Either way our trading range is narrowing and we should know soon which way the next move is... a move above 50 day moving average (now below 1370) would make us short term bullish, and a break down below S&P 1320 would make us short term bearish. We've navigated this downturn very well this week, so I've lightened up short exposure here and simply moved much of it too cash. Anything between 1330 and 1370 is simply white noise to me at this point (3% range) - until we make a clear move out of this range its just random trading. My gut says, some order of bounce is due here since things have been quite negative for a while and things don't move in a straight line up, or down. If there is a failure for even a cursory bounce from here, that would be quite bearish...
I'm still thinking of a rotational correction to follow past patterns - looking for any signs of strength in retail, financials, and homebuilding... the latter has at least seemed to stop going down. Or I guess coal fertilizer and natural gas can go up every day for the next 120 days. ;) We'll see how it goes. Currently swimming in US Pesos at 28.5% of fund, awaiting clarity.
You expert technicians out there - feel free to add your viewpoint in comments... I'm an amateur technician (at best) ;)
6 comments:
Here's my take.
VIX just broke the short-term downtrend around 21, and is resuming the intermediate-term uptrend.
Market volume has been light, and breadth has been bearish. So my gut says we'll test 1320 and break it, since there's been lack of conviction and buyers.
I am holding TWM and it has been quite frustrating. There are lots of negative news out there but the market has been hanging onto its gain quite well - esp. IWM. IWM has been outperforming larger cap SPY. This may be an intermediate term bullish sign. Furthermore for bulls, BKX has formed a nice hammer today and could be bottoming here.
But short term, bears still have the benefit of doubt. Short term, the downtrend started on 5/21 is still in effect - i.e. lower highs and lower lows.
hey Mark - this made Seaking Alpha this morning - you once commented that because of time demands you miss reading SA; now you are writing [a portion of] it - congrats
Jay
It has been interesting to see small caps outperform the large of late. It makes little sense since large caps are more tied to world markets and small caps to the US. Unless we see the market building a thesis that the world markets are set to weaken and hence US multinationals won't have the benefits they had in the past. But I've noticed the trend since I've held TWM since early in the fund on basis of multinationals outperforming anything tied to the US consumer.
Agree, the logical move is to continue downward - the bounces have been quite pathetic (i.e. yesterday)
As of today, 6/23/08, I believe the first down leg in SPX is over. For these reasons:
1. Financials, XLF, is quite oversold and is now exhibiting positive divergence in daily MACD.
2. Meanwhile, SPX has not collapsed and is now showing a clear '5 wave down' pattern showing that we may soon have '3 waves up' correction before resuming the bigger down trend.
3. Small stocks, IWM, has been outperforming SPX. In fact, IWM has corrected in 3 waves down so far, indicating a possibility that it may yet make another higher high above 6/5 top ( or a double top).
4. We are near the seasonally strong July 4th week.
I am now expecting a couple of weeks' bounce for the stock market, perhaps into 7/7 time frame. At that point, I may try to buy TWM again.
Meanwhile over the next couple of weeks, I am expecting energy sectors to rally even higher.
Just my 2 cents' worth as a technician.....
Thanks Jay
You are a bit more optimistic than me.
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