The Morning Cup of Jo
Give me somethin' to work with here.
Good morning and happy Monday to all Minyans. A quick recap on last Monday's 'Jo.' I talked about looking at the market from a bottom-up approach and keeping a watchful eye on Citigroup (C:NYSE). It displayed an enormous Head & Shoulder formation with converging support from the neckline and the 2-year upward sloping trend line. Also mentioned was Intel Corporation (INTC:NASD) and its 11-month inverted Cup & Handle base. Needless to say, they both caved on massive relative volume. When I said Boo's back in charge, I wasn't kidding. The next, and obvious question, is will the markets follow suit?
After the markets' actions last week I believe we have some new lines in the sand to talk about. First, the Nasdaq only has another 18 pts to go before busting its latest relative low and second, the SPX has officially closed below the 200 dma for the first time since the March '03 bottom. Hoofy's not exactly singin' "Happy days are here again." Actually, he spent most of his weekend over at Birdland with Daisy tryin' to see how much vodka actually goes into each martini.
So now what? As you'll read today in "Collins Trading Radar" there will be over 200 of the SPX and ½ the Dow reporting earnings this week, so hold onto your hats, it's gonna be busy. Most of the markets focus will be on the "going forward" comments made during the earnings releases. With the lack of volume over the last 3 months you're going to have to be extremely nimble and attentive to all your positions.
For those of you who don't read or follow "Collins Trading Radar," I believe you're missing a great service provided in Minyanville. Many traders go to a countless number of different locations to get this type of information and Professor Collins puts it into one concise location. Since he's been putting this together, my Monday morning routine consists of printing this out and having it on my desk all week long.
Also, Professor Reynolds put out an outstanding article this morning, "A Scary Shift in the Economy," that describes what may transpire in the equity markets if there was a shift in sentiment in the corporate market and relates it to the widening gap between production and consumption. A must read!
The levels you need to keep you eye on this week are...
The light volume upswing since May and the stochastic divergence top in June have definitely created quite a pullback. Hoofy hasn't seen daylight for over 2 weeks. Approaching these aforementioned levels, and given the current oversold conditions in the momentum indicators, could provide a bounce in the coming sessions. However, the volume will be your key to the kingdom.
If the markets undercut these levels on higher relative volume, look for a sustainable break. On the other hand, if they hold these levels and bounce on lighter relative volume, look for, at minimum, a retest of these levels. Either way, it's not pretty. Hoofy's only solace would be if the markets could hold and bounce on extremely high accumulation volume.
For more on this theory with a Fibonacci backing please read Professor Reamer's morning "Advanced Technical Analysis."
I hope this helped!
Until next time...
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