Monday, August 30, 2010
Weekly Outlook 8/30
Last week the market had an ugly week and ended Friday with a little relief rally courtesy of the Bernanke speech. All the market really did Friday was rally up to the downtrend line near 1070. This week we have tons of data to digest and it starts Tuesday night with China PMI, then Wed ISM and ADP, claims on Thurs and finally the jobs report on Friday. I dont see any of these reports being good but its all about how the market trades into and after the news that counts. My thought is that above 1070 there is a chance that enough shorts cover to push this thing up to the 1080s but I would be surprised to see much more than this. I do think that if we rally into the jobs number then it could be the best shorting opportunity of the year as these markets are so ready to give up the ghost and roll over towards 980. There are very few weekly charts out there that make me bullish longer term.
I was reading the AAII sentiment survey over the weekend and everybody seems to think its giving bullish signals. I dont. First off, yes the % of bulls is lowest since March 09 at 21% bulls. BUT, the amount of bears is only 49%, versus 70% bears in March 09. Not enough fear I say. This is a different market and most people have given up and are either neutral or agnostic and totally apathetic towards the market since they have lost so much money in the last 3 years.
Currencies- EUR is still looking heavy breaking 1.27 this morning and this is a huge level going forward. The JPY got weaker since rumors of BoJ intervention came into markets but it has rolled back down from 86 to 84.5 this morning. It does not matter what the BoJ does or says, the yen WILL get stronger and thats just how markets work. They rule and will ultimately go wherever they want. JPY next stop is likely 83. Risk crosses like EUR/JPY and AUD/JPY are still weak besides the relief rallies that eventually fail. The bottom line is risk appetite is not on the table yet.
Commodities- Oil bounced off 70 last week and tested 75 before pulling back a bit today. I am bearish of oil and think it gradually heads lower from here. Copper remains bullish and it is about the only thing economically that looks strong. The copper move is impressive but it seems like the market is not following copper as much as it used to. Gold and silver look bullish but need some rest and should consolidate into next week before testing the highs of the year. The grains are the most bullish charts out there right now and remain in buy the dip mode.
Buy the dips>> ARUN, PCLN, EGO, SLW, UXG, AMZN, RVBD, FFIV
Sell the rips>> WLT, AAPL, INTC, MELI, GS, BAC, X, ISRG