JULY 16 INDEX UPDATE
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Just some additional thoughts.
Option expiration is this FRI. Early last week the QQQ's were about 4 points below MAX-PAIN and the the OEX was about 15 points below its MAX-PAIN. With the rally late last week both the QQQ's and OEX rallied to their MAX-PAIN point. So it appears that the MAX-PAIN should not have that much of an issue this week.
Please also keep in mind that statistically this week should either be flat to up, and I believe that is partially due to option expiration.
Now if the market cannot move up nicely this week producing HIGHER HIGHs, I would take that as a short-term negative for the market.
Last THUR was up strong, but there wasnt any significant follow-thru on FRI. I would not turn negative that fast in light of FRI showing little follow-thru, since it could be a 3-DAY pattern where DAY-2(FRI) is FLAT, and DAY-3(MON) is up strong. However, if there is no significant follow-thru today, then that could be viewed that this rally may be weakening. Also need to watch the market internals. So I feel that today is a key day for looking for clues to the strength of this short-term rally. Keep in mind, if the current short-term rally stalls/tops-out around here that would create a LOWER LOW and imply that the downtrend is still intact.
As Im typing, Im hearing the host analyst on CNBC mentioning that she was certain that there will be a SUMMER RALLY. I also notice that no one on CNBC mentioned that MAY-OCT is statistically the weaker 6 months of the year. As mentioned previously, although there is so much hype each summer concerning the summer rally, the bigger issue is that MAY-OCT is a weak period. So in reality the SUMMER RALLY is a just an oscillation within the WEAK 6-MONTH PERIOD from MAY-OCT.
I was looking at the US DOLLAR chart. Im never sure, but it does look like it may be topping out. As we all know, if the US DOLLAR drops alot that would help U.S. firms since it would make U.S. products less expensive, down the road, in the international market, but on the other hand if the US DOLLAR drops too much money may start to leave the U.S.MARKET immediately.
ASIA, overall, is now quite weak economicly. In some cases they are hurting alot. SINGAPORE is now officially in a recession, and we all know about JAPAN. Are we to assume that ASIA will always be in a recession? What happens when they start recovering - which could take awhile and be in terms of years. If they start recovering, is it fair to say that FOREIGN DOLLARs will move away from the US market?
The reason I mention it is that there is now so much bullish talk from the media/analysts/J6P. The only negativity I hear is from SI, which is only an extremely small part of the market. I know plenty of J6P, actually all of those I know, who dont read SI. Im am a strong believer that there are 3 main factors which move the market - EARNINGS, INTEREST RATES, LIQUIDITY. Earnings are not good right now but may improve some. INTEREST RATEs are good. Now the LIQUIDITY ISSUE - once foreign countries recover, and eventually they will that would hurt LIQUIDITY in the US MARKETs.
Not that I like to use one-to-one comparisons, but heres one of interest. Back in the 1970's the US was in a bear market while the JAPAN market was starting to climb. The JAPAN market peaked out in 1989, and in 1990 the US market started eccelerating to the upside. As the JAPAN market declined alot of YEN moved to the US, and you cant say that didnt help fuel our bull market in the 90's. Just something interesting to think about, especially if one is overly bullish.
Since I wrote this post, some may think that Im bearish longer-term, which Im am, but not overaly bearish. However, I am also a very disciplined short-term swing trader who trades both directions, so the longer-term view does not matter to me at all. I could care less for my trading what happens long-term. And lets not forget that I have gone long(short-term trades) on several occassions this year, and I have actually made a lot more on the long side than short side this year. So I would not fall under the category of a perma bear.
seeya |
