The market rally this week led to the largest weekly
gain since
mid-April. Meanwhile gold and silver dropped very
noticeably along with the other commodities. Our 60-min
gold GDX chart performed very well and got
us short in it before the big decline.
As oil is back only to its April prices the US Dollar
rallied to a five-month high against the Euro. Their
central bank made some statements about weakening
economic growth which helped this dollar rally.
And the sectors that gained or lost
the most for the week.
The rallies lately have been on less
volume than the declines and that is not bullish. Volume
in general is light but we are, after all, in August and
that should change about the second week in September as
vacations end. We have seen so many ups and downs there
may be lack of conviction also as it is seen as the same
old thing each time. One day there will start a follow
thought from one of these rally periods and that could
bring in some from the sidelines.
The
Labor Department report showed that the number of people claiming unemployment
benefits rose 7,000 in the week ended August 2nd to 455,000 from the previous
week's unrevised average of 448,000.
Here are the top and bottom industry groups for the past
week.
There will be no newsletter next week as I will be traveling.
This is the major indices overview
chart where you can compare them to each other and see
their position in regards to Bollinger bands and
Fibonacci retracement. The Russell 2000 is still the
leader, though it had fallen the least, and the Nasdaq
and Nasdaq 100 are also both at the 38% retracement
lines. Often if they can break through that line with
good volume they have a good chance to go back to the
top line. (meaning the May or June highs) It is ok if an
index pushes the Bollinger band up but when they break
through the top of one they should pullback.
The Dow
closed above the 50-day EMA for the first time since the
end of May though with the light volume there is some
negative divergence in the histogram and stochastics. If
it does break out the pullback to retest will be quite
important to see if more would be waiting to buy. This
could reverse at any time as we have seen many times
recently but the bulls have the short term advantage.
The Monthly Dow with
Fibonacci for the October 2003 low shows the Dow now
back over the 38% line. RSI is pointing up but
stochastics have not yet turned up to go over 20.
DDM is the Ultra Dow long play with the goal to pay 200% of what the
Dow does on rallies. This gained 4.27% on Friday with the Dow up 2.65%. This
is just under resistance and the 50-day EMA.
The transports
had a good week also and closed over the Fibo line and
resistance. With oil down this move seems logical.
We pointed out how the Utility sector could drop
and it did break the triangle but then put in a rally at
the end of the week to move it back to the bottom line.
I do not think a buy yet in general as we watch the
stochastics.
The Nasdaq really made a move over its resistance
on Friday and ran right into the 200-day EMA at the 38%
retrace line. Consolidation first then a break over
would be the most bullish case as seems ok to be
rejected by the 200-day on first try.
The McClellan Oscillator for the Nasdaq is over
bought but not quite to extremes.
The Nasdaq 100 proxy QQQQ even more above the
retrace than the Nasdaq and also above the 200-day EMA.
It is options expiration week and the price at which the
total value of options is minimized - often called "max
pain" is at $45. This would be the natural attraction
price to reach by Thursday or Friday. This does not
always play out of course.
The VIX remains low which could add to the idea
of a rally being able to continue but the weak buying is
the one glitch.
The S&P 500 weekly moving averages and MACD have
only a hint of an upturn after this rally. Someday the
moving averages will cross and the bear market will end
but no signs yet.
The S&P 500 ran over its trend line and right
into resistance at the 50-day and horizontal at least as
we have drawn. It is actually over the 50-day but not by
much. 1320 is a well watched level of resistance. Not
shown here, the 55-day moving average is at 1305 and
that may be an important level as if it is too strong of
a resistance, we could set up for a fall to test or
break the lows of the year.
The 60-minute S&P 500 as shown last week it was
in a pullback but never made it to the 50-day and
instead broke out to its 200-period EMA. If you are a
futures trader watch this level.
The NYSE gained the least and any longer term
market move will have to have this participate much
more.
The number of stocks on the NYSE traiding over their 50
day average is 46%.
The Russell 2000 broke above its 200-day EMA and
recent range. It is up 97 points or $9,700 per e-mini
contract in 19 trading days and is about where it was 19
trading days before that so it took the same number to
days to go up as down. At
Global Futures the
margin required for each e-mini is only from $300 to
$500 for non overnight holding. They have a free
simulated account for trial and practice.
The Russell 2000 monthly chart showing how it
went up for 3 weeks in a row in the past (about 3 weeks
ago) and that turned out to be a bear flag and it fell.
This now may turn out to be a repeat of that. It would
need to break over 763 with some conviction.
The S&P 400 mid caps broke above their trend line
and to the 50-day EMA which is a popular theme today it
seems. It has horizontal resistance not far above also.
The London Financial Times index FTSE also broke
above the resistance and is 55 points below its 50-day
EMA.
We pointed out that this Health Care ETF XLV was
set to break out and it did, so a sector to watch for
good charts as they would have the wind at their back as
long as this is strong.
We also showed the agriculture double short AGA
as being in a bull flag and it triggered the buy and
gained about $4 and is now at a break out point. It of
course could use some consolidation but could trade a
break out with a tight stop.
Someone in the chat room pointed this out - the Homebuilders ETF XNB at a
break out area I have no idea why they are buying homebuilders but guess they
must have been oversold.
The commodity ETF GSG
continued its decline and from the trend line break
short point it has dropped about $10-$11 so far. The
indicators show it is oversold but show no signs of a
reversal.
Oil is nearing its 200-day EMA at $111 and then the $110 support. It is pretty
oversold so a bounce should or could come someday this week. The Fed chairman
told us when this was at about $146 that the price rise was not caused by
speculators in his opinion. If that were true than this would have to represent
a huge decline is demand. We say it is speculators long and short, not supply
and demand in general. When the Olympics ends there are thoughts that the
Chinese government may cut back on some of its subsidizing of gas prices. If
that were the case it would likely cut some demand from China.
The USO United States Oil Fund many people like to trade as an oil proxy.
It has done well as a short and has the 200-day at $89.64. May bounce there or
go to the 62% retrace and support at $87.34.
If you want to be short oil you can of course buy DTO and it has done
well since the break out at $26.25. When oil bounces you can short this or or go
long DXO.
Gold continued its fall - if we call that a head and shoulders pattern it
measures about 80 points with a neckline at about $910 so the target that way
would be about $830. The May low was at $846. Short term it will bounce when the
dollar pulls back as one is oversold and the other overbought.
This longer term weekly
gold chart from the 2005 base has the retrace to 38%
at about $800 as is the lower trend line. The 65 week
EMA has been support for many years on pullbacks so the
retrace could stop there but a better chart is if it
goes to the trend line. The white live was the sell
signal.
The gold
cloud chart has the bearish crossover 2 weeks back
and has now fallen under the clouds so they now become
resistance.
The double gold short is DZZ and it had the original buy on the RSI and
stochatics crossovers at about $24 so a decent gain. Remember on gold rallies
you can short this one of go long DGP which is the double gold ETF.
We have said so many times that GDX renko chart has been a gold mine in
profits for a basically auto-trading system. It has had a couple of whipsaws but
few. On the latest dive the short was at about 50 to about $43.50 then long but
a whipsaw so a loss of about 50 cents to a dollar then a short at about $43 to
now at $36.62. A gain on this fall of about $12 in a few days. When CCI goes
back over -100 and the parabolic SAR shows under the pattern we will switch to a
long position.
With the gold pullback the gold
stocks also sank as shown here on the XAU.
The unhedged gold stocks HUI
broke below their 3-year trend line so it should now
become resistance to sell short at that level when it
rallies with a stop above.
Silver broke below its 5-month range to near its 62% retrace.
The Japanese yen is heading toward its 62% retrace.
The Dow Jones Euro currency index shows the weakness in the Euro as it
nears its 200-day.
You can also trade the Euro Trust FXE though it is gappy. Big gap down on
Friday.
UUP is to trade the US
Dollar long and it had the break out we charted a while
back and on Friday the gap up. With such big gaps it is
wise to take profits.
The US Dollar and its
recent strength. It is really overbought.
Weekly economic calendar from briefing,com
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New additions to the
watch list.
Remember that we add many stocks to it each trading day.
LLNW on another move over
$4.20 or the high over $4.51
INTU Over $30.06. It has gone
up vertical so consolidation first is best.
YGE First part triggered
Friday now short under $14.20 or $14.00
STV Short
under $10.00
VLNC Short under $3.00 then careful at
$2.75 as has support.
PWR Broke out already but watch for a
pullback as nice volume
SINA Short
under $39.20 as if this does trigger it could make a
good move. The 50-day is still above the 200-day and
that is still bullish.
ICE Short
under $80.20
OFC Over $40.40
ACN Over $42.04
GNK Short
under $51.00
MOVE This is not on the watch list but was pointed out in the chat
room so showing it.
XIDE This was also talked of in the chat room. Watch the 200-day
for a break. Not on the watch list but watching anyway.
There will be no newsletter next week nor videos after Monday as I will be
traveling - have a good week and I will be back by August 21.
Must be a Wall Street deck
Photographer
-Alexander Mutovins
Photographer -a-s-s-a
Photographer -RatmiR
That's a full lid for today - will see you all after a week.
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Oil
Drop. With oil dropping back to its April prices
this sparked a rally in the markets while the weakness
in the European economy helped the US dollar which in
turn also helped the market rally. As the dollar
rallies, those foreign investors benefit by the dollar
price appreciation so if the stock prices also rise they
gain two times. This move in the dollar helps to weaken
the commodities and they took a hit this week. From one
day to the next there seems to be little continuity
in the market except for select sectors as the market
drops like a stone one day and flies up the next. One
day they can love paper companies and the next who cares
about paper as toys are the rage. There is no good
central theme that works though we have been pretty
successful at identifying some groups that have done
very well like biotech and now other parts of the health
sector.
