Weekend July 21, 2012
S&P 500 Has First Back-To-Back Weekly Gain Since June
U.S. stocks rose for the week, giving the Standard & Poor’s 500 Index its first back-to-back gain since June, as results from International Business Machines Corp. (IBM) to Baker Hughes Inc. beat forecasts and Federal Reserve Chairman Ben S. Bernanke said he’s prepared to add stimulus.
The benchmark index snapped a three-day rally on the final day amid concern Europe’s crisis is intensifying. Baker Hughes surged 16 percent to lead energy shares to the biggest weekly gain among 10 S&P 500 groups. Technology stocks rose 1.9 percent as IBM climbed 3.5 percent and EBay Inc. (EBAY) jumped 12 percent amid better-than-expected earnings. Financial companies had the biggest retreat after Bank of America Corp. (BAC) and Morgan Stanley (MS)sank more than 9 percent amid disappointing results.
Bloomberg July 20, 2012 Back to Back
Observation - Who would guess amid the gloom and doom of Friday?
Cafe Americain sees two more weeks of 'coiling'
It is always interesting to read about world events from a perspective outside the USA. This rhetoric between Israel and Iran has to be worth ten bucks on the price of oil.
It costs $4.25 MN< goes 44 MPH and is 95 feet tall, take a look
The markets have been up and down, it challenged the upper trend line suggesting a pullback the next few days. Baker Hughes is a component of our recommended XES Energy Service ETF which was up on Friday.
Here is our short term expectation.
The character of the rally changed after June 4. Now the market has been moving higher with the RSI bouncing off its zero line. Since the top on June 18, the market seems to have averaged 4-6 days in one direction or the other. I labeled the down moves in days. so a test of that 50 day MA now at 1333 seems realistic in the next week.
A multiple ribbon of Exponential Moving Averages based on a Fibonacci time sequence suggest a stronger market, i think,than others might be seeing. Each high this past month has been met with skepticism from Art and John at stockcharts. The market exhibits a series of higher highs and lows. The MAs are moving apart as the market moves up. This past week was an up week.
All markets do not bottom at the same time. Natgas in blue bottomed mid April and has zoomed since-in total contravention of the conventional wisdom at the time. One alert reader sent an article suggesting there is still way too much natural gas. This is probably true but the energy markets trade on emotion not supply and demand.
Everything else pictured here bottomed precisely June 18. Since then silver and copper are the laggards. Crude oil in black is having a nice upswing. Gold is moving sideways and trails crude oi.
Please remember the move up in crude, over $90 now, is happening despite a strong dollar. So crude is bucking the notion that demand is slowing and the dollar strength which usually keeps it down. I believe this remains a harbinger of a weaker dollar straining at its upper limit now.
Dollar Versus SPX
Numerous other blogs and websites have noted that the Dollar is still in an uptrend. True, but the MACD is waning, see bottom panel as the main chart is the Dollar. And the SPX is gaining. One is going to win this race and the other is going to lose.
Here is the exact same chart except I substituted TLT bonds for the Dollar. Again the MACD is lower while price registers a slightly lower high. This is a negative divergence. I admit it is amazing how long this is going on, the drumbeat of Spanish, Portugese, and Italian problems grind on. All of that is old news, the idea that the Dollar and bonds were up on fears of Euro whatever with a declining MACD suggest this is a market about to break, see Jesse's coiling comment in the introduction.
Zero Hedge and Mish are suggesting a Spanish meltdown, let's take a look
Spain's stock market using EWP as a proxy has returned to the area of the March 2009 panic lows, how much worse can it get?
Another buck down and Italy is there as well. I don't know quite frankly what to make of that other than to observe this level only lasted about a week in March 2009. Italy has survived worse than this, so Jesse's guess at two weeks, looking at this chart may be about right. Do not be surprised if a large swoon occurs in the European markets as we open for trading Monday. BE aware of how close they are to previous panic lows. Of course yes they can always go lower.
The low for France's CAC was about 2500 in march 2009, it is at 3193. or so now. While I see many hysterical headlines I don't see any one pointing out these three are at or near March 2009 lows.
Bonds and the US dollar continue to show some divergent behavior near their recent highs as shown by the MACD indicator. Energy leads the way commodity wise.
While there is an outpouring of concern after the Denver ashooting, calls for gun control, politicians seeking to capitalize on the tragedy, no one seems to be making the obvious connection other than socionomists, to the 18 year cycle of negative opinion. As I say, we have written extensively to prepare you for this. Now that civil war rages in Syria, murder in Bulgaria and Denver, and Iran Israel trade threats, it is clear the same cycles that set in post 1966 have set in post year 2000.
For your own personal safety try to operate at a higher alert condition. One SWAT instructor puts it this way. Most people walk around in Condition White, they are oblivious to what is happening around them. When the gunman entered the theater in Aurora Friday, most thought it is was a stunt, not a threat. This is understandable but was of course the wrong conclusion. The SWAT instructor suggest putting an orange square (move to Condition Orange) on your rear view mirror in the car, be alert, pay attention. Look before you enter or exit your car or your building, be on alert for anyone unusual, drive a different way to work if possible. The SWAT instructor suggests moving to what he called Condition Red, if say you suspect youare being followed. If so, make three right turns, if the car behind you is still there, you are being followed. Those that would do you harm spend a lot of time planning their actions, even a few seconds of discovery may be to your advantage.
I don't have any solutions other than a sense of heightened alert for all of us.
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