Dr. Duke's Blog

The markets opened up under continued concerns about Europe's financial problems, but soon turned positive and traded up most of the day; shortly before the close, much of the earlier gains were given back. RUT ran as high as $704 before turning back to close at $695, a gain of $6 for the day. SPX traded as high as $1170 but then gave it all back and then some to close at $1156, a loss of $4 on the day. Gold hit new highs for 2010 at $1220, a continuing response to the possibilities of financial problems in Europe spreading across the globe. Trading volume was down or flat today: down 19% on the NYSE and essentially flat on the NASDAQ. The S&P 500 stocks traded about 4.8 billion shares, just above the 50 day moving average.

Take a look at the RUT chart; I see a strong up move through most of February, then a brief period of consolidation before another strong push up for the first couple of weeks in March. That was followed by consolidation in the range of $675 - $690. Then we had a strong run upward in April, followed by the correction of the past couple of weeks. Therefore, that consolidation range $675 - $690 in late March is significant. I would see a strong close for RUT above that area as a bullish sign. And that appeared to be in the works today, but then RUT was pulled back into that consolidation range. SPX has traded in a similar pattern, but was pulled back even more strongly than RUT today. All of this suggests a cautious, sideways market for now; I think the unbridled enthusiasm that drove the markets in March has been shaken.

In summary, I think this market is rather fragile at this point in time; the wrong news report out of Europe could send it back down in a hurry. So be careful out there; be sure your stops are in place. But, in the absence of significant news, we may just chop up and down similar to what we saw today.