Weekend notes on the market -- April 19 ,2008

Bulls in marching order, finally?

By shrugging off the continuously dire economic news and embracing better than expected ER from tech heavyweights INTC/IBM/GOOG and other major companies, the bulls rallied for the week to not only recover all the losses of the previous week, but also push the major indices to their upper boundaries of the 2008 trading range.

On the weekly charts: all major indices posted a bullish Marubozu Candle; momentum turned positive for the first time since last November; MACD crossed up and turning up for the first time since last November; Stochastic in full swing of over-sold rebound process; MA10s curved up; overall volumes remain relative light for the forth straight week.

On the daily charts: for all major indices, momentum once again turning positive after a short sting in the negative side; candle formations overall bullish for recent days; RSI(2) in short-term oversold; MA10 pointed up while the short-term MAs forming bullish order; overall volumes continue the light pattern started since the rally off the Mid-March bottom.

Thoughts and observations about the current market conditions and near-term outlook:

1. Both momentum and MACD changes on the weekly charts since last November may signify a significant turning point for major indices, putting down a high probability of overall uptrend for the coming weeks.
2. As of the Friday’s closes, DOW led the market with a close above the Feb/March highs, while both SP500 and NASDAQ just inches below their 2008 highs. While it becomes increasing clear that the market has seen its inter-mediate term bottom, the ongoing rally has to take out the heavy resistance zone just above before any talks of new bull market can be substantiated.
3. The big boys have been sitting tight ever since the Mid-March’s huge rally off the bottom, and that remained unchanged in the first week of high ER season. The impact of their lukewarm participation in the ongoing rally can also be seen in the post-ER run of some major companies with better than expected results/outlooks (INTC/IBM/GOOG). Additionally, there are signs of big-boys selling in to strength.
4. While technically, it becomes compelling to join the bulls march, as long as the inflation/housing pictures remain dismal and big-boys sitting tight, the rally will be choppy and vulnerable to profit-taking whenever there are not-so-great ERs from major companies.
5. As the major indices at the top of the 2008 trading range with 2 gaps-up this past week, I expect the market to take a breath in early part of the next week before any further meaningful movement.