Morning Coffee. Wednesday, 6 April, 2011

1. Dow Industrials -0.05% (finished at 12393, marginally above Feb. high)
2. Dow Transports -0.67%
3. SP500 -0.02%
4. Russell 2000 +0.47%
5. Nasdaq100 -0.29%

Comment: Relatively flat night.  Moderate gains in the Russell 2000 were counterbalanced by weakness in the Nasdaq100.  The Nasdaq Composite was down (the broad Nasdaq index) +0.07%. See Technical Commentary below

Europe

1. France -0.03%
2. Germany -0.00%
3. London -0.16%

The picture in Europe was similar - flat.

EWA (Australian Shares ETF traded on the New York Stock Exchange). -0.11%

Australian Dollar closed at 103.3 last night. -0.31%. 

I've shown the S&P500 chart today rather than the Dow Industrials.  The S&P 500 is a much broader index than the Dow Industrials and probably gives a "truer" picture of the market than the DJIA Index.  Usually the two are in sync, but it is notable that the S&P 500 is still below the February high while the DJIA is marginally above.  The S&P 500 is not confirming the new high on the DJIA.  That gives some more credence to my concern about the "buy" signal produced by Dow Theory that I talked about yesterday.  Given the the Semi-Conductors Index is in a down trend, even more doubt must be held about the Dow Theory buy signal.  In high-tech modern societies Semi-conductors have just as much if not more credence as a barometer of economic activity as the Transports.

Technical Comment on the American Market:

1. Current run-up in the S&P500 is similar in scale and time to run-ups in June/July 2010.
2. Index is still below the February closing high of 1343.  Today's close was 1332.
3. RSI at 660.4 is in the caution zone but can go higher.
4. Stochastic is overbought and flattening out.  Caution
5. Today's candle was a reversal day "tombstone" candle on heavy volume. The bulls tried to push the market up today, but in the end were overcome by the bears.  At the top of a trend this is a dangerous development.  A down day tomorrow would be a short term sell signal.
6. Significant support in 1300 area.
7. Breadth as measured by the Russell 2000 was still good today, so that gives the bulls some chance of regaining the upside tomorrow.

On the Dow Industrials, The lines of demarcation remain clear: above 12400 - very bullish, below 12000 - very bearish.

Yesterday, on the Australian market, the Gold ETF broke marginally higher from a short-term consolidation area.  Today should confirm that break higher with a significant rise in Gold priced in Ozzie dollars (about 1.5%) in the past 24 hours.  That's a negative for our market.

Our market struggled to gain traction yesterday.  I can't see us doing any better today - and may be negative.

Good luck

Red