Monday, August 9, 2010
Weekly Outlook 8/9
This week it is all about that 1131 resistance level on the SPX and I do expect the bulls to run past it and then we have a clear shot at seeing 1161 as a pretty easy target to get out of longs. Options expy for August is in 2 weeks and I expect the bullish momentum to stay here into that date. Last week the Friday reversal was very impressive as the SPX tested the 200 day at 1115 and buyers stepped up into the weekend. Textbook. I have no reason to be looking for swing shorts until we lose that low from Friday or more likely the 1093 level that supported us two weeks back.
The sentiment in this market is still decidedly bearish as the most recent AAII sentiment survey returned just 30% bulls. The lowest bullish reading since July 1 when we were--you guessed it-- AT THE DEAD LOWS of 1010 SPX. I think this is easily the most bullish data I have seen since the market rally started. To say that we have rallied up over 100 SPX points in one month and this survey still shows only 30% bulls says that there is plenty of room to rally on the upside. This is a buy the dips market and until that changes then why should you?
FOMC meeting on Tuesday should make for quiet trading ahead of that but afterwards it could be the catalyst to spark some more buying especially if the Fed hints at more stimulus coming to a zip code near you.
Currencies- EUR/USD just keeps trucking and I think the 4 hour chart looks bullish for a potential move up to 1.35 as that is the 50% retrace of the entire selloff. But first it could easily pullback after the run its had. GBP has had a huge move up lately and nearing the 1.60 level of resistance could stall it out and at least give it some consolidation. USD/JPY is the story out there as it is making 15 year lows near 85. The weekly and monthly charts here show breakdowns and that could go to 80 in the coming months. Watch out for the Japanese to intervene however as a stronger yen only hurts their exports.
Commodities- Bonds are important to watch here as the 10 yr just keeps making new highs and yields are now at 2.82%. This is not what the stock bulls want to see and if this keeps trending then the stock market will correct lower so you want to be aware of the bonds. Crude and copper are consolidating above recent key levels. They are a bit extended and could easily pullback if the dollar starts to bounce like it seems to want to. Gold is interesting here as it has bounced off recent lows and is catching some resistance up over 1210. If this fails to get back over 1215 and actually slides under 1195 you could have a continuation selloff in gold that might be fast and furious.
Buy the dips>> AAPL, AMZN, BIDU, NFLX, SHOO, MELI, FFIV, EMC, DECK, GMCR, CMI
Sell the rips>> GOLD, RIMM, WDC, CME, ICE, JCP