Which Direction is the Market Headed?

The market started off strong on Tuesday, but it wasn't long before it turned into another pre-holiday trading session with low volume and a narrow trading range. If it wasn't for the technology stocks, the major averages would have been flat or lower.

Profit-taking developed early, and the sector hit hardest was the one that gained the most during the first quarter, i.e., the financials. But Apple ( AAPL ) saved the day as investors focused on their new iPad and the report in the Wall Street Journal he company is designing new iPhones for Verizon ( VZ ).

The Dow Jones Industrial Average ( DJI ) rose because Verizon was up 6.2%, but a 1.6% drop in Bank of America ( BAC ) and 0.8% in Boeing ( BA ) kept the major index in check. The S&P 500 ( SPX ) was down slightly, but its strongest sector was technology, up 0.5%, and following the pattern of the Dow, financials were down 0.7%. The Nasdaq ( NASD ) rose 0.25%, the result of a new high for Apple.

March consumer confidence showed an increase after its steep drop in February, and the Case-Shiller home price index indicated that prices were flat in January versus a year ago.

The U.S. dollar was strong throughout the session following a report from the International Monetary Fund ( IMF ) that Germany's economic recovery is exposed to "substantial downside risk." And credit analysts at S&P voiced concern about Britain's fiscal deficit. The dollar traded higher against a basket of currencies and was up 0.2%.

The Dow closed up 12 points at 10,907. The S&P 500 was slightly lower at 1,173, and the Nasdaq rose 6 points, closing at 2,411.

The NYSE traded 907 million shares with several hundred more advancers than decliners, and the Nasdaq crossed 595 million shares, also with slightly more advancers than decliners.

May crude oil gained 24 cents to settle at $82.37 per barrel. The Energy Select Sector SPDR ( XLE ) closed at $57.25, up 8 cents.

June gold fell $5.80 to settle at $1,105.70 per ounce, and the PHLX Gold/Silver Sector Index ( XAU ) closed at 163.72, down 0.82 points.

What the Markets Are Saying

As our readers know, I've remained cautiously bullish even as the major indices broke to new highs and our internal and sentiment indicators hovered at dangerous levels.

I've warned again and again of the "overbought" condition of the market and its need for a correction, and here is the tough part, while still riding the "long equities" train. Even though it's been a profitable ride for us, the resilience of the trend higher has provided this daily writer with some anxious moments.

Now one of the highest profile analysts and a renowned technician has publicly expressed his frustration with the market. I share with you part of what Mark Arbeter, chief technician of Standard and Poor's told subscribers yesterday:

"Quite frankly, we're tired of calling for a pullback that never comes, and this week, we turned our quote machine off on two different days, as we couldn't take it anymore. Many times when the monitor goes off and my mind wants to throw in the towel, we are close to an inflection point. It's just the opposite of the movie "Trading Places," when Mortimer Duke screamed, 'Turn those machines back on.'"

Mark then goes on to explain the similarities of the current condition to that of the blow-off of the first phase of the bull market in 2003 when the S&P 500 rose 12% in 43 days. The current rise of the S&P is about 10% in 30 days. The 2003 blow-off ended with a reversal similar to last Thursday's signal -- and that sell signal is still intact. But if Thursday's high is exceeded, you should again jump back onto the train headed north.

However, if Friday's lows are penetrated, then we should grab a ticket for a train headed south where we'll find Mark finally getting some well-deserved rest in the sleeper car.

Today's Trading Landscape

Earnings to be reported before the opening include: A-Power Energy, Acuity Brands, BPZ Energy, Dollar General, Flotek Industries, Lindsay Corp., Rite Aid, SmartHeat and UniFirst.

Earnings to be reported after the close include: AngioDynamics, Demandtec, Global Payment, Immucor, Mosaic, Omeros, Research In Motion, Resources Connect, RINO International and Xyratex.

Economic reports due: MBA purchase applications, ADP employment report, Chicago PMI (the consensus expects 61), factory orders (the consensus expects 0.4%), and EIA petroleum status report.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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