Market Notes as of close 06 Mar

Dollar gap lower to 26.40- Buy Response and gapfill as expected- Value Area Lower

USO continued consolidation at supply- Open Interest neutral and volume declining- Value Area slightly Higher

SPY/IWM auction lower-Buy Response into close-Value Area Lower

10Yr Bond consolidation- Increasing bearish skew at longer term demand (120)- Value Area Sideways

TF

414 Supply/435 Overhead Supply

385 Over/Under

342 Demand

Options show put bias

USO

28 Supply/ 30 Overhead Supply

26.05 Over/Under

24.10 Demand

Options show neutral bias (net long)

SP 500 and Commodity Sector Overview

SP 500 Sectors

Sectors: XLY 7.99% XLP 13.97% XLE 14.18% XLF 8.62% 

XLV 16.07% XLI 9.55% XLB 3.19% XLK 22.04% XLU 4.39%

XLF= Financials are now a remarkably smaller percentage component than they were at the bull market high of mid 2007. Much like the effect of companies like Citi (now trading near $1) on the Dow 30, it is a worthwhile question to ponder the effectiveness of these indices as indicators of broad market activity with certain sectors and specific stocks so drastically skewing the indices they are components in.

Commodity Sectors 

It is interesting to note the condition of energy and industrial metals specifically within the context of any future reinvigoration of the global economy. Certain intelligent observers like Jim Rogers have noted that these commodities are due for tremendous upside going forward due to the position of China. China remains in a state of previously unseen industrialization in modern history. In spite of the global recession, they are not laden with debt at all levels (consumer, business, & government) like the United States. This fact supports the asssertion that China's stimulus will likely be much more effective and could be a sign of a change in the prevailing winds of the market going forward.

Oh yes, and there is that $10 Trillion or so our government just printed. Inflation anyone? Bueller? Bueller?

Long Term Condition

Of all the four major US Equity Indices (Dow 30, SP 500, Nasdaq 100, Russell 2000), the small caps (IWM/Russell 2000) continue to hold the 2000-2003 Bear Market Low. As the other 3 major indices have breached that level, the small caps continue to diverge from the rest of the US equity market and are not leading the longer term downtrend at this time. 

Weekend News

After emerging from the haze of the weekend's drunkenness on "hope" and "change", I'm faced with the following realities:

Obama Budget

• Obama Budget includes $1 Trillion Tax Hike
• Obama Budget requests contingency for as much as $750 Billion in additional aid for financial industry
• Obama $3.55 Trillion budget proposal projects 3.2% economic growth in 2010 (twice the projection of the Congressional Budget Office). This makes Obamas' promise to slash the deficit shall we say "dubious"
• Obamas' Budget requests $205.5 Billion for more combat operations in Iraq and Afghanistan- $75.5 Billion more this year and $130 Billion in fiscal 2010. Wasn't he the "anti-war" candidate?

Inside the Auction

• Bonds give indication of potential bottom in equities by selling from their high

• After initiated sell response of bonds from supply, equities find initiated buying and begin auction back toward mean (66.5)

Market Notes as of close 03 Mar

Dollar gap above supply @26.20 and pullback to gap holds as demand- potential test of overhead supply @ 27.15- Value Area slightly Higher

USO gap lower holds w/ consolidation- potential gap fill and sell response- Value Area Sideways

SPY/IWM continues slow liquidation lower with extremely weak close at lows- Value Area Lower

10yr Bond continues consolidation at/near longer term demand (120) w/neutral volume skew- Value Area Sideways

TF

383 Supply/415 Overhead Supply

373 Over/Under

350 Demand (Long Term)

Options show put bias

USO

27.70 Supply/30 Overhead Supply

24.30 Over/Under

22.70 Demand

Options show call bias

"The only way around is through"- Robert Frost

Equities' Long Term Condition

IWM Long Term

SPY Long Term

• IWM has not broken 2002 Bear Market Low at/near 350 while SPY has breached its 2002 low and exhibits extreme weakness. Small Caps typically lead in trends.

USO 022709

TF 022709

Market Notes as of close Fri 27 Feb

• Dollar did test supply @ 26.20- Sell Response there- Value Area Higher
• USO saw pullback and gap fill as expected to 26 area- Buy Response there- Value Area Lower
• SPY/IWM break Nov lows w/ Sell Response and close at Low- Value Area Lower
• 10yr Bond consolidation near long term demand (120)- Contract Roll to Jun- Value Area Sideways
  

TF AM Sell Response @Supply 02.26.09

• A Sample of the volume pricing chart know as the "bid/offer footprint" (among other things)
• This chart is based not on time but on reversal of a specified number of ticks (8 in this case) and precisely shows in real time the flow of capital within the 30 min alphabetical charts previously listed
• Note the initial "imbalance" is a an uptrend to an area of previous supply. "Consolidation" occurs at that area of previous supply (buyers' orders being absorbed by resting limit sell orders- Supply). After consolidation, buyers must either reinitiate trade and drive mkt higher OR sellers must step in and "hit the bid"  (initiating trade), overwhelming the buyers with supply, and thus driving the mkt lower. In this instance, the seller becomes aggressive and drives the market back from whence it came.
• More to come of these examples of reversal at both supply and demand areas.