You have to give it to the bulls. They pushed back a major bear attack last week. NDX/QQQQ held their 200 dma's and both the COMP and the RUT closed this week above that level as well. It would have looked better if the RUT had managed to break 750, so there is still a big question mark going into next week and the all important jobs report.
The other major problem is still the financials. I'm not sure that group can take off until XLF closes its March gap at 23.45 (chart). There have been too many attacks on the 24.65 level (gap open) and another failure today at 50% (25.23).
Hedge funds that were over-invested in commodities put some money to work in technology at the end of May, so as not to look too stupid if oil falls off a cliff in June. Nevertheless, as far as the S&P 500 is concerned, we are still in a bear market and the recent rally is still a bear flag on the monthly chart. The lousy market breadth of this week's advance suggests tepid participation. In fact, we have not had a single +2000 day on the NYSE advance/decline since April. And then of course, there was the keen interest in bonds on Friday with yields on the ten year hitting 4.1%.
If they decide to unleash more upside, COMP 2602 and the January gap close would be on the radar. The one thing bulls have going for them, or had going for them, was the sharp reversal in investor sentiment early last week. Those readings have been a roller-coaster, from extreme bearishness in March, to a good degree of bullishness by mid-May, back to bearish the week before last. The next release is set for Tuesday, it will be interesting to see if we flipped back up.
As far as equity put to call ratios are concerned, bulls have gotten enthusiastic once again with many reads between 160 and 200 on ISE and CBOE in the mid 50's. In other words, we have a mix of everything out there, making it very difficult to get a clear picture. When that happens, go back to the primary trend, which as far as the S&P is concerned is still down, or better yet stick to day trading.
The other major problem is still the financials. I'm not sure that group can take off until XLF closes its March gap at 23.45 (chart). There have been too many attacks on the 24.65 level (gap open) and another failure today at 50% (25.23).
Hedge funds that were over-invested in commodities put some money to work in technology at the end of May, so as not to look too stupid if oil falls off a cliff in June. Nevertheless, as far as the S&P 500 is concerned, we are still in a bear market and the recent rally is still a bear flag on the monthly chart. The lousy market breadth of this week's advance suggests tepid participation. In fact, we have not had a single +2000 day on the NYSE advance/decline since April. And then of course, there was the keen interest in bonds on Friday with yields on the ten year hitting 4.1%.
If they decide to unleash more upside, COMP 2602 and the January gap close would be on the radar. The one thing bulls have going for them, or had going for them, was the sharp reversal in investor sentiment early last week. Those readings have been a roller-coaster, from extreme bearishness in March, to a good degree of bullishness by mid-May, back to bearish the week before last. The next release is set for Tuesday, it will be interesting to see if we flipped back up.
As far as equity put to call ratios are concerned, bulls have gotten enthusiastic once again with many reads between 160 and 200 on ISE and CBOE in the mid 50's. In other words, we have a mix of everything out there, making it very difficult to get a clear picture. When that happens, go back to the primary trend, which as far as the S&P is concerned is still down, or better yet stick to day trading.
This entry was posted
on Saturday, May 31, 2008 at 5/31/2008 11:00:00 AM.
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