Monday, March 22, 2010

Weekly Outlook 3/22

Yes we are in a bull market. Yes I think the bull market is probably in the 7th inning stretch of its move and I doubt it gets to extra innings. Yes, the final stages of a bull market can be the most rewarding and fast moving. No its not a good idea to try to short it thinking you caught the top. Believe me I've learned. Anywho, as for this week we have Obama-care passed and stocks gapped down sunday night only to recover and turn green monday morning. I do think the markets are overextended wherever you look and this should produce a minor pullback this week. It would be surprising to me if we do not at least stall out and consolidate.

A pullback to the 1150 area is buyable as that was previous resistance and now is support. Below that level we should see 1120s possible and then if the market gets below that the 1105 gap fill is highly likely. However, if we rally up and make new highs look for 1185 to be first resistance and then ultimately 1200. Unless, we sell for greater than 3-4 days then this should just be a pullback within a bull trend. Don't fight it. I think this market is strong enough to rally up into early April believe it or not. There is still simply not enough bulls out on the street to signal a major top.

Economic data is light this week with the important stuff being new home sales Wed. and claims on Thurs. Bernanke speaks before Congress on Thursday as well.

Currencies- This is where the volatility has been for sure. The euro and pound are normally more volatile than the stock indices but lately have really been moving. Friday the GBP lost about 250 pips. This week I expect the weakness in these currencies to continue The 1.35 level in the EUR is very important and if it breaks I expect the 1.3250 mark to be seen. The GBP should continue lower to 1.45 in the interim but could see some choppy backing and filling action on its way there. The dollar index looks strong and ready to break higher thru 81. I think 82.50 is a good short term target in the /DX for the next leg higher. Commodity currencies like the AUD have stayed strong recently as the Aussie hit .925 last week and now is pulling back a bit. The pair still looks strong so I would guess it consolidates further.

Commodities- Copper and oil have stayed remarkably strong during the recent months of dollar strength and are still hanging out at the top end of their ranges. Something tells me a correction is needed in this space but what do the charts say? Oil looks strong above the 79 level which is the site of the 50 day ema. I am not sold on oil moving higher until a close above 84. If we break 79 I think we see a quick retracement into the 74s. Copper is similiar on the daily but appears to be forming a bull flag so if this doesn't break down under 3.28 then it could remain strong and challenge the highs of 3.50. Gold is the tricky one and its because it looks like it wants to go higher but then sells off. That's a very choppy chart when I look at it and I think gold can remain rangebound between 1080-1140 for awhile. This is generally the quiet time of year for gold and precious metals anyway.

Buy the dips>> WYNN, TGT, PAG, DNDN, NTRS, VMC

Sell the rips>> JRCC, STT, SCCO, PBR

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