Tuesday Curtain Raiser

Earlier today I talked about the slide in the XBD. Here it is again, with a view value added items.


The upper chart is a ratio of the XBD to the S&P 500 and look what's happened: an uptrend of better than 5 months has clearly been broken over the last week. I'd say this would be an important red flag to keep an eye on where the overall health of the stock market is concerned. Where, afterall, would the stock market bull be without the brokers over the last 3 years? The brokers have been among the strongest of leaders.


John Murphy over at Stockcharts.com sent an email late this afternoon noting that a big weekly MACD divergence is only in the process of forming...


We'll have to wait to see how things pain out this week where weekly MACD is concerned, but already, weekly RSI is looking shabbyl. It's just another interesting piece of the puzzle that has featured an overall resiliant market with a capital-R, yet signs continue to pop up of trouble on the horizon.

Tuesday is going to feature some important economic data. At 8:30 ET we get January Durable Goods Orders - forecast by economists to fall by 3%. Ex-transportation will be especially important since a drop in aircraft orders at Boeing is expected to skew the headline number. As the Econoday chart shows, this is one volatile data series.

At 10 a.m. we get the latest on Consumer Confidence from the Conference Board, and also Existing Home Sales. A small nudge higher to a 6.25 mln rate is expected.

As the above Econoday chart shows, the trend has not been a good one in housing. This chart also gives pause because it shows the phenomenon of falling home sales has not been with us for a very long period of time, yet it is amazing that many pundits were recently saying we hit bottom when it's clear to see we've only gotten down to 2003 levels. Yes, there are a bunch of liars out there masquerading as analysts, economists, etc. With my wife in the real estate business and my ability to see first hand what goes on on the MLS daily, my theory is that come springtime the market will be flooded again with new inventory.

I have no changes on bullish thoughts on energy and metals.

John Murphy in his email earlier today had mentioned that he feels Dow 12,500 will be an important tipping point that would generate the first PnF sell signal since last August. That makes sense to me when looking at 3 box reversal chart.

Tonight stock futures are little changed... all quiet ahead of what promises to be another exciting battle between the bulls and the bears.

On Marketwatch.com, an excellent column by Herb Greenberg about Novastar. It's not merely about the implosion of Novastar, but Herb also takes a much needed swipe at what he calls the "see-no-evil, hear-no-evil, speak-no-evil investment message-board crowd". That crowd would include bloggers as well. Greenberg's Novastar Column.