Complex Signals from the Market

[Excerpted from Bill Cara's Daily Report]

The US equity market is giving complex signals as to possible trend direction. Thursday, the market volume and breadth improved, and chart break-outs are showing up, possibly, in the NASDAQ, FTSE, NIKKEI, and more. But the rally is already seven weeks old, and many traders are questioning many aspects.

The major indices began Thursday by moving quickly to the upside, reaching session highs before noon and then selling off through the afternoon, before closing mostly unchanged from Wednesday.

At the close, the DJIA (8,168.12 -17.61 -0.22%), S&P 500 (872.81 -0.83 -0.10%), and NASDAQ Composite (1,717.30 +5.36 +0.31%) were flat.

However, although many technical analysts are still unconvinced this seven-week rally is anything more than a final weeks blow-off of prices in advance of a significant pull-back, there has been improving sentiment.

The Toronto Composite (9,324.83 -91.48 -0.97%) and the Toronto Venture Board (1,008.98 -4.99 -0.49%) flopped as cautious traders sold the miners and oilers.

Earlier Friday, trading in Japan’s Nikkei 225 (8,977.4 +1.69%) resulted in higher prices.

In NY Thursday, the strongest sectors were Basic Materials (XLB +2.8%), mostly chemicals and paper, and Consumer Discretionary (XLY +1.7%). Among other industry groups, the Semi-conductors caught a bid ($SOX +2.8%), while Biotech ($BTK -2.5%), Goldminers ($XAU -2.2%) and Banks ($BKX -2.1%) were soft.

Stress tests at the US banks will show that much more capital is required, so the banks would like to talk this market higher to minimize the resultant dilution. However, they will have six months to raise that capital, and a lot can happen in that amount of time.

For the Cara 100 companies, the winners were led First Solar (FSLR +23.5% on +299% average daily trading volume), and Dow Chemical (DOW +18.4%, also on big volume). In fact, the Cara 100 volume leaders were more active and also showed mostly price gains. The worst of the losers were Peruvian goldminer Buenaventura (BVN) and Russia telecommunications company Mobile TeleSystems (MBT), each down -5.7%, and another Russian telecom, Vimpel-Communications (VIP -5.5%).

The $USD recovered a bit (84.73 +0.15 +0.17%) following two down days. The Pound (147.88 +0.13 +0.09%) and Cdn Loonie (83.77 +0.71 +0.85%) were also up on the day against the USD, while the Euro (132.22 -0.36 -0.27%) and Yen (101.46 -1.09 -1.06%) were weaker.

US Treasury yields lifted a bit more and bond prices pulled back. The 30-year (4.044 +0.18 +0.45%) and 10-year (3.124 +0.28 +0.90%) yields were higher, and the 5-year (2.017 -0.02 -0.10%) a bit lower, and the long bond ($USB 122.56 -0.19 -0.15%) dropped a bit in price. The T-Bill yield increased from 9½ basis points to 12½ bp.

Crude Oil ($WTIC 51.12 +0.15 +0.29%) closed higher and above 50 for the third day in the past four. At 7:00am ET this morning, the futures were down a bit (50.95 -0.17 -0.33%).

$GOLD futures moved down with a stronger $USD (888.80 -9.10 -1.01%), for a third down day in the past four.

Spot (cash) market prices just before 7am ET were on the weak side, and apparently under pressure: Gold (883.80 -1.10 -0.12% 06:58am ET), Palladium (211 -3 -1.40% 06:52am ET), Platinum (1092 -4 -0.36% 06:48am ET), and Silver (12.25 -0.08 -0.65% 06:58am ET). The price is at technical support levels. Should broad market prices hold up today, the precious metals group could lift into the weekend.

Stock futures were stronger Friday morning (8160 +34 +0.42% 06:51am ET). Ninety minutes later, it was a tad softer than that at +30.