Bullish price action but 1 major sell signal

The major
indexes were able to turn in an impressive performance
last week as both the Dow
and S&P 500 posted technical breakouts on Tuesday, and seemed to set a generally
positive tone for the remainder of the week. During the first 3 sessions of the
week, money flowed back into higher-beta Tech names. However, this trend did
not last due to sharp declines in Chip shares on Thursday. Interest
rate-sensitive shares were especially strong, thanks to the combination of a
drop in the 10-year yield and speculation that the Fed would stop raising rates
in April.

Just when it appeared as if equities were on the ropes last week, dovish
comments the Fed seemed to bail stocks out. It also helped that inflation data
was tame, Retail Sales were soft, and Housing Starts confirmed a continued
slowdown in the real estate market. This allowed the 10-year yield to drop
significantly and created speculation that the Fed may be less likely to
continue raising interest rates aggressively. As such, talk of a Goldilocks
economy resurfaced.

Given how quickly the S&P 500 was able to rebound from the previous week’s
setback and record new highs for the year, it’s difficult to ignore a bullish
event like that. Also, both the Dow Jones Industrials and Transports were also
able to post new highs for the year in concert. This was classic Dow Theory
bullish behavior. However, on the other side of the fence, bigger commercial
players in the SPoos are at a 3-year high in their net short positions, and
Steve Briese, who wrote the book on Commitments of Traders interpretation, calls
that a major sell signal.

Daily Pivots for 3-20-06

Symbol Pivot R1 R2 R3 S1 S2 S3
INDU 11274.61 11295.11 11310.56 11331.06 11259.16 11238.66 11223.21
SPX 1307.45 1309.59 1311.92 1314.06 1305.12 1302.98 1300.65
ES M6 1317.67 1320.58 1323.67 1326.58 1314.58 1311.67 1308.58
SP M6 1317.80 1320.10 1322.80 1325.10 1315.10 1312.80 1310.10
YM M6 11350.00 11381.00 11401.00 11432.00 11330.00 11299.00 11279.00
BKX 108.20 108.39 108.55 108.74 108.04 107.85 107.69
SOX 495.15 501.00 505.62 511.47 490.53 484.68 480.06

Please feel free to email me with any questions
you might have, and have a great trading week!

Chris Curran


Chris Curran started his trading career at the
age of 22 with a national brokerage firm. He combines fundamental and technical
analysis to get the big picture on the market. Chris has been trading for 15
years, starting full time in 1997, and has never had a losing year as a
full-time trader.