If only every day could be Tuesday, we all could retire very quickly. Three of the last four Tuesdays (the day without a feel, according to Seinfeld's buddy/nemesis Newman) have been downright phenomenal and certainly have a very good feel of late. On Tuesday, Mar. 11, the S&P 500 jumped 3.7%, on Mar. 18, the "500" soared 4.2%, and on Apr. 1, the index surged 3.6%. These three days have been the biggest one-day gainers since October, 2002. Who knows, since the seasonal patterns have not been working well of late, maybe a Tuesday portfolio is all we need to trounce the market. Personally, I could deal with a one-day week very well.
Even with all these large one-day advances, the S&P 500, as well as many other indexes around the globe, remain locked in a trading range, and they will have to deal with some hefty overhead resistance before they can embark on a sustainable intermediate-term rally. For the "500," there were some encouraging technical signs after the latest Tuesday party, as some short-to intermediate-term pieces of resistance were overcome.
Both the 50- and 65-day exponential averages were taken out, and this is a positive, in our view, as the index failed at these pieces of resistance during February's rally. The S&P also broke out of a 21-day envelope that has been shifted up and down 2%. This is the first break out of this envelope sine early December. The index also broke above trendline resistance drawn off the recent highs.
However, we ran smack into another clump of resistance, and so the rally stalled for the rest of the week. The 80-day simple average sits at 1378, right at the intraday high on Wednesday. Chart resistance, from February's highs sits just above 1380, while a 38.2% retracement of the correction targets the 1385 level. Well at least the market got out of neutral, but we are stuck in an old car running on bad gas.
One of our many duties is to assist our colleagues overseas and give our technical take on markets in Europe, Japan, and Asia. Interestingly, sometimes foreign markets lead the U.S. and sometimes they lag. But in many cases, markets around the world move together, the size of the rallies and corrections are just different. Established markets move pretty much in concert with the U.S., while the emerging markets sometimes rally to a far greater degree -- and fall much harder -- than the U.S. It is encouraging to us that many overseas markets have stabilized and look to be tracing out bottoming patterns very similar to the U.S. If the markets here can complete bullish reversal patterns, we expect to see similar formations take shape all around the world. That would signal to us a good time to shift back towards those emerging markets that could supply us with outsized returns vs. the U.S.
Over in Europe, the FTSE 100 index in the U.K. continues to rally off the mid-March lows, and is starting to break back above some key pieces of resistance. While we believe that the FTSE is tracing out a bullish, reversal formation, we are unsure about what pattern will play out. As we have seen over the years, the FTSE many times traces out an imperfect double bottom, with the second low undercutting the initial low. That is possible at this point. In addition, we think it is possible that the index is working on an inverse head-and-shoulders bottom. If this pattern plays out, we could see a rally back towards the late-February high of 6087, and then more corrective action back towards the lows put in on Jan. 23 down near 5609. This final decline would be the right shoulder of the pattern. To finish the pattern, we would need to see the FTSE take out the neckline that develops or the interim highs near 6100. Either way, the late-February highs at 6087 have to be taken out to complete a reversal pattern.
On the upside, the index took out the 65-day exponential average this week. This is potentially a bullish sign as the rally in late February failed right at this average. In addition to the chart resistance at 6087, it also represents Fibonacci resistance as it is a 50% retracement of the entire decline.