Monday, February 8, 2010
Weekly Outlook 2/8
We bounced perfectly off the 200 day ema on the SPX near 1046 and closed up at 1066. Of course the 1080 level is huge resistance I think we at least test that this week if not try to fill the gap left from last week up near 1100 ish. However, I do have some suspect feelings about any reversal I see on a Friday. That's because they are rare. It did feel like a short term low being put in but what really matters is the confirmation day on Monday. We need to see Monday close above Friday's close for the reversal to matter to me.
The sovereign debt issues in Europe are just beginning to show its face globally and if you add China to the mix we could be staring a much larger Dubai situation in the face in the next 6-12 months. All I am saying is that the warning signs are here and it reminds us that we are still in bad shape globally. The Obama administration put a bandaid on it last year and now are boasting of the "improvement" in the economy we have seen. When in fact they are doing everything they should not be and more due to their poor understanding of how markets function. Anywho that's a discussion for a different day.
Sentiment is quickly bearish once again after being extremely bullish in early January. The American Association of Individual Investors weekly survey showed that less than 30% of those surveyed describe themselves as bullish on the market. This is the first time since November 2009 that the percentage of bulls fell below 30%. The percentage that describe themselves as bearish rose to 43%, also the highest since November 2009.
The dollar rally has been a big part of why stocks are fallen recently as the Euro specifically gets crushed. With the dollar index clearing 80 last week and the Euro hitting the 1.3550 area I think you get some kind of retracement near this level. This is one of the main reasons commodities are gotten slaughtered as well.
Last week we saw a complete liquidation of copper, gold, and crude oil. In that order. The did slightly rebound on Friday by end of day and you may see a similar retracement here as it seems lots of weak hands got taken out violently.
Bottom line, expect some kind of retracement rally in stocks this week but watch the 1080 level for the first sign of resistance and then 1100-1105 if this thing really gets going higher. On the flip side, if we get rejected and lose 1050 then the selling could get hardcore.
Buy the dips>> AMZN, RYL, EL, EAT, GLD
Sell the rips>> LFC, MRO, YUM, BCS, FCX