Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Digestion versus Indigestion


Last week reinforced the "good enough" scenario I have been writing about since the end of the second quarter. Despite two presentations by Fed Chair Greenspan, a good chunk of the S&P 500 reporting quarterly results, and a lot of volatility - there was very little progress made in either direction. That trend of higher volatility with limited progress should continue for the next few weeks as mixed results relative to higher expectations come from economic and corporate releases.

Near-term Outlook: The market seems to remain in a transition phase from the perception the economy should improve to ascertaining the integrity of real economic and therefore corporate earnings improvement. The S&P 500 (SPX) is still in the process of digesting the gains of move off the March low. This process is further along than it "seems." As the chart below suggests, the S&P 500 has not made any progress since the June 17th high (Exhibit 1). In addition, for the first time since early July, there are more oversold than overbought components of the S&P 100 (OEX). This suggests the "good enough" environment has been underway for a month.

Exhibit 1 - The "churning process" continues on the daily chart

Intermediate-term Outlook: The market continues to consolidate the breakout from the clearly defined trading range. How it consolidates the significant rally that took stocks out of the range (Exhibit 2) depends on how it consolidates the gains. In English, a vibrant market works off the near-term excesses by going sideways vs. a pronounced sustainable drop. So far, so good, but the consolidation process has a bit more to go.

Exhibit 2 - Weekly SPX chart shows breakout consolidation

No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Featured Videos