"Blue light special" for stocks on sale today? Technicals say it's possible but remain cautious

All that big scare this morning - as the yen popped nicely up testing our 111.49 (FXY / $XJY) pivot - and equities dropping ... only to rise from the lunch hour doldrums to start a short-covering rally! Anyone following my tweets - and I must disclaim, that I cannot guarantee I'm able to see or tweet about everything, every day - but still, I tweeted mid-day saying that the SPX could get support at 1090 and making something happen to the upside. Well it happened! So was this just a "fund manager's 'blue light special'" of sorts? Maybe - since fund managers often like to buy in the few days prior to the end of the trading month, in order to get better stock pricing, and get ready for the influx of new month in the new month. But the technicals, as I've marked onto the SPX daily chart (at right), show there's still strength in this market.

Surprising areas of strength included not just the transports - mentioned below - but also retail (with the RTH pushing over $95) and real estate (with the IYR closing at almost $46).

If you're cynical (and ain't it fun to be!), you say that IRA and 401(k) money doesn't necessarily get the best deals with the new-month/new-money idea, as there's some evidence of a cycle of higher stock prices in the early part of a month and weak around the 26th (in normal months - this being February, tomorrow's Friday the 26th but then a weekend and presto, it's March). But it isn't a strong enough statistic for anything other than being aware of it and keeping it in mind. Of course that was partly on my mind with the remark about the SPX getting support at 1090. Another thing on my mind was that some Elliotticians are saying this can be part of a "wave 4" before a "wave 5" to finish a move up, perhaps to the .707 retrace level about 1114 SPX. I don't know if that is the right Elliott Wave count or not. I could also suggest that the recent decline on the hourly chart (below) shows a leading diagonal and that the SPX may drop down from it to re-test the 1030 level, either as a price level or as the area of the 200-day moving average. Traders may as well be prepared either to follow a move that pushes higher - even if short-lived (will address that in the next paragraph), or go bearish if the market cannot sustain this afternoon's rally.

The Bradley turn date that I posted about yesterday, is coming right up. Will it be a turn higher or a turn lower? Last year, the mid-summer turn date that was indicated to be a high, turned out to be more of a twisting type turn that pivoted the stock indices out of a turn down and into a strong trend move higher. Let me say up front, I'm not a huge Bradley fan - I guess because I haven't yet seen a Bradley chart that was "tradable" meaning that I could go long at an indicated low and short at an indicated high. Maybe it's because those turn dates are merely that - turn dates. But - it doesn't hurt to be aware of this!

KI$$ swing traders may as well keep in mind our overall plan for this year 2010 - the idea of high points January, maybe March, and then definitely May and perhaps August. Along with the idea of a low point in March that we will want to buy. Maybe we get an intermediate high and then a low (whether lower low or higher low) in the next two or three weeks - if so, that will meet our overall yearly plan. If I understand Terry Laundry's T Theory daily update this morning correctly (readers - check out his T Theory site in the sites list at right), this may be consistent with what he's seeing too. So KI$$ swing traders should not feel they should wade in here, especially not with the Bradley turn date. And especially not at a time when the euro MIGHT get support, but MIGHT NOT and might go into a wave (3) of 3 of C down to test $112 on the FXE / $XEU charts.

I've added the Dow Transports ($TRAN) chart at bottom, daily chart, with additional markings for it. If you've followed Tony Caldaro's updates you know that he's viewing the transports as having a bullish chart pattern (check out Tony's Elliott Wave Lives On site in the sites list at right). So, no real surprise then that it looks like the $TRAN got support at the February lows, at a possible uptrending parallel channel. If that channel doesn't give it support then traders who are long the transports may want to re-examine. But the markings I made on that chart suggest that it isn't really looking bearish, at least not yet. This may be part of what helps the overall stock indices remain positioned to make a high in May as Terry Laundry has been indicating in his T Theory charts.