Canada’s TSX 60 index found support at 700. 13-Week Twiggs Money Flow, holding above zero, continues to indicate buying pressure. Recovery above 720 would signal a primary advance to 790*.
* Target calculation: 720 + ( 720 – 650 ) = 790
US markets pause in anticipation of March sell-off
US markets are anticipating a quarter-end sell-off in the second half of March, driven by the tax season and Spring-cleaning of fund balance sheets. The S&P 500 Index continues to test resistance at 1370. Breakout would signal the start of another primary advance, with a target of 1450*. Reversal below 1350, however, would warn of a correction, testing support at 1300 and possibly 1250.
* Target calculation: 1300 + ( 1300 – 1150 ) = 1450
The Nasdaq 100 reached its initial target of 2650 and is due for a correction. Bearish divergence on 21-day Twiggs Money Flow indicates medium-term selling pressure. Expect retracement to test support at 2400.
* Target calculation: 2400 + ( 2400 – 2150 ) = 2650
Dow Jones Transport Index has retraced over several weeks to test support at 5000. Respect would signal another attempt at 5600, while failure would indicate that momentum is slowing.
* Target calculation: 5000 + ( 6000 – 4500 ) = 5500
Aussie Dollar, Canadian Loonie and commodities
The CRB Commodities Index retreated from resistance at 325. Failure of medium-term support at 310 would signal a test of primary support at 295. Respect of the zero line (from below) by 63-day Twiggs Momentum indicates continuation of the primary down-trend.
Lower commodity prices weakened the Aussie Dollar, with a fall below $1.06 warning of a correction to the long-term (green) rising trendline. 63-Day Twiggs Momentum remains strong, however, and recovery above $1.08 would confirm a primary up-trend.
Canada’s Loonie was helped by rising crude prices and recovery above $1.01 would confirm the primary advance to $1.06*.
* Target calculation: 1.01 + ( 1.01 – 0.96 ) = 1.06
Fed Weighs ‘Sterilized’ Bond Buying if It Acts – WSJ.com
JON HILSENRATH: Federal Reserve officials are considering a new type of bond-buying program designed to subdue worries about future inflation if they decide to take new steps to boost the economy in the months ahead. Under the new approach, the Fed would print new money to buy long-term mortgage or Treasury bonds but effectively tie up that money by borrowing it back for short periods at low rates. The aim of such an approach would be to relieve anxieties that money printing could fuel inflation later, a fear widely expressed by critics of the Fed’s previous efforts to aid the recovery.
Transactions like those under the third scenario are called “reverse repos.” A related program called “term deposits” also ties up short-term money held by banks. The effect of this approach is the same as Operation Twist: The Fed would hold more long-term bonds and investors and banks would get more short-term holdings in exchange.
via Fed Weighs ‘Sterilized’ Bond Buying if It Acts – WSJ.com.
US Momentum stocks to watch
I set up a stock screen for strong Momentum stocks on Incredible Charts Shared tab (#49419) to run every weekend. Here is a list of the most promising:
- Arctic Cat [ACAT]
![Arctic Cat [ACAT]](https://i0.wp.com/www.incrediblecharts.com/images/2012/2012-03-06-acat-us.png?w=1140&ssl=1)
- Cheniere Energy [LNG]
- DXP Enterprises [DXPE]
![DXP Enterprises [DXPE]](https://i0.wp.com/www.incrediblecharts.com/images/2012/2012-03-06-dxpe-us.png?w=1140&ssl=1)
- Healthstream [HSTM]
![Healthstream [HSTM]](https://i0.wp.com/www.incrediblecharts.com/images/2012/2012-03-06-hstm-us.png?w=1140&ssl=1)
- Lion’s Gate Entertainment [LGF]
- Liz Claiborne [LIZ]
- Pharmacyclics [PCYC]
- Regeneron Pharm [REGN]
- Select Comfort [SCSS]
- Sourcefire [FIRE]
- United Rentals [URI]
- Vocaltec Comm [CALL]
Bear in mind that the market is starting a correction and suitable entry opportunities may only present themselves in 3 to 6 weeks, but I have added them to my watchlist and will re-visit weekly.
S&P 500 retreats
Jeffrey Hirsch of the Stock Trader’s Almanac predicted that we would see an adjustment in the second half of the month. It looks like it may have started a few days early.
Failure of short-term support at 1350 on the S&P 500 index indicates retracement to test medium-term support at 1300. Declining 21-day Twiggs Money Flow indicates medium-term selling pressure but this is not mirrored on the long-term (13-week) indicator. Respect of support at 1300 would confirm the primary up-trend — presenting a buying opportunity. Target for the advance is 1450*.
* Target calculation: 1300 + ( 1300 – 1150 ) = 1450
Canada: TSX 60
Canada’s TSX60 index is headed for another test of support at 700. Respect of support would present a buying opportunity, with confirmation from recovery above 720.
* Target calculation: 720 + ( 720 – 650 ) = 790
Trader’s Almanac’s Hirsh says “more of the same”
Jeffrey Hirsch, president of the Hirsch Organization and editor of the “Stock Trader’s Almanac,” sees “more of the same” for U.S. stocks markets, with solid performance for the year. But first expect an adjustment (of 5 to 15 percent) starting in the second half of March because of:
- tax season;
- end of quarter sell-off; and
- triple witching.
That should present buying opportunities for investors.
The outlook for 2013 is not as good. The first two years of a new presidential term are when bear markets are prevalent. They try to do the hard stuff in the first two years and then prime the pump in the two years leading up to the next election.
Morgan Stanley Still Expects QE3 This Year – WSJ
“For some time, our call has been that the Federal Reserve will undertake additional balance-sheet action in the first half of 2012,” writes Vincent Reinhart, an economist with the bank and a former top-level Fed staffer.
He argues it’s most likely the Fed will act to expand its balance sheet via Treasury and mortgage bond buying — in market parlance, QE3 — at either the April or June Federal Open Market Committee, and that the ultimate size of the program could tack on $500 billion to $700 billion onto what is currently a $2.9 trillion balance sheet. There’s also a chance they will put in place a modified version of the current effort to sell short-dated bonds to buy longer-dated securities.
Why act? Reinhart says the second half of the year will box the Fed in politically. Officials won’t wish to be seen starting a high-profile action in the thick of the presidential campaign. Also, he reckons growth will still be too weak, and inflation will be falling short of the Fed’s 2% target.
via Morgan Stanley Still Expects QE3 This Year – Real Time Economics – WSJ.
Economic Data Shows Signs of a Slowdown – NYTimes.com
WASHINGTON (Reuters) — Manufacturing slowed in February and consumer spending was flat for a third straight month in January, new economic data showed on Thursday, suggesting the economy lost more momentum than expected early this year.
……the spending and factory data cut into the optimism generated by a recent decline in the unemployment rate, and suggested rising energy prices were taking a toll.