The Market
It has been four weeks since we saw the high on March 1. I hadn't even realized it until the weekend, but the S&P (barely) closed down on the month in March. Why is this important? In the scheme of things, it isn't, because the first two months of the year were very good. But do you recall at the end of February how many times we heard all these statistics about when January and February are strong March is strong too?
I introduce this concept not because it shows how many were loaded on one side of the boat with that thinking, but the fact that so many highlight seasonality in their work. I rarely do, because in my work if the market is set to rally then it is set to rally and it isn't going to do it just because last month was positive. Keep in mind that the months from November until April are supposed to be the best six months of the year for the Russell and it essentially topped out in early December.
So of course, now I am going to mention something about seasonality for the coming week! The first few days of April have a very strong tendency toward the upside. Since 2009, the S&P has been up 75% of the time on the first day of the new quarter. And since I am still waiting for this funky head and shoulders bottom to get near its target, perhaps the early part of the week will bring that to us.
However, statistically we'll be back to an overbought reading by midweek. The Russell has now been green seven straight days. In November it went 15 straight green days, but my point is that if it does stay green for the next day or so it will be very overbought, since it is bordering on it now.
Why else (aside from seasonality and the pattern not yet achieving its target) do I think we can rally Monday and/or Tuesday? Well, the put/call ratio was 119% on Friday. That is incredibly high, and typically short-term bullish.
Now, the bad news. So many charts are into overhead resistance, so eating through them will be difficult. The number of stocks making new highs continues to contract, rather than expand. Breadth has been terrific (and was again on Friday), yet up/down volume has lagged tremendously. The one-day put/call ratio is high, but the 10-day moving average is rising (thanks to high readings) and so a bit more downside later this week could send it soaring, and thus make the moving average bullish.
Back on the plus side, the insiders seem to be done selling for now. Sentiment is back to complacent, but is far from giddy. The 30-day moving average of the advance/decline line will actually be oversold mid-month, if not sooner. Therefore, the most interesting opportunity in the market would come, according to my work, if the market would turn down mid-week this coming week, because it would make many of the indicators more interesting. If that doesn't happen, I think we can expect more action like March: with ups and downs, but not much trend.
New Ideas
I find myself intrigued by the flag that is forming on the chart of Pan American Silver (PAAS:Nasdaq). If it can push up and over this top line (around $18-ish), the chart gets much more interesting I think.
Today's Indicator
The number of stocks making new highs continues to contract, not expand.
Q&A/Reader's Feedback
Incyte (INCY:Nasdaq) has a habit of popping on a spike up and then drifting back down for weeks or months before it does it again. This particular drift-down took a harder hit on Friday than has been standard the last six months, but it finds itself at an uptrend line. It should bounce, but I think even if it does, it is likely to come back down. I would probably get a bit more interested on the long side down near $125 filling that gap. If it can bounce up and over $140, then I might change my mind.
I was asked to look at Market Vector Russia ETF Trust (RSX) , an ETF to be long Russian stocks, but on a longer-term weekly chart. I would love to see the chart come back and retest $18-ish, and I might even like the chart there as a buy. But stepping back to the longer-term, there is a measured target around $27.
It's been quite a while since I have liked Jet Blue (JBLU:Nasdaq). I liked it in the mid-teens, with a target for $23 last year, and have not been a fan since. Yet now that it has corrected and no one talks about it anymore, I find I am drawn to it again. I believe it will not be easy to eat through all that resistance overhead and I suspect some of the hot airline money might be siphoned off into the just announced Fronier IPO, but if JBLU can stay over $19.50-$20 I think it makes its way higher.
