Short-Term Horizontal Support Holds
The following is an excerpt from the June 26, 2012 blog for Decision Point subscribers.
The market trickled up today after suffering a steep drop yesterday. We saw climactic behavior on a few of our ultra-short-term indicators yesterday, so we suspected we might see a baby bounce.
Stocks: Based upon a 05/15/2012 Thrust/Trend Model neutral signal, our current intermediate-term market posture for the S&P 500 is neutral. The long-term component of the Trend Model is on a buy signal as of 1/5/2012, so our long-term posture is bullish.
Short-Term horizontal support at the June 12th low held today as price bounced off of it today. Volume decreased and the PMO continued lower.
The ultra-short-term CVI rebounded out of somewhat oversold territory into neutral. The STVO has completely cleared overbought conditions and also sits neutral. The intermediate-term VTO remains somewhat overbought and could still use some relief.
Short-Term STO-B and STO-V are both neutral like the STVO above.
The ITBM and ITVM both are neutral and mixed as the ITBM has topped but the ITVM is still rising.
A look at the Thrust/Trend Model chart illustrates how very close we are to switching to an intermediate-term buy signal. Should the PBI cross above its EMA we will see a buy signal. However, the Trend component is pretty far from confirming any switch as the 20-EMA has quite a bit of ground to make up before a positive crossover the 50-EMA. A decent rally would need to be in place as price has to reach above both the 20/50-EMAs. Consequently if the signal changes, it will be vulnerable to whipsaw because the Thrust component (i.e. the PBI and PMO) would be in control and should either the PBI or PMO cross back below their EMAs, the signal would move back to neutral.
Conclusion: The daily bar chart reflects a possible bottom as short-term horizontal support held. Neutral indicators are not shedding much light on where the market is directed but they do tell us that the market is still vulnerable to another decline.
Like yesterday, the dollar briefly broke out above the declining tops resistance line, but ultimately closed below it. A small bull flag does seem to be forming and the PMO though still declining, is flattening out in possible anticipation of a direction change.
Gold dropped back down after bouncing up off of declining tops support. Price did remain above last week's low but today saw a negative PMO crossover. We've annotated a bullish intermediate-term double-bottom.
USO continues to oscillate above horizontal support, but is beginning to form a possible bearish reverse flag. The PMO continues to fall.
If horizontal support on the daily chart above did not coincide with the strong horizontal support on the weekly chart, I would really be thinking sell-off. But it appears to be strong support. A possible outcome would be a breakdown below this horizontal support and a move to support at the 2009 low.
Bonds continue to bounce around hugging the rising bottoms support line. The PMO continues to fall on declining volume leaving us less than optimistic about this support holding. Stronger support would likely be found at October/December highs.
Technical analysis is a windsock, not a crystal ball.
About Erin Swenlin Heim
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