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Morning Cup of Jo: The Four Witches


The embers started glowing under the iron container as all four witches presented an outside day...


"The last to go will see the first three go before her."

-- Wicked Witch of the West, 'Wizard of Oz'

Market Comment:

Good morning. As I pen this under the advent of a full moon shining on my laptop, I realize, now more than ever, it is a necessity I remind you to keep your "Eye on the Ball." The four sisters, which today I'll call The 4 Witches, are – in unison – stirring up a brew that could wake all bears from hibernation. The fire under the black cauldron was actually started on Friday when the employment data was released. As discussed in last weeks 'Week in Review,' the markets opened higher to only reverse the remainder of the day with a broad decline while treasury yields spiked. The embers started glowing under the iron container as all four witches presented an outside day – also known as a bearish engulfing day in candlestick charting.

An outside day is when the market begins higher than the prior day (or days) and ends lower than the prior day/days. The more days it swallows, the more negative the sign. The NDX ate 1, the Dow ate 4, the SPX and RUS both ate 6. The bears began to rumble.

On Monday, with no pertinent economic news on the agenda, the market found some support. However, the long half-charred wooden spoon continued to churn the pot. By yesterday morning another ingredient was added – the Iran Nuclear Debate spiked Oil prices and the talk of a surge in gas prices this summer.

So here we sit. All four witches are sitting on ST trendlines which all correspond to their respective 50-DMA's (Day Moving Average). Take a look.

Click charts to see larger images:

If in the following day/days these give way and the pot starts to boil, be assured the bears will be out in full force. The next logical, and technical, level I can foresee after a potential break of these levels is the 200 DMA for all the witches. This would correspond to a more predominant horizontal support.

I truly hope everyone has a happy holiday weekend.

Good Luck and until next time:

No positions in stocks mentioned.

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