Monday, June 25, 2012


SPX moved bellow SMA 120 on hourly chart and we also have a bearish EMAs crossing. The recent rally was too short lived to be profitable according to EMAs crossing on hourly chart. 

I mentioned in a previous article that there were rumors of another QE. The problem is there are no official rumors on this subject just people guessing that we are going to have another round of QE based on not so good news in the economy and on the jobs front. 

If any of these rumors are going to materialize in the end remained to be seen but the most important news today was that another European country, Cyprus, was asking for a financial bailout. More likely this is not the last European country asking for help and the situation in Europe may be even worse than we imagine. 

On daily chart please notice that SMA 50 is still moving down while SMA 200 is moving up so we may see a cross between these two SMAs ("death cross") in a few weeks. The thing is on the other two occasions when the "death cross" happened since 2009, the event per se was not bearish but it was a good buying opportunity in the end. 

During 2003-2007 bull market we had three "death crosses", the first two being good buying opportunities but the third one was real. The difference between the first two and the third one was that SMA 200 was rising or stayed flat during the first two "death crosses" and moved down only in 2008. As a matter of fact moving bellow SMA 200 is not such a good indicator that a new bear market has started but a declining SMA 200 is a "kiss of death". Or it was until last year in August-September when SMA 200 started moving down and I was pretty sure that a new bear market has started. However, a new round of QE completely screwed technicals and instead of a bear market we had a pretty decent rally from 1,100 to 1,400. Trust me, without Feds' intervention there was no way that market could avoid plunging last year. 

Summer is always bad for stocks (with a few exceptions, of course) so I don't expect a sustained rally anyway, plus or minus the European saga. By August-September market may stabilize and chose a clear direction but until then expect more volatility. 

Gold, that usually follows the market, went up today despite dollar going also up but remains weak at the technical level. It seems to find support around 153 on GLD with a resistance downtrend line around 164. 

Silver looks even worse than gold but it may find support around 25 that coincides with the three years uptrend line. The resistance level is around 31 so we may see silver oscillating between these two levels.  Looking at the weekly chart one can easily notice that between 18 and 50 silver was in a big bubble. Right now is approaching the uptrend line, meaning the place were it was suppose to be all the time. During the same period gold was not in a bubble, it stayed more or less around the uptrend line. 

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