An Ugly Week
Or perhaps I should say WEAK! The market couldn't make any friends, and every rally was met with selling. To make matters confusing, though, the NYSE breadth was largely positive during the week, and the NYSE Summation index is still quite positive.
The market has been looking pretty bad, and now pessimism is starting to build. We could well be nearing an important juncture. At the very least, we're near a bounce.
DOW: If we get a rally too early, the Dow looks like a short on a test of the break down.
DJA: The Dow Composite looks like there's more downside. Another reason to short a premature rally.
DIA: I'm with Doug, but I'm hoping for a sharp bounce. Sometimes, hope is a bad sign.
DJT: The Tranny's are telling us that there may be economic trouble ahead.
DJU: The Utes agree with the Tranny's.
SPX: The SPX is overdue a bounce, and I'm hoping that the Nasdaq pulls it up after touching it's targets. Nothing too exciting longer term.
SPX: The 50 Week is down around 1085. I'll just tell you that we're headed there, though it may be after a bounce. We may be headed lower.
NDX: The Nasdaq is close to a target and I personally think that it's only in a corrective decline and thus has a nice rally ahead of it, and after another pull back another better rally after that.
QQQ: The Q's might be a buy on a bit more pullback.
COMPX: All of these techs are at or near targets. We know from experience that this often brings a bounce and it could be a big one.
PSE: The Pacific Techs are near a target.
SOXX: The Semi's are there.
SMH: I'm thinking that the holders may make sense to buy.
SMH: Yup, there's some support for a bounce below, alright.
HUI: I like Gold, but I don't like this chart. Use care.
XAU: The XAU looks better than the HUI.
NIKKEI: The Japanese Market looks like it needs to correct for a while. So far, to me, that's all it will be.
XAX: Look at the American! This shows you just how many cross currents there are in this market. If you've been confused, you haven't been alone!
DJUSHB: I'm pretty sure that the Home Builders are done.
BKX: The Banks need to find their feet here. If they break down, I think that you can bet on the dollar getting weaker and interest rates falling.
DXY: I'm with Doug. The Golds should look better with this ugly Dollar chart. I note that the TYX has broken down (that's the long bond yield) and I think it goes all the way down to 4.8%. If so, the Dollar has more weakness and the Golds may play catch up.
BBH: The Biotechs have been the object of considerable speculation. That's usually a big warning sign.
CMR: The consumers are trying to base. Perhaps with a stronger bond market, consumption will improve?
CYC: The decline in the Cyclicals looks impulsive, so longer term, this is not the place to play.
DRUG: The Drugs are in a pretty serious down trend. Longer-term, investors should keep an eye on these, as they are starting to look cheap. 10% lower may be all we get.
XBD: The Broker Dealers are likely to get clogged with shorts here soon. They also have a ton of downside potential.
SCH: If they whack Schwab, I think that there'll be a bounce.
MVR: The Retailers don't look so good. Is the consumer tapped out?
EP: Look at our El Paso go! Nice play, so far.
LU: Lucent may be headed lower, but I think it is testing, not entering a new bear move.
WMB: Williams is looking good.
PKD: So is Parker Drilling.
AMGN: Amgen looks good on a pullback, but keep one eye on the BBH.
ORCL: I hate to see "name" stocks seriously break down.
TIWI: Buy Telesis at the open if it's not up more than 1%.
WOR: I hate to say it, but the Steel stocks do look good. I'm with Doug. There's risk, but in a market hungry for an idea that works, these can play.
Summary:
There's no sugar-coating it. This market is not looking good. Finally, though, we are seeing some rising pessimism. I fear we have a bit more weakness, but I'm pretty sure that we get a bounce.
It is important to remember that this is an election year and the odds favor the market coming on for the last several months, unless something dramatic happens. Often, we'll see some strength at the end of July, too. I'm thinking that this year may look a lot like the election year of 1984. If I'm right, we may a primary low shortly, then a secondary low next week, followed by a dandy rally into August. In 1984, they got a 10.6% rally out of the July low. No guarantees, but let's keep that in mind lest we become too pessimistic.
The chart below compares the '84 election year with the current. I'd expect that we are a little bit out of phase, but none the less, it looks like August could be a pretty good month for the market.
Be Well, and Trade Smarter Than the Average Bear!
Mark, Doug, and Holly
-The ChartSmarts Team
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