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Range-Bound Market

 
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PostPosted: Sat Jul 22, 2006 9:38 am    Post subject: Range-Bound Market Reply with quote

The first chart shows NYSI (red line) and the NYMO 50-day MA (blue line) reached low enough levels in June for an SPX (black line) intermediate-term bottom. Also, the CPC 21-day MA (above price chart) remains at a high level, while the CPC 50-day MA (below price chart) continues to make all-time highs. However, there's a great deal of confusion in the market, because core CPI was slightly worse than expected over the past three months. Consequently, volatility may continue, perhaps at least until the FOMC meeting August 8th.

The second chart is a QQQQ (large cap tech ETF) weekly chart that shows RSI (above price chart) fell below 30 for the first time since the 2000-02 bear market (vertical lines). Also, the heavy recent volume may indicate capitulation, although it may be short-lived, similar to the third vertical line. Consequently, QQQQ may outperform other major indices, and either trade in a range or rise somewhat within the next month or two.

The CPC is a sentiment indicator that's currently market bullish. Also, the following is a recent comment by Helene Meisler on Thursday: "Finally we have a sentiment gauge that is extreme! The bulls are at 23.85%, the lowest percentage since April 2005. The bears are at 57.9%, the highest percentage since February 2003." However, investor surveys have been volatile week-to-week. It seems likely, SPX will continue to make lower highs throughout the summer. Therefore, SPX, which closed at 1,240 Friday, may not rise much above 1,260, before falling again.




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