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arthur
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PostPosted: Sat Jun 11, 2005 5:24 pm    Post subject: General Markets Reply with quote

The multi-year technical breakdown, in Apr, caused hedge funds to short the markets. The short squeeze that followed, over the past month, was more powerful than expected (e.g. Nasdaq rising over 200 points in a month). Stocks, bonds, oil, and gold all participated. The speed and magnitude of the rallies, along with little volatility, made it a buy & hold market (using stops) rather than a trading market.

The three charts below are daily charts of SPX TLT and OIH (SPX and TLT from Feb 1st, and OIH from Jan 1st). The SPX Parabolic SAR (red dots) gave a sell signal Thu. I believe, SPX is in the process of topping rather than consolidating, although a run to 1,220 is possible. SPX has generally traded between the mid-1,190s and mid-1,200s recently. I believe, SPX will close the gaps at 1,174, 1,143, and 1,138 this summer.

TLT created a MACD bearish crossover late last week. Also, the Parabolic SAR gave a sell signal Thu. Next major support is at 93 1/2, which it may reach next week. There are two open upper gaps at around 96. Nonetheless, it seems, TLT started a downtrend, and should fall below 90 within two months.

OIH rallied to about 100 Fri, which has been major resistance, and 100.30 is its all-time high. Unless oil stays in the mid-$50s a barrel or rises higher, OIH should pullback. OIH is a "double winner," because it's fundamentally overpriced and very volatile. OIH Jun and Jul Max Pains are both 95.

SPX Jun Max Pain rose to 1,180 with the value of calls 40% more than the value of puts, which is bearish (since the Put/Call is a contrarian indicator). OEX Jun Max Pain is still 565, while the value of puts rose to over twice the value of calls, which is bullish. QQQQ Jun Max Pain is still 37, while the value of calls rose to over 50% more than the value of puts, which is bearish. It seems, OEX will trade around 565 next week. Major support has been 563 and major resistance has been 570. Oil prices, which are currently high, should influence market direction. The Oscillator's 20 day MAs are high and pointing down, which is intermediate-term bearish (see bottom of page one of Chart Room).

Next week is options expiration week. Also, there are many important economic reports: Mon: None, Tue: PPI, and Retail Sales, Wed: CPI, Empire State Index, Industrial Production, Capacity Utilization, and Fed's Beige Book, Thu: Building Permits, Housing Starts, Unemployment Claims, and Philadelphia Fed, Fri: Current Account, and Michigan Sentiment.

Financial markets will be influenced by the following events over the next few weeks: Earnings warning season in late Jun. End-of-the-quarter window dressing on Jun 30th. FOMC announcement also on Jun 30th. New money often flows into financial markets over the first few days of a new quarter. The stock market often rallies the holiday week of 4th of July. Q2 earnings in Jul.






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