STOCKS – ACTION ALERT – BULL
Looks like we experienced the both the best and worst of ‘Turnaround Tuesday’ yesterday and even perhaps a slice of ‘Weird Wollie Wednesday’ at the same time. As you know markets rallied early yesterday (actually quite sharply) following the ‘expected’ pattern of a rally following Monday’s weakness. Then the market started to sell-off sharply which is more attuned to a ‘Weird Wollie’ pattern.
On Friday morning I warned that a July swoon may be ahead. Equity markets reached an overbought condition and the Fourth of July fireworks show had ended. A Leibovit Negative Volume Reversal had formed and we should be heading south to at least fill the upside gap from June 27. In the S&P 500 that would equate to 1335.00. We touched 1336.27 yesterday.
Volume is negative, but we’re already approaching an oversold state. I am awaiting confirmation of a bottom before jumping back in on the long side with regard to long index ETFs, just in case this decline accelerates following somewhat the 2010 and 2011 summer patterns. Downside risk is difficult to measure during this timeframe, so we’re taking it one day at a time. We took profits in our inverse S&P 500 ETF position on Monday and hesitated to jump back in that position during the Tuesday morning rally. Even so, I would have ‘rung the register’ with the S&P approaching the previously predicted gap. – Mark Leibovit of VRTrader
From the VRtrader.com website here is a link to World Market Indices:
http://www.vrtrader.com/vr_free/worldmarkets/index.
Outlook for August – Investors Beware! S&P 500 Technical & Seasonal Status – by Brooke Thackray Market Letter
Investors should be cautious in August. Although it is possible for the stock market to produce a positive return, August is typically one of the weaker months of the year and is not a good time to take large risks in the stock market. This is particularly true given the current backdrop of a slowing global economy.
Last month when I was writing the June newsletter the S&P 500 was at the 1325 level. Currently we are only nominally above this level. Although the market rallied strongly at the end of the month, it has since pulled back and sits under the resistance level in the 1350 range. If much better than expected earnings do materialize it is possible that the S&P 500 will once again challenge the 1400 level. Currently, analysts are expecting a decrease in earnings of 1.8% this quarter (Bloomberg). Investors should note that even if earnings do be beat their estimates by a small amount, the market will probably maintain a neutral bias, or even slightly negative bias. When the expectations are so low, just meeting expectations is not good enough.
