Chainsaw Al Strikes Again
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The most interest rate cuts in the shortest
time in history…. yeah, they’re
not worried about a
recession.
Chainsaw Al lops another
50 basis points off the Fed funds rate and the crowd roars. No,
wait…the crowd had no idea what to do. After an attempt to rally off the
initial spike down immediately after the FOMC rate-cut decision, the futures
markets seemed unable to decide where they wanted to go. As such, the S&P
futures whipsawed between 1248 and 1260 and glamour stocks like JNPR, CIEN, CMVT
and JDSU all closed in the red. As is par for the course, no one was interested
in buying INTC today either. Strange that Intel was the company that sparked
this rally back on April 5th yet it has been unable to spend much time above
$30, today closing at $27.25.
After the bell, AMAT missed their number
for the second quarter and said their third quarter will be very weak as well. The CEO declined to make any forecast for the future past the third quarter,
although he volunteered that “we remain confident in the long-term prospects of
our business.” How incredibly helpful. He can’t see beyond the third quarter,
which he admits will be terrible, but he is quick to say that the long-term
prospects for the company are good. Can you define “long term” and tell us why
we should be buying your stock right now, as the analysts have urged us to? It
seems like as hard as the bulls try to force this recovery fantasy on us, the
CEOs of these firms just can’t provide us with any evidence of it.
size=2>Further,
are we supposed to feel warm and fuzzy that they can’t even see past the next
quarter concerning their business’ prospects?
The intent of this
commentary tonight is to evaluate the current technical picture and what type
of trading opportunities it provides. The following charts should give us some
direction:src=”https://tradingmarkets.com/media/goran/gy051501ndx.gif”
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An analysis of the Nasdaq 100 index reveals
multiple bearish candle formations at current levels. The index failed to hold
a late-day rally and closed near its session lows. As such, although a retest of
today’s high may be possible should the bulls try to manufacture a positive spin
on the after market earnings reports that were released this afternoon, the
index should eventually continue its path down to closing multiple gaps that lay
below. src=”https://tradingmarkets.com/media/goran/gy051501spx.gif” width=508>
A
monthly chart of the S&P 500 Index reveals a head and shoulders formation
(some may disagree with this chart call). At present, we have rallied to the
neckline of the left shoulder and have hit a brick wall. It is clear that this
neckline resistance will provide a fulcrum for us from which to direct our
trades.src=”https://tradingmarkets.com/media/goran/gy051501aol.gif”
width=459>
AOL is looking mighty tired at these levels. As shown above,
the stock has rallied non-stop for the past month and is now experiencing
resistance at the $52 level. Oh, if true market bottoms could be this simple,
but they aren’t. AOL has several gaps underneath the current price that will
call the stock home like a mother calling for a lost child. We don’t know when
(who really does?), but AOL should be on course to retrace much of its recent
gains.
It is impossible for me to look to the long side at the present
time, with so many charts looking this extended and technical indicators on all
indexes showing multiple negative divergences relative to their price action. I
will continue to press the short side as stocks and indexes continue to battle
with resistance levels unsuccessfully.
Have a good
evening,
Goran