Testy Tuesday Morning

Two weeks ago we looked at the Big Chart, today is going to be a good day to review our positions.

We've made some progress and moved to just under the 200 DMA's on the Dow, the S&P, the Nasdaq and the SOX.  The Russell is still dragging behind but the NYSE has already punched through by 130 points at 9,602 and I am hoping we are finally going to be able to draw up a new set of goals but it's amazing to look back at those 25% "terror" levels and think of how close we came in January, when we first started tracking this set of numbers, looking to get to exactly where we are now:

Despite some nice gains, the ONLY boxes to change on the whole chart is the 200 DMA on the Hang Seng, which turned red on the 1,000-point dip of the past 2 weeks, the BSE, which fell below the 200 DMA as well and the NYSE, which gave us a green 200 dma on it's move (commodity driven).  Other than that, we remain range-bound in the very wide area between our comfort zone ("Feeling Better") levels and the 200 DMA breakouts we need to confirm a strengthening market.

I've been growling for quite some time now that I want to see a real breakout before we turn bullish and, unfortunately, we could be in for a textbook reversal as we do not have the catalysts we need (falling oil, rising dollar, aid to homeowners) to push us out of a range we've been tracking since January 21st. 

Note on the Dow that we see little resistance to the downside between 13,044 and 11,808.  At this point, I would expect the rising 50 DMA at 12,600 to hold us up just a bit but, below that, I will turn very, very bearish indeed and no amount of commodity pumping is going to hold up the markets if we turn down there.  The pre-market today (8:30)shows the Dow down about 100 points as oil tops $127.50 and the PPI shows signs of inflation (even in the core!) – these are all things we are well positioned for in our virtual portfolios, including the fact that we've cashed out our $10KP, DTP and Stocks virtual portfolios with perfect timing last week and welcome the chance to do a little bargain hunting!

Asia was ahead of the game this morning with the Hang Seng dropping 572, just about at the 2.5% rule, while the Nikkei gave up 1% with a 109-point fall (reflected in the Big Chart).  Apparently, it also took Asian investors by surprise that high oil prices may be bad for the market so thank goodness for Eli Harari (SNDK's CEO) or we could have gone on for year's without knowing this (end extreme sarcasm font).  I mean really people, I've been saying it for months but this guy says "With the oil prices hitting $127 a barrel, discretionary spending is going to be affected" and the markets start tumbling…

China is struggling to find shelter for 5M people who were displaced by the earthquake and it remains to be seen how widespread the economic disruption is over there.  The region is still suffering aftershocks and about 40,000 people are confirmed dead so far, not exactly rally conditions…

Europe is down about 1.5% as investors there were also shocked to discover that high oil prices may be inflationary.  Rising food prices are leading to a rethinking of the $75Bn worth of farm subsidies handed out by the EU as France wants a system that is tied to production while the UK wants to shift more money to rural farmers and away from agri-conglomerates, who are taking in record profits as prices skyrocket.

As I mentioned, our own PPI shows the most core inflation since Bush the first back in 1991, when the country finally got fed up with that Bozo but it only took us 10 years to forget all that and elect the son and we'll see if the lesson sticks this time or if we're voting for Jenna in 2016.  HD gave a lousy report, with net income off 66% and SPLS held on but gave a very cautious outlook.

Fed Gov Kohn gave the mandatory "Do not panic, all is well" speech this morning, which seems pretty ridiculous with oil racing up to $130.   "In the near term," he said, "consumer spending should see some lift from the tax rebates households receive as part of the fiscal stimulus package. He cited economic studies suggesting a "noticeable" share of households "respond reasonably quickly" to such stimulus measures."  I don't know about you but this kind of total BS from our government officials is exactly the sort of thing that does make me panic!

I'll be very happy if we can hold last week's lows, this will give us a much needed bottom test that we really could have used last week but look out below if we fail it!