Monday, August 2, 2010
Weekly Outlook 8/2
I have been calling for this market to rally higher into August since the early July reversal down at 1040 and it has developed a very bullish pattern as the SPX has put in a couple decent higher lows as it rips the shorts heads off on rallies. Last week I was buying tech stocks like BIDU, CREE, AAPL plus others like GS, SPY and FCX and I think I had just about the most messages ever from amateurs on Twitter telling me the market is going to crash and I am crazy. I knew the market was not going lower, especially after I called the late week pullback to 1090 and it held as a dip buying opportunity. This said the bears could not get enough ammo on the downside and subsequently failed to sell the market down. Whenever I see this amount of bearishness in the public I take a contrarian view and look away. This simple look at sentiment told me what most traders were looking for and if they were wrong--as the crowd normally is--then they would have to cover their shorts and that the rally is not over. For this reason, among others, I felt great going into the weekend the most long I have been in months. It sure did pay off Monday.
As for the rest of the week I do think we should test and attack the 1130 level just overhead as that is the June high and the market is looking like it wants to get above there before any pullback. I do still think we rally into August options expy which is the 21st of this month. After that we will have to check to see how sentiment is and assuming we do grind up for the nest few weeks then I think a logical target to see on the SPX is 1160 which is the site of a unfilled gap from May.
Longer term view I have is that after summer into September we do see more selling pressure and perhaps we could be topping out for the year on this next high, wherever it may end up being. I see a gradual selloff taking shape into the fall that could see us breaking to new lows on the year. We shall see.
Currencies- EUR is making new highs at 1.3195 as the dollar index has been cliff diving. EUR seems like it wants to test 1.33 before retreating.The /dx has basically went down in a straight line from 88 to 81. This is probably going to catch support between 80-81 and see a relief rally back to 83's I would think. The foreign currencies have been on fire with AUD/USD leading the way hitting 0.9145 this morning. It does seem like it wants to challenge 0.93 eventually but a pullback to 0.905 wouldnt shock me first. GBP/USD hit 1.59 today and looks so stretched I'd hesitate to buy but instead look for retracements back to 1.56 soon. USD/JPY still weak down at 86.50 and looks to break lower to new multi-year lows.
Commodities- Copper has led this rally for the last two weeks as it was 3.00 just 10 days ago and today has hit 3.39. Crude oil finally busted that 80 level this morning and looks strong on the daily charts here as long as 79-80 holds as support going forward. Gold rebounded slightly last week back into the 1180s and could be rangebound here unless it gets above 1205 or back below 1170.
Buy the dips>> FCX, BIDU, CREE, CLF, OIH, WLL, DECK, VMW, FLS, CMI, CTSH, CRM, FFIV, GS
Sell the rips>> RIMM, GOLD, MA, ZMH