The Fred Report - Mid Week Update July 20, 2011

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The FRED Report – Financial Research, Education & Data

Mid Week Update

Volume 3, Issue 58

July 20, 2011

Download PDF Version here

Update of Market View

So far this week is playing out as we thought it might, and it looks to us as if this rally can take us to new rally highs on the SPX. Indeed, given the indicator set up, this represents the best chance we have seen all year for a decent, playable rally. Our forecast remains the 140 area on SPY (1400 or so on SPX).
There are a few signposts along the way and we will discuss those briefly. On the downside, we note that while SPY went intraday slightly through our objective of 130.50, OEF did not strike 58.03 (the low was 58.05).  We mention these points because we believe that the recent lows (OEF 58.05 and SPY 129.63) should be the summer lows – and these should not be retested before upside objectives are met. On the upside, exceeding 133.22 would suggest a test of the recent highs at 135.70 should be tested and, if exceeded, the next objective is the high end of the “Cambridge Hook” formation at 137.18 is next.
The rest of the week may chop around a bit to alleviate some of the short-term overbought readings, but we would not be surprised to see the market simply work its way higher. We will discuss sectors and such on the Thursday conference call – but we continue to believe very favorable earnings are coming in most of the sectors, and should we see some in Financials, that would be a big plus to support our positive outlook.

Other Points of Interest

We show Monthly charts of the Midcap and Smallcap indexes:  MID and SML. The purpose here is to show that these indexes are very close to all-time highs. Given the news, short-term turbulence and such, it helps to step back to note that equities are doing pretty well here.