|MV Weather Report: Bulls Wait Out S&P Showers|
By Matt Theal AUG 11, 2009 4:30 PM
Rain or shine, we review the day's biggest stock stories.
Stories were scarce today as the dog days of August are here. The S&P 500 is officially in “pullback” mode as the market declined for the second straight day, making it four down days out of the last five trading sessions.
For the day, the S&P 500 closed down -1.27% to 994, just off the low of the day at 992. The index was lead lower by Bank of America (BAC), JPMorgan (JPM), Wells Fargo (WFC) and other financials on fears that the sector may be overbought.
Today on the Buzz and Banter, Professor Jeff Cooper walked readers though his thoughts on the index.
“90 degrees down from our idealized 1007 projected high works out to 975 which coincides with a kiss of the rising 20 day moving average.
“The first pullback to the 20 day moving average typically offers a good risk to reward buy point--especially in the midst of an aggressively, persistent uptrend. I would suspect some bears would cover there and some bulls would buy there.
“However, if the near term trend has turned and the move off the July low was a cherry on top/ blow off sundae and the agenda of Mr. Market is for lower prices, then any move off the 20 day moving average should prove to be a test failure of the highs.”
With regards to the pullback, going back now six sessions, the S&P 500 has been in a narrow range between 990 and 1009. Hardly a pullback, more of a consolidation phase. I believe that Coop is right, a move to 975 or even 980 could present interesting long side opportunities.
Phil Erlanger, from Erlanger research, spotted a bullish head and shoulders pattern, he told readers about it on the Buzz and Banter.
“Back in early July, there was much talk about a head and shoulders formation. The neckline was broken but then reversed to the upside. The breakaway gap then ensued. Therefore, this head and shoulders formation was a failure for the bears. Another head and shoulders formation has arisen and few are talking about it. This is a head and shoulder bottom. Like in July, a test of the head and shoulder bottom neckline would be useful. This level is 970. A hold would be bullish. The upside count would then be 1250.
“The months of September and October remain resistance but recent technical positives could get the S&P 500 to 1250. For more insights we would point you to our video from today.”
I like it when two technicians come to the same conclusion on areas where to buy, it's a good sign. The problem is, the market is a good 15 to 20 points away from this entry and a major catalyst will be needed.
Tomorrow we'll get that catalyst when the FOMC concludes its 2-day meeting. All eyes will be on the Fed announcement at 2:15. On the Buzz and Banter, Lance Lewis said he wouldn't be surprised if the Fed increased its monetization facilities just like the BOE announcement last week. He went on to say, “It would be a big surprise to the market though, just as it was back in March when the program was first announced.”
Big day tomorrow, have a great night!