Keep An Eye On These Stocks
As we head into what is
likely to be a quiet week, it also proves to pivotal in terms of how
we finish out the Summer and make our way into the ever volatile Fall. I am
sure that I am not the only one happy to say adios to Summer. One thing for
sure, other than the weather and outdoor activities, traders, for the most part,
dread Summer. So what is in store next week as Wall Street re-groups?
Other than the obvious traits, more volume and
potentially more range, the market is still faced with the current trading
range, which has existed since June. There are solid arguments on which way it
might go (highlighted below), but the path of least resistance would appear
higher. In fact, one commentator I follow closely was maintaining his positive
bias simply because there had not been any substantial pull-backs sine the March
Rally. Nonetheless, he, like many others are not starry eyed with visions of a
new bull leg, there are simply too many problems that have simply been pushed
aside in order for this to be a sustained move higher.
But how do we look technically? If one were to
simply look at the S&P’s and other major indices, things seem OK. However,
below the surface there are a few things worth paying attention to. My
colleague Bo Harvey made the following comments this weekend in a note to our
subscribers of the
Trading Room:
“Banks, Banks, Banks…they
had a nasty down day Friday, they are one of the weakest sectors out
there…again, perhaps the market smells a rat with the interest rates higher.
Without the Banks or S&Ps confirming the new highs in the SOX or Dow, it is hard
to get enthused about the long side. They led the market up but now they refuse
to participate in the big SOX/Tech rally.
850 in the Bank Index ($BKX) is the neckline of the potential H&S in the
index. Keep an eye on this, if it gives way it will prove a real weight on the
market, I would imagine.”
The Dow meanwhile managed to poke its head above
9504, the 50% mark form the bear market low (7,286) to the bubble high (11,722),
but was unable to close there. While one day does not indicate anything, it
bears watching.
Turning to fundamentals, which paints a
brighter picture, the economic results do keep improving, little argument there
and the grand-daddy of this move higher – burgeoning money supply – keeps on
grinding higher. In fact, according to Doug Noland,
“The broad money supply (M-3) surged $49.9 billion last week. This increased the
16-week money expansion to $389 billion or 14.7% annualized. Since early last
October (43 weeks), money supply has inflated $642 billion or 9.3% annualized.”
Deflation? Give me a break, the seeds have been
sowed for inflation in the next few years, why else do gold and gold shares
continue to hang in there day in and day out? Do not get me wrong, enjoy the
move higher in equities while it lasts, in my honest opinion another band-aid
has merely been applied, not a cleansing which would allow for a sustained move
higher.
So, my suggestion is to keep a close eye on the
bank stocks and gold stocks, these will offer some clues as we make our way
through this week and more importantly into next. My bet: Much better
trading. Direction? I dunno, I will figure that out as the market throws out
its clues each day.
| Support/Resistance Numbers for S&P and Nasdaq Futures |
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As always, feel free to send me your comments and
questions.
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