Indicator Watch

(June 28th) The Dow Jones Industrial Average fell for a second straight week and ended last week down 101 points to 8438. The S&P 500 slipped 2 points to 919, but technology stocks continued to outperform and the Nasdaq Composite Index climbed 11points to 1838. It is up 45% since early March. This week is likely to see light trading because markets will be closed July 3 for Independence Day. Thursday's market could be volatile because the Labor Department will issue its report on unemployment and nonfarm payrolls. Normally, that report comes out the first Friday of the month. However, we stick to our bearish outlook for the near-term for the same reasons we have mentioned last week. Also, two weeks ago, the Standard & Poor's 500 made an important move when it poked its head above the top of its early June trading range only to close back within that range. For technical analysts, a failed breakout is a bearish warning sign that often foretells a move downward. This came true last week and now the index has broken its rising March trendline to the downside. Another warning sign comes from our Global Futures Dumb Money Index, which has replaced the oscillator of the Global Futures Trading Index. This indicator shows that the so called "crowd" is too bullish at the moment. We would also like to remind you again that the the xxx-week crash cycle is due this week (week of July 3rd).

(July 5th) On Thursday the xxx-week crash cycle appeared right on time and the Dow lost 223.32 points, or 2.6 percent, to close at 8,280.74 – the biggest one day loss since April 20th. The S&P 500 fell 2.9 percent and the Nasdaq shed 2.7 percent. For the week, the Dow dropped 1.9 percent, the Standard & Poor’s 500 Index fell 2.5 percent and the Nasdaq skidded 2.3 percent. Of course, according to Wall Street experts the ostensible reason for the sell-off was a weak jobs report that muzzled all the green-shoots talk. However, we stick to our bearish outlook for the near-term for the same reasons we have mentioned last week. A small positve signal comes now from our Smart Money Flow Index, which held up quite well during last week's selling. But Odd-lots are showing no signs of panic yet, and the Trend Trader Index closed below its 20-day moving average of lows, signaling a down trend and it is therefore our guess that we will see a few more grizzlies around.

(July 12th) Last week the grizzlies showed up right on time and stocks racked up their fourth straight down week. For the week, the Dow lost 1.6 percent, while the S&P skidded 1.9 percent and the Nasdaq dropped 2.3 percent. The S&P 500 rallied as much as nearly 40 percent from a fallen back 7.1 percent since its peak on June 12.
Of course according to the Wall Street experts the stock market has been correcting on jitters about the earning season now underway. Anyway, the market is still in a downtrend according to the Trend Trader Index, but considering that the latest declines have occured on low volume and relatively tame downside volume (Upside-Downside Volume Index) there is a good chance that the correction is close to ending. The S&P 500 closed below its 200 day moving but failed to close below the 78,6% Fibonacci Retracement (878,49) which indicates a strong support level. Also a number of our indicators (Bottom Indicator, WSC Index Oscillator, Market Timer Index) show that the market is already in an oversold condition and the numbers of increasing bears (Percentage of Bulls Market Vane) among Wall Street indicate rising pessimism and now there is a good chance buy agressively into the market. Stay tuned!

(July 19th) The Standard & Poor’s 500 Index finished Friday at 940.38, up 7% for the week – the biggest weekly advance since March. The Dow Jones Industrial Average jumped 597.42 points to 8,743.94, or 7.3 percent while the Nasdaq gained 7.4 percent.
On Monday the bears took the Standard & Poor’s 500 Index down to 875.32 on a intraday basis, to retest the Fibonacci Retracement and have triggered heavy buying, wiping out all the short sellers.
The so called Market Experts explained the massive rally after Goldman Sachs Group Inc. and Intel Corp. beat analysts’ estimates and reports on manufacturing and retail sales signaled the economy is improving.
The Market closed above its 20 day moving average highs and is therefore in a powerful uptrend according to our Trend Trader Index and our Wallstreet Courier Index Oscillator is still bullish. Of course after massive gains last week, the market is heavily overbought, especially if we look at the daily Upside/Downside Volume Ratio, the daily Advance/Decline Ratio and the Global Futures Trading Index. Therefore we think that the market will need a few attempts to break through the strong resistance level at 946. We expect the bullish xxx-week cycle this week (week of July 24th) could be the catalyst and Contrarians should take advantage of this situation and buy agressively into any weakness.

(July 26th) Last week the bullish 7-week cycle appeared right on time and the S&P 500 added 4.1 percent to 979.26. The Dow average jumped 349.30 points, or 4 percent, to 9,093.24, completing the steepest two-week rally for the Dow Jones Industrial Average since 2000 extending its rally since July 10 to 12 percent. The Nasdaq Composite Index gained 4.2 percent to 1,965.96. Its 12-day winning streak, the longest since 1992.
No need to mention the so called Market Experts on CNBC explaining the huge move of the market as companies beat profit estimates and an increase in home resales telling investors the recovery is at hand.
However, the big question of course is whether stocks are able to push higher. Like last week the market is in an extremly overbought condition if we have a look at our Advance-/Decline Indicators (Advance Decline Ratio Daily, Advance/Decline 20 Days Momentum), The Global Future Trading Index and the Upside/Downside Volume Ratio. But the tape is still extremly strong according to our Trend Trader Index and The Global Futures Trend Index. We expect the bullish xxx week cycle this week (week of July 31th) will help the market to overcome the overbought condition. Also the Percentage of Bulls Market Vane reached one of the lowest level since 2002 telling us there are still enough bears around which haven't been invested yet. Explaining that the Upside Volume is still rising (Upside/Downside Volume Index ) after that impressive gains. And there is an old saying: Volume breaks before price.
Another positive sign comes from the Global Future Long Term Trend Index (Chart of Interest) which worked out very well in the past for the S&P 500. So we stick to our bullish outlook for a while but the pace of ascent is likely to slow.

(July 31th) On Thursday the xxx week cycle appeared right on time helping the market to overcome their oversold condition an key indices reached their highest closing levels since November, when the downturn began. For the week the gains were pretty decent. The S&P 500 rose 0.8 percent to 987.48 and the Dow Jones Industrial Average rose 78.37 points, or 0.9 percent, to 9,171.61, extending its monthly advance to 8.6 percent, the biggest since October 2002.
The big number of the week was the GDP report on Friday, which showed the economy contracted at a 1 percent annual rate in the second quarter and beat economists' expectations of a 1.4-percent decline. No need to say that the guys from CNBC said, that the market had been already anticipating that in the past few days, rallied on the rumor and therefore there was some selling on the news on Friday.
However, according to our Trend Trader Index and the The Global Futures Trend Index the market is still in a powerful uptrend which is confirmed by Upside/Downside Volume Index. What we worry about is, that Dumb Money is heavily buying Call Options (ISEE Equity Options Call/Put Ratio) and Smart Money is starting to sell slightly into the market (Smart Money Flow Index). Also the Trin Index turned into bearish territory and like last week the market is still in an overbought condition (Advance/Decline 20 Days Momentum). For long term we stick to our bullish outlook according to our Global Future Long Term Trend Index (Chart of Interest). But for the short term we guess that the market is out of fuel and might will retest some support levels (Fibonacci Retracement) before breaking through to powerful resistance of 1003 (161.80% Fibonacci Retracement) at the S&P 500 (Chart of Interest).