial breakout of above 1350 has held. 1350 was probed earlier with a rescue effort being successful. Therefore the 1350, if broken down, will be even more credible as a roll down of this distribution top when it occurs.

Strangely, Friday did not have one plus 1000 NYSE tick while an assault was made on the 13,000 level of the Dow Jones industrial. Lack of energy was evident in the stock quotes as well. There must still be sideline money as share volume is still low. We did not climb above the overnight Globex high, which is telling. The domestic market does not seem to have the vitality of the overnight market. The S&P ended up closing above 1365, surpassing the 2011 closing high for the index and pushing it to a level not visited for over 3 ½ years.  Moreover, the Nasdaq reached heights not traded at in more than a decade. In currencies trading, the Euro topped the yen and dollar as the second bailout agreement was reached for Greece.

Oil prices gushed just shy of $110 per barrel! It marks a 10% gain for it on the month. I remember trading back when they were in the $40 area and thinking it was too high. $40 seems so low now.  Although it would not surprise me if our current high oil prices seem low to us in the not so distant future.

In the bond market, it seemed to defy gravity in the morning as 143 was broached, and then energy seemed to wane. Its rallies had no persistence. Generally a market still in a trend mode has persistence to make higher highs throughout the day. It did make a higher high, but a discernible progression was not evident.