Today's session was a study in rangebound trading, with little excitement for bulls or bears. Volume was lighter than we've seen of late, with 1.55B NYSE shares and 1.4B COMPX shares changing hands. The markets opened flat and drifted higher, never seriously challenging upper resistance before moving lower without challenging support. What followed was an extension of the same, with little of interest along the way.
The fed added $4.75B via overnight repurchase agreements, refunding the 1.5B expiring from yesterday's repos with a net addition of 3.25B. For all that, treasuries saw only light buying, with the five year yield (FVX) closing down 3 basis points, the ten year (TNX) down 1.7 basis points, and the thirty (TYX) down .4 bps.
The lack of excitement was like a wet blanket thrown on the volatility indices, with the VIX closing down .50 to 32.16, QQV down 1.04 to 38.38 and the VXN down 1.06 to 43.94. Particularly for the COMPX and QQQ, moves of that magnitude would imply a nice gain for the day, but the price failed to participate, with the all of the major indices closing lightly in negative territory. These moves lower in the volatility indices diverge from the price, and are either giving us early warning of an impending bullish jump in equity prices, or merely reflecting a very low volatility day. A glance at the charts shows these volatility measures moving to their lower supports, and a bounce from here would mean a move lower for equities.
Chart of the VIX
The VIX, while on "sell" signals (bullish for equities), is in a bull wedge. A failure to take out the lower support line would be bearish for equities.
Chart of the QQV
We see that the QQV too is resting upon significant support while printing sell signals on the oscillators and moving averages.
On to equities:
Chart of the INDU
The INDU put in another rangebound consolidation day on light volume. While there were no sell signals given, the stochastic and its slower cousin, the MacD, seem to be headed in that direction. It is bad form to anticipate signals, and we will not do that, so for now the only thing to do is note the pivot levels and wait for the market to tell us what it wants to do. With the VIX resting on critical support in a potentially bullish chart pattern and the oscillators closer to overbought than to oversold, bulls need to be careful here. Note that the 5 day SMA, represented by the blue line at 8306.67, never got tested today.
I'm posting the daily pivots based on today's session. For the weekly and monthly pivots, please see Jeff's index wrap here: http://members.OptionInvestor.com/Itrader/marketwrap/iw_032503_1.ASP
Chart of the SPX
The SPX printed an inside day on volume roughly equal to that seen yesterday. Again, no sell signals, and today showed us no decent signals except for intraday scalps. The 5 day SMA was never touched. Energy is clearly building for a strong move, and whether it comes on a downside VIX breakdown and a blast higher for the SPX or a fulfillment of the VIX bullflag and a breakdown for the SPX, only time will tell. In the meantime, here are the daily pivot levels to watch.
I would add that 850 SPX is significant support below S2.
Chart of the OEX
The same comments apply to the OEX. An inside day, slightly lighter volume, no clear signals, no test of the 5 day SMA. Clearly, the 439 support level is key, and tomorrow should resolve our conundrum.
Chart of the COMPX
The indecision in the market is clearly reflected in today's candle, with a top and bottom spike closing in the middle of the day's range. As with the other indices, the 5 dma provided resistance, but unlike the other indices, it was not only tested but actually exceeded for a brief moment. Volume today was lighter on the COMPX than for the other indices, and the stochastic is closer to a sell signal than for the INDU, OEX and SPX. As we see below for the QQQ, which is actually on a stochastic sell signal, the COMPX is either leading the decline and implying a downside breakout for the other indices, or setting us up for a headfake. It would not be the first.
I agree with the above pivots, but would add that 1368 is the level I'm waiting for to confirm a downside breakout. 1421 is the rally high from last week, and 1425 would be the level conservative bulls are watching for confirmation of a show of strength.
Chart of the QQQ
QQQ posted a closing gain of 15 cents, but like the COMPX, looks like the weakling of the bunch. Note that the Qubes finish trading at 4:15 EST, and those 15 extra minutes brought the QQQ higher from its 4PM print.
A series of candle stars show indecision here, and the stochastic is on a sell signal confirmed today. According to the stochastics, QQV should bounce off its lower trendline tomorrow and add some premium to QQQ options. The 5 day SMA was exceeded but not on a closing basis.
As we can see, tomorrow will be a critical day. With the indices building energy for their next move, traders will want to be attentive and tight on their stops. The markets have been anything but simple this month, and capital preservation remains a traders number one task.