“As the World Turns” the crisis seen last week seems to be abating this week. Greece has been put on life support and the debt mess in the USA will be given the reprieve that it needs. Neither problem has been or will be resolved in the short run. It is like treating the symptoms of cancer without ever treating the disease. You can’t fix the problem that way but you can make life a little more tolerable for the moment.
We continue to believe that the market will rally in the face of the multiple global problems and that the risk trade is again on. Portfolio managers are yield starved and will continue to invest in issues that have a long history of paying dividends.
The NASDAQ 100 is pushing up against a double top. Should this double top fail to contain this rally, it is likely that we will see a fast short-covering rally. Both the S&P 500 and the Russell 2000 did not confirm this action. It is our belief that the NASDAQ 100 is the leader of the pack and that should the rally continue, the other indices will follow.
Tuesday: S&P Case-Shiller May home price index is released at 9:00, June single family homes sales are released at 10:00, July consumer confidence is released at 10:00, and Kansas City Fed President Hoenig testifies on the “Hill.”
Wednesday: June durable goods are released at 8:30 and the Beige Book is released at 2:00.
Thursday: June mutual fund sales/redemptions.
Friday: 2nd quarter GDP is released at 8:30, July Chicago Purchasing Managers’ report is released at 9:45 and Fed Presidents Bullard and Lockhart speak.
The US Dollar index rallied in the Friday session and will continue that rally as the US approaches the debt vote which will likely raise the ceiling. This rally could extend for several days before wearing itself out. We will have a fresh buy-signal issued by the stochastic indicator and our own indicator in the Monday session. The RSI is also pointing to the upside. The Thomas DeMark Expert indicator is pointing to the upside. Should this market resume its voyage lower, you will see good support at 73.51. The 5-day moving average is at 75.008. The top of the Bollinger Band is at 76.415 and the lower edge is seen at 74.159. The down sloping channel lines are 75.183 and 73.726. We are below the Ichimoku Clouds for all time-frames. The uptrend line for the weekly chart is at 74.125. We must stay above that level if we are to resume any bullish relief action.
The S&P 500 futures left a doji like candle on the chart in the Friday session. We have become accustomed to the indices retreating on Friday’s because of possible events that could occur over the weekend and thus weekend risk. We closed below the downtrend in at 1347.23 for the Monday session. We are above the uptrend line of 1304.34. the stochastic indicator and our own indicator are curling over to the downside but have not issued a sell-signal. The RSI is going flat just below overbought levels. The Thomas DeMark Expert indicator is going flat at overbought levels. We are above the Ichimoku Clouds for all time-frames. The weekly indicators are pointing higher and are approaching overbought levels but still have lots of room to the upside. The 5-day moving average is at 1325.30. The top of the Bollinger band is at 1357.93 and the lower edge is seen at 1283. 54.
The NASDAQ 100 weekly chart has given a solid buy-signal. Yes, we are overbought but we can go higher. This index has pushed to a high of 2429.75 in the Friday session removing 2428.00 high of May 2, 20011. Still the numbers are so close as to look like a double top. We would expect to see these levels exceeded in the not too distant future. The 5-day moving average is at 2389.75. The top of the Bollinger band is at 2445.78 and the lower edge is seen at 2267.61. All the indicators that we follow herein are issuing a continued buy-signal and all are overbought but show no signs of changing their direction. We are above the Ichimoku Clouds for all time-frames. This is the definite winner for the indices this week. We would be long the NASDAQ 100 with a tight trading stop.
The Russell 2000, like the S&P 500 pushed higher in the Friday session but closed below the opening level. We are above the Ichimoku Clouds for all time-frames. The stochastic indicator is rolling over to the downside near the neutral level. Our own indicator continues to point higher. The RSI is bending over and the Thomas DeMark Expert indicator is pointing higher. We have lots of non-confirmations in this index. The 5-day moving average is at 830.70. the top of the Bollinger band is at 856.48 and the lower edge is seen at 806.16. the up trending channel lines are 815.53 on the bottom and 843.67 on the top. If we had to make a choice of indices to trade, we would opt for the NASDAQ 100.
Crude oil is in an uptrend. The week ended the Friday session with a small but welcomed rally. We are inside the Ichimoku Clouds for the daily time-frame but above the clouds for both the weekly and monthly time-frames. The 5-day moving average is at 98.11. The top of the Bollinger band is at 100.53 and the lower edge is seen at 92.08. The up trending channel lines are 96.19 and 103.27. The indicators that we follow are overbought but all are pointing higher. We shall see what the new week brings. If long keep stops tight and enjoy the ride.
Gold has been in an uptrend and consolidating for this past week. Take a look at the daily continuation chart and you will see a flag formation. The channel lines are at 1607.70 and 1579.10. The 5-day moving average is at 1597.38. The top of the Bollinger band is at 1632.01 and the lower edge is seen at 1467.37. The indicators are going to issue another buy-signal but are at overbought levels. We would not chase this market but would be buyer and pull-backs.