Trend day up in Stock Indexes

The stock indexes gapped higher today and continued in rally mode all day. A higher bid for Bear Stearns seemed to kick off the rally, and then a better than expected housing report added to the directional tone throughout the day. The Nasdaq had a larger percentage gain. I’ve been somewhat expecting a rally, as I’ve posted here recently, but with much caution. One negative that I still see is the very negative advance/decline line, as you can see in the chart above. Nearly every major bottom seems to be accompanied by a divergence in the advance/decline line. Some of my oscillators based on the a/d line did put in some minor divergences, but it is more meaningful if the actual line shows divergences, as it did on the way down with negative divergences.
spy0324.pngThe chart of the S&P etf to the left shows how choppy the daily price swings have been. Also, the blue lines, which is one of my main trend indication filters, crossed up today. You’ll notice that it also crossed up briefly in the middle of the chart. It is far from infallible, but it generally keeps you on the right side of the trend, as most moving averages will do, but with some lag. Of some concern on this chart is the way that volume rose on the decline, and then has been generally falling off during this rally. Bulls might argue that there was a selling climax, at least regarding volume, on the day where I drew the purple line. It was a high volume day, but the price action was not climatic. Price was down on that day, but it didn’t probe into low territory and then reject those prices. It was still trading in a wide swinging range, so I don’t think that can be called a selling climax. Since that day the volume has been shrinking, but on the one down day on the third bar back volume rose slightly and then fell back on the next two up days. I know that bulls will attribute this to the Easter holiday, but the day before was quad witching, which you would think would have very high volume. Thursday wasn’t like Christmas eve, and there wasn’t an early close. Also, momentum is getting into the high area where a pullback could occur, although it is still increasing and can continue increasing in the overbought area, especially since we are coming off an oversold condition on the longer time-frames.
In other markets, the dollar had a small follow-through. Gold sold off if you look at the pit sessions. Grains rallied back after being hammered in the previous sessions.

For those who still trade the CCI and didn’t catch my post yesterday, you really need to scroll down and click on that link. You need to know what goes on there and why the old and most respected member of that chat room has called it quits. I know, by some emails I’ve received, that there are still some traders that believe there are profits to be had following that methodology. Buy before you flush any more money down the drain, please go read what is being said on the link from the post yesterday. There are many posts and comments, but the most telling is the one posted on the traders paradise site on the Ides of March (the 15th for those not into Shakespeare). Also, do read the comments that are attached to that post. There is also related information on mplay’s site. I have no grudge against that room. I’m just putting this out there so people can read what’s being said so they can make their own decision. Oh heck, here’s the trader’s paradise site link again in case you don’t want to scroll down. But do go down to the post on the 15th on that link, as well as one of the newer posts by moderator Dan. If you’ve read this far and don’t know what I’m talking about, don’t worry. Just ignore this last section. It is relating to a certain chat room that some reading this blog have been associated with.

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