We have a market that has been stuck in quicksand, trying to get some traction, for weeks now. Ironically, the action can be seen as bullish because we have had many reasons to see this rollover and come off some very extreme readings, but it hasn't happened. Instead of a pullback, stocks have been treading water (choose your metaphor) and that basing action is moving some of those indicators from overbought down to neutral with little negative impact on prices.
It was a mixed bag again as the Dow ended the day down 28-points, which was the 6th consecutive down day, while the S&P and small caps were down slightly, and the Nasdaq rallied again making a new 52-week high.
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This week's catalyst should be the July Jobs Report, which comes out on Friday. The consensus estimates are looking for a gain of 185,000 jobs and an unemployment rate of 4.8%. If you remember we had a big disappointment in the May report, followed by a big upside surprise in the June report. Let's see what July will brings, although I have a feeling investors are getting tired of reacting to these seemingly spurious reports that get dramatically revised in later reports.The Jobs Report Contest is now open in the forum. Click here for more info.
The SPY (S&P 500 / C-Fund) made a new intraday high this morning but quickly retreated back into the trading channel flag formation. Something is going to have to give soon. We have been counting on the underinvested to keep fueling the rally by buying each minor dip, but if we don't get a breakout soon, the bulls may start to lose faith and take some profits.
The DWCPF (S-fund) was down modestly but continued in its "F" flag, with the trend moving slowly higher.
The EFA (I-fund) pulled back to try to fill that small open gap created on Friday. But overall, this chart is looking better.
Japan's Nikkei is in an interesting situation where it may have created another lower high but at the same time the lower high is above the blue dashed descending trading channel, and it is also in a very clear bull flag.
The price of oil tried reverse itself last week but that was erased yesterday as we saw a negative outside reversal day yesterday and the steep downtrend continues. There is some possible support at $39. This decline is why we have been seeing the Dow and S&P lag recently.
The AGG (Bonds / F-fund) fell sharply after Friday's big rally. It is back the bear flag formation and testing the bottom of the flag now.
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Thanks for reading. We'll see you back here tomorrow.
Tom Crowley
Posted daily at www.tsptalk.com/comments.php
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