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Friday, July 8, 2011

Friday Weekly Charts

 Today's disastrous NFP numbers were not quite a disaster for the market, although it did seem to be on the brink early on. but the market bottomed just before noon and had a mild, but important, rally the rest of the day. Important because the all important support at 1340 was not breached on a closing basis. Volume decreased, so there was no panic in the early selling, and in hindsight today's drop may have been a buying opportunity. However, there really isn't much of a catalyst to drive the markets much higher, so it might be an opportunity only for day traders. We do have earnings season starting, and that has in the recent past been an opportunity to rally, but the trouble with patterns like that is when you notice them they stop. In actuality, we are in the middle of the summer doldrums, with a July rally that may already be over, and not much else happening until after labor day.

Here is the weekly chart with the actaul trading range we have been in since hitting the top in early May. We will probably be in that range for the next couple of months, although it still looks like we have som upward momentum, that does not necessarily mean we will much that much higher. This week's volume was not bad considering it was a 4 day week, but look for low volume for the next 7-8 weeks.

The Nasdaq sure picked up a lot of strength in the last two weeks, after it looked like it was about to lead us into a bear market. Once again leadership is mostly coming from here, which, if not an overtly bullish signal, at the least means there is no reason to be bearish now.

The Dow industrials are still strong, but losing some steam as the market rallies, which, again is a bullish sign. Investor confidence is apparently up to a point where they are willing to take more risk on the Nasdaq type leaders rather than looking for safety in the low beta Dow.

The transports are just about the strongest of all, and damn near broke out to a new high this week.

Also very near a new high is the Russell 2000. Although it doesn't look quite as strong as the transports, it is still quite strong. MACD is about to cross again and stochatics are rising fast but have more room to go. While i'm not thrilled with the chart pattern (a v shaped recovery, usually only good for very short rallies), I'm not real confident bout this topping out, either.

I complain, probably too much, about the disconnect between the market and the "real" economy, but sometimes even the stock market sometimes comes to grip with reality. Today's NFP was a very big disappointment, but the market says not a disaster (yet), but it is not going to put up with this for a whole lot longer.

I will have the new highs update shortly.

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