Chart Courtesy of StockCharts.com
The Wilderhill Clean Energy Index is testing the area above its 200 day moving average.This is a key area to watch also.
Chart Courtesy of StockCharts.com
The Philadelphia Oil Service Index (OSX) is also testing its 200 day moving average.
Chart Courtesy of StockCharts.com
The Amex Oil Index (XOI) is also its 200 day moving average.
Technical Summary:
Chart Courtesy of StockCharts.com
Rally Flags Waving
We're at that key point in a market where the bulls and the bears are ready to wrangle,and the line in the sand is the 200 day moving average for the major indexes.
Last week, the market failed to move back above the key line convincingly, with the actionbeing muddled by options expiration.
But, the start to this week could be interesting, as the pre-market futures werepredicting a nice little rally at the start.
We remain skeptical, but are not blind to the possibility that the market is finally soldout and that a rally is on its way.
Last week did have one day of overwhelming up volume to down volume, although tradingvolume was neutral at best.
What would make us more positive? Two things. Another big up day in the next couple ofdays with a 9 to 1 up/down volume ratio, and a two week two to one advance decline ratioon the NYSE, would be very nice.
Why so skeptical are we? Because we've seen 20 to 1 up volume/down volume days in theNasdaq before, as there were last week, that have led to very little, due to the fact thattrading volume was low.
As we noted last week, the stock market is now defending the 200 day moving average. Themarket bounced right on schedule on 6-14, as we expected, due to the fact that the majorindexes fell below their 200 day moving averages on 6-13.
When these events happen, it puts traders in a tough position, as they have to decidewhether to heed the sell signal or to hope that the market bounces off of thissupport/resistance area.
Usually, you get some bouncing around the average over a few days, before the marketdecides what to do, as we are seeing right now.
No matter what, the key is that technically, the market is now at a point that could shapethe next several months of trading.
The S & P 500 remained below the 1245-1260 area, and the Nasdaq's 2137 support levelalso got taken out handily.
That means that this is still no time to be particularly bold about making bets on thelong side. But it's not a time to ignore the possibility that a significant rally maystart within the next few days, since the market is clearly oversold.
Commodities Weaken
Commodities pulled back overnight.
Crude oil continued to test the support of the $65-70 area.
Gold was back near $570, but the real key is what happens at $600 on the up side, and $550on the down side.
Check our energy section for bond, gold, dollar, and currency recommendations.
What To Do Now
It's time to keep an open mind, and not make big bets on either side. The action in thenext few days will make the decision for us.
Investors should stay on the sidelines and wait for confirmation of a sustainable trend.Raise cash. Build a shopping list. Be patient.
Our ETF trading systems have been adjusted accordingly. The Fallen Angels have newrecommendations as well.
Remember, our Fallen Angels portfolio is designed for those with a longer term time frame,and offers both long and short recommendations.
Check all our sections daily. See tech, biotech, Fallen Angels, and timing systems forthe latest adjustments. Our ETF trading systems for energy, Spyders, Small Caps, andtechnology have also been updated.
Chart Courtesy of StockCharts.com
Sentiment Summary:
More Volatility
The options market ended last week showing signs of major fear, which suggests at least astrong opening on Monday.
But last week was very volatile, as Thursday's rally cut deeply into the wall of worry onWall Street.
On Friday, though, the pros and the public seemed to be equally worried, which is a goodsign, as far as these indicators go these days.
Healthy advances tend to rise on the back of worry warts who buy put options when themarket falls. But, as the bear market that ended in 2003 showed over and over again,rising put/call ratios are not enough, in and of themselves, to keep a bull market going.When the market falls and put option buyers are absent, it is often a sign that moreselling is coming.
The CBOE Put/Call ratio checked in at 1.27 on 6-16 falling from 1.12 on 6-14. A consistentstring of low readings can be a sign of excessive optimism and often signals a top in themarkets. Readings below 0.5 are of concern, but not as serious as readings below 0.40.Readings above 1.0 are bullish. The numbers cited here are meant to be evaluated on aclosing basis.
The CBOE P/C ratio for indexes checked in at 2.35. Numbers above 2.0 as the market sellsoff, often lead to rallies. Readings below 0.9 suggest too much bullish sentiment, just asreadings above 2 are usually required to mark major bottoms.
The VIX and VXN had readings of 17.25 and 21.69, both registering precipitous drops afterhitting very high levels for the current climate. When these indexes begin to rise, it isa sign of concern as rising volatility indexes suggest that an acceleration of theprevalent trend is on its way. A fall near or below 20 on VIX and 30-40 on VXN isconsidered negative, a fact that is usually confirmed when the volatility indexes begin torise. Readings above 40 and 50, respectively, are often signs that a bottom may be closeto developing.
The Duarte Overbought-Oversold index remained at 25%, giving another buy signal, its thirdin a row. This is getting a little more weight now. But still, use this signal withcaution, as durin g a bear market, these signals are usually wrong. Readings of 80 areoverbought and 40 and below are oversold.
NYSE insiders were sellers of stocks for the week of 6-2-06. NYSE insider short sales arestill at very low levels. When NYSE specialists raise their short sales, and sell stocks,risk increases dramatically. There is a two week lag for these figures.
Market Vane's Bullish Consensus fell to 55% on on 6-16-06, falling but remaining neutralafter several consecutive sell signal levels. This indicator has been calling for apullback in stocks for several weeks. Buy signals occurr when the indicator falls to 40%or less.
Market Moves
Exxon Remains In Trading Range
Exxon Mobil (NYSE: XOM), the stock market's biggest money printing machine can't buyrespect from traders.
Chart Courtesy of StockCharts.com
In another blow to the "good earnings = good stock" crowd, Exxon Mobil despiterewriting the book on multi billion dollar profit quarters, remains in the doldrums.
We'll see if the news that the fact that Exxon's Russian oil flow from the Sakalin projectcan ignite the stock.
So far, nothing doing. And if oil starts retreating, we would expect a continued underperformance for the stock, despite what are likely to be sterling earnings for at leastone or two more quarters.
What would be more interesting, would be if Exxon missed its earnings expectations at anytime in the near future.
If that is combined with a major break in the price of oil, life could get rough for Exxonshareholders.
Chart Courtesy of StockCharts.com
The Amex Biotech Index (BTK) may be a source of relative strength if a market rally canshow some staying power.
Chart Courtesy of StockCharts.com
The Amex Pharmaceuticals Index (DRG) is still in no man's land.
Chart Courtesy of StockCharts.com
The Philadelphia Semiconductor Index (SOX) is trying to bottom.
Chart Courtesy of StockCharts.com
Small stocks are groping for a bottom.
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Disclaimer: The financial markets are risky. Investing is risky. Past performance does not guarantee future performance. The foregoing has been prepared solely for informational purposes and is not a solicitation, or an offer to buy or sell any security. Opinions are based on historical research and data believed reliable, but there is no guarantee that future results will be profitable.
