Equity

As many commodity and equity futures markets bottomed in late February and early March, many of these markets also consolidated and gave sell signals over the past week. By the later half of the week, most of these markets returned to their upward movement. The equity futures markets were no exception to these quick signal shifts.

After several weeks of rallying, the DJ (basis June) finally consolidated between March 27th and 30th by giving back almost 500 points. On March 30 we received a signal to go short. But it was a very short lived signal as March 30th was a bottom into the next up leg. On April 2nd we received a signal for the next leg up in what some are calling this rally as a bear market rally (dead cat bounce).  Some are saying its the process of forming a bottom. Of course differing opinions is what naturally causes price action in a market. Time will tell which it really is. However signs are beginning to appear that the economy may be seeking some sort of stabilizing process. But we will still need several months of data to determine if this is true.

Beware that the faster the market moves up without some consolidation, the greater the potential for a sharper consolidation. Or if unexpected bad news should arrive,  there is potential for equities to make a quick, sharp, downward move.

When the market first began to rally in March we had an initial resistance of 7539. This area has now become a support level. If this rally holds our next resistance level is 8300 to 8600.

The S&P 500 (basis June) has moved in tandem with the DJ contract. We initially received a buy signal on March 10th and had a major resistance level at 778. On March 18th the market surpassed this level and pushed a little over 800. The market then consolidated to sideways action until April 2nd. However the S&P 500 just like many other futures markets, gave a very short term sell signal on March 30th. We had 836 as our next resistance level. On April 2nd the market broke out of the sideways action and we received the next buy signal.  The market closed just barley above 836 on April 3rd.

Our next major resistance level is 894 to 905.  Its possible it could be reached sometime this week. As the market is technically showing signs of overbought, we could see more consolidation after this level is reached as these prices have not been seen since early January. We have an initial support in the 805 to 825 area. If it breaks that area we have major support in the 780 area.

A consolidation of the equity markets could coincide with the release of the earnings reports. Put on your seat belt folks, this could be a bumpy ride.