Market Internals

Introduction

Articles from across the globe noted uncertainty ahead of FOMC Chair Janet Yellen's and BoE's Mark Carney's turns in the hot seats this week, with Chair Janet Yellen's testimony before the House of Representatives slated for tomorrow. She'll testify before the Senate on Thursday. Some market pundits predict the markets will react badly if she's not dovish enough, and others predict that the markets will react badly if she suggests that recent weak economic data might lead to more asset purchases. Others believe that if she suggests more asset purchases, markets will take off to the upside again. Take your pick which to believe, but this might be a time when we need the porridge neither too cold nor too hot.

The SPX gained 0.16 percent; the Dow, 0.05 percent; and the NDX, 0.57 percent. The RUT rose 0.20 percent, and the SOX, 0.51 percent. While again gains provide relief after last week, today's daily candles indicated indecision. The economy-sensitive Dow Jones Transports (^DJT) lost 0.98 percent, however, a development that proved troubling on a day when so many other indices posted gains. Healthcare outperformed, with the Health Care Select SPDR, the XLV, gaining 0.82 percent.

Gold futures (/GC) for April delivery settled at 1,274.70, up 11.8 points. Ahead of Chair Yellen's testimony this week and after the China Gold Association said that the country's demand rose 41 percent in 2013, gold was deemed a safe-haven trade today, or at least that was the take by some gold experts. Volume was much less than Friday's, however.

Silver futures for March delivery settled at 20.131, up 0.179. Volume was about equal to Friday's. Copper futures (/HG) for March delivery settled at 3.2245, down 0.0115 on volume less than Friday's. Light sweet crude futures (/CL) for March delivery settled at 100.06, up 0.18 on volume 22 percent lower than Friday's.

Monday's Developments

Last night, Japan's current account and consumer confidence both disappointed. The yen had declined against some other currencies leading up to the opening of the Asian sessions but then began strengthening again before steadying beginning about 2:30 am ET. Most Asian bourses gained, but volume on the Nikkei 225, at least, proved light. The Nikkei 225 gained 1.77 percent; the Hang Seng lost 0.27 percent, and the Straits Times gained 4.06 percent. China's Shanghai Composite percent gained 2.03 percent.

Across the globe, many emerging markets reacted negatively. Turkey's bourse and its currency, the lira, turned lower after Turkey and the Ukraine both received credit downgrades. Capital controls had been imposed in the Ukraine on Friday, and losses there were limited.

European bourses started off in the green but lost ground after the first couple of hours of trading. Some recovered. Some didn't.

What was happening in Europe? Some European banks struggled. That weakness was perhaps due in part to the suggestion by Daniele Nouy, the incoming head of the Single Supervisory Mechanism, that European financial institutions should be allowed to fail (Financial Times). She doesn't believe that the Single Supervisory Mechanism should "necessarily try to merge [failing banks] with other institutions." In addition, Barclays Plc (BARC) said that the bank could have experienced a leak of customer data from 2008 or earlier in a unit that has been closed since 2011. As many as 27,000 customer files that included passport numbers, health issues, and insurance policy numbers in addition to financial information could have been compromised. The information may have been stolen for use in investment scams, a whistleblower claimed.

In addition, Europe looks ahead to testimony from FOMC Chair Yellen (Tuesday and Thursday) and Bank of England Governor Mark Carney (Wednesday). Some market watchers believe that both central bank heads will be required to revise prior guidance, with unemployment falling faster than anticipated in both countries.

The FTSE 100 rose 0.30 percent; the DAX declined 0.13 percent; and the CAC 40 gained 0.21 percent. Spain's IBEX 35 lost 0.89 percent, and Italy's FTSE MIB, 0.05 percent.

In the U.S., Fannie Mae (FNMA, 3.00, down 0.02 or 0.66 percent) reported the results of its latest monthly survey, with its survey conducted since mid-2010. Respondents showed record (for the length this survey has been conducted) confidence in their ability to easily obtain a loan (52 percent) and record low concerns about difficulties in obtaining a loan (45 percent). About 70 percent report that if they were to move, they'd buy a house. Last Monday's Wrap mentioned the Federal Reserve's conclusions that some large banks are easing conditions for prime home mortgages, and perhaps that difference is being felt among those surveyed, Fannie Mae felt.

Moody's concluded, in its weekly Analytics Survey of Business Confidence, that business confidence remained strong despite recent economic reports that show mixed results. Almost three-fourths of respondents believe that conditions will improve in the future. That's up from the two-thirds who were confident about the future just a few weeks ago. Unfortunately, Moody's did not make further information available to anyone other than its subscribers, contrary to its usual practice. Therefore, it was impossible to determine if the headline number went up or down.

An early look at a heat map this morning revealed a sea of light green and light red patches, punctuated by a number of small dark red spots. In many cases, those dark red spots were coming from companies in the mobile communications spot such as S and NOK. Nokia (NOK, 7.38, down 0.28 or 0.28 percent) and HTC settled all their pending patent litigation cases and signed a patent and collaboration agreement.

Sprint (S, 7.69, down 0.33 or 4.11 percent), due to report earnings tomorrow, declined on strong volume. Analysts fear that the company will report a loss of subscribers with service contracts.

Apple (AAPL, 528.99, up 9.31 or 1.79 percent) provided some large dark green squares on that early heat map, showing that it was bucking the trend in early trading. Carl Icahn wrote a letter to AAPL shareholders expressing his approval of AAPL's recent buyback of $14 billion of its stock. Market watchers interpreted this as his backing off more strident demands for buybacks.

Yelp (YELP, 91.11, up 1.70 or 1.90 percent) benefited from the news that Yahoo Inc. (YHOO, 37.76, up 0.53 or 1.42 percent) will include Yelp's listings and reviews of local businesses when someone searches for results on YHOO's search engine. Volume was strong for YELP.

Boeing (BA, 127.16, up 0.14 or 0.11 percent) offered a forecast for airplane sales in the Asia Pacific region. The company believes that the region will require an additional 12,820 planes in the next twenty years, representing more than a third of the global new airplane deliveries. The company pegs the value of those planes at $1.9 trillion. The company believes that passenger growth will require new single-aisle airplanes, with 69 percent of the projected growth concentrated in that type of plane. Economic growth will require twin-aisle airplanes for long-haul traffic. The company believes it offers planes that meet these requirements.

Bitcoin prices were hit this morning when an exchange, Mt. Gox, warned that all transactions sent to a third party are experiencing a problem. The issue occurs when someone changes transaction details so that it appears that bitcoins were not sent to a bitcoin wallet when they were. The bitcoins might be resent because the sender believes the first transaction went awry.

The issue is a known one that has been occurring since 2011, one Bitcoin developer, Jeff Garzik, reported. Garzik denied that Bitcoin was broken and said the software had no fundamental flaw. He said that exchanges such as the one reporting the problem Friday and today can employ security procedures that recognize that transaction ID's can be changed before being confirmed. Transactions should be "confirmed in the blockchain," he said, denying that the company would need an emergency update to the core software for bitcoin transactions (Marketwatch, "The Tell"). One exchange, Mt. Gox, had halted withdrawals Friday, bringing this issue to the forefront.

Mt. Gox still appears to have blocked some transactions today, making the halt indefinite. On its website, Mt. Gox noted that the problem is not limited to Mt. Gox, but that Mt. Gox had "detected unusual activity on its Bitcoin wallets," leading to its decision to suspend bitcoin withdrawals "until this technical issue has been resolved." Mt. Gox lists Bitcoin's last price for today at $595.23, down from Friday's close of $692.00, with a day's low of $500.00 and a high of $700.00.

This weekend, AOL (AOL, 45.76, down 1.52 or 3.21 percent) Chief Executive Tim Armstrong reversed a change to employees' 401(k) plans announced last week. He also apologized for comments he made when he announced the change, when he blamed higher health care expenses on Obamacare (ACA) and the "distressed babies" of two staffers. Armstrong had originally announced that rather than matching the 401(k) contributions each pay period, a lump sum would be deposited at the end of the year. That meant that an employee who had worked at AOL through November 30, for example, before leaving the company, receive nothing in matching contributions. None of the employees would receive the benefit of compounding from the matching funds that year.

AOL is not the first company to announce similar changes, but according to Lauren Lister, writing for The Daily Ticker, the practice is not widespread. Other data suggest that the cost of health benefits to employers has not changed much in the last several years when calculated as a percentage of employee compensation. Some sources report that health care costs are rising more slowly than they have previously.

In addition, the WSJ reports that most large companies purchase stop-loss insurance designed to pick up unexpected amounts. That would also include large amounts for adults who experience unusual healthcare expenses, not just a couple of "distressed babies." The ACA and a couple of "distressed babies" make handy scapegoats for this CEO, but these types of company practices and this kind of blaming are not new.

Since we're on the ACA, a sticky subject that I hate to tackle om these reports since it's so imbued with emotion, the Treasury Department announced late today that companies with 50-99 full-time workers will now have until 2016 to have health coverage plans for their employees. That's an extension from the prior requirement to have them in place for their employees by 2015. Companies with more than 100 full-time employees also have a bit of a reprieve. Instead of needing to have 95 percent of their full-time employees covered by 2015, they must have 70 percent of their full-time employees covered by then, and 95 percent by 2016.

The Treasury Department said that companies with 50-99 full-time employees comprises only about 2 percent of all employers. About 96 percent of all employers have less than 50 full-time employees working 30 or more hours a week and fall outside the employer mandate.

The nonpartisan Congressional Budget Office also found it incumbent to step into the fray again. Its treatise released last week included statements about ACA's effect on working hours that the agency felt were misleading after listening to and reading coverage since then.

The CBO's Director Douglas Elmendorf clarified that it is not true that the agency predicted that 2.5 million people will lose their jobs. Instead, he said that employees will choose not to work or to work less since their income is effectively boosted by the ACA's subsidies. Employees may not have to take on those extra hours just to pay for health care. That will reduce hours worked by only 1.5-2.0 percent, the CBO estimated. The CBO does not project that that 2.0-2.5 million people will be tossed out by their employers, he said.

Instead, if you totaled up those hours and divided by the number of work hours per employee, it would be the equivalent of that many fewer employees. He hoped that statement would clarify an issue that the CBO believes is being distorted.

Um, no. Why they put such a politically charged issue in those terms at all escapes me. It was not a surprise that attack ads appearing as soon as last weekend would trumpet that two and a half million workers would lose their jobs. I would bet they'll continue to appear, no matter what the CBO now helpfully "clarifies."

Hasbro (HAS, 52.36, up 2.27 or 4.53 percent) reported earnings per share that disappointed and revenues slightly below predictions. HAS reported $1.12 per share but had been expected to report $1.22 per share. The company reported revenue of $1.28B versus the expected $1.3B. The company said that the quarterly dividend would be $0.43 per common share, an increase of $0.03 per share. The company also announced that it had repurchased 2.3 million shares of common stock during 2013. Investors liked something about the report as HAS, an SPX component stock, shot higher.

After the close, Urban Outfitters Inc. (URBN, 36.64, up 0.40 or 1.10 percent) reported that same store sales rose 1 percent in the fourth quarter. Analysts had predicted a rise of 3.1 percent. While sales at Anthropologie rose 10 percent, those at Urban Outfitters dropped 9 percent. The company also operates under the Free People, Terrain, and BHLDN brands.

Rackspace Hosting, Inc. (RAX, 40.36, up 0.85 or 2.15 percent) dropped hard in after-hours trading. It was last down to 35.25 in after-hours trading as this report was prepared. When announcing earnings that demonstrated a 30-percent drop in quarterly profit according to some analysts, the company announced that its CEO was retiring from both the CEO and Board positions, and the chairman would take on the CEO role. The company reported earnings of $0.14 per share and revenue of $408.1 million on expectations by Reuters of $0.14 per share on revenue of $404.5 million. However, a positive currency impact distorted the revenue beat, and that retiring CEO is only in his early 40's, so some market participants were worried about the company's prospects.

With the Transports down today, it is perhaps notable that United Continental Holdings (UAL) announced after the close that January's traffic was lower than the previous month's traffic. UAL boarded 10.1 million passengers for January, 4.1 percent more than the year-ago number, however.

Independent oil and gas exploration and production company Pioneer Natural Resources (PXD) reported a profit of $1.00 a share after some items were excluded on revenue of $970.8 million. The company had been expected to earn $0.99 a share on $900 million in revenue. The company was last down 2.11 from the day's close. Without excluded those items, the company swung to a $9.82 a share loss from a year-ago gain of $0.22 a share.

Let's look at daily charts.

Charts

Those new to my Monday Wraps might find the following paragraphs useful when interpreting my charts. Those who have read the Wraps can skip straight to the charts. I set up nested Keltner channels on my charts. It's a run-of-the-mill channeling system like the more familiar Bollinger Bands. As with those more familiar BB's, channel boundaries are often targets for upside or downside moves. They also mark levels where prices might find support or resistance on closes. When several channel lines converge, that potential resistance or support might appear stronger, just as it would if 20-, 50- and 100-sma's all converge in one spot.

For the benefit of subscribers, I mark potential upside and downside target/support/resistance levels with rectangles, usually green for upside and red for downside. Orange rectangles are sometimes used when the darker-colored ones would not allow for a clear examination of the next target. From now on, I will mention the nearest potential support or resistance level in the discussion on the chart, but not the further-out ones. They can be located on the charts if price breaks through the nearest levels on consistent daily closes. If an interpretation such as "support levels appear stronger than resistance, so up looks more likely than down" is possible, I'll tell you. Often we traders must be able to defend our trade against a move in either direction.

As with any type of potential support or resistance, those with profits should be protective of those profits as support or resistance is tested. If prices find support and climb, look to the next higher rectangle, even one just broken through, as potential resistance. Do the reverse when resistance is breached. Hopefully, this format provides you with the information you need without requiring all night to read as happens when I list each potential support or resistance level individually.

Annotated Daily Chart of the SPX:

Last week, the SPX bounded off Wednesday's low and shot up through a couple of layers of potential resistance. Friday and today, however, it paused at the next level of potential resistance, one that's particularly important. Consistent daily closes above about 1,820 would confirm that the SPX was negating the bearish head-and-shoulders possibility suggested by the shoulder formed from mid-November to mid-December and the double-peaked head formed in late December and mid-January. Those consistent closes above about 1,820 would set a next potential upside target from about 1,840-1,855, where resistance might be found on daily closes. Even if the SPX can sprint past that 1,840-1,855 boundary, next potential resistance on daily closes is likely to be incurred rather quickly, at about 1,862-1,878.

What about before the SPX gets to 1,820? Consistent closes between about 1,800-1,820 unfortunately don't tell us much except that bulls and bears are battling it out.

As long as the SPX maintains daily closes beneath about 1,800, it's vulnerable to a rollover to 1,772-1,786, at least, and perhaps 1,740-1,760. If the SPX is going to reassert its prior rally patterns, it's probably best if any pullback finds support rather quickly at the red 9-ema.

The Keltner setup suggests that if the SPX sustains daily closes beneath about 1,740, it sets a potential downside target of 1,642-1,660, but there's of course potentially strong historical and round-number support near 1,700 and 1,726-1,728, too. That $1700.58 marked on the chart indicates that my fine-motor skills weren't good enough to draw the line exactly at 1,700 rather than any significance to the extra $0.58.

Annotated Daily Chart of the Dow:

Neither potential historical support nor potential Keltner support held the Dow during last week's retreat. It punched through both before rebounding. I had noted in a recent Wrap that the Dow had a pattern of punching through the support of the converging purple and green moving averages (45- and 120- ema's) and bulging the 45-ema lower, but the Dow completely broke through the 45-ema. The decline was overdone for the short-term. It was time for a rebound, but has the bounce been anything more than a relief rally?

We can compare the Keltner levels being tested on the SPX and Dow and see that the Dow is faring worse on a Keltner basis. If their performances were comparable on this basis, the Dow would today have been challenging the potential resistance on daily closes from about 15,982-16,093. The Dow still needs to produce consistent daily closes above about 15,837, however, before price action even sets a potential target at 15,982-16,093.

If the Dow does break higher this week, managing consistent daily closes above about 15,837 and then above about 16,093, it will have negated a potential head-and-shoulders formation. Such action sets a next potential upside target at about 16,350-16,485, with another additional upside target also marked. By the time that highest green rectangle could be tested, however, that next target would likely be pushed higher by the price action.

Bulls will likely be nervously watching as the current resistance is tested and then if the resistance band that extends up about 16,093 is tested. If in short-term bullish trades, have just-in-case profit-protecting plans in place in case the Dow rolls down from one of these levels.

Bulls would like to see any pullbacks be small, finding support on daily closes at the red 9-ema or at least by 15,678. Sustained daily closes beneath about 15,678 set a potential Keltner target at about 15,355-15,550, although there's also possible round-number support at 15,600, of course.

A failure to hold support above last week's closes sets a potential downside target of 14,733-14,900.

Annotated Daily Chart of the NDX:

The Dow might have underperformed the SPX, but the NDX outperformed it. Finding support last week at the potential Keltner support surrounding the converging 45- and 120-ema's, the NDX bounced up through the Keltner, historic and round-number potential resistance near 3,500. It has risen into a near challenge of the potential resistance on daily closes that extends from about 3,590-3,646. That brings the NDX within striking distance of the recent closing highs.

Watching the NDX as a bellwether index may be a good idea over the next few days, as it seems to be leading to the upside. Bulls want it to continue to do so, while bears want to see its strength wane. Watch out for the possibility, however, that the NDX could be forming a broadening formation, with the trendline along the December and January highs climbing and the trendline along the December and January lows declining.

Why does it matter if the NDX is forming a broadening formation? Such formations can be signs of instability. They can break either direction, of course, as we've seen in recent years, but they certainly don't reveal a clean rallying pattern we can trust. For example, when do we know that the NDX has broken to the upside? Is it when it clears the January closing high or is it when it closes higher than an ascending trendline drawn off the December and January highs? Similar questions could be asked about determining when there's been a break of support.

Let's look at what the Keltner channels suggest. The potential resistance on daily closes has already been outlined. What about support? Bulls would like to see any pullbacks be shallow, perhaps stopping at the potential support on daily closes that extends from about 3,480-3,525. A failure to hold support on daily closes at about 3,480 sets up a potential retest of last week's low and perhaps of deeper support at that descending trendline. Potential Keltner support also converges in the same area, from about 3,375-3,437.

A failure to sustain support on daily closes above about 3,375 sets a potential Keltner downside target that extends from about 3,100-3,130, but of course potential historical and round-number support also exists at 3,300 and about 3,330. If the NDX should barrel lower, short-term bears should have just-in-case profit-protecting plans at 3,300 and 3,330, too.

Annotated Daily Chart of the RUT:

The RUT also rebounded off last week's low near historical support. The RUT was also producing most daily closes at or near potential Keltner support, violating that support a little last Monday. Last Monday's close had been ambiguous, as indicated in last Monday's Wrap. It wasn't clear that the RUT had set a new downside target. This week, the RUT would need to sustain daily closes below about 1,080 before it sets a new downside target. The Keltner setup suggests that, in that case, the RUT would be vulnerable to a drop to 1,000-1,015, but of course it also has potential historical support levels stair stepping down in 20-point intervals, too.

What if the RUT heads higher instead? Keltner and other evidence suggest that the RUT needs consistent daily closes above about 1,122 before it sets a new potential upside target. That target would be at about 1,133-1,147. There's at least stalling potential if not rollover potential anywhere in that band. The RUT needs sustained daily closes above about 1,147 before it's even begun to negate the possibility that a sloppy head-and-shoulders formation is being mapped out. However, sustained daily closes above about 1,147 would set the potential for a climb to 1,160-1,175 where next resistance on daily closes might be found. A higher potential target is also marked, but that one is likely to have been pushed even higher before it could be tested.

We often watch either the Dow Jones Transports or the VIX chart or both as benchmarks about what to expect with other indices. We know that the VIX isn't always a good market-timing tool, but generally we want to see the VIX retreating during equity rallies and then we become cautious of the rally's staying power once the VIX retreats to 11-13. If we're bearish, we want to see VIX climbing. We grow cautious about the possibility of an equity bounce when VIX pushes above 18, toward 20-22, and then retreats back below 18. That latter scenario is what happened the last two weeks. The VIX, then, has been supportive of rally potential as it dropped below 18 again in the last several trading days. Equity bulls want to see it stay below 18. Have the Dow Jones Transports been as supportive of the rebounds on equities?

Annotated Daily Chart of the Dow Jones Transports:

The Dow Jones Transports can be a first indicator of the underlying health of the economy. It's not optionable, so we option traders don't trade this index, but that doesn't mean that it's not useful to watch. Right now, this index pauses at or near likely strong resistance on a Keltner and historical basis. It looked weak today, retracing Friday's gains.

When this index was last at this level, it spent several weeks chopping back and forth, chopping out a shoulder formation. Equity bulls would like to see the transports zoom right past about 7,255 on daily closes and preferably above about 7,300 on daily closes to lessen the likelihood that it's about to roll over and confirm the bearish formation.

Tomorrow's Economic and Earnings Releases

This week's important economic events are carried forward from Jim Brown's weekend Wrap.

Sometime this week, the Mortgage Bankers Association (MBA) will release the percentage of MBA-represented mortgages that were behind by at least one payment. The number is often considered a lagging indicator according to ForexFactory.

Japan's bourses will be closed for a holiday, National Foundation Day, tonight. China will release the potentially market moving trade balance sometime this week. One economic calendar lists the release as occurring any time this week, but another slates it for Wednesday, which would be Tuesday night for North American traders. Experts have predicted a surplus of 24.2B, down from the previous surplus of 25.6B.

The prepared portions of Chair Janet Yellen's remarks are due to be released at 8:30 am tomorrow, so futures will react before the open.

Companies reporting earnings tomorrow include Sprint (S), CVS Caremark (CVS), Trip Advisor (TRIP), IntercontinentalExchange Group Inc. (ICE), and PG & E Corp. (PCG), among others.

What about Tomorrow on the Intraday Charts?

Annotated 30-Minute Chart of the SPX:

The SPX spent most of the day churning inside a potential support/resistance zone that spans from about 1,791-1,802. Technically, the SPX produced 30-minute closes at or above its red 9-ema and above its mid-sized nested Keltner channel, so it preserved its next short-term upside target at about 1,814-1,822. However, price action needs to sustain those 30-minute closes above about 1,802 before we believe too strongly in the potential for the SPX to hit that next short-term upside target. This is especially true since we know that the SPX was also facing potential resistance on the daily chart.

Continued churning with 30-minute closes between about 1,791-1,802 don't give us a lot of confidence about next direction. Sustained 30-minute closes beneath about 1,791 set a new potential short-term downside target at about 1,774-1,783. The target is likely to be compressed toward the lower half of that zone if the move down is abrupt.

If 1,774 is violated on consistent 30-minute closes, the next short-term downside target is at about 1,742-1,748. That potential support on 30-minute closes might be pushed a bit lower, to Wednesday's low, on a sharp decline, however.

Annotated 30-Minute Chart of the Dow:

The Dow also produced most 30-minute closes at or above its red 9-ema, technically setting a new potential upside target. However, its churning flattened that moving average and rendered the action less bullish than neutral. Thirty-minute closes between about 15,684-15,801 don't tell us much about next direction. The Dow, of course, pushed above 15,801 on the close, but that cannot yet be considered a sustained move, of course. If the Dow can sustain 30-minute closes above about 15,801, it sets a new potential short-term upside target at about 15,980-16,060. However, bulls need to see the Dow make progress higher after breaking above that resistance before they believe too strongly in a target confirmed by a little last-minute short covering.

Sustained 30-minute closes beneath about 15,684 set a new potential short-term downside target at about 15,566-15,630, and sustained 30-minute closes beneath about 15,566 suggest that last week's low could be retested. There's potential support on 30-minute closes at 15,373-15,437, but it's likely to be pushed lower by a sharp downturn.

Annotated 30-Minute Chart of the NDX:

The NDX also churned in a tight range much of the afternoon, with that churning inside a potential support/resistance band on 30-minute closes. That band currently extends from about 3,561-3,582. Technically, the NDX's sustained 30-minute closes at or above its 9-ema have set a new potential upside target at about 3,600-3,614, and the NDX moved high enough to keep the red 9-ema rising. However, the NDX didn't seem to be able to build on its strengths this afternoon, rendering the upside target just a little suspect until it can also sustain thirty-minute closes above about 3,582.

Thirty-minute closes between about 3,561-3,582 don't tell us much about next direction. However, if the NDX rolls down and sustains 30-minute closes beneath about 3,561, it sets a potential downside target of 3,510-3,537. That target is likely to compress toward the lower end of the range if the move is abrupt.

Keltner channels suggest that sustained 30-minute closes beneath about 3,510 set a new potential downside target roughly in line with last week's low. Short-term bulls would wish, of course, to see the support near 3,510 hold on 30-minute closes instead.

Annotated 30-Minute Chart of the Russell 2000:

The RUT really was caught between the proverbial rock and a hard place today. Potentially strong resistance on 30-minute closes up to about 1,119 and potentially strong support on 30-minute closes down to about 1,110 encapsulated most of the RUT's movements today.

The RUT needs to sustain 30-minute closes above about 1,119 and build on that breakout to set and maintain a new potential upside target at about 1,140-1,145. Remain cautious of bullish hopes if the RUT breaks out minimally but can't ever build on its gains.

The RUT needs to sustain 30-minute closes beneath about 1,110 and decline from there to set a new downside target from about 1,099-1,105. A minimal drop beneath about 1,110 that immediately reverses or just goes nowhere should be held suspect.

If the RUT does sustain 30-minute closes beneath about 1,099, however, next support on 30-minute closes exists from about 1,085-1,092. If that support doesn't hold on 30-minute closes, look to the daily chart for next targets.

With the exception of the NDX (bullish candle) and Dow Jones Transports (bearish candle), the indices observed in this Wrap produced small-bodied candles indicative of indecision. That's natural after the wild swings of the last week and ahead of Chair Janet Yellen's first testimony before Congress tomorrow and other developments this week. The pauses are at or below levels that need to be breached to avoid the appearance of sloppy head-and-shoulder formations on some indices, however, so it's unfortunate, if entirely understandable, that the indices were parked where they were. It's also unfortunate for bullish hopes that the Transports turned in a much more bearish performance than some of the other indices.

We have visible evidence (the charts and the low volume) that big money is as cautious as we are about predicting the next action, but we all know better by now than to necessarily equate caution with bearishness. Sometimes bearish action will result: bullish action will result when bears are surprised and must cover and bulls are still willing to jump on when they see buying. The transports, however, should be kept on the radar screen, because you don't want to be leaning too far in your bullish hopes if this index heads down hard.

Linda Piazza