NASDAQ BOUNCES SOLIDLY AT 200 DMA -- SOME DRILLERS ROCK, OTHER DRILLERS SINK -- GOLD HOLDS 1300 -- COPPER GAPS DOWN OUT OF CONSOLIDATION -- TWITTER FINALLY MAKES A REVERSAL CANDLE

NASDAQ BOUNCES SOLIDLY AT 200 DMA ... We need to spend some time here on the Nasdaq. The Nasdaq Composite bounced off the 200 DMA. After falling almost 10% exactly, the bounce off the lows was a full 2.3% reversal. For many reasons, this is a strong place to expect the market to bounce. A 10% pullback is bigger than anything in 2013. This was low enough to take out the February 5 low by 20 points. Any stops that were set just below the February low were triggered and then the market ripped to the upside. Anybody going short on the break of the lows would be forced to cover. The volume has been piling in for the first quarter. We can clearly see the volume change since January 1. You can see the zigzag indicator with the parameter set to 10%.

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Chart 1

Staying with Chart 1, the MACD has dipped down to a level where momentum usually reverses. I have put the PPO at the bottom of the chart and it still shows the momentum to be at an extreme level as well. The PPO measures the percentage change in the price and neutralizes the effect of higher prices in the $COMPQ. The MACD is a price based measurement so higher prices in the $COMPQ will create bigger swings in the MACD. Notice how the ATR is at an extreme it has not been at for over 2 years.

The 50 DMA is almost 300 points above the lows of today as shown in Chart 2. Now that the 50 DMA is flat, how the market behaves up at that level will be critical. The support level shown in red for the March 6th head/shoulders topping pattern sits at 4250, which was also resistance in January. If this market is going to stall, a firm retest of the highs is in order before we really break down. When we near the 50 DMA and the 4250 level, how price responds to those levels will be critical. The lows today reached back to levels we saw back at the October month end as shown with the yellow dotted line.

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Chart 2

SOME DRILLERS ROCK, OTHER DRILLERS SINK... Yesterday, the Oil Equipment & Services sector took over #1 spot in the energy sector. We can see on Chart 3 the Oil Services industry group testing new highs. The industry group is really divided as shown in Chart 4. Offshore drillers like Transocean and Diamond offshore are behaving terribly with SCTR's showing those stocks in the bottom 12% of the market. The SCTRs are in the first numerical column. On the other end of the scale is HP, NBR, BHI and SLB in the top 15% of the technical strength in the market.

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Chart 3

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Chart 4

GOLD HOLDS 1300... I have used the GLD in chart 5 so I have the SCTR on the chart. GLD is still performing weaker than most. If the Mario Draghi's of the world want the Euro to go lower, it will be hard for GLD to climb when the $USD will also be moving up. GLD needs to hold here and not follow $COPPER lower. This chart is susceptible to sharp moves down here. I keep thinking about getting bullish on gold but it has not been able to improve relative strength over the $SPX. I like the building of a head/shoulders base. I like the MACD up near the zero line. Being at this level on the MACD is often an important decision time for a stock. The momentum is back to zero. We'll have to watch closely. I like the recent spike on the SCTR telling me there is significant interest in the group.

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Chart 5

COPPER GAPS DOWN OUT OF CONSOLIDATION... After $COPPER lost the $3.15 level, it fell almost 10% below the support level. After a move up with lots of overlapping candles, copper fell out of the channel today losing almost 2%. If copper continues lower, I would not be surprised to see Gold follow. The coming weeks will be very interesting. $COPPER closed back under $3.00.

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Chart 6

TWITTER FINALLY MAKES A REVERSAL CANDLE... Well, the tweet on Twitter today was hugely bullish. After dropping to support on Friday, the stock made a slightly higher candle yesterday. This morning it opened up higher, tested yesterdays low and launched from 1 EST to 4 PM EST. Why would TWTR bounce here? Well, the support level looks like a typical place to bounce from. It was also creating what is termed a bullish wedge. While the stock is dropping, the trend lines are converging. Eventually, TWTR either drops quickly to create a parallel lower channel line under the prices or it breaks out to the upside. The 2-day bounce off the low and having TWTR hold as the Nasdaq dropped sharply intraday was very bullish. Once it started to move higher, the short positions were covering very quickly.

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Chart 7

It would appear to me that the market has made an interim low here. We'll see if the upward bias can grab control.
I made a rookie mistake yesterday and pushed Arthur's well written article on the MTA out. Here is a link if you missed it.
Arthurs MTA Review
Good trading,
Greg Schnell, CMT