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The Fred Report - Mid Week Update July 14, 2010

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author/source: Fred Meissner, CMT

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The FRED Report – Financial Research, Education & Data

Mid Week Update

 

Volume 2, Issue 56

July 14, 2010

 

Download PDF Version here


Update of Market View

So far this options expiration week, the market has traded up as expected. The overall market remains somewhat overbought short-term, but is handling it well and look for the current move to continue.

Many pundits were looking at the 1090 area to provide resistance and we have cleared that area for the moment. We are much more concerned with the 1140 to 1150 area on the S&P 500 Index (SPX), which is where the rally failed the last time. We think that 1150 will be exceeded as well, although, as explained below, maybe not without effort.

Our only concern is the trading pattern we are seeing where the market opens up and then trades higher. This suggests a bit too much enthusiasm and is creating some minor gaps that need to be filled. As such, what we may do is test the 114 area on the SPY, fail, retrace to fill in the gap at 107, and then go through to the upside. We think SPY can challenge the 120 area on this move and note that there are many skeptics.  We gave a talk last night, here in Atlanta, and none of the other professionals in attendance believed that this rally had legs.

One of our clients asked why we follow ETFs in the report and not indexes. The reason is that ETFs are actually traded, while indexes simply measure. This can become important in two areas – Gaps, and Volume. An examination of the SPX vs. the SPY as of yesterday’s close illustrates the problem. Note how there is no gap on the SPX, while there is one on the SPY. This is because, on indexes, the open is often simply yesterday’s close. We also like the fact that SPY volume is just that – volume on the SPY, while the volume figures for the SPX often make no sense. From an analytical perspective, ETFs provide a much clearer picture to a technician than an index does.

 


Other Points of Interest

We show a chart of the Dollar index. Note that yesterday was an outside day to the downside (a higher high, lower low, and negative close – the range was “OUTSIDE” the previous day’s range). This is a negative configuration, and suggests that our objective of 82 may be too high and the downside could be even greater.




 

 

 

 


Disclaimer:



DISCLAIMER: 
Fred Meissner is primarily responsible for the research in this report and certifies that: (1) all of the views expressed in this research accurately reflect his personal views about any and all of the subject securities or issuers; and (2) no part of his compensation was, is, or will be directly or indirectly related to the specific recommendations or view expressed him in this research.
 
This report is for your information only and is not an offer to sell, or a solicitation of an offer to buy, the securities or instruments named or described in this report.  Interested parties are advised to contact the entity with which they deal, or the entity that provided this report to them, if they desire further information.  The information in this report has been obtained or derived from sources believed by Fredco Holdings, Inc. to be reliable, but Fredco Holdings, Inc. does not represent that this information is accurate or complete.  Any opinions or estimates contained in this report represent the judgment of Fredco Holdings, Inc.  at this time and are subject to change without notice.  Fredco Holdings, Inc.  or its employees, officers, directors, principals, agents, affiliates or adviser may from time to time provide advice with respect to, acquire, short sell, hold or sell a position in, the securities or instruments named or described in this report.
 
Fredco Holdings, Inc. does not have investment banking relationships with any of the companies mentioned in this report and does not conduct investment banking business, in general.  Fredco Holdings, Inc.  and its employees do not receive compensation of any kind from any of the companies in this report.  Fredco Holdings, Inc. , its directors,  officers, principals, agents, advisers, affiliates and employees may maintain a financial position in the securities mentioned in this report, provided however that no buying or selling  activity will be taken with respect to a security referenced in a report by such parties within three days of such report’s publication.
 
The information contained herein was prepared by Fredco Holdings, Inc., which is solely responsible for the contents of this report.
 
Copyright 2010-2019 Fredco Holdings, Inc..  All rights reserved. This report is a publication of Fredco Holdings, Inc.  located at 4514 Chamblee-Dunwoody Rd, Suite 112, Dunwoody, GA 30338. 

 

 

 

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