June 26, 2011
Weekly Market Outlook
By Keith Schneider
To the surprise of many and under the influence of bad economic reports, 28 countries led the US to agree to release oil from their rainy day (strategic reserves) stash of crude oil to ease the economic suffering around the globe and offset supply issues emanating from the Libyan civil war. Surprising indeed, considering oil is not even close to its $150 peak just a few years ago. Not wanting their heads on lampposts from disgruntled denizens, politicians around the globe agreed to the scheme of leaking a little oil to ease pressure. Its just another version QE2 or TARP. It has not helped the markets much so far and certainly helped take the fluff out of the metals and other commodities. Let's hope there is not real need before we can replenish those vital reserves!
Meanwhile the market continues to gyrate and the charts are ever more interesting and are approaching inflection points... read on for the technical picture.
SPY (S&P 500), DIA (Dow Jones), IWM (Russell 2000) and QQQQ (NASDQ 100)Indexes
The market see-sawed and teetered on the verge of a meltdown but came back strong on Tuesday managing 2 accumulation days in volume this week but still ending down across all key indexes. We now have a wide trading zone that is well defined by the last two weeks of trading. The declining 50 day should limit the upside if we move up and conversely the weekly charts and rising 200 day should keep the declines in check although the looming debt ceiling issue and general economic malaise certainly puts us in a "anything can happen" situation.
Market Internals
VIX (sentiment): After closing over the 200 day Ma for 2 consecutive days, it traded back never below the 50 day and now again is firing off an intermediate term sell signal.
Fear Creeping Back
Accumulation/Distribution Volume: We have had two accumulation days this week even in the face of a down market , so this is a positive.
Sectors/Commodities
Gold (GLD): Gold broke this week with a big gap trapping complacent bears. Still one of the better looking charts on an intermediate term and longer term. If we don't hold here and consolidate, we have support at 137 -140 level on the weekly charts. A healthy sell off would offer a great buying opportunity in this long term uptrend.
Currencies - Swiss Franc (FXF) The only major European economy independent of the Euro is the Swiss. The Swiss have always managed to stay neutral and have been one of the most stable economies in the world with low debt and highest standards of living. Its currency enjoys safe haven status and made new highs this week even as the metals sold off.
Interest Rates TLT (20 Year treasury) Treasuries hardly moved this week with all the uncertainty. We hardly hope for higher rates and a failure of this pattern would mean that, however, it would probably point to a stronger market. Rates hardly moved by the weeks end. The breakout from this pattern will be an important clue to the direction of the market. We await.
MIsh totally nailed the silver market with a rare option trade recommending two simple put trades on SLV on Wed. The market dropped over 7% in just 2 sessions. The strong warning phase and declining volume on the recent rally were the clues. We covered some and are still long our longer dated puts with no loss stops.
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