The Trader Daily

 | Apr 10, 2014 | 7:30 AM EDT  | Comments
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Stock quotes in this article:

FB

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celg

,

aapl

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pcln

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twtr

,

spy

,

DIA

,

QQQ

,

IWM

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gm

Few things please investors more than dovish comments from the Federal Reserve. Whether you interpreted Wednesday's FOMC minutes to be bullish or not, the market voted by hitting offers and pushing anything not nailed down to multi-day highs. Stocks, bonds, or commodities, it made little difference. Nearly everything was bought in a relatively aggressive manner.

We found buyers in the 10-Yr T-note pits, the gold and silver pits, and throughout the equity complex. Stocks like FaceBook (FB), Celgene (CELG), Apple (AAPL) and Priceline (PCLN) all recaptured several days of losses. If there was one obvious disappointment on my screen, it was Twitter (TWTR). Buyers, for whatever reason, remain hesitant to jump headfirst back into that stock.

Now that we've established that nearly everything publicly traded rallied (if only for a little while) on the back of Wednesday's FOMC minutes, are we to assume that the major indices are destined for new 2014 highs? In a word: No.

As you review the daily charts of the major indices below, you'll notice that the SPDR S&P 500 (SPY) and SPDR Dow Jones Industrial Average (DIA) remain in balance, while the PowerShares QQQ Trust (QQQ) and the iShares Russell 2000 (IWM) are still stuck in short-term downtrends.

In Wednesday's report I highlighted the bullish divergence in the five period RSI that existed in the QQQ and IWM. But as discussed, that is a very short-term indicator. While all the indices may have additional upside in them, I see no reason to change my view that the IWM and QQQ are better sales on rips, than buys on dips. As far as the SPY and DIA are concerned, they are in balance, and should be faded near their edges (both long and short).

Daily Chart of Major Indices
eSignal

The direction of Thursday's SPY trading will likely hinge on which side of $187.37 the ETF is trading. Keeping in mind that the SPY is still trading in the same balance range we've been discussing for several weeks. The bottom line is that a sustained move above $187.37 encourages buyers to press their positions toward $187.95 to $188.10 and $188.80. The notably less bullish scenario involves rejection from $187.37, and a slide back down through $186.55 and toward $186.18.

A quick reminder on balance. The SPY failed to sustain a trade above balance on Friday and was bullishly rejected from the bottom of balance on Tuesday. It closed in the middle of our balance range on Wednesday. Considering these actions, it should go without saying that entering swing longs against $187 carries with it notably more risk than longs entered closer to $184. The bears don't catch a tail wind until bids dry up beneath $186.18.

5-Minute Volume Profile Es
eSignal

 

Between the widespread love that many value oriented folks have for General Motors (GM), and the seemingly weekly recalls highlighted by Phil LeBeau on CNBC, it seems this company is in the news on a daily basis. Setting aside the fact that the least reliable truck I ever owned was a Chevy Blazer, I simply can't find much to like about GM's chart. If one were hell bent on being optimistic, one might point to support at 33.55 and the multi-month bullish divergence in the RSI. Beyond that, however, and I don't see much to smile about.

Long-biased technical traders would be better off waiting for the stock to regain its footing above the 50-day moving average (at a bare minimum). And if one were stalking the breakdown for a short trade, I'd remind you that selling short anything in the hole (on weakness) in this market has resulted in frequent and painful heartburn. I'd wait for a weekly close beneath $33.55 before assuming support had been broken.

 

Daily GM Chart
eSignal

 

Any trading or volume profile-related questions can be posted in the comments section below, emailed to me at parkcityyeti@gmail.com or posted to my twitter feed @ByrneRWS

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