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$4 Billion Golden Oppoerunity

Stock Index Action Gives Bears a Chance to Gain Control in the Markets

Stock-Markets / Stock Index Trading Jul 05, 2009 - 06:51 PM GMT

By: Angelo_Campione

Stock-Markets

Best Financial Markets Analysis ArticleCurrent Positioning:
SPY: Nil (Cash)
QQQQ: Nil (Cash)


General Commentary:

The last couple of months have been tough for both bulls and bears, it seems both parties have been exerting relatively equal strength and the result has been a sideways market.

For us, we're in cash now as the market works on making a decision as to which way it's going. If the markets break down further from here, that'll be confirmation of the new down phase beginning.

At this point it seems that the bears do have an edge but it's not a done deal and I wouldn't rule out another pounce by the bulls just to create a little more doubt.

The VIX seems to have found support at 25 and finished strongly on Thursday, however more work is still needed to say that the market sentiment has finally changed.

On to the analysis..

SPX Chart - Bigger Picture

The bigger picture is still showing a sideways pattern although the weak finish to the week has had the linear MACD begin to turn. We could be seeing the beginnings of a down phase here.

SPX Chart - Shorter Picture

The shorter picture seems to be following the head and shoulders scenario discussed last week. A break below 880 will be confirmation that we have in fact seen a head and shoulders top and the target region becomes 800 - 820.

Note, we did close the week below the 50 DMA again, although this happened on low volume and so it could easily reverse now. Also note that the linear MACD was about to turn higher and then Thursday's weakness opened the door to the potential of a bearish break in the week ahead.

For the week ahead, support on the SPX is 880 - 900 and resistance 930 - 950.

NDX Chart - Shorter Picture

The Nasdaq seems to be putting in more of a double top rather than a head and shoulders here and the fact that it reversed quickly after approaching 1500 during the week means it is vulnerable to further falls. The key now will be the 50 DMA, which also coincides with support around 1420.

Unlike the end of May, the MACD took has taken a sudden turn lower and now has potential to continue lower. It all depends on how the market responds in the week ahead.

At this point the gap down on open from Thursday might get filled before this one finally breaking down, time will tell and we'll wait for clarity from the market before entering a position again.

For the week ahead, support on the NDX remains at 1400 - 1440 and resistance at 1500.

The VIX Picture

The VIX found support around the 25 level midweek and finished higher by the end of trade on Thursday. The 50 DMA is now the next target at around 31, if we get a close above that a change in sentiment will be in the air.

Notice the MACD wanting to cross higher here, if it goes higher the bears have a chance to gain control in the markets, although while it stays below zero, the bulls remain in control.

The VIX measures the premiums investors are willing to pay for option contracts and is essentially a measure of fear i.e. the higher the VIX, the higher the fear in the market place. It tends to move inversely with the markets.

Performance

We're using a starting capital of $5,000 for each market and allocations are based on 25% of this or the remaining balance.

Quote of the Week:

The quote this week is from. Denis Waitley, "Life is the movie you see through your own eyes. It makes little difference what's happening out there. It's how you take it that counts."

Feel free to email me at angelo@stockbarometer.com if you have any questions or comments.

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By Angelo Campione

Important Disclosure
Futures, Options, Mutual Fund, ETF and Equity trading have large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in these markets. Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to buy/sell Futures, Options, Mutual Funds or Equities. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this Web site. The past performance of any trading system or methodology is not necessarily indicative of future results.
Performance results are hypothetical. Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not actually been executed, the results may have under- or over-compensated for the impact, if any, of certain market factors, such as a lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown.
Investment Research Group and all individuals affiliated with Investment Research Group assume no responsibilities for your trading and investment results.
Investment Research Group (IRG), as a publisher of a financial newsletter of general and regular circulation, cannot tender individual investment advice. Only a registered broker or investment adviser may advise you individually on the suitability and performance of your portfolio or specific investments.
In making any investment decision, you will rely solely on your own review and examination of the fact and records relating to such investments. Past performance of our recommendations is not an indication of future performance. The publisher shall have no liability of whatever nature in respect of any claims, damages, loss, or expense arising out of or in connection with the reliance by you on the contents of our Web site, any promotion, published material, alert, or update.
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© 2009 Copyright Angelo Campione - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


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