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MARKET WRAP UP 07/28/10
Stocks drifted lower for the second day in a row, as the S&P 500 finished down 0.69% to 1106. After the sharp run up that we have seen this month, from 1010 to 1120, some type of correction was to be expected. The issue is whether the correction would be one rooted in the passage of time, the relinquishing of prices, or both. Thus far, the bulls have avoided any 3% down type of bloodbath days, which illustrates their resiliency. On the one hand, as I pointed out earlier today in a post, just because we are churning sideways instead of down after a strong move higher, does not necessarily presage higher prices, as witnessed by the bearish outside reversal trap on June 21st of this year. On the other hand, we have already seen what can be argued as a higher low, at the 1056 level last week.
As the updated and annotated daily chart of the S&P 500 illustrates below, the bulls are struggling to maintain control of the price action, despite the fact that we are trying to work off overbought conditions in the face of resistance from the multi-month trading channel.
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Beyond the S&P, the Nasdaq, Russell 2000, Dow Jones Transportation Average, as well as the emerging markets all indicate the state of purgatory that market players find themselves in for now. Their annotated and updated daily charts, seen below, show that they continue to outperform the S&P, which remains a bullish omen.
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A key level that I am watching is 1100 on the S&P. That price marked resistance during the middle part of this month. Should the bulls prove inept in holding on to it, the bears will seize the opportunity to push us back down into the even choppier range of 1050-1100. Thus, as boring as it is to be in heavy cash during the summer doldrums, I will continue to do just that until this range resolves itself. Beyond that, many stocks are providing attractive entry points during this consolidation, so long as it remains as a mere consolidation, as opposed to the beginning of another leg down.
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TOTAL PORTFOLIO:
EQUITIES: 22%
- LONG: 22% ($BX $SAPE $POWR $JMBA)
CASH: 78%
Hang Seng
Until this puppy decides our fate.. we sit fluttering in an east breeze
we will see
I’m more boring then you.
You mean, you are more bored than he is bored,
versus being more boring than he is boring,
because he is not boring,
nor are you in all likelihood.
It’s the market that’s boring, thus shouldn’t be shorted.
I’d tweak 1100 to 1089 where wave3 was initiated … if we break below that mark the entire bullish pattern may be disrupted.