A Delicate Balance - Morning Market SnapShot for Tuesday, August 17, 1999
This morning, the market expects a host of important economic news and in the data, hangs the fate of the entire market.
The Dow Utilities Index went to a new 20-day low yesterday, breaking the low of July 29, after the bear flag pattern was broken to the downside on the daily chart. Each time it has bounced to the 20-day exponential average (EMA), it has found resistance and this time it was no different. The Dow Utilities Index is very interest sensitive and is a leading indicator for the Dow Industrials. With this new 20-day low in place, unless it forms a double bottom right here and begins to bounce, we should expect that the market is at crossroads.
A quick look at the S&P 500 index shows the broader market to be much weaker than the Dow Industrials and the NASDAQ 100, which we covered yesterday. Since the successful test of the June lows last week, the S&P has been on a bounce, and has now reached resistance at the 20-day EMA. If the market is no longer in a downtrend, it should be able to gather momentum and move up from here. If there is any weakness, resistance should be in this area. Yesterday?s column can be found at intelligentspeculator.com
Let?s take a quick look at the intermarket charts, and the delicate balance of some important factors in the financial system. The US Dollar has now bounced to resistance on the daily chart forming a classic Edwards and Magee bear flag pattern (similar to the Dow Utilities Index). This bounce has relieved upward price pressure on commodities, in the form of the CRB index, and interest rates, allowing the 30-year Treasury to bounce off the June low. If the bear flag seen in the US dollar breaks to the downside, this will once again put pressure on interest rates and that will be bad for the market as a whole, with the Dow Utilities Index leading the way for stocks.
Charts specific to these comments have been posted to
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