Market Timing – Weekly Stock Market Strategy – July 2010
Posted: August 26th, 2010 | Author: admin | Filed under: Uncategorized | Tags: Dips, Fridays, Head And Shoulders, Holiday Weekend, Level Of Significance, Lipper Mutual Fund, Lows, Market Sentiment, Market Timing, Maximum Pain, Mutual Fund Performance, Performance Indexes, Rallies, Rebound, Retracement, Stock Market Strategy, Target, Term Trend, Trend Indicator, True Textbook | No Comments »Weekly stock market strategy updates that went out to subscribers during July 2010. To receive current weekly update sent to your email, click on the FREE TRIAL link at the top of the page.
Weekly Market Update 7/3/10
Well the market could not close above June 25th high and it soon became apparent that 104 on the SPY would be tested. It was breached on Wednesday. Despite the fact that some of the indexes have lost almost 10% over the past two weeks, I do not believe we have seen the last of this sell off. Market sentiment is poor but not bad enough that we should expect a rebound. Last week I mentioned a target of 87 based on a break in a head and shoulders formation. If this market were to act like a true textbook head and shoulders we may see a failed test of the 104 level on the SPY. That should now act as resistance. Looking at the charts the next support level of significance is near 94 on the SPY. This would also be a 50% retracement of the move that started off the March ’09 lows. I have written in the past how I use RSI as a long-term trend indicator. Well with Fridays close the 14-period RSI on a weekly SPY chart closed below 40. To me this officially makes this a bear move. It also makes it more advantages to sell rallies than to buy dips.
Our Quarterly ETF portfolio has taken a beating. The good news is the pain should be over soon. We will be adjusting this portfolio in next week’s newsletter. An early look at the Lipper Mutual Fund Performance Indexes indicates this portion is likely to go 100% into cash.
Weekly Market Update 7/11/10
What a difference a week makes. I am glad I had not placed any new trades based on the bearish moves prior to the holiday weekend. This market feels like the professionals are moving the market around to inflict maximum pain on the average investor. First we have the unexplainable flash crash on May 6th. Then the markets test the 104 level on the SPY during the last week of May and the second week of June. This should have confirmed 104 as support. Then the markets make a higher high the week of June 14th. This indicated maybe a bottom was in place and we could expect higher prices. The next week began a sell off that took the market below support at 104, and indicated the possibility of a new leg down. This week the market reverses and gives us its best performance in over a year. I am not sure what to make of this weeks move. I am glad we have been mostly on the sideline except for the Quarterly ETF portfolio, and when we exit those positions on Monday we will be 100% in cash.
Typically a failure of a head and shoulders can be a bullish pattern itself. But I do not trade off chart patterns alone. The interpretation is to subjective for me. Last week I stated that the RSI had indicated we are in a bear market and I will stick by that until the RSI tells me otherwise.
Weekly Market Update 7/18/10
The SPY seems to have found some resistance near 110. The highs Tuesday thru Thursday were very close to that level. Friday the market decided to sell off and closed down 2.5% for the day. Typically a new bull move would brush off its first overbought readings and just keep moving higher. That did not happen this week and confirms my suspicions at least momentarily.
Two weeks ago I indicated we are in a bear market. I would like to take a moment to clarify and adjust my opinion slightly. I have stated previously that a RSI (14 period) close below the 40 level indicates a bear market move. On a daily chart I would call this an intermediate bear move. The SPY RSI closed below 40 on May 6th, the day of the flash crash. The RSI, on a daily chart, has not traded over 60 since that time so we are still technically in an intermediate term bear move. I also look at the RSI on a weekly chart to indicate long term moves in the market. During the week of July 2nd the weekly RSI closed below 40. On a weekly level I would like to see the market trade below the low of the week that generated the RSI reading below 40. We did not have that so the long-term RSI bear signal was not confirmed. However a close below 101.13 would confirm a new long-term bear move.
Weekly Market Update 7/25/10
The SPY managed to close over resistance at 110. This is a good short-term sign for the bulls. The next level of resistance will be between 112 and 113. I think this will be a much more significant level than 110.
About 85% of the S&P 500 companies that have reported earnings in the last two weeks have beaten estimates. Yet the SPY is up only a little over 2% during that same time frame. The markets appear to have run up in anticipation of a positive earning season. Now the question is, “What will drive the markets from here?” I am not going to try and pretend I know the answer. However if the market struggles from this point, the implications would clearly be a negative for the markets going forward. Maybe letting the Bush tax cuts expire will be the catalyst. Raising taxes in this fragile economy, I think is a recipe for disaster. Some of the news stories I am reading are implying that the Bush tax cut debate will be used to sway votes in the elections this fall. Are our representatives in Washington so psychologically disturbed they are willing to risk an economy, on the edge of a depression, to garner a few votes?