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Friday, July 23, 2010

Friday Weekly Charts

Here we are, going right into the meat of earnings seaso, and right into the teeth of resistance, and so far, so good. The former pivot at 1105 looks like it is coming into paly again, and with resistance up near 1130, that would put the bottom support at 1180. so our range is slowly creeping up. Volume was a little on the light side, but that is understandable as anyone reading a chart can plainly see that this is not the place to be buying. If we break 1105 next week, we could see a flood of program buying that could quickly take us up to 1130.

The 40 week average is now at 11111, just above the daily pivot at 1105. I put that as the center point, 1150 as the ultimate weekly target, and somewhere near 1070 as the ultimate support level. The 10 week line is now well below the 40 week, a bear market signal that has to be respected. MACD and stochastics, however, indicate that momentum is turning to the upside, so we could be in for a significant rally here.

The Nasdaq has broken through it's 40 week line. MACD is slightly waeker here, but we are still in good shape rally-wise with a traget around 2350, which, if it stops there, probably won't be enough to drag the 10 week b ack over the 40 week. If it doesn't, we could be in for a long slow grind down.

The Dow industrials are over the 40 week line as well. This does look quite a bit stronger than the other indexes, but for now I don't see it getting above 11000 any time soon. August is traditionally vacation time on Wall Street, and the market usually futzes around until after Labor Day. So far I see nothing to make this year any different.

The Dow transports have lately been the strongest of all indexes, and the most likely to get to a new high. Notice that the 10 week has not crossed the 40 week here, and a decent rally will turn it back up, If that happens, then we can put a fork in this correction. If not, and they do cross, we are probably in for several months of range bound hell.

The Russell 2000, which is my favorite market barometer, is the weakest of the indexes at the moment, despit the fact that the 10 week is still above the 40 week. This one got hit pretty hard in this correction, and if it doesn't lead on the way up, I don't believe any rally here will be sustained for long.

We are at a point where the corection we have waited for may be just about over. We really haven't gone as low as I thought we were going to (I had a downside target of 950 n the SPX), but it was deeper than a lot of people expected. We can get a decent rally from here and still not hit a new high. The chart pattern to me is still bearish long term, bullish short term.

I will have the new highs update shortly.


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