- Earnings provide the catalyst NASDAQ and SP500 sought as they break through the February peak.
- Consumer Confidence rebounds after a March decline even as home prices continue to fall.
- More evidence the feds are a major cause of oil price increases: EPA wants to close the Permian Basin oil production for a lizard.
- Now that SP500, NASDAQ broke the highs, can they hold them?

MARKET SUMMARY

Earnings give NASDAQ, SP500 the nod to make the upside breakout.

Stocks got their catalyst in the form of good earnings from F, UPS, and MMM. CMI reported a 66% increase in Chinese exports and a 39% increase in Brazilian exports. With those kinds of numbers, the heavyweight SP500 had the catalyst it needed to clear that February high and break out from the inverted head and shoulders base. Typically we like to see these at the bottom of a selloff. We saw that in the summer of 2010. When an index refuses to give up gains and wants to rest and put more gains on the table, it does not matter what kind of pattern you have as long as it is an accumulation pattern. That is exactly what SP500 showed, and it made the breakout on Tuesday on some better (though not huge) volume.

NASDAQ joined the party as well. It had formed the same kind of inverted head and shoulders pattern. It gapped out of the pattern on Tuesday, moving past its February high as well. Its volume was more respectable, topping 2B shares. It moved above average as the techs made the move, joining DJ30 in the breakout over the February highs. The Dow moved to a new rally high. With its heavy industrial segments, it has become one of the de facto leaders in the market.

SP600 posted a nice 1.27% gain. It is ready to challenge its prior high, which is in early April. The small caps led the move higher from March into early April, making a break to its all-time high faster than the rest of the market. Indeed, it hit an all-time high while the other indices have not. It is not far behind, however, trying to break through once more and join its large-cap brethren higher up the food chain.

The action started higher with a gap. It rallied nicely, moving through that important level on SP500 at 1344. It tested it, coming back down to 1344 and again later in the day at 1346, holding both times. A logical double top. Now that it has made the break, can the break be held? It is not bad to have the Dow already in the bank as holding its break the rallying higher. That will tend to draw SP500 and NASDAQ along with it. Moreover, if the small cap SP600 can move to a new high as well, that will tend to draw the others with it as we have the market leaders pulling the rest of the train along.

It was not a bad session. There were decent moves. NASDAQ, +0.77%; SP500, +0.9%; Dow, +0.93%; SP600, +1.27%; SOX, +1.59%; NASDAQ 100, +0.52%. The large cap techs struggled a bit, but they moved higher nonetheless. Note that they were unable to break to a new high   at least a new rally high that held on the close. They slipped back below 2400, and they are hanging in there. A good move to the upside, but they could act as a drag to the rest of the indices. Very interesting action among the large-cap techs.

WEDNESDAY

Earnings will be important, no doubt. AMZN reported earnings after hours. It looked quite good on the rally to the day, but it did have a tough day. Indeed, we took more of our gain off the table ahead of the earnings. After hours it reported a miss and was down initially. Notice that it came back quite nicely. That was a nice twist to the day. From what I heard in snippets, their outlook was good, so that heartened investors and they came back. Maybe the earnings move continues because we keep getting very nice results from some solid market leaders.

The big news tomorrow will be the FOMC meeting. It is not the FOMC decision itself on rates, but it will be the press conference afterward given by the Federal Reserve Chairman. It is the first one in 90-odd years. You will note that the rate decision has been moved up in the day to accommodate the Federal Reserve Chairman’s conference after the announcement. He wants to come out and tell us that everything is just fine. He wants to tell us that he will not make the mistakes that were made in the Great Depression.

Of course he is making the mistakes that were made back in the 1970′s and early 80′s. That was the big mistake where they monetized the oil price shocks and we got stagflation. If we have any kind of pick up in the utilization of the money that is out in the system, inflation will spike. We will have some problems at that point, but we could already have them with the way gasoline prices are now. We will have to see. Consumers are supposedly still spending. If they do, that is good for the economy.

There is not much else out there. We will have the durable orders out and crude inventories. Important, but crude is moving technically right now. It may pull back a bit more before it moves higher. Inventories may swing a bit one way or the other, but it will not make a major difference. Waiting on the Fed will be one of the big features of Wednesday. The other will be, of course, looking at what SP500 and NASDAQ do with their breaks over the February peaks.

Again, this is not necessarily the time to be buying in. As noted, we were taking gains today as the indices broke above those levels. A lot of our plays were hitting targets   either targets they had hit before, new targets we raised them to, or just the first targets of the play. These were logical levels to take some gain off of the table. That is not just because the indices broke above their February high, but because they hit logical resistance levels or extension levels where they will probably show some weakness afterward. You would almost expect that from the indices as well.

Will we buy a lot? Not really, but we will not stop looking for potential buys. They are out there. We will continue to look into some because they break higher in waves. As we get our opportunities, we can move into those. There may not be a lot of them moving higher right now after this move   or at least moving in good position   but we will get some. Then when we get a pullback, we will have more.

We have made some great money. We do not necessarily want to run out and start buying just because we sold some positions. Wait, be patient, and let them come to you. If you wait, they will come in a market filled with liquidity by the Fed. It may be a bit slow tomorrow ahead of the Fed   maybe or maybe not. This market is being driven by money and earnings, so we will see how it rallies. If it goes higher, that is great; we can take some more gain off the table and just wait for positions to set up.

It does not look like it will turn over right now. Just like in Field of Dreams, however, you always have to watch for in your ear. Be careful. As soon as you make a breakout and everyone thinks all is clear, that is when you can get a reversal. We will be weary of that. We have good stop points and have taken some good gain off the table. We are in good shape to face whatever the market throws at us.