Morning Coffee. Thursday, 7 April, 2011

In America:

1. Dow Industrials +0.27% 
2. Dow Transports +0.02%
3. SP500 +0.22%
4. Russell 2000 +0.1%
5. Nasdaq100 +0.19%

Comment: Modest gains in most of the major indices.  Breadth (Russell 2000) was weaker but still positive.  I like to see breadth stronger than the major indices. 

Europe

1. France +0.16%
2. Germany +0.55%
3. London +0.57%

The picture in Europe was a little better, but those exchanges closed while the American market was much higher than its closing price.

EWA (Australian Shares ETF traded on the New York Stock Exchange) +1.6%.  The performance of the EWA was helped by a strong Australian dollar which closed at 104.4, up +1.06%.

Technical Comment on the American Market:

1. Current run-up in the SP500 is similar in scale and time to run-ups in June/July 2010.
2. SP500 is still below the February closing high of 1343.  Today's close was 1335.5.
3. RSI at 63.8 is in the caution zone but can go higher.
4. Stochastic is overbought and flattening out.  Caution
5. Significant oblique resistance line has halted strong advance.
6. Today's candle was the third "doji" candle in a row.  Volume is a little higher than the 10-Day average.  Another day of indecision.   
7. Significant support in 1300 area.
8. Momentum is slowing:

• MACD Histogram is dropping
• Stochastic is flat
• Force Index is registering a negative divergence from price
• Index chart has dropped below the 45 Degree Gann line which was providing support

Despite the slowing in momentum, bears still haven't proved themselves.  The past few days slowing in momentum could be just the pause the bulls need to regain strength.  Looking at today's intra-day chart the second half of the day is in a bearish upsloping wedge which broke to the downside in the last few minutes of trading.  If that carries through to tomorrow, then the bears might just emerge on top.

On the Dow Industrials, the Dow Theory buy signal is proving to have some validity.  The Dow Industrials Index is now 35 points above the "buy" level of 12391.  So much for my skepticism.  :)  I'd still like to see confirmation by the SP500.  It is still below its February high.

Yesterday, on the Australian market, the Gold ETF (up 0.97%) broke above the 13-Day Moving Average.  In the past 24-Hours Gold in Ozzie Dollars has fallen -0.67% (due to that strong Ozzie Dollar).  That's a plus for our market today.

Although positive, our market struggled to gain traction yesterday.  We'll probably do much the same or a little better than that today on the back of the stronger Oz Dollar and stronger Industrial Metals prices (up +0.44%).  If my bearish comments about America work out - then we could see our market weaken.

Good luck

Red