Saturday, April 24, 2010

Divergence Expands

The usual suspects led the pump on Friday after the expected fade at the open. SMH and the Qs were front and center and by the end of the day all the lagers had joined in the surge.
The XLE broke out of the upper LR30 channel closing on the high of the daily bar. With summer driving season only weeks away this move was not unexpected and additional upside momentum is likely.
I mentioned the need for caution on Thursday when the 4V (volatility indices) all closed in the same direction as the majors (SPY, QS, IWM). I suggested that when all symbols are green the market typically favors the 4Vs signal =market bearish. What we got was a fade at the open that lasted 30 minutes (20 0n the NYAD) before buyers stepped in and pushed the markets to new highs on moderate volume.
Once again Friday's VXN Strategy Matrix closed 18/18 = neutral, while the SPY and Qs each closed +25,-11 = bullish 2:1.
Just in case you though GS was hurting as a result of the SEC charges, they aren't. The WSJ noted that GS's new 43 story 2.1 million square foot headquarters in downtown Manhattan cost $ 2.1 billion to construct. Among other features, it contains 6 trading floors, each larger than a football field and a 54,000 square foot gym to help those frenzied traders take the edge off.
Below is a 4 square chart of the VIX/SPY and the VXN/Qs. The interesting thing here is that while the SPY and Qs continue to rise, VIX and VXN are also upslope . . not a lot, but not downslope as you would expect.

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