Will 20-Week M.A. Halt Rally?
Thursday, July 15, 2010. 9:15 am. Updated at 10:30 a.m. to add new top post.
The market rolled over in April into what turned out to be an intermediate-term correction of 16% for the major indexes. Since then there have been four rallies that began when the market became oversold short-term beneath 21-day moving averages.
The first two, marked A and B in the above chart, ended quickly when the major indexes reached the short-term resistance at their 21-day m.a.’s.
The third rally, marked C did not end until it reached the intermediate-term resistance at the 20-week m.a. shown in the next chart.
In doing so it left a potential head and shoulders top in place, and the question of whether the current short-term rally will also be halted without breaking through the important potential resistance at the 20-week m.a.
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NOTE: The rest of this post is unchanged from the 9:15 upload.
The Fed Is More Concerned About Economy.
9:15 a.m.
The minutes released yesterday of the Fed’s June 22-23 FOMC meeting revealed more concerns about the economy than was implied in the Fed’s announcement after the meeting.
In the meeting Fed governors cut their forecasts of economic growth for the year, and discussed whether they need to take steps to keep the economy in recovery mode.
Their main concerns were the debt crisis in Europe, the housing market’s significant backslide since the stimulus efforts expired, stubbornly high unemployment, and the declining stock market.
A significant change was the discussion of the potential need for new stimulus efforts, an about-turn from the discussions at previous meetings of when and how they should reverse more of the stimulus efforts and perhaps begin to raise interest rates.
Fed Chairman Bernanke will be providing his semi-annual testimony to Congressional committees next week, which should bring some interesting questions.
In this morning’s headlines:
Associated Press: ‘Foreclosures on Track to Reach a Million by Year-End. Nearly 528,000 homes were taken over by lenders in the first six months of the year, a rate that is on track to eclipse the more than 900,000 that were repossessed in 2009, according to data released this morning by RealtyTrac Inc., a foreclosure listing service.”
Yesterday in the U.S. Market.
A mixed day, but after 7 straight up days. Can’t fault the market for taking a rest.
No impact from Intel’s impressive earnings report. Not much volatility. The Dow was down only 60 points at its low, up only 37 points at its high, and closed up only 3 points, virtually unchanged.
Light volume, only 1.05 billion shares traded on the NYSE. Market breadth fairly negative with 1,322 stocks up, 1,654 down on the NYSE, 1,102 up and 1,519 down on the Nasdaq.
Yesterday’s intraday chart:
The Dow closed up 3 points, or 0.03%. The S&P 500 closed down 0.01%%. The NYSE Composite closed down 0.1%. The Nasdaq closed up 0.3%. The Russell 2000 closed down 0.4% The DJ Transportation Avg. up 0.7%.
Of the safe haven etf’s, the U.S. dollar etf UUP closed down 0.2%. The 20-year treasury bond etf TLT closed up 1.0%. Gold closed down $2.80 an ounce.
Yesterday in European Markets.
European were also mixed with small moves. The London FTSE closed down 0.3%. The German DAX closed up 0.3%, and the France CAC closed down 0.1%.
But Asian Markets Closed Down Last Night.
Among individual markets:
Australia closed down 0.5%. China closed down 1.9%. Hong Kong closed down 1.5%. Japan closed down 1.2%. India closed down 0.2%. Indonesia closed down 0.1%. New Zealand closed down 0.9%. Singapore closed down 0.3%. South Korea closed down 0.4%. Taiwan closed down 0.1%.
Markets This Morning.
European markets are mixed with only fractional moves this morning. London is down 0.1%. Germany is up 0.3%, and France is up 0.3%.
Oil is up $.19 a barrel at $77.23.
Gold is $5 an ounce at $1,213.
Markets In the U.S.
This week has a fairly heavy week for potential market-moving economic reports, including Retail Sales for June, minutes of the Fed’s last FOMC meeting, the Producer Price Index, and Consumer Sentiment. To see the full schedule of the week’s reports click here, and look at the left side of the page it takes you to.
Yesterday it was reported that Retail Sales fell 0.5% in June, and the minutes of the Fed’s last FOMC meeting revealed the Fed as being more concerned about the slowing economic growth than it let on in its announcement after the meeting two weeks ago.
A bunch of reports today. So far it has been that new unemployment claims fell by 29,000 last week, an encouraging number. But the NY State Mfg Index fell to just 5.1 in July, from 19.6 in June. Its new orders index fell to 10.1. And Producer Prices fell 0.5% in June led by a 2.2% decline in food prices. It was the largest monthly decline for food prices since 2002.
Still to come are Industrial Production at 9:15 a.m., and the Phila Fed Index at 10 a.m.
Pre-Open Indicators.
Our pre-open indicators are pointing to the Dow being up 30 points or so in the early going.
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In the premium content area today:
A surprising change in investor sentiment as measured by last night’s AAII poll. Resistance levels that are liable to halt the rally. And the potentially important historical weekly market pattern for this week.
Please scroll down to see other recent ‘Interesting Charts of the Morning’ and commentary.
To read my weekend newspaper column ‘A Rally With Legs? – Give It a Maybe!’ click here!
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