***Executive Summary***

• A New Opportunity at Stockcharts.com
• Stock Market: Medium-term Bullish, Short-term Neutral
• Weekly Chart: Double Bottom for QQQQ
• Weekly Chart: DIA Hits Broken Support
• The 2002-2003 Bottoming Process
• Major-index ETFs Remain at Overbought Levels
• UUP Fails at Broken Support
• G20 Weighs on Gold
• USO Follows Stock Market Higher
• TLT Fails at Resistance – Again (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 be processing refunds and transfers this 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. Earnings season gets under way in mid April and expectations are high after a four week surge. In addition, there is often a market lull around tax time (15-Apr). Even if earnings are good, 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 that may last into early May.

Market moving events for the next few trading days:

• 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***

***Weekly Charts*** Today I am starting off with some weekly charts for some perspective on the major-index ETFs. QQQQ forged a double bottom and broke resistance with a surge over the last four weeks. Chart-wise, QQQQ is the strongest of the major-index ETFs because it is the only one to break its January high. The breakout confirms the double bottom and projects further strength towards the 38-40 area. Based on traditional technical analysis, the double bottom targets a move to 38 (32 –26 = 6, 32+ 6 = 38). The height of the pattern is added to the breakout for a target. In addition to this target, there is resistance from broken support around 41 and the 50-62% retracements mark resistance around 38-40. Even though the four week surge was strong, keep in mind that QQQQ is medium-term overbought. This means we could see a pullback (correction) before continuing higher. The gray arrows project a potential pullback into May and then a summer rally towards the target zone.

The weekly chart for the Russell 2000 ETF (IWM) is not as bullish as QQQQ. First, IWM forged a lower low in March. Second, IWM has yet to break above its January high. A lower low and lack of a higher high mean the trend is still down overall (lower lows and lower highs). Despite a bigger downtrend, the ETF formed a bullish engulfing and surged over the last four weeks. This surge featured strong breadth and good volume, which indicates that it could last a few months. In addition, IWM is leading the major-index ETFs with the biggest percentage advance over the last four weeks. Even so, we should not expect another four weeks of big gains. More likely, I would expect a pullback of some sort before another significant advance. The target would be the resistance zone around 53-55.

The next two charts show weekly candlesticks for SPY and DIA. SPY shows characteristics similar to IWM above. The overall trend is down and the 4-week surge is impressive. However, SPY is medium-term overbought and ripe for a correction before a continuation higher. DIA is the weakest link. The ETF is meeting resistance from broken support around 80.

***Bottoming Process*** While the surge over the last four weeks was most impressive, I think it is part of a bottoming process that could take months to unfold. The chart below shows the S&P 500 ETF (SPY) in 2002 and 2003. The ETF recorded a new bear market low in July 2002 and then surged with a monster four week advance. From low to high, the ETF advanced over 25% in four weeks. Despite this impressive surge, SPY tested the Jul-02 low in Sep-Oct with a sharp 5-6 week decline. After a successful test, the ETF surged back to resistance with another impressive surge. Notice that the bulk of the surge occurred in the first 3-5 weeks. Despite another impressive surge, the ETF corrected back to 80 with a rather deep decline. A higher low formed and the Mar-03 surge signaled the beginning of a long bull market. The first low formed in Jul-02 and the final low in Mar-03, which was 6-7 months later. More importantly, there was one support test and one correction during this bottoming process. SPY is currently up over 22% in four weeks. We have yet to see a support test or a correction.

***Medium-term Trend*** The surge turned 19 (days) with another up day on Friday. It will therefore come as little surprise that there is no change in my medium-term outlook. The trend is clearly up with a higher low on Monday and a higher high on Friday. Moreover, there are no signs of weakness, just the usual red flags. QQQQ, SPY and IWM are overbought after 22-30% surges in the last four weeks. SPY and IWM ended the week at the top of their resistance zones. These zones stem from the 62% retracement and the middle of the triangle consolidation. Even though I think this rally could extend into the summer, jumping on the bandwagon after a huge advance risks a correction. This could form as a falling wedge or flag over a 3-4 week period. However, this correction has yet to actually begin.

***Short-term Trend*** The short-term trend is also up as QQQQ, SPY and IWM move higher within rising price channels. The next upside target would be the upper trendline of these channels. SPY and IWM have further room to run, but QQQQ is already quite close to this channel boundary. The major-index ETFs dipped early Friday, but rebounded in the afternoon and closed strong. With a small reaction low forming on Friday, this is the first support level to watch for signs of a pullback (S1). Key support is based on last week's lows and the Monday-Tuesday consolidation (green ovals). A move below these lows would forge a lower low and reverse the four week uptrend. Such a break would signal the start of a corrective process.

***Inter-Market Charts***

***Dollar*** After a chart review this morning, my bias on the Dollar is turning bearish. The US Dollar Bullish ETF (UUP) broke support with a sharp decline in mid March and then retraced 50% of this decline with a move back to broken support. This level turned into resistance and held last week. The sharp decline from resistance is bearish and favors a break below the March low. There could even be a test of the December lows. The Euro ETF (FXE) shows a mirror image with a bounce off support at 131. This bounce looks bullish and favors a break above 137. The Japanese Yen Trust ETF (FXY) remains the weakest of the three. FXY broke neckline support at 100 and this favors a move to the mid 90s.

***Gold*** Before looking at the technicals, remember that 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, stalled on Thursday and continued lower on Friday. Gold futures are sharply lower this morning and there could be a lack of buyers. This is easy to understand after the G20 announcement. Securities can decline simply from a lack of buying. Based on the failed bullish engulfing, channel break and support break at 90, my downside target is the next support zone in the low 80s.

***Oil*** No change. 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 and the next resistance zone is around 35. 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. Thursday's big move produced a nice low to base key support (28).

***Treasuries*** Treasuries took a hit on Friday as stocks finished strong and the prospects of inflation heated up. A rising stock market points to an economic recovery and this will put upward pressure on rates (downward pressure on Treasuries). In addition, big stimulus plans are putting upward pressure on inflation, which is bearish for bonds. Despite these bearish influences, the Bernanke buy program is still in the game and could keep losses limited in the Treasury market. On the daily chart, the 20+ Year T-Bond ETF (TLT) hit resistance at 107 on Wednesday and declined rather sharply the last two days. No breakout and no uptrend. At best, the trend is flat with a two month trading range. At worse, the trend is down after the sharp decline in January. At this point, the most I would expect is a move towards support around 101. The UltraShort T-Bond ETF (TBT) surged on Friday with a pretty good move. While this bounce off channel support is short-term bullish, the channel is still falling and I would expect resistance in the 47-48 area.

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.