Market Summary

As can be seen in the chart below of the S&P500 prices have broken out above prior resistance level at 1130 and are now up against the next area of resistance at 1150. Should the market break above this level the next area of resistance is the 1170 area. While historically September and October are the worst months of the year in the market September has so far proven to be exceptional. It appears very unlikely we will have a double dip in the economy if the stock market is our guide. How long the current rally will continue we will just have to wait and see. Click on chart to enlarge.

For the YTD period gold continues to outperform the rest of the markets. Over the last several weeks more and more of the funds followed have moved into positive territory for the year. For the week EFA was up the most up 3.26% followed by the small cap index up 3.00%. The US dollar and natural gas were the only losers for the week down -2.67% and -3.04% respectively. Click on table to enlarge.

The chart below is of the daily S&P 500 using a modification of My ETF Trading System found here. What this chart shows is that we are at the top of a range in an uptrend. The two blue bars on the right side of the chart indicate that last Thursday and Friday the momentum had declined from that of the green bars that preceded it in this uptrend. The last blue bar is a doji like bar indicating indecision. The MACD indicator, which is set to a very sensitive setting, will indicate a downtrend once the zero line is crossed to the downside. We are at a critical point in the markets where we will either break out above the 1130 area and move higher or breakdown and move lower from here. Which way we go we will just have to wait and see. Click on chart to enlarge.

The performance chart below shows that we have several ETFs that have moved from negative to positive territory on the Year-to-date basis over the last week and these include the Russell 2000 small cap index, the emerging market EEM, the Nasdaq index, and the Dow Jones index. This is a positive change but will it last? Again, we will just have to wait and see. Click on table to enlarge.

Market Summary

From the chart below it can be seen that the market has been going sideways for several months in a range from 1020 to 1130 on the S&P500 and has the shape of an inverse head-and-shoulders formation with the neckline at the 1130 area. If the market breaks above that area it would be very bullish. We are between the most recent high and low of August and so will have to watch and see which of these two areas is crossed first. Click on chart to enlarge.

Gold remains in the number one spot for the YTD period at 10.87% and natural gas is the dog of the group at -39.00%. Click on table to enlarge.

Market Summary

This last week was a good week in the market with the major indices showing gains and the S&P500 gaping higher on Friday. With 3rd quarter earnings season behind us for the most part market participants are looking to the release of economic numbers for a sense of direction in the economy. The 1st Friday of every month is the release of Non-Farm Payroll (NFP) from the Department of Labor which is one of the biggest movers of the market. This last release, while not spectacular, was better than expected and the market gaped up in response. The Federal Reserve also watches these numbers closely to determine when or if to do Quantitative easing, in other words, to print money and to buy bonds which gives the US Treasury cash. With the better numbers they are less inclined to do so.

One of the interesting indicators I follow is the Volatility Index ($VIX), the so called 'Fear Index' as it is called. When the $VIX goes down there is less fear in the market and the market goes up, and when the $VIX goes up there is more fear in the market and the market goes down. In other words it is inversely correlated to the market and that is how it works. When the $VIX gets to below two standard deviations from it moving average and comes back up that means it has made a low and is a buy signal on the $VIX which is a sell signal on the market. But it does not correlate immediately but has a little bit of a lag time. The first time it occurred this year was on January 12 and then about 8 days later the market dropped about 10%. The second time it occurred this year was on April 13 and then the market hit a high on April 26 and dropped about 20% to the July lows. See the first chart below and the highlighted ovals and compare those dates to the S&P500 chart below that. We again had the $VIX drop below its lower standard deviation on Friday. Will this be followed by another drop in the market? It is interesting to note that the market often reverses course over long weekends. We had a reversal at the beginning of July after the long July 4 weekend. How we fair after this long labor day weekend remains to be seen. The markets are coming up to their 200 day moving averages and if they can get above that level it would be a good sign and indicate strength in the markets. If however they get up to that level and reverse it would be a good shorting opportunity. How the markets go we will just have to wait and see. Click on charts to enlarge.




The ETFs followed had a good week with natural gas, the laggard for the year, doing the best up nearly 5%. For the YTD period gold continues to outperform. Click on table to enlarge.

Market Summary

The monthly chart of the S&P 500 below shows the rally off the March 2009 lows to the April 1010 highs and the pull back we have had since that time. And while we have 2 more days left in this month as it stands now we show having made a higher high and a higher low this month than last month. And while anything is possible it seems to me we have a good chance of finishing the month this way. September and October are seasonally the worst months of the year in the market. How it plays out this year we will just have to wait and see. Click on chart to enlarge.

Gold is the leader in performance on the YTD basis followed by the US dollar ETF UUP with the natural gas ETF UNG doing the worst. For the week the gas and oil ETFs were up the most and the natural gas ETF UNG was down a lot at -10.22%. Click on table to enlarge.

Market Summary

As can be seen from the weekly chart of the S&P500 below the 20 moving average(blue line) is at the point of crossing the 50 moving average(red line). This last happened at the beginning of 2008 and we know what kind of year that was. Currently we are in between the low and the high of July and which price level we reach first, the prior low or the prior high, will tell us a lot about the trend of the market. Click on chart to enlarge.

For the YTD period gold and the dollar are the only ETFs in positive green territory. For the week FXI and GLD did the best and USO did the worst. Click on table to enlarge.

Market Summary

The market has once again fallen below its long term moving average as seen on the monthly chart of the SPY below. The good news is that with the month of August we have made a higher high and a higher low as it now stands. The momentum of the last several days has been to the downside and it is possible that this is the beginning of a wave 3 count to the downside which would take us to below the 100 level. There are however several areas of support and I am not in the camp of those who believe in a double dip at this point. Next week will tell us more as to the future trend of the market and we will just have to wait and see. Click on chart to enlarge.

We have lost two members of the "Green Team" in the YTD column from last week and the more riskier asset classes, the small cap and nasdaq which usually lead the market, were down more than the Dow or S&P500 which is not a good sign. The US dollar also has changed its downward trend and begun to move up which puts downward pressure on the equity markets. Click on table to enlarge.