MARKET COMMENTARY
The Dow was uncertain in the opening hours. It wobbled before rallied to a high of 11600, gaining 135 points for the day. This is a surprise to the market and to me. This gain is expected to extend to the next trading day, although the volume was not exactly fantastic. At this time, nobody can really tell what caused the market to surge at the last hour. Some pointed it to the drop in oil price whereas others say it was the banks which led the market. You know what? It is actually none of the above. Weak oil price perhaps helped push the market. (Anyway, they have not explained why the hurricane Dolly did not bring about the increase in the oil price as they have projected just a day earlier). But I am convinced that it was the relatively unpopular index called the Russell 2000 that brought the market higher.
As a matter of fact, the Russell (RUT) rallied very early in the trading session on Tuesday and it rallied hard. It has the highest gain (2.75%) among other indexes. Russell 2000 is an index that pooled 2,000 midsized companies in the America. I have no idea why these companies are doing so well that led investors rushing to buy their stocks. Is it their soundness of their financial positions or is it a case of rotational play by the financial institutions? It is too early to tell. What we chartists can say is the fact that we are seeing a strong undercurrent of this index to shore up the overall market in the next couple of days or so. Depending on the causes of this bullish move, the market may still not be able to break the supports.
Now, the best that we can do presently is to hold our position and stop taking up new ones. We need to look for more leads before we can tell what to do with this change of event. Meanwhile, I am still holding the resistance of 11800 for the Dow.
DJIA Daily Chart
The S&P is has crossed the 20-day moving average. Now, the new resistance is about 1320 but I doubt it can go that far if its bearish trend is still intact. RSI is the better gauge for the resistance point.
SPX Daily Chart
Nasdaq is still feeble at this rallying time. Hence, I take the Russell chart for leads this time. Russell is technically completed its retracement. Due to its strong move, it may run all the way to the 200-day moving average (also coincides with the RSI 60%). These are my key resistance to watch.
RUT Daily Chart
STOCKS TO WATCH:
Thanks for your chart and comments.
The Russell 2000, flew 2.5% through resistance at 70 to close at 71.47.
This is just short of 72.50 — a pivotal point for the Russell 2000 that goes back to October 2, 2006, where a broadening top pattern formed. Street Authority relates: “When you see a broadeing top, the market will eventually drop”.
Said in a conservative way: the Russell 2000 at 72.50 is now at strong support; that which was once strong support will now be resistance.
Said in a contemporary and more fitting way: now that the Russell 2000, $RUT, has once again risen up to the apex of its broadening top pattern, it will once again fall.
We live in a time of awesome financial waves. The wave that is coming immediately is going to literally sweep these small US based companies off the map as they are highly dependent upon a dysfunctional and broken credit and lending system.
I recommend that one go short the markets via Proshares 200% bear market ETFs which were oversold as seen in the following percentage losses for the last five days:
SKF Financial -30%
SRS Real Estate -20%
SJF Russell 1000 Value -16%
FXP China -16%
SCC Consumer Services -13%
Google Comparative Chart
DXD Dow 30 -12%
TLL Telecommunications -7%
RXD Health Care -3%
SSG Semiconductors +2%
TBT US Treasuries +3%
Or even better yet, dollar cost average buy gold during its current dip as it really is in an Elliott Wave 3 up breakout.
My investment maxim is: “In a bull market be a bull; in a bear market be a bear. In a bull market, one buys on dips; in a bear market, one sells into strength”.