7 Key Levels To Watch In Today’s Market

The major indexes extended their losses from previous
on the heels of further gains in crude oil and worries over
the state of the Housing market.  There were several attempts to rally, but each
upside move did not hold, as it appeared if traders lacked conviction. 
Meanwhile, the declines weren’t severe, but it was clear that the equity markets
were “heavy” with a downside bias.  Financial and Homebuilding shares were the
worst performing groups, given worries that the Fed could over-tighten, which
they normally do, and cause widespread problems in both segments of the
economy.  Energy names, on the other hand, turned in a solid performance thanks
to the strength in crude oil. 

September SP 500 futures finished the week with a loss of -17.75 points, while
the Dow futures posted a slightly larger loss of -189 points.  On a weekly
basis, the ES broke its rising wedge and 10-week MA, while the YM broke its
symmetrical triangle and both its 10-week and 40-week MAs.  Looking at the daily
charts, both contracts negated Thursday’s market structure lows with bearish
engulfing lines.  For you daily 3-Line Break followers, the ES remains short
with a new Break Price of 1221.50, while the YM remains short with a new Break
Price of 10558.


It was
difficult to make much of the action in recent days, because of the low volume
and slow seasonal time period we are in.  However, certain economic indicators
have started to suggest another "soft patch" is underway. Many interest
rate-sensitive shares have started to break down, which may be signaling to the
Fed that their work may already be largely done.  Meanwhile, the Fed remains
worried about elevated energy prices and transfixed over speculation in
housing.  In fact, just Friday Alan Greenspan made comments that housing was an
"economic imbalance".  It would not surprise me to see the Fed tighten too much
in order to slow housing, as they did in 2000 for the Tech sector.  If this
turns out to be the case, there likely would be considerable downside risk for
the equities markets.  For the time being, it appears as if the
intermediate-term trend has turned down, and could, in turn be setting the stage
for a normal seasonal bottom in the September/October time period. 


Please feel free to email me with any questions
you might have, and have a great trading week!