Stock Market Direction: Technical Take

The S&P futures have rallied about 50 handles off the low only 5 trading days ago and there is a ton of technical data to help us paint the picture of the next major move.  My opinion is that the bullish side of the equation is more heavily weighted, but let’s see what the facts tell us.

Fact 1: The S&P futures reached a very oversold level on 3/16/11 coinciding with the lows of the recent pullback.  Bullish

Fact 2: Any positive day in the next two trading days will give the futures a positive line cross on the MACD indicator. Bullish

Fact 3: The S&P futures have used the 50 day SMA as resistance on this last move higher and were unable to penetrate up through.  Bearish

Fact 4: The 20 day SMA is very close to moving down through the 50 day SMA, sometimes known as the death cross.  Bearish

Fact 5: The last two days had a tightening intraday range on the S&P futures.  Bullish

The score is 3-2 in favour of bullish, but clearly a grain of salt needs to be taken on each of these indicators as traders are still in wait and see mode.

A couple of “tells” that I would like to see in this market:

1) Commodity stocks take the lead again.  We have seen nice leadership out of these sectors and with banks firming the last few days and tech struggling to hang in there, this sector could lead us higher.  The Japan rebuilding story is out there and it would not surprise me to see steel and agricultural names start a move higher.

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