Monday, April 12, 2010

Weekly Outlook 4/12

This week the market should continue up thru 1200 as earnings season starts off. Also, with options expy week here it could give an uptick in realized volatility. Some Bernanke speak midweek as well might add to the action. The important question is are expectations too high going into earnings season like they were in Jan and Oct which sparked nice corrections to the downside. It's hard to say but I kind of doubt it as of today because I still people convinced this rally will rollover anyday. Bullishness is up a bit in recent weeks but still plenty of room of retail traders to push this thing higher especially after this round number resistance in the indices is taken out and the media does a table dance around it.

As for technicals the charts really just keep grinding up and taking there time. As much as you may think the market shoudn't go up, it relaly doesn't matter because it will do what it wants. And right now it wants to go up and the weekly and daily charts are saying so. I do think the rally has legs into early May where we may see a correction into early summer but we could rally alot between now and then. The SPX being above the 200 week ema is a big signal that we have a floor underneath us. I see 1225 as an interim spot of heavy resistance that should be the next target once we break 1200 which was roughly the July 08 low. Look how far we've come.

In the short term you gotta keep watching the transports (IYT) and Russell 2000 (RUT) as these are market leaders which should lead the SPX higher this week.

Currencies- The euro gapped up big with the GBP as the Greece debt concerns eased over the weekend. Euro now has a good shot of testing the 1.38 level from here as the dollar index pulls back to the 80 mark. Aussie gapped higher as well but completely gave it all back this morning as it traded back down to 0.925, more than 130 pips off the sunday night highs. I still like the Aussie to the long side going forward as long as it holds the 0.91 level. Weekly chart looks exceptionally strong here and I think this currency is the key to holding the stock market up as it influences where commodity prices go.

Commodities- Gold looks about as good as it gets. After consolidating for the past 3 months or so gold has broken out over 1140 to test the 1165 highs from Jan. If this level is held I don't see any reason why it wont go up and thru 1200 and it could happen fast. Copper is holding the recent breakout of 3.50 and I still see upside in copper above this level. Remember copper has been a fantastic leading indicator of the SPX in recent years. And right now it is showing no signs of slowing. Crude above 84 is still a buy and should head to 92 imo. Bonds popped back higher last week after the 10 year tagged 4% yield. I think this is temporary and bonds are in a major topping pattern.

Buy the dips>> VMC, PCX, DPZ, FCX, SU, APA, BP, BWLD, LVS, COP, RGLD, DRI, FLR

Sell the rips>> IMA, RIMM