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Broad Markets The Russell 2000, S&P 500 and Dow Jones all held support after re-testing their June reaction-lows. While the Nasdaq-100 broke its June reaction-low in early July, it is now also re-testing that level, only from the downside, meaning that level is not support but resistance. Last week I turned bearish in the short-term after I saw the market struggle at its lows and also when I saw that commercials were sellers during a down-trending week. (This is unusual behavior for the commercials and is considered bearish). On Monday, however, the markets did not violate their June lows on a closing basis and a rally ensued. If the market is not going down, sooner or later it is bound to go up. And so I quickly turned bullish on the market in the very shorter-term. I guess what I am really trying to say is, wait for market confirmation. This is where the idea behind buying higher highs and selling lower lows comes from. For example, I would never initiate a sell order on Monday before I saw some sort of new low. Whether a violation of the June lows or a violation of Friday’s low, I always wait for the market to confirm my strategy before implementation, so to speak. After all, there are countless of technical analysts, market forecasters, etc, that all have various ideas about where the market is headed. At the end of the day only one of them is right, and that is Mr. Market. Net-commercial position for the Russell 2000 and Nasdaq 100 increased slightly, 543 and 1 417 contracts respectively. NASDAQ 100: http://buythebottom.com/ndx.html and Russell 2000: http://buythebottom.com/rut.html Net-commercial position for the S&P 500 decreased a modest 10 155 contracts or approximately 3 billion dollars S&P 500: http://buythebottom.com/spx.html Net-commercial position for the Dow Jones increased 2 848 contracts or roughly 310 million dollars. Watch the 61.8% Fibonacci level on the Dow Jones and S&P 500. If the market successfully breaks above these levels we may see new highs on the Dow Jones. But without commercial participation we won’t stay there for long, if we ever get there in the first place. In my opinion the catalyst for such an event could very well be a FED pause in August. But there is no need to get ahead of the market, first of all the Dow has to break above 11 295 (61.8% fib level), and the S&P 500 has to break above 1286 (61.8% fib level). If the indexes do not break and remain above these levels, the market is either going to trade sideways or re-test the June-July lows once more. I have to stress, that – longer term – any rallies are inevitably setup to fail. The market also made marginal new highs right before the 1987 crash. So watch out. Furthermore, the Russell 2000 is lagging the other indexes, with short-term resistance in the 702 to 705 range. I would like to see the Russell 2000 break above this range before I consider any trades on the buy-side. Major
support for the market averages is at their June-July
reaction-lows. The numbers are as follows: Gold
- http://buythebottom.com/gold.html Oil
- http://buythebottom.com/wtic.html US
Dollar Index- http://buythebottom.com/usd.html ©
2006 James West Updated weekly COT charts can be found @ www.buythebottom.com Mailing
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