February 1, 2010, 4:00 pm …
February 1, 2010, 4:00 pm … Closing Thoughts … The Standard & Poor’s 500 index closed up 15.30 to 1089.17, as today’s stock rally was evidence that the bulls are looking for undervalued plays and excuses to buy. Indeed, stock pessimists made a compelling case for a correction even among Monday’s solid gains. Strategists said that while the indexes moved strongly positive, sellers stepped in before the surge got out of control. However, Dartline noted that the Standard & Poor’s 500 has broken below its 80-day moving average for the first time since March 2009, which also marks the oft-cited most recent low for the market and the barometer by which the current rally is measured. This intermediate trendline acted as resistance on rally attempts during the last seven months of the 2007-2009 decline. A crossover above this trendline in March 2009 proved to be a ‘buy’ signal, and pullbacks to this moving average in July and October 2009 were excellent buying opportunities. The index has now closed below its 80-day moving for six consecutive days, and has resisted attempts to close back above it in each of the past five days.
Broad market volatility closed the session lower with equities strongly in positive territory. Market volatility initially moved lower as stock indices opened the first session of February on positive note boosted by the ISM Index reading and dollar weakness. The “fear gauges” have continued to move lower with minimal action in the major averages since midmorning. The VIX closed -1.67 (-6.8%) at 22.95, while the more tech-focused VXN (Nasdaq Volatility Index) -1.16 (-4.5%) at 24.63. The CBOE put/call ratio is at 0.76, indicating higher call trading than put trading. (VIX ETF trades under ticker symbol VXX)