The possibility of General Motors (GM) declaring bankruptcy appears to be more and more likely. Fiat has purchased the European operations of GM as well as the deal with Chrysler in an attempt to create a mega company that combines Fiat, Chrysler, and GM. It will be interesting to see what develops.
Over the last 6 to 8 weeks, the VIX, which is used to measure volatility in the markets seems to be indicating that volatility is decreasing which suggests we should see more stable market movement.
On Friday, markets were all over the place, but mostly closed on the positive side but on lower volume. The Nasdaq Composite is showing a spinning top followed by a doji candlestick pattern which suggests caution and a possible retrace from the most recent advance. Similarly, the DOW is showing a spinning top and hammer candlestick pattern, giving the same caution signal. The other indexes are not showing any readable candlestick patterns. Gold, silver, and the US dollar have all broken below their respective 50 day moving averages but remain above their 200 day moving averages. Oil is above its 50 day moving average but remains below the 200 day moving average. As you know, institutional investors track these two key moving averages and tend to buy stocks and ETFs when they are above their 200 and 50 day moving averages.
While economic data is not really improving, most of the recent reports are not showing worsening conditions. The stock market is a leading indicator and many analysts believe that the markets have gotten ahead of themselves and have moved too far too fast. This may be the case, but since we have been keeping daily track of the indexes and price action on the charts, we will continue to focus on what the charts are telling us first. Right now the charts appear to be indicating that the current rally is getting tired, but the selling pressure appears to be muted suggesting a continuation of a sideways or resting mode, which would be a positive development for the potential of a summer rally and maybe even a stronger rally in the fall. We will see.
As of this writing, futures are positive and the DAX is positive, indicating a positive open. The market bias indicators are showing a slightly bearish bent. The market condition scans remain neutral but show a slight bias to the upside. Institutional and RSI scan numbers continue to improve which is a positive sign in terms of market stability and continued positive momentum. Given the mixed signals from the indicators we follow, the markets are once again likely to be choppy today.
| Index | Change | %Change | Level | Phase |
| TSX |
| +1.85% | 9496.96 | Recovery |
| DJIA | +44.29 | +0.54% | 8212.41 | Recovery |
| Nasdaq | +1.90 | +0.11% | 1719.20 | Recovery |
| SP 500 | +4.71 | +0.54% | 877.52 | Recovery |
| Russell 2000 | -0.58 | -0.12% | 486.98 | Recovery |
| NYSE | +55.40 | +1.00% | 5568.76 | Recovery |
Source: Telechart
Short Term market outlook:
Bias: Scans showing a neutral bias
Energy: moderate
Primary Trend: Remains down to sideways
| Sector | Phase |
| Consumer Staples | Recovery |
| Healthcare | Recovery |
| Technology | Recovery |
| Utilities | Recovery |
| Energy | Recovery |
| Financials | Recovery |
| Industrials | Recovery |
| Materials | Recovery |
| Consumer Discretionary | Recovery |
Source: Telechart
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