***Executive Summary***

• A New Opportunity at Stockcharts.com
• Stock Market: Medium-term Bullish, Short-term Neutral
• Breadth Falls Short of Positive Extreme
• Volume Expands on Thursday
• Financials Lag Despite FASB Ruling
• Major-index ETFs Return to Overbought Levels
• UUP Declines from Broken Support
• GLD Breaks Support at 90
• USO Gaps off Support
• TLT Backs off Resistance (video link)

***Big Changes Afoot*** As many of you know, I also provide analysis for the Market Message (John Murphy) at Stockcharts.com on Wednesdays and Thursdays. Starting 20-April, I will write exclusively for Stockcharts.com. It is a great opportunity to be part of the web's premier charting site. Commentary will not be exactly the same as on TDTrader.com, but I will still cover the major index ETFs, intermarket charts and stocks on a regular basis. We will also be producing regular videos.

Before starting this new endeavor (20-Apr), I will grab a little vacation time and the last commentary/video at TDTrader.com will be on Monday, 6-April. Remaining subscription time from TDTrader.com will be transferred to the Stockcharts.com Market Message.

What if you currently subscribe to both TDTrader.com and the Stockcharts.com Market Message? Where possible, I will process refunds for the remaining time at TDTrader.com. If this is not possible, then we will issue a subscription credit through stockcharts.com. Let me know if you already subscribe to the Stockcharts.com Market Message. Click here for the form.

Additional Info: Sorry for the late notice. The agreement was in the works in February, but there were delays with the lawyers and the actual contract. The breadth charts at ETF Investment Outlook will continue to be updated. John Murphy will remain at the Chief Technical Analyst and continue to provide commentary. I will leave up the videos and commentary at TDTrader.com for a few months. I will be processing refunds and transfers next week.

***Stock Market Stance*** Medium-term Bullish and Short-term Neutral. There is no real change in my market stance. There is a time to chase and a time to wait. I think this is a time to wait. Today we have the employment report and Bernanke speaking. Perhaps more importantly, earnings season gets under way in mid April and there is often a market lull around tax time (15-Apr). After a huge surge the last four weeks, some pretty good news has been priced into stocks. They best deliver come earnings time. We could also see a buy-the-rumor and sell-the-news scenario develop as we move into earnings. The rumor (buying) was based on better-than-expected earnings. Once the news hits, traders will take profits and sell. This could start a correction.

Market moving events for the next few trading days:

• Friday: Employment Report, ISM Non-Mfg Index, Bernanke Speaks
  -Earnings: AZZ Inc
• Monday: No economic reports
  -Earnings: Apogee, Immucor
• Tuesday: Consumer Credit
  -Earnings: Bed Bath Beyond, Alcoa, Mosaic, Ruby Tuesday
• Wednesday: Crude Inventories, FOMC Minutes
  -Earnings: Constellation Brands, Shaw Group, WD-40
• Friday: Markets Closed
  -Earnings: Markets Closed

***Technical Highlights***

***Breadth Falls a Bit Short*** With such a monster rally on Thursday, I would have expected positive breadth extremes across the board. For the S&P 1500, AD Net% (+86%) and AD Volume Net% (+82%) fell short of the +90% required for a positive breadth extreme. This implies that 93% of stocks in the S&P 1500 advances and advancing volume made up 91% of all volume. Not a bad day though. The short-fall was not that much and participation was broad on Thursday.

***Volume Surges*** Volume for the S&P 500 surged to its highest level in six days. Volume on Wednesday's bounce was suspect, but yesterday's volume showed new buying pressure. The same is true for Nasdaq 100 volume. Also notice that the 2-Jan surge occurred on low volume and did not hold (red arrows). Even though increasing volume and strong breadth validate yesterday's advance, it does not change overbought conditions and the prospects for a correction as we head into earnings season (mid April).

***Financials Lag*** I assumed that the rally was predicated on the FASB ruling that eased mark-to-market accounting rules. Lord help us if the market rallied on the G20 statement. Financials should be the biggest beneficiaries of the new mark-to-market rules, but the Financials SPDR (XLF) and Regional Bank HOLDRS (RKH) lagged yesterday. The key word is "accounting". These new rules do little to change the underlying value of these assets. The rules simply allow for more subjectivity in the valuation listed on the books, which can be dangerous. On the price charts, XLF and RKH opened strong with the rest of the market, but closed below their open to form small black candlesticks. In fact, XLF and RKH did not move past the high of the first 5 minutes. They drifted lower after the open. While many ETFs were breaking above their March highs, XLF and RKH fell short. Overall, triangle consolidations are forming a break above the March highs is needed to signal a continuation higher.

***Medium-term Trend*** With new highs on Thursday, the current advance is 18 days old. SPY and QQQQ are up 22-24%, while IWM is up a whopping 30%. Percentage-wise, small-caps are leading the way and this is positive overall. Chart-wise, QQQQ is leading the way with a break above its Jan-Feb-Mar highs. QQQQ hit a new high for 2009 and this is also positive. Despite such an impressive surge, overall conditions have not changed. All three ETFs are trading in resistance zones. All three are overbought medium-term and short-term. There was also some evidence of indecision yesterday. SPY formed a small shooting star, which has a small body (open-close) and long upper shadow (intraday high). Basically SPY did not close strong (83.43) and finished well below its intraday high (84.16). IWM and QQQQ also closed below their highs. The bulls appear to be getting tired. Who can blame them after an 18 day stampede.

***Short-term Trend*** Even though the major-index ETFs closed off their highs, the bulks of the gains and the gaps held yesterday. The blue trendlines show a rising price channel over the last 2-3 weeks. All three ETF forged higher highs with yesterday's surge. The first supports (S1) are based on Thursday's gap and the channel trendline. The second supports (S2) are based on the late March lows. A move back below the gap would be quite negative, while a break below the March lows would reverse the short-term uptrend. It takes a lower low to start a downtrend. The market is really frothy with the employment report on deck this morning. Should stocks gap higher on today's open, I would be on guard for a reversal in the first 30-minutes. I am not calling for a trend reversal, but rather a pullback to digest current gains.

***Inter-Market Charts***

***Dollar*** The Dollar moved sharply lower as the flight-to-safety trade abated. With a surge in stocks across the globe, the need for a safe-haven currency was reduced. This insinuates that the Euro is a riskier bet than the Dollar. Simon Johnson of Baselinescenario.com suggested that US banks were too big to fail and European banks were too big to be rescued. The European Central Bank (ECB) lowered its base rate by 1/4% and it now stands at 1 1/4%, which is much higher than base rates in the US or UK. In addition, the ECB deferred a decision on quantitative easing (QE) until its next meeting. Relatively higher interest rates and less currency dilution (via QE) pushed the Euro higher on Thursday. On the price chart, the US Dollar Bullish ETF (UUP) declined sharply with a move below 25.5. While negative, the ETF remains above its March low and there is a lot of support around 25. The Euro ETF (FXE) surged, but there is lots of resistance around 137. I would not be surprised to see both trading flat for a week or two. The Japanese Yen Trust ETF (FXY) remains the weakest of the three with a close below 100 on Thursday.

***Gold*** The G20 dropped a bomb on the gold market with its decision to fund the IMF through gold sales. This proposal seeks to sell some 400 million tons of gold over the coming months. It will probably not happen on the open market, but it will produce a supply overhang that could weigh on prices. On the daily chart, the Gold SPDR (GLD) broke support at 90 and I consider this a bearish development. Even though GLD finished with an indecisive doji on the day and there is still support at 87 from the March lows, the inability to follow though on the mid March surge and this support break argue for a move towards the low 80s. On the 30-minute chart, GLD never broke resistance and gapped down after the G20 news leaked. Only a move above 91.5 would reverse the two week slide.

***Oil*** These bloody gaps make it difficult to trade oil. With the Dollar falling and stock markets surging, oil caught a big bid and surged over 8% on Thursday. The United States Oil Fund ETF (USO) bounced off its support zone with a move back above 30. On the 30-minute chart, USO bounced off the 62% retracement and a little island reversal formed. There is a gap down on 30-Mar and a gap up on 2-Apr. The blue oval marks the island. The move is bullish, but buying after a 7% gap is a difficult trade. The big move produced a nice low to base key support (28).

***Treasuries*** No change. When will the trading range trade end? Buying at support and selling at resistance has been the only way to trade the 20+ Year T-Bond ETF (TLT). There will be a range break one day, but the risk of a pullback is above average while TLT trades near range resistance. There is no signal here, just a top picking opportunity for a pullback towards range support. While TLT trades flat, the UltraShort T-Bond ETF (TBT) sports a downward drift. This is probably due to leverage, extra fees and rebalancing. Despite drifting lower, TBT is trading near the bottom of its channel and RSI(2) is oversold. This could give way to a bounce towards the 47-48 area. Keep in mind the underlying themes working in the bond market. The bulls are inspired by the Bernanke buy program. The bears are driven by the US government debt needs and Chinese reluctance to buy more Treasuries.

Good day and good trading -Arthur Hill

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Disclaimer: Arthur Hill is not a registered investment advisor. The analysis presented is not a solicitation to buy, avoid, sell or sell short any security. Anyone using this analysis does so at his or her own risk. Arthur Hill and TD Trader assume no liability for the use of this analysis. There is no guarantee that the facts are accurate or that the analysis presented will be correct. Past performance does not guarantee future performance. Arthur Hill may have positions in the securities analyzed and these may have been taken before or after the analysis was present.
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About: The Daily Swing is posted every trading day around 6AM ET and focuses on short-term strategies for QQQQ, SPY and IWM. In addition, at two stock setups are featured every day with a detailed trading strategy. As warranted, coverage extends to broad market topics, key sectors and industry groups and inter-market securities (gold, bonds, the Dollar and oil).
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Sources: Data from Bloomberg.com, CBOT.com, Kitco.com and ino.com; Charting from Metastock (equis.com). Closing data from Reuters.com, eSignal.com, MS QuoteCenter and Yahoo! Finance.