FSU Editorial: "Middle East Conflict" by James West 07/15/2006

MIDDLE EAST CONFLICT
by James West
buythebottom.com
forever a student of the markets
July 15, 2006

BROAD MARKETS

Net-commercial position for the Nasdaq 100 decreased slightly.
NASDAQ 100: http://buythebottom.com/ndx.html

Net-commercial position for the Dow Jones & S&P 500 was unchanged.
Dow Jones: http://buythebottom.com/indu.html
S&P 500: http://buythebottom.com/spx.html

And net-commercial position for the Russell 2000 increased slightly.
Russell 2000: http://buythebottom.com/rut.html

FED Support has been violated by all indexes:
S&P 500: 1245 – 1255 *VIOLATED
Russell 2000: 688 – 695 *VIOLATED
Dow Jones: 10 980 – 11 040 *VIOLATED
Nasdaq 100: 1540 – 1545 *VIOLATED

Moreover, the Nasdaq 100 index closed 50 points below its June reaction-low, plus there is conflict in the Middle East and oil is trading above $76 per barrel. It sure doesn’t look good for the markets.

HOWEVER, the problem with that line of thinking, in my opinion, is that most traders are thinking the same thing. And we all know when the sellers are out, the market bottoms.

From a technical stand point it will be very important for the rest of the indices to stay above their June reaction lows. The COT report is not offering much help thus far. Next week’s COT data will be very interesting, because it is going to reveal how the commercials played this very recent decline in the markets. If the commercials were buyers, then we can expect a relief rally sometime in the near future. But, if commercials were sellers, then that would be the catalyst for the markets to violate their June lows and enter into a bear market. Stay tuned…

Gold - http://buythebottom.com/gold.html
Gold continues to rip, enjoy the ride while it lasts.

Oil - http://buythebottom.com/wtic.html
Commercials continue to sell crude at these elevated price levels. I would not touch oil right now, it’s far too risky. The risk reward ratio is out of whack. Yes we can see an Iran supply disruption, alongside another million things that can “hypothetically” drive the price of oil higher. The bottom line is, commercials are sellers here, and so am I. Well, maybe I am not a seller per say, but I am surely not a buyer right now.

US Dollar Index- http://buythebottom.com/images/usd.gif (under construction)
Nothing changed here, still looking for the dollar to put in a rally, exceeding its June high at approximately 87.

Here’s to a peaceful world,

James

Updated weekly COT charts can be found @ www.buythebottom.com

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CONTACT INFORMATION
James West
www.buythebottom.com
Toronto, Ontario, Canada
Email: westjam @ gmail.com (Remove the space before and after @ when sending your email)

The opinions of FSU contributors do not necessarily reflect those of Financial Sense