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Intuit's Shares May Dictate Market Direction


If support holds, the stock could quickly turn up. But all bets are off if it can't hold its uptrend line support.

Summary of Yesterday's Notable Technical Developments

The benchmark 10-year Treasury finished Tuesday's session flat despite gapping higher by 1.25% in price at the open. Selling pressure came in around 10:30 to take the yield back above 3.6%. Thus far, support at 3.55% has held. Yesterday's reversal will only be meaningful if there is follow-through. A close above 3.69% would go a long way in confirming my view that the next big move in yield is higher (target 4.12%).

Stocks succumbed to selling pressure, too. After early weakness, stock indexes rallied a little more than 1% and actually overtook Monday's highs; selling began just before 2 p.m., taking stocks all the way back down near the morning lows. While the averages were down only slightly for the day, weak market internals tell a different story.

had the same down-up-down pattern as stocks, but the DBC failed to approach Monday's highs, finishing lower by more than 1%. Yesterday's action clearly demonstrates the difference in effect that the dollar's movement can have on commodities versus stocks in a single session or two. This can lead to thinking that commodities are more levered to the dollar than stocks. However, since the DXY's lowest close this month (see chart below) on January 14, the S&P and the DBC are each down roughly 5%, while the DXY is up by 2.2%.

The US Dollar Index was higher Tuesday, putting pressure on commodities. The positive day didn't, however, have any real impact on the technical picture for the greenback. As long as 78.81 remains as resistance, I believe that we're in a wave (b) corrective move lower in the DXY, with a pullback to 77.04 or lower a possibility.

This morning: Asian markets were all lower, with Australia (-1.5%) and Singapore (-1.25%) leading the way down. European markets are also uniformly lower, with losses ranging from 0.75% to 1.5%. The US dollar is trading higher versus four of the six currencies measured by the DXY, and this has the dollar index slightly higher. Stocks, oil, and gold are slightly lower to unchanged in the early going.

Market Internals: NASDAQ
(Figures are rounded)

Critical Market Components (with ETF proxies):

S&P 500: First Support: 1,087.24 (109.03 for SPY) horizontal line support from November 12, 2009 close; First Resistance: 1,100.84 (110.25 for SPY) 75-day moving average

NASDAQ: First Support: 2,187.08 (43.95 for QQQQ) 80-day moving average; First Resistance: 2,269.11 - 2,271.48 (45.75 for QQQQ) late December/early January lows and the critical monthly closing support level for NASDAQ

Dow Jones Industrials: First Support: 10,117.96 (101.20 for DIA) October 2009 peak level;
First Resistance: 10,285.97 (102.94 for DIA) lower edge of the December 2009 trading range (December 8, 2009 low close to be exact)

10-Year US Treasury Yield (TLT used here as a proxy for longer-dated bonds): First Support: 3.554% (93.72 resistance for TLT) the wave (i) extreme, which can't be violated by wave (iv) according to EWT rules; First Resistance: 3.918% (88.77 support for TLT) recent high yield

Commodity ETF (DBC): First Support: very close by at 23.32, which is the intraday low from December 10, 2009; First Resistance: 24.00 -- the August 5, 2009 high & support for a while

US Dollar Index (DXY): First Support: 78.00 (23.02 for UUP) -- horizontal line created by previous resistance; First Resistance: 78.81 (23.20 for UUP), which is the January 21 intraday high (wave (a) high)

Semiconductor Index (SOX): First Support: 330.00 (25.20 for SMH), which is an uptrend line (SMH has already broken below its trend line); First Resistance: 337.16 -- the October 14 intraday high (26.24 for SMH -- previous uptrend line)
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No positions in stocks mentioned.

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