Monday, March 22, 2010

Morning Briefing for March 22nd: Continuing the Correction

9:26 AM CT - Note the breakout move above the overnight highs and the key Friday low level mentioned below. NYSE TICK turned meaningfully positive and, despite overnight weakness, we've yet to get a significant negative TICK reading on the day. With bears trapped, we are now trading back into the range prior to Friday's break: clearly an indication that bulls are using short-term weakness as a reason to buy this market.

Note how we opened overnight trading at Friday's lows, on the heels of passage of controversial health care legislation. Since that time, attempts to move back into Friday's trading range have not gained traction. As long as we cannot sustain buying interest above Friday's lows, we should see a continuation of the short-term correction mentioned in the recent indicator post. Supporting that outlook is overnight weakness among other risk assets, including crude oil, AUD and EUR vs. USD, and gold. I'll be watching the distribution of NYSE TICK in early trade; also key to watch is the relative strength/weakness of small cap stocks. The small caps had been leaders during the market rise and then lagged on Friday.