Morning Coffee 31/3/2011

Hi I'm back.

Morning review:

America

1. Dow Industrials +0.58%
2. Dow Transports +0.29%
3. SP500 +0.67%
4. Russell 2000 +1.31%

Comment: Solid rise. Good Breadth in the small caps.

Europe

1. France +0.92%
2. Germany +1.77%
3. London +0.27%

EWA (Australian Shares ETF traded on the New York Stock Exchange. +1.45%

Australian Dollar topped 103 last night. +0.33%

Looks like we'll have a solid start to our market today.

Technical Comment on the American Market:

1. Current run-up in the Dow Industrials is similar in scale and time to run-ups in June/July 2010 (see circled arrows).
2. Index is now at February high
3. Negative divergences on RSI and MACD
4. Stochastic is overbought.

All that adds up to the probability of at least a mild-pullback.

A solid push through the level of the February high would be very bullish.

The ratio chart of Commodities:Bonds has shown weakness in the past three days while the Industrials Index has continued strength. The market is suggesting, at least in the short term, that bonds are a better bet than commodities. That's not a good sign for stocks. Now - that's a very short term movement - it might or might not mean something. But worth keeping in mind.

If our market sells off late today - it could just be a bit of book squaring for the end of quarter. But given the state of the Dow Industrials - it could signal the start of a pull-back.

I think I'd be looking at taking some medium term profits today if the market looks weak in the afternoon. That's just me. Remember, I'm just an elderly bloke sitting at home trying to make sense of all this stuff.

Good luck

Red