There was a massive rally in the futures this morning, and in the manner to which we've recently grown accustomed, the entire move today occurred before the cash markets opened. They gapped open within a few points of their highs of the day, and then bled lower, pausing briefly to pay their respects to the various support levels on the way down to their closes at the lows of the day. Volume was moderate at 1.75B NYSE shares and 1.51B Nasdaq shares.
Treasury yields got huge boosts, rallying strongly right out of the gate, but drifting lower to close near their lows of the day for respectable gains nonetheless, with FVX + 9.9 basis points, TNX +7 bps and TYX +4 bps.
The TRIN opened at .18 and closed at its high of the day, at .91, while the TRINQ opened and printed a low of .10, closing at .73. Volatility was negative for all the indices, with the VIX down 1.07 to 31.73, VXN -1.41 to 41.44, and QQV -.62 to 36.59. Breadth- and sentiment-wise today was bullish, but the direction intraday was bearish, as we'll see below.
Without frontrunning my review of the chart action and pivot points, the day did not have that doji "feel" to it, in which a strong trendlike move is blown off and followed by a desperation reversal. This was caused primarily by the slowness of the day's trading after the initial hysterical gap up open. In fact, much of the session was sideways, as price flatlined the indicators within what appeared to be an intraday bull flag. It was only with a print below the lower reaches of that flag around INDU 8375, COMPX 1400, and SPX 893 that the decline began to accelerate. The day ended with gap fills or near-fills on all the indices.
I have posted the daily pivots based on today's ranges. These numbers represent potential support and resistance and pivot levels. They should be referenced in the context of your own technical analysis and targets.
On to the charts:
Chart of the INDU
The INDU is trading on buy signals across the indicators I follow but they're looking long in the tooth. Today's gravestone doji print closed right above the widely-watched 8275 support level. While the oscillators are not giving sell signals, the MacD is close to it and the stochastics have stopped in mid-run higher. Today was a lighter volume day, which leads me to two possible conclusions. On the one hand, it shows a lack of conviction at these potential breakout levels, which is bearish. However, the cash INDU traded steadily lower all day, and to that extent, one could argue that the lighter volume indicated a lack of conviction to the sell side. The lower VIX despite the downside trading sets up a potentially bullish divergence. On the other hand, it could signal apathy in the options market on a price decline, setting up the INDU, OEX and SPX for a potentially steeper fall. The price action did little but fill the opening gap, closing above key support. Neither bulls nor bears are out of the woods yet, and conclusions are difficult to draw.
My strategy continues to be to watch support and resistance levels. I am trying hard to keep an open mind as to direction, because of the violent upside surprises we're getting into the habit of seeing.
Chart of the SPX
The SPX showed us similar action today, failing to take out resistance and closing right above critical support just above the 875 line. The stochastics, which tend to be earlier than the MacD, are close to a sell signal, but not there yet, while the MacD is still in "buy the dips" mode. Lastly, the 5 dma (blue line) is above the 13 dma (red line), which is also a buy signal. While today felt quite bearish, as the bulls failed to hold their gains from the open and most buyers of the SPX lost money with a close a few cents above the lows, the support underneath never got challenged. Bears should remain cautious, because the party for the bulls is not necessarily over.
Chart of the OEX
The OEX did not diverge from the SPX in any appreciable way, closing within a .01% change of the SPX. Little can be inferred from this, other than that today was relatively orderly for the S&P 500 and 100 indices. The close above support would signal traders to wait for a test of support and to go long for the bounce. However, the toppy MacD and imminent crossing on the stochastics will make that a riskier trade than you probably want to see. Tomorrow's open should hold a clue, as the big moves tend to occur after hours anyway. I would be more inclined to go short on a test of resistance than to try to catch a bounce, but the premarket will likely make the decision for us.
Chart of the COMPX
The COMPX outperformed today, holding onto more of its gains than the other indices. However, the QQQ, which closes 15 minutes later than the COMPX, filled the opening gap completely, and presumably the COMPX would have done so as well. Please note that the chart above shows a marubozu candle (one with little or no shadow), where it was actually a gravestone doji as well, blowing off the entire top and closing at its low of the day. The chart above seems to misrepresent that. Volume was lighter than on the other indices, and my comments about the volume action in the INDU apply equally to the COMPX. Combined with the low VXN today, it is difficult to predict tomorrow's action. Either the COMPX will resume its upward march from support in the 1380 area, or it will resume its slide. The prevailing economic and fundamental news has been not only ignored but in fact faded by the COMPX, moving higher on increasingly bad news and causing QQQ bears (like me) to pull their graying hair out.
Chart of the QQQ
QQQ suffers from the same candlestick confusion as the COMPX, having closed at its low of the day. Note that this frequent leader amongst the different indices is on a sell signal from the MacD, the only one of those reviewed above. The stochastic has yet to cross but it appears to be not far behind. The Qubes could not take out resistance, but they closed right above Friday's support level of 25.90-26.00. I would not be looking to short this or any of the other indices until we see this and its equivalent support taken out. I say this in light of the fact that there have been no gradual moves higher in many weeks. The declines are quite orderly, but the upside has been explosive, often fast enough to make all but market orders difficult to set and fill. If going short, I'd suggest setting active stops instead of merely mental ones, or at least leave your finger on the trigger.
Whatever you do, do it defensively. Protecting capital remains job one in this dangerous market. It seems as if war news is finally loosening its grip on the markets, but I suspect that we've been seeing irregular moves continue. Whether those moves begin to show us some downside for a change, or whether we see yet more flagpole rallies like this morning, time will have to tell.