Monday, February 22, 2010

Weekly Outlook 2/22

Going into this week the market is trying to build on a third straight week of rallying. The 1110 SPX level is an important mark to watch as it represents the 61.8% fib retracement of the correction from the January highs. The RUT is already surpassing this mark and looking stronger than the other indices. We have seen the SPX rise in 6 of the last 8 days and this move from the Feb 5th low has lasted 9 trading days. If this is a counter trend move in a new bear trend then it should not last further than 12 trading days. It should be telling this week whether we continue up and retest the January highs or fail up here and roll back over. I tend to still side with the latter and do expect a pullback starting this week.

Some bullish technical signals do argue for more upside including the 8/21 ema crossover to the upside on the SPX. Also last wee the MACD had a buy signal but is still in negative territory. The stochastics and RSI have risne nicely into or close to overbought zones as of Friday. These are just indicators that confirm price action and that is why I like to keep an eye on them but the pattern of price trends and volume is what I listen to the most. Regardless, I do believe we are sorta in "no man's land" here as we are closer to resistance than support and most stocks I watch are overextended in the short term.

Currencies- The Euro tried to bounce off 1.36 last week but ultimately just grinded lower most of the week before popping back a bit on friday. As oversold as the Euro continues to be, it is just showing such strong weakness that I would remain a seller of rallies in this currency. The dollar index looks like it has room up to the resistance of near 82.

Commodities- Last week I said I thought the commodities were overbought. Well now they are even more overbought. The move in crude oil surprised me as I thought it would not clear 75 but it did infact hit 80. I still think oil should rollover and fail in the this area and if it does it has potential to show a head and shoulders pattern on the daily. Copper has recovered sharply off the 2.81 low and is still in the midst of a topping pattern so be cautious there. I believe gold and silver still look decent and gold held up well last week after the dollar strength and discount rate being hiked. Gold has moved off the 1060 support quickly so could be in for some sideways action this week but of course we have lots of Fed speak so be nimble.

Overall I am expecting the market to retrace some of the recent gains this week and I would rather be nibbling on shorts and selling longs in aniticipation of some selling pressure returning to the markets.

Buy the dips>> UAUA, CAKE, TOL, OSK, HAS, MGM

Sell the rips>> FCX, APA, FWLT

1 comment:

睡衣 said...