WEEKLY TECHNICAL COMMENTARY

THIS WEEK’S ISSUE:
• Market Commentary: S&P 500 ($SPX), NASDAQ ($COMP)
• New-Highs/New-Lows, Advance-Decline Lines
• Gold ($GOLD), Crude Oil ($WTIC)
• This Week’s Economic & Earnings Reports

U.S. FUTURES (as of 8:50AM EST): DJIA (-0.82%), SPX (-0.88%), COMP (-0.56%)



MARKET COMMENTARY – INDU 8,497.31, SPX 873.29, COMP 1,516.85

I mentioned in a previous post on my blog that we have to cancel out Friday’s 4-5% loss today (with a 4-5% gain) and break through the 20-day MA within 3 days. This still holds true. The purpose of support is to become a spring board for the markets to attempt to head higher. However, if the market reaches its 4th attempt or greater, the chances of a significant bounce diminishes. Support isn’t supposed to be used that often and we can see many descending triangles form as a result. In addition, we need new and fresh buying pressure on the markets, but I don’t see where that will come from in the near-term. Many institutions are sitting on the sidelines (or lost it all) and many hedge funds publicly stated that they will remain in cash for the rest of the year. If hedge funds make (made) up 25% of the trading volume on the exchanges, then there is no other greater influence to buying and therefore a large, sustainable rally cannot take place without conviction. By observing the talking heads on financial news outlets, we may have a near equal division among bulls and bears. I want to note that a bear market cannot end unless there is 100% pessimistic sentiment ruling the markets and a complete sense of hopelessness. That level has not been reached.


What’s interesting is the divergence among all the indices. The Russell 2000 (not picture) is performing the worst of all indices. The NASDAQ is forming a diagonal neutral range or a wedge, but is threatening to break the lows as the 2nd worst performing index. The DJIA and S&P 500 are very similar, but they too are threatening their own lows. In the midst of all the technicals, let’s not forget the dire fundamentals of GM’s demise. The uncertainty surrounding that alone will prevent the markets from rallying.

NEW HIGHS-NEW LOWS, ADVANCE-DECLINE INDICES

Both the Advance-Decline and New Highs-New Lows lines have been declining during the time spent in the current neutral range. This suggests that we may have some serious problems coming if we keep hitting new lows. New highs remain only in the single digits out of tens of thousands of stocks. You can also see that the $NYAD is only one-day from breaching its low while the $NAAD has already breached and pulled back and will likely head lower. I provided a VIX update on my blog and that too suggests that the market may be heading lower given that the indicator is forming a bullish ascending flag.


GOLD & CRUDE OIL

There’s no question that oil is heading lower due to the numerous bearish flags that continue to form. I wouldn’t be surprised if oil hits the $40’s within 2 weeks. Unfortunately for oil bulls, this is a classic technical boom-and-bust pattern. Gold has been acting strange as everything in the world decouples. Gold is currently in a neutral range or symmetrical triangle; however you want to look at it. The fact is that gold can either spike higher or lower, even though its range is bearish. The chart is too unpredictable and therefore unreliable and will not give you too many clues as to where the next probable direction will be.


THIS WEEK’S WATCH

• A possible re-test of the Oct lows.

Noteworthy Economic Reports: Mon. (Manufacturing Survey – 8:30AM, Industrial Production – 9:15AM), Tues. (PPI – 8:30AM), Wed. (CPI – 8:30AM, Housing Starts – 8:30AM), Thurs. (Jobless Claims – 8:30AM, Leading Indicators – 10:00AM, Philly Fed – 10:00AM), Fri. (none).

Noteworthy Earnings Reports (planned): You can find at the complete list here: http://www.rightline.net/calendar/index.html.