Market Update
August 18, 2008
The markets are currently rallying
strongly as oil and other commodities have broken sharply.
Bad news is still pouring out of the financial sector,
consumer spending is down, unemployment up, and the
housing market is in the tank. Remember, markets are
a forward looking mechanism and for now they are seeing
higher prices ahead.
We are still waiting for new leadership
to emerge, not just beaten down sectors rallying off
extreme lows. Until that happens we will be taking ‘buy’
signals, but treading lightly.
CAUTION: This current rally can be viewed
as a "bear market rally." Watch out, they
can turn rapidly. This simple tool shows that the S&P
500 entered a "bear market" at the start of
2008.
The Nasdaq composite is continuing it’s uptrend and
leading the markets higher as tech stocks continue to
get a strong bid. Prices have easily risen above key
resistance levels at the 50 and 100-day moving averages.
Stochastics are "locked-in" up so we could
see higher prices ahead. There is continued resistance
at the upper bollinger band. If stochastics dip under
80 look for a pullback to the 20-day line.
The S&P 500 has not been as strong as the Nasdaq
and is fighting a battle at it’s 50-day line. Stochastics
are overbought so the upside potential is not as strong
as the Nasdaq’s. Prices are in a short term uptrend
so we are still bullish. Expect overhead resistance
at the upper bollinger band and the 100-day moving average.
Chinese shares are still in a major downtrend despite
all the good news coming out of the Olympics.
Oil and gas explorers and producers are getting stronger
as prices remain in a solid uptrend. However, we won’t
be getting bullish till prices get over the 20-day line.
Stochastics have room to the upside so keep an eye on
this index as it may have found a bottom.
Financial stocks are still weak despite their strong
move off the bottom earlier this summer. Prices are
in a downtrend and below the20-day line so there is
absolutley no reason to get bullish. In fact, this may
be setting up as a short-sale.
The gold miners had a huge break off the highs made
in July but it appears that they may be finding a bottom.
The retest of the bottom made last week may set up to
be a "double bottom" that the index can rally
off of. Look out for new lows however. If stochastics
can close above 20, look for a strong rally back to
the 20-day line.
Tech stocks have rallied strongly after the lows were
made about 5-weeks ago. Can the rally continue? Watch
out for headwinds at the 20 and 40 week lines.
Lots of pundits are saying that the commodites "bull"
is dead and that the "bubble" has popped.
In looking at the CRB overall commodites index you can
see that steep/swift corrections are not out of the
ordinary.
Gold is going thru a steep correction like it did in
2006. Watch if the key 20-month moving average holds.
Long-term traders will support the metal here if they
believe it’s going higher.
Oil has gone thru a recent 25% correction. As you can
see, this is not out of the ordinary and in fact the
other recent corrections have been steeper. Look out
for more downside if the 10-month moving average fails
to hold the market. The next support would come at the
20-month line which is at about $90 and rising.
At 42.58%, silver’s recent correction is the steepest
of all the commodities seen here. Let’s see if the 40-month
moving average holds.
Tags: Weekly-Market-Report
