Morning Coffee, Tuesday, 3 May, 2011

In America:

1. Dow Industrials -0.02% 
2. Dow Transports -0.13%
3. SP500 -0.18%
4. Russell 2000 -1.22%
5. Nasdaq100 +0.01%

Comment: generally the market was flat, but when you look underneath it's not a pretty picture.  The small caps (Russell 2000) had the boot put into it -1.22%.  That's a negative sign  The Materials Sector -0.71% and Energy Sector -1.33% were both down.   That's a minus for Australia.  The Banking Sector lost -0.39%.  Semi-conductors was down -1%.  

Europe:

1. France +0.05%
2. Germany +0.18%
3. London -0.03%

EWA (Australian Shares ETF traded on the New York Stock Exchange) -1.2%, The Australian Dollar was down -0.24% to finish at 109.72 - knocking on the door of 109.46.   Those are further negative signs for Australia today.

Technical Comment on the Dow Industrials:

1. The Dow Industrials finished at 12807.4.
2. The Index is above both the 13-Day the 50-Day MAs.  Positive.
3. The Index is stretched way above the 50-Day MA - similar to the distance above when the February 2011 retracement occurred.  Negative.
4. Indicators:
• Slow Stochastic 95.4.  Overbought
• The 13-Day MA is above the 50-Day MA.  Positive
• RSI above its mid-line, now 72.4.  Now out of the caution zone (60-70) and into the danger zone (above 70).  Overbought.  A break below 70 would be a sell signal.
• MACD Histogram above Zero.  Positive.  
• CCI +176.4 and dropping.  A dropping CCI while the market is rising is often an early warning sign of a coming fall in the market.  A break below 100 would be another sell signal.

And the price of oil remains high but down a little on the recent high (-0.46%) - now at 113.4 for West Texas.  

The American market had a euphoric rise early on as a result of the announcement of Bin Laden's death.  It was all down-hill after that.  Today was an "upthrust" day at the top of the range in an overbought market.  That's often a sign that the market has topped.  That doesn't mean it must come straight down.  That's not how things work.  The sentiment which has sent the market this high is still there - and has to be worked off.  So the market might see a bit of to and fro before falling.  A new high could even be seen.  But today marks a significant point in this rally.   My opinion:  this is not a time for entering the market.  

Good luck

Red