May 30, 2011
Weekly Market Outlook
By Keith Schneider
Consumer Confidence rose in May as the US consumer said "never mind" about the housing mess. Last month's cheaper gas prices left many feeling better about driving from their foreclosed homes to the mall.
By the week's end, the market posted its fourth weekly decline in a row because of sovereign debt woes and general malaise, although by Friday, it did recover a lot from Monday's low.
Two other factors that could influence market action, is the news out of Egypt and Libya.
First is that Mubarak and some of his closest associates are being tried in court for financial shenanigans as well as complicity in the murder of protesters. Also, Egypt has opened up the border to Hamas controlled Gaza, something that is likely to stoke tensions with Israel. Together they represent a significant shift in the policies of Egypt. But more importantly point to how unpredictable the outcome is of the revolutions spreading throughout the Arab world.
Meanwhile, the Russians are supporting the Western led drive to rid Quadaffy's hold over Libya, a meaningful step in Russia working together with the West. If that happens Libya's oil production could be back on line sooner rather than later.
For specifics on our current trading outlook and technical outlook read on.
SPY (S&P 500), DIA (Dow Jones), IWM (Russell 2000) and QQQQ (NASDQ 100) Indexes
QQQ still lagging, touching but unable to cross the 50 day moving average at 57.49. SPY has a better chart formation and IWM closed above the 50 day moving average with an unconfirmed return to a bullish phase. DIA has an unconfirmed bullish phase and filled the gap up to 124.57 before retreating and closing very close to the 50 DMA at 124.18. As we know, SPY will not be enough to carry the whole market, so look for QQQ to tackle the 50 day moving average with good volume and IWM to stay above the 50. In order for confidence to return fully to the market, all indexes must be lined up.
SPY - Positive phase change but stopped at Trendline and Adaptive MA
Market Internals
VIX (sentiment): Risk is back on as this indicator that worked well exactly at the market top is back into trading bands and with the market action, back to a bullish reading.
Accumulation/Distribution Volume: After the big gap and selloff on Monday, we managed to get a positive accumulation day in several of the key indexes later on in the week; a big plus for the possibility of the big players sticking around for more.
McClellan Oscillator (Advancing/Declining Issues): This intermediate term breath indicator reached oversold levels this week and the market bounced on queue. It is now in a neutral zone working its way up-neutral to bullish.
Still Working Off Oversold
Up/Down Volume: Our short term volume indicator now in a neutral zone and has plenty of room to move either way.
Sectors
Gold (GLD): Gold broke out from its consolidation last week and looks poised to tackle the highs. Silver broke out from the recent consolidation but is much weaker technically, although performed well.
Gold - Testing Highs with nice follow thru
Silver - Resistance at 38.25
Goodnight and good trading!
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