Tuesday, July 6, 2010

Weekly Outlook 7/6

This week is a shortened week with light economic data and thus should be fairly low volume and potentially lower volatility. The reason I say potentially is because this market is pretty much still on thin ice and flirting with new lows everyday. We have not seen a capitulation bottom yet and until we see that flush of selling action with volume and a intraday reversal back to positive territory I will be expecting the downside. I still see us getting back to the 980 level shortly. The overnight lows on the futures brought us down to 1002 until they pushed the ES clear back up to 1038.50 this morning. This is likely nothing more than a snapback rally and guess where it stopped. Just under 1040. That massive resistance which will be tough to crack for now.

Earnings starting next week should be the next catalyst for the market to do its thing. I would think if we sell into the rest of the week then we could see a slight bounce into the first week of earnings season because the worst case scenario would be priced in.

Currencies- The EUR is seeing the bounce I have been looking for the last few weeks and we have got to 1.266 today. I think the easy money of this bounce has been made and now it should be more of a grind. I think the highest it goes from here is 1.30 and that would be a stretch in the short term. The USD/JPY is the weakest looking chart and I think the yen continues to rally and this pair should break down under 87 soon. This pair and the EUR/JPY cross shows risk appetite and they have both stabilized but not really rallying to the upside. IF EUR/JPY gets over 111 the market could stabilize further and fear might dissipate. The AUD is recovering back above 0.85 after finding a double bottom support level above 0.83 overnight. This is bullish short term for the commodities.

Commodities- As such, the oil and copper market is rallying today off the dollar weakness. I'm not really bullish here but it was overdue for a dead cat bounce. Oil has a serious risk of losing the 72 support level this week and falling further to 67. Copper support comes in at 2.90 and needs to hold if the stock market has any chance this week of recovery. Gold imploded last week as I had said it wanted to after failing to break out of 1266. I think gold could retest the 1175 level next.

Buy the dips>> AAPL, GMCR, SAP, BHI, CREE

Sell the rips>> AMZN, PCLN, GOOG, QCOM, ICE, POT, CLF