Morning Coffee, Wednesday, 4 May, 2011

In America:

1. Dow Industrials +0.00% 
2. Dow Transports -0.54%
3. SP500 -0.34%
4. Russell 2000 -1.29%
5. Nasdaq100 -0.48%

Comment: Apart from the Dow Industrials, the market was down.  In the case of the Russell 2000 (small caps) it was down strongly.   The Materials Sector -0.91% and Energy Sector -2.51% were both down.   That's a minus for Australia.  The Banking Sector went against the trend +0.94%.  Semi-conductors was down -1.26%.  

Europe:

1. France -0.29%
2. Germany -0.36%
3. London +0.21%

EWA (Australian Shares ETF traded on the New York Stock Exchange) -1.54%, The Australian Dollar was down -0.9% to finish at 108.48 - falling away from the 110 region.   Those are further negative signs for Australia today.  Gold in Oz Dollars was up 0.54% in the past 24 hours.  That's another negative for our market.

Technical Comment on the Dow Industrials:

1. The Dow Industrials finished flat 12807.5.
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. Two doji candle-sticks in a row.  Indecision.
5. Indicators:
• Slow Stochastic 93.15.  Overbought. Strike One  Below its signal line.  Strike Two.  Needs to fall below 80 for Strike Three. 
• The 13-Day MA is above the 50-Day MA.  Positive
• RSI above its mid-line, now 72.49.  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 +137.7 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.

The Nasdaq Composite shows a worse technical picture with two sell signals:  RSI breaking below 70 and CCI breaking below 100.  A break by the MACD Histogram below Zero and the Stochastic below 80 would complete the quadrella.

And the price of oil dropped off the recent high (-1.88%) - now at 111.45 for West Texas.  

My opinion:  this is not a time for entering the market.

Good luck
Red