FREDAlert!
Volume 2, Issue 8
August 12, 2010
STOCK MARKET
Wednesday’s trading generated enough questions that we decided to put out a special note in front of Thursday’s conference call. We will discuss these issues in more depth on the call as well.
First, and most important – while we have failed at resistance, close examination of Wednesday’s trading indicates the market looks a bit better than it did at first glance. However, as we have said through the last week – if we are going to be wrong about early July being a significant low, now is the time. The SPY remains in a downtrend started by the lower low in early July, and until we trade above the June 26 high, (i.e. 114 on the SPY) the potential remains for lower lows for the current up move – so tend to your risk management and stops. Subscribers note we have been reducing exposure over the last couple of weeks, and we were stopped out of our long QQQQ position yesterday, with a small profit. Our plan has been to add aggressively on a break out above 114 on the SPY, which so far has not occurred.
That said, though, intraday charts suggest that there was very little deterioration after the first 2 – 4 hours of trading. The market came down into either 11 or 1:00 depending on the index, and then trended sideways all day. This is favorable action.
The McClellan Oscillator has moved to -101, and another down breadth day would move us into the buy area on that indicator.
The FPO daily is down, not to a buy zone but close – another day or so down could get that oversold as well.
Daily stochastics are overbought, but should correct, and moving average systems remain positive.
There is a gap at the 107 area on the SPY which could fill on the downside, as well as a gap on the upside. We would have concerns about the bullish case on a break below 107, and actually think 108 may hold, especially on a big down open tomorrow which does not appear in the cards as of 7:30 a.m. EDT. So many gaps generally mean light volume – up and down. This morning’s opening gap, unless it is a breakaway gap, should fill. Assuming 108 to 107 support holds, we should generate a short-term buy signal.
NOTES ON OTHER MARKETS
Nothing untoward is happening. We felt that the FXE and FXY could come down, and the dollar rally – and this is occurring.
The TLT is a bit more concern, but overall still looks like a top, unless it moves through 103.00.
Gold still looks like it held support. Let’s see how these markets sort out, but the FXE could trade back to 125 – 127 and then rally again.
Disclaimer: