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The Way We Were: One Year Ago on March 29, 2010

 HedgeFundLIVE — Let’s rewind back to exactly one year ago on March  29, 2010 and see what out Chief Market Strategist Jeremy Klein had to say on that day: The Gallbladder Fairy 

About eight weeks ago, my 6 year old middle daughter received her first ever visit from the tooth fairy. Just days later, after months of please-cut-off-my-arm-to-make-the-pain-go-away sleepless nights, I had my gallbladder removed. Upon my return from the hospital only hours after the surgery, my daughter asked me quite bluntly if I could stick the discarded organ under my pillow to prompt a visit from the gallbladder fairy. Yes, she was serious. While the going rate for a child’s tooth may be $2 (please let me know if I am overpaying), I can’t imagine how much I would have cleaned up. Ahhh, the happy days of childhood as one hopes and wishes some old pixie like creature makes a visit to his or her room overnight to trade a few ducats for an incisor or in my case a slimy green useless blob of bile. Alas, I wonder if many of today’s equity and index traders have decided to put future returns underneath their pillow each night in exchange for a continuation of this recent impressive, yet overextended, bull run from the February lows.

If you assume, like I do, that the market should continue to resolve to the upside over the long term, then in theory, the DJIA knocking on the door of 11,000 and the SPX trading in a stone’s throw of 1200 should not bother you. However, I do believe that stocks can move up too far too quickly such that future gains, otherwise garnered under steadier price action, will be sacrificed. Short term momentum traders trafficking in stocks such as GE or even the E-Minis currently risk just that for the rest of us in the pursuit of squeezing more P&L out of this tired market. How do I know? For the 7th session out of 8, the closing Tick for the NYSE on Friday printed a weak 99, thereby suggesting despite equities giving up nearly 2% from last Thursday’s intraday high, we have yet to see any real money looking to buy the modest dip. The overall Rolling Average Tick sits at 506 which despite being well off its peak of 725, remains solidly overbought. Also, because of the market skittishness, the overreaction to the obvious innocuous South Korean naval vessel’s sinking of the shores of North Korea keeps the 5 day average session range over 12 to provide additional warning signs.

Further issues include the heavy volume on that lunchtime sell off as that hour, usually the quietest of any day, produced 417K traded E-Minis to help supply the most contracts transacted on a Friday in six weeks. Other items on the docket that get me nervous include month and quarter end which despite a last gasp window dressing push up being seemingly on everyone’s mind, we will have asset allocation problems, which I will discuss on Wednesday, that will add pressure to downward momentum. Finally, as I always do, I took a glance at the CFTC Commitment of Traders Report from Friday which has indicated the “non-reporting” or “small” traders accurately predicting market direction 6 out of the past 7 weeks and 22 out of the past 30 for an astonishing 73+% hit rate. Guess how they went out this week.

If this group of little guys nails the market again, they will need some help in the form of weak data from the bevy of economic reports on the calendar. Most notably, the BLS could care less that we have a day off on Friday as they release the uber-important Jobs Report at 8:30. Other biggies include Consumer Confidence tomorrow, the Chicago PMI on Wednesday, and the ISM on Thursday. In addition, because of the release of Nonfarm Payrolls on Good Friday, Wednesday’s ADP Jobs Estimate takes on much more significance as an important proxy for the Employment Report. For completeness, we receive the Personal Consumption Expenditure (PCE) data premarket this morning which only will cause issues if it comes in hot as the Fed has maintained publically that the year-over-year core rate offers them their stated preferred measure of inflation. Fortunately, economists have the easiest time predicting this report among the various price releases, so I do not expect much movement at 8:30 especially as the 1.3% consensus sits well below the FOMC’s 2.5% comfort zone. Regardless, those who believe in stock market fairies are a fickle bunch. If they don’t get their wish and the market starts to grind on them and head lower, look for them reverse course and help momentum really get going to the downside.

S&P 500 June E-Minis Key Technical Levels

Support: 1164.00/63.50, 1156.50, 1147.75, 1145.50, 1136.50, 1134.00, 1129.50, 1121.50, 1111.00/10.50

Resistance: 1171.00, 1176.50, 1180.00, 1190.00, 1198.00, 1200.00, 1210.00

Where we were then:

S&P Futures

Open: 1164.75

High: 1171.50

Low: 1164.00

Close: 1168.75

Where we are now:

Last: 1316.25