Sunday, August 2, 2009

Technical Update 29.09

The last week saw the major averages push into the second cluster of resistance I have been eying since update number 14 in April. I do not expect a push much higher prior to a significant pullback. However, sentiment indicators (like the AAII survey) are not yet at extreme enough levels for an "ideal" topping process to be counted. Both Elliott Wave and DeMark patterns are suggestive of a push higher following a short pause as well.

I have had my eye on negative divergences in the currency, commodity and bond markets for signs of an impending change in direction.

The chart below shows the month's gain as the fifth consecutive for the S&P 500. It also helps to provide context to the size of this rally.

The 50 day moving average of the advance/decline line is again pushing its upper boundary.

The Chinese stock market saw some volatility last week with a 5% selloff. It was met with a rebound in the final two days of trading. As one can see from the previous bull market, betting on an end to parabolic moves in this particular market could prove costly.

Commodities put in a massive reversal mid-week, but still remain below their June highs.

I outlined a possible non-confirmation between the US Dollar and the Euro last weekend. The Dollar index has indeed pushed below its previous low, while the Euro has failed to confirm the move. This kind of a divergence has typically preceded major moves. Early in the overnight session, we can see the Euro trading higher, but still under its resistance level. Regardless, I see limited downside for the greenback with only 9% bulls ( It has almost become "common knowledge" that the US Dollar is soon to become worthless - which is precisely why it won't happen.

Have a great week!

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Anonymous said...


I really think you need to give up your support for the dollar. Faber is right. The current rally is caused by the Fed pumping money into the economy. We will be seeing high inflation soon, a continued dollar weakness, and a continued loss of confidence in the United States.

Matt Stiles said...

I'm not "supporting" anything.

I simply believe the Dollar is in no worse shape than the Euro, Pound and Franc.

Think about this: In the summer of '08, if one said there would soon be $23 Trillion in guarantees/stimulus/whatever made to support the economy, would you have guessed higher or lower on the USD?

occdude said...

This is not a confidence in the dollar thing. The dollar is crap. And it's bigger crap than all the other crappy currencies and thats precisely why it will RISE.

You see when people need to liquidate assets, they in essence sell the assets and ask guessed it, they say "gimme dollars". When you sell your overpriced house, you wont do it for gold,oil,Euros,yen etc. you're gonna want green backs. That is what we saw last fall which was a grand liquidation with people selling overpriced assets and requesting dollars en masse.

So it is precisely due to the inherant pathologies of the dollar, that in a liquidation you will see it rise until the liquidation is done AND the government finally catches up with the money printing which is not going to take that long.

stevesmith said...
This comment has been removed by the author.
stevesmith said...

Thanks for sharing this updates..

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