Market Summary

The market does not paint a pretty picture. Technically speaking it was a weekly key outside reversal to the downside and the candlestick pattern is known as a bearish engulfing weekly candlestick. The last time we had a week like this was the week of the April 26-30 where we opened higher on Monday and went down all week. Same thing happened last week where the Chinese made the announcement that they would ease currency exchange rates for their currency and the market gaped open higher Monday and sold off all week long. Is this the beginning of a bear market? The market is already weak and deteriorating and the odds of a double dip increase as the market goes lower. Sentiment is bearish. Click on image to enlarge.

Gold is again the leader to the upside up nearly 12% for the YTD period. For the week the China ETF FXI was up the most. FXI could be a stock to watch as a global economic bellwether. Click on table to enlarge.

Market Summary

At the mid year point what can we expect from the rest of the year? Sentiment in the short and intermediate term is bullish and we have made a higher high and higher low on the daily chart. Technically that is all good but what really moves the market is the fundamentals of the economy. Jobs, the housing market, government spending, and retail sales are just some of the indicators that will determine where we go. Ease of credit, the CPI, inflation or deflation, and the business cycle are some of the others. And lets not forget sovereign debt and currency concerns which change and change the market.
Today is options expiration day, the 3rd Saturday of the month, and is often in my experience a turning point in the market. The chart below shows that we have been going sideways for the last several hours and have formed a pennant over the last several days. This could be building a high base which is considered bullish should we break out to the upside. However, we will just have to wait and see. Click on image to enlarge.

Looking at the daily chart in the image above shows a bigger perspective on the market trend. So far it is looking good. Click on chart to enlarge.

GLD has once again topped the list of ETFs moving to the upside for the YTD period passing up UUP which has retreated down as of late. For the week the gasoline ETF UGA was up the most followed by the natural gas ETF UNG while the US Dollar was down the most. Click on table to enlarge.

Mid Week Review

Does the Dow Jones Transportation Average ($DJTA) lead the market? According to Dow Theory as I understand it the $DJTA should lead in a move to the upside in a recovery. Are we in a recovery or is this the beginning of a new leg to the downside in the market? Only time will tell but note that the faster moving average (blue line) on the chart below of the $DJTA has crossed the slower moving average (red line) to the upside yesterday. Click on chart to enlarge.

Notice how the chart of the S&P 500 below has the same moving averages as the chart above but that the moving averages are just crossing today indicating that indeed the $DJTA is leading the market to the upside. Click on chart to enlarge.

Market Summary

While I usually post the SPY chart which is the ETF that follows the S&P 500 index this week I wanted to post a daily chart of the index itself. As can be seen it appears that we have 5 waves to the downside beginning with the April 26 high on the chart below. However, what we have is a double bottom with the apparent 5th wave low higher than the 3rd wave low throwing into question the complete wave count. What I am really looking at is which of the two most recent market pivots, the recent high of 1108 or the low of 1040, will be taken out next. Next week will most likely tell us which direction the market will be moving to next. Click on chart to enlarge.

For the YTD period the dollar is up the most and natural gas is down the most although UNG is off it lows for the year. For the week the FXI was up 1.95% and the UUP was down -1.20%. Click on table to enlarge.

Mid Week Review

A gap open to the upside produced a short lived rally that faded in the afternoon to fill the gap. Selling pressure predominated all afternoon however we got a higher high and a higher low today than yesterday so it appears we have some support at this level. Friday the Retail Sales report is released and this report has the potential to really move the market and is rated an A- by Yahoo Finance. Sentiment continues to be bearish. Click on image to enlarge.

Market Summary

The monthly Non-Farm Payroll (Jobs) report was released on Friday at 8:30AM before the market open so that the futures traders could sell off the market before the open and produce a gap open lower to the downside. The market had turned up after the long weekend holiday only to turn back down with the strong sell off Friday. Former Labor Secretary Robert Reich posted on his blog here that we're falling into a double-dip recession. Jobs creation is falling behind population growth which requires at least a 100,000 new jobs a month to keep up with population growth. Short term sentiment again turned bearish. Intermediate and long term sentiment also remain bearish. It appears that we have entered a 5th wave to the downside on the daily chart, although it is possible that what appears as a 5th wave could indeed be a continuation of the 3rd wave to the downside and that would be very bearish. What is particularly ominous at this time is the potential for this turn in the market where it is rolling over to be the beginning of a weekly 3rd wave to the downside. We have made new closing lows for the year in many markets. Click on image to enlarge.

The US dollar via UUP and gold via GLD are the only two listed funds that are up for the year. What this means is that there is deflating prices in most markets and that is not a good sign for the economy. Should we fall into a deflationary cycle even gold could lose some of its glitter as the dollar moves higher due to European debt worries. Click on table to enlarge.

Mid Week Review

What a difference a day makes! It is well known that many markets reverse trend over long 3 day holidays like Memorial Day where either Friday or Monday the market is closed. Here is a perfect example with the SPY. This first chart is as of the close of the market BEFORE the long weekend. Notice the sell off on the hourly chart and the close below the 50 week moving average. Click on image to enlarge.

And here is AFTER the long weekend and notice how the hourly and 240 min charts show the short term sentiment has turned bullish. This is a trend reversal pattern that has occurred over a long weekend. Click on image to enlarge.