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Morning Cup of Jo: The Short-Term Key


If the financial complex gains some mojo we could be in-store for an interesting bullish scenario.


"The sure way to miss opportunity is miss the opportunity."
(Victor Chasles)

Key Points:

  • The DJIA & SPX have broken topside through their February highs
  • The NDX confirmed this latest move higher albeit on low volume & poor A/D. It is critical we maintain the secondary trends from the March lows
  • The financials stalled at key resistance highlighted last week and continue to consolidate
  • I continue to follow the Transports, Basic Materials, Semiconductors, & CRB for opportunities
  • Important announcement: TAM will release its updated 100 Year Market Theory and accompanying Dow Chart this week. This update focuses on the market's recent break above the major consolidation.

Market Commentary

Maintaining is the short-term key.

On April 16 the SPX took out its February high, on Friday (April 20) the DJIA took out its February high and last week's Jo concluded with a chart of the technology laden sister NDX. I mentioned that if the NDX could follow the eldest two sisters above its latest high, it would give credence to a much larger tailwind for equities. However lackluster it appeared, due to the low volume and poor quality of the A/D line, yesterday's action did fulfill the technical requirement. From here the importance lies with maintaining the ST (secondary) trends set in place from the March lows.

Last week I also discussed the XBD and BKX and their relation to the broader picture. While we have had a number of earnings reports and continued M&A activity, both retreated since the last report and continue to consolidate below some significant resistance levels. If the financial complex gains some mojo we could be in-store for an interesting bullish scenario.

The reason I stated at the beginning of this Jo, "…the importance lies with maintaining the ST trends...," is because if they are broken the likelihood we may see a divergent top for all markets increases. This could be just as fast, ferocious and nerve racking as the February fall.

As for current opportunities, I continue to favor the Basic Materials and Transportation sectors. If there is any sort of follow-through and successful retest in the NDX, my firm will become more interested in the technology sector. Many of you saw the move in the SOX yesterday. This was not only impressive, but it broke into territory not seen since April of 2006 when busting a horizontal floors and ceilings and corresponding 1 ½-year downtrend. The question remains if others will follow.

Another interesting chart, alluded to last week, is the CRB Index. In May of 2006 the index topped around 365 and broke an uptrend that's been in place since 2001. This has been the first correction in six years and has been consolidating ever since. On a weekly chart it is plain to see a massive double bottom with a handle and a 320 neckline. Busting through this could signal a run for last year's top.

Earnings are continuing to drive the markets higher into new territory. It's mainly been the big-caps that have done much of the pushing thus far while the rest remain quite mixed. This is where you'll want to keep your eyes focused on for the next week or so. My firm's OTC (On the Calendar) document, which comes out every Monday morning, is a great resource for those inquisitive about who is releasing when and what their estimates are.

Important Announcement

This Friday TAM will be releasing an update to our 100-Year Market Theory and the "New and Improved" 100-Year Dow Chart. The update is quite lengthy and it is for that reason my firm paraphrased a similar comment made when we first published the original theory…

"Before venturing through the epic endeavor we realize it is quite lengthy and recommend having some serious focus time. Therefore you may want to print it out, put it in your briefcase and take it home to read over the weekend."

That being said, the technical underpinnings are not difficult to understand, but may require some time to examine all the illustrations and comb through the analysis.

Stay tuned & good luck!

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No positions in stocks mentioned.

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