Monday, June 21, 2010

Weekly Outlook 6/21


The market is gapping up big on Sunday night and the EUR is rallying towards 1.25. The ES finished last week near the 1110 level as options expiration kept us grinding up all week. The market is bound to have a nice week as we enter the final days of June and the 2nd quarter window dressing comes in. This is why I have maintained a bullish bias for the markets while everyone was so overly bearish this month.

We are retracing a good portion of the selloff so far. The 50% retracement of the recent correction stands at 1136 and we are trading 1126 as I type. We are very likely to see the 1140s this week and is basically my first target of resistance before any kind of pullback. The 61.8% retracement is another area I'm watching with this rally in the next several weeks. That level is 1148 on the ES and about 115 on the SPY. It signifies monster resistance and I think the market will have major trouble getting above it, at least on the first attempt. Above that there is actually an unfilled GAP on the chart from mid May and that mark is about 115.44 on the SPY. That would be my ultimate target on the upside before I start looking for weakness.

We are entering the summer doldrums and this is a time of low volatility and grinding markets with low volume. I could see this market actually grind up or sideways well into July and then maybe we see some kind of correction later in August or early September. On the downside crucial support is at 1110 and 1093.

Currencies- The EUR was up big overnight and has now turned negative back towards 1.23. I think the EUR is still stabilizing and should grind higher in the coming weeks as the relief rally is here. The other foreign currencies from Europe are looking good on a swing basis. The CHF (Swissy) looks better than the others and I think USD/CHF can see 1.08 soon. GBP has retraced 50% of the selloff from late April and unless it can get over 1.50 then it should fall back towards 1.44. Aussie and CAD look strong as AUD has rallied back to 0.88 which is tough resistance. I would not be surprised to see a small pullback to the 0.855 level this week on this and that could put some pressure on the commodities.

Commodities- Crude at nearly 79 bucks seems a bit overdone on the upside, coming from a low of 67 last month. I expect a pullback here back to 75 at least and if the market overall gets weaker and dollar index is storng then oil can easily retest that 67 low. Everyone seems to be so bullish of oil and I am confused because its at the same price it was back in October. The daily chart just looks like on large rollling top pattern to me and if copper is leading the market and other industrial commodities then the weakness there should translate over to crude oil. Copper below 3.20 is bearish and below 2.95 even more bearish. Finally, gold is the most bullish chart in town and I think we see 1300 on gold within a month or so but today it is down pretty good after hitting new highs at 1266. That could pull it back short term to the 1220 level at least. Below that 1200 is your next level of support on gold.

Buy the dips>> WYNN, AAPL, BIDU, SGG, SPG, CRM, FFIV, AKAM, NFLX, CMG, ALK

Sell the rips>> FCX, VXX, ARW, WDC, DSX, WFC, EAT, JCP