The Day Of Reckoning Is Rapidly Approaching
Friday’s market action was choppy again as
the
(
SPX.X |
Quote |
Chart |
News |
PowerRating) closed at 1198.11, -0.2% and +0.2% on the week. The SPX range
for
the last three days has held between 1202.79 – 1191.09, so that will be
resolved
this week with the obvious downside focus 1190 – 1191 (see chart). The Dow
(
$INDU |
Quote |
Chart |
News |
PowerRating) was +10 points Friday and +0.5% on the week. After a very
sharp
unsustainable advance, the
(
QQQQ |
Quote |
Chart |
News |
PowerRating) was -1.1% on Friday and -1.5% on the
week. The 06/03 price and time reversal for the QQQQ has retraced five days
from
the 38.66 high to Friday’s 37.38 low (-3.3%) and 37.55 close. It closed
right at
the 20-day EMA of 37.57 with major support now at 37 – 36.65. The Nasdaq
(
$COMPQ |
Quote |
Chart |
News |
PowerRating) was also down for the week at -0.4% and was -0.7% on Friday.
NYSE volume was light at 1.25 billion shares,
and
in fact, only averaged 1.3 billion shares for the week with the high day at
1.44
billion and low day 1.17 billion on Monday, June 5. The primary sector
action on
Friday was the semiconductors, with the
(
SMH |
Quote |
Chart |
News |
PowerRating) -2.0%, reversing the
previous
day’s +2.1% gain and closing at 34.60, -0.5% on the week.
(
INTC |
Quote |
Chart |
News |
PowerRating) had a
reversal on Friday to a 26.98 close, down from a 27.74 intraday high the
previous day as some money was obviously banked on the news.
The SPX has an 11-day downside range low of
1190
with the 20-day EMA at 1191.11 as of Friday’s close, so the initial downside
focus is no mystery, and below that, the next level is 1184 – 1181 (50- and
89-day EMAs). If the Generals expect a six-month mark-up through June
month-end,
they probably don’t want to let price get beyond 1180 on any continuation of
the
06/03 reversal. For the
(
SPY |
Quote |
Chart |
News |
PowerRating), the 11-day range is 121.25 – 119.40 with
the
lower support level now 118.60 – 118.25. The SPY closed Friday at 120.20
with
the 20-day EMA at 119.40.
Another key focus this week is the price
action
of the Transportation index ($TRAN) which closed at 3521 vs. its 200-day EMA
of
3497 and 233-day EMA of 3461. Any early break this week below these
longer-term
EMAs would probably take the SPX along with it down to that 1184 – 1180
zone.
Another key focus this week will be the price action of the XLB (basic
materials
sector SPDR) which closed at 28.13, below its 200-day EMA of 28.31 with the
233-day EMA at 28.09. Nothing positive for this sector happens until the XLB
breaks above its inverted head-and-shoulder neckline, which is about 28.60 –
28.70. A negative divergence of the $TRAN and XLB is not a positive for any
continuation of the current rally. The media continues to focus endlessly on
whether Greenspan will continue to raise the Fed Funds rate, but says little
about the Fed jacking up the money supply the last three months. There will
be
no continuing economic advance with the long-bond yield where it is
currently,
and that is what the XLB and $TRAN indices are probably signaling now as the
Generals have reduced their allocations to the basic industry sectors. How
long
can the Fed prolong the inevitable pain of all the interest-only loans for
homes
that actual income does not support or job security, especially in the
brokerage
community? That day of reckoning is rapidly approaching and it is certainly
not
what the equity market wants to witness as it heads into the next bear
market
cycle low in late 2006 or early 2007.
There is some SPY and
(
DIA |
Quote |
Chart |
News |
PowerRating) time symmetry
this week, with today, 06/13, being the 1.618 ratio of the last two primary
swing point bottoms of 01/24/05 and 04/20/05. Tuesday, June 14, is the 2.618
ratio measured from the last two primary tops of 01/03/05 – 03/07/05 (the
ratios
are measured in trading days). We’ll probably have some good volatility this
week.
Have a good trading day,
Kevin Haggerty
P.S. I will be
referring to some charts here:
www.thechartstore.com in the future.
