Chart Courtesy of StockCharts.com
The Wilderhill Clean Energy Index has made a new low to end last week, highlighting thefickle nature of the sector.
Chart Courtesy of StockCharts.com
The Philadelphia Oil Service Index (OSX) has continued to act well, but has run intoresistance near the 50 day moving average.
Chart Courtesy of StockCharts.com
The Amex Oil Index (XOI) is the strongest sector index in the energy complex at themoment. It is now within reach of its all time highs.
Technical Summary:
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Rally Fades
The rally that started on 6-29 fizzled last week, as several major indexes made new lows.
Especially tough was the action in the Nasdaq 100 and Nasdaq 100 both of which made newlows. The S & P 500 fell below its 200 day moving average.
The action calls into question the momentum thrust that occurred on 6-29, as the up volumeto down volume ratio exceeded 9 to 1 on the NYSE for the second time since June 15th andthe third time for the Nasdaq.
This is what Martin Zweig described as a momentum thrust. Usually, two days of 9 to 1 upvolume to down volume are good enough to launch a bull market.
What's the down side risk? If you believe what the Fed says than bad data, or anythingthat suggests that inflation is persisting can derail this market.
As we noted after the momentum thrust, though, in the post 9/11 world, geopoliticalsurprises can derail any rally.
Commodities Perk Up
Commodities were volatile in pre-U.S. trading.
Crude oil is still testing the $75 area with the $80 resistance level proving tough.
Gold is still testing the $600-$675 area, with prices responding to news reports fromIsrael.
Check our energy section for bond, gold, dollar, and currency recommendations.
What To Do Now
See all our sections for new stock picks. The key remains to find the strong stocks in thestrong sectors.
Traders and investors should be scouring their shopping lists for signs of strength, andshould be building positions in strong stocks.
Investors should also start looking to build positions, albeit less aggressively,concentrating on strong stocks.
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:
Some Caution Noted In Options
Options traders were cautious going into the weekend.
We like to think of put options as a potential powder keg of buyers, ready to explode whenthe market rallies.
Still, at this point, options are less important as leading indicators.
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 1.23, an excellent number. A consistent string oflow readings can be a sign of excessive optimism and often signals a top in the markets.Readings below 0.5 are of concern, but not as serious as readings below 0.40. Readingsabove 1.0 are bullish. The numbers cited here are meant to be evaluated on a closingbasis.
The CBOE P/C ratio for indexes checked in at 1.81, again rising but remaining below the2.86 on 7-5. Numbers above 2.0 as the market sells off, often lead to rallies. Readingsbelow 0.9 suggest too much bullish sentiment, just as readings above 2 are usuallyrequired to mark major bottoms.
The VIX and VXN had readings of 18.05 and 24.62 both rising. A fall near or below 20 onVIX and 30-40 on VXN is considered negative, a fact that is usually confirmed when thevolatility indexes begin to rise. Readings above 40 and 50, respectively, are often signsthat a bottom may be close to developing.
The Duarte Overbought-Oversold Gauge (DOOG) fell to a reading of 15%, after it fell tozero on 6-23 staying in buy signal territory, for its fifth week in a row.
NYSE insiders were buyers of stocks for the week of 6-30-06, reversing several weeks ofselling. NYSE insider short sales are still at very low levels. When NYSE specialistsraise their short sales, and sell stocks, risk increases dramatically. There is a two weeklag for these figures.
Market Vane's Bullish Consensus fell to 63 % on on 7-14-06, again remaining neutral afterseveral consecutive sell signal levels. This indicator has been calling for a pullback instocks for several weeks. Buy signals occurr when the indicator falls to 40% or less.
Market Moves
Google Tests $400 As CME Pulls Back
Google (Nasdaq: GOOG) and shares of the Chicago Mercantile Exchange (NYSE: CME) are bothfalling.
Chart Courtesy of StockCharts.com
Google is a rarity these days, as it's a tech stock that had been moving higher until thelatest Middle East crisis erupted.
But, even Google has been falling as the rockets have been flying.
More interesting is the fact that CME shares have also been falling of late, afterreaching the 500 area in late June.
CME shares have been excellent predictors of the price of gold and oil, with bothcommodities having been closely following the general trend of the exchange's shares.
The action in these two stocks over the next few days might offer useful clues as to whatthe rest of the market does, as the situation develops.
Persistent weakness in these two stocks, though, if there is a quicker than expectedresolution to the current situation, might be a sign of caution for the overall stockmarket.
Chart Courtesy of StockCharts.com
The Amex Biotech Index (BTK) has been falling with the market.
Chart Courtesy of StockCharts.com
The Amex Pharmaceuticals Index (DRG) is trying to break out of its trading range, but hasnot been very successful.
Chart Courtesy of StockCharts.com
The Philadelphia Semiconductor Index (SOX) is weaker than the market.
Chart Courtesy of StockCharts.com
Small stocks showed some life once again on 6-30, but have done little since then.
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