Z W E I G, The Zweig Finally Goes Overbought.. an Event We Have Been Waiting for
Around the Globe
Europe as of 6:01am EDT
Today's Economic News:
Wow! Look at the news from the UK. Great unemployment numbers and another drop in the unemployment rate. Other than that, not a lot happening today as we wait for the USA markets to open. Eyes will be on the housing market which has been touted as a decent recovery story, but yesterday's numbers disappointed so watch 9:00am for the House Price Index, we would like to see price inflation in housing continue as it is a great way to inflate the beleaguered US middle class.
10am is the consumer confidence numbers.
Quote of the Day:
For Sweetest things turn sourest by their deeds; Lilies that fester smell far worse than weeds.
Current Breadth Readings: (click here to see all our breadth charts)
ZWEIG! It is done. Complete … well, maybe there will be a follow-through day, but our drought of Zweig overbought values is over and for us marks the beginning of the battle for the top, much as it was declared in November last year for the bottom when we went oversold. We will switch high weighting off of the trenders that have faithfully remained bullish and begin to consider the markets as range-bound and looking for that first 1%+ pullback to define the downside range and we still need to define the upside, which should be tested a time or two before the wheels come off for a more aggressive downside.
ES SP500 Futures Comments:
Our 1489 from yesterday got squeezed through the cash close yesterday and we put in a 1491.50 high of the March contract, amazing. That is the new high watermark, with the globex session moving down to the pivot area here at 1484. We still think 1% pullbacks need to be tested, that is 2x what we have been doing so for that reason or first full-pullback buy area now sits at 1476 along with the new high.
The Zweig overbought puts us into battle of the top mode as we watch the top begin to get drawn. Topping can be a long painful process of pullbacks and retries so February could get a little bumpy. For those that want higher, that move into the close is further evidence that there are plenty of traders willing to short at these levels — the bulls need those traders.
We thought yesterday that handing off the piton to Asia and Europe might produce some more upside, it has not, just a decent hold about 0.5% back. There is not much in the way of economic news so we wait and see what will become of today as far as follow-through. A third green day would certainly surprise but it is not out of the question, but we think just a peek above 1491.50 is all that can be mustered.
US Dollar DX Futures Comments:
If there is something fundamentally going on here in the US economy and it is stronger then that of our European brethren / sistren we should see this pattern now reverse to the upside. That delta is hard to figure and evidently so for the traders also as we remain trapped in a range even as the equity markets make new highs. A kind of neutral holding pattern. We have a slight bearish prejudice on the dollar as we think Europe is in a stronger recovery and had worse publicity . So we think 79.5 before 81, but our resolve is not strong and we could claim tomorrow we have been dollar bulls all along.
TLT Twenty Year Bond ETF Comments:
TLT lies in wait and now we like it better to the upside. Interesting that it is not testing the 118 area even as the market moves to new highs. We have raised the lid on TLT now, looking for prints of 124 to the upside and 118 defines the downside range.
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