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Markets Overview

8/24/2008 7:40:04 PM

Index Reviews for August 22, 2008

Here's an overall review of the various major markets. This analysis has a medium term outlook. Note, the figures in brackets were the last reported figures on July 25, for comparison purposes.

Index Close Support Resistance Primary Trend 200 DMA
Financials 20.64 (20.87) 19.00? 24.00 Down 24.99

The Financials are still weak but look like they may be forming a bottom, which indicates a range bound market ahead.

Index Close Support Resistance Primary Trend 200 DMA
S&P 500 1292 (1258) 1250 1320 Down 1357

The S&P has been in a short-term uptrend that is holding so far, although there is substantial overhead resistance and so may trade in a range in the medium term between support (1250) and resistance (1320).

Index Close Support Resistance Primary Trend 200 DMA
Nasdaq 100 1931 (1846) 1850 1950 Side 1900

The Nasdaq is still in a large symmetrical triangle, even though it's been stronger than the industrials. This means we're still in a period of indecision and most likely at the least 1850 will be tested.

Index Close Support Resistance Primary Trend 200 DMA
Dow Jones 11628 (11370) 11400 11800 Down 12347

The Dow is in essentially the same position as the S&P.

Index Close Support Resistance Primary Trend 200 DMA
Russell 2000 737 (710) 720 760 Side 717

The Russell has been the strongest of them all, rebounding to its May peak. Like the other markets, I expect the Russell to trade sideways to down in the medium term.

Index Close Support Resistance Primary Trend 200 DMA
Volatility (VIX) 18.81 (22.91) 18.00 25.00 Side 23.46

The VIX is also indicating that we're in a period of indecision in the medium term.

Index Close Support Resistance Primary Trend 200 DMA
US Dollar 76.81 (72.85) 74.00 77.00 Side 74.16

We had our first positive move with the dollar exploding higher in a parabolic move up to 77. The rise was unsustainable and now looks like it will take a breather. The test will be for the 74 level to hold.

Index Close Support Resistance Primary Trend 200 DMA
Gold 823 (937) 780 850 Side 896

Gold essentially mirrored the dollar in the opposite side and is now rallying strongly. $850 will be the test now.

Index Close Support Resistance Primary Trend 200 DMA
Crude Oil 114 (123) 110 130 Up 112

Oil fell just short of the anticipated $110 level, but it found strong support and looks ready to rebound although after Friday's drop, it could be going through a bit more of a bottoming process. If $110 breaks then the rebound scenario will have changed and $100 becomes key support.

Index Close Support Resistance Primary Trend 200 DMA
CRB 395 (412) 380 420 Up 400

The CRB index found support at 380 and now looks ready to retrace some it's large decline.

Index Close Support Resistance Primary Trend 200 DMA
Bonds (TLT) 93.08 (90.14) 89.00 94.00 Side 92.00

Bonds are looking stronger, they may take a breather before proceeding higher and breaking 94.

Index Close
Put/Call Ratio 0.88 (0.83)

Looking at history, when the ratio of put options to call options is around 0.70 it indicates a short-term top, whereas a figure of around 1.50 indicates a short term bottom. The current figure of 0.88 indicates that possibly some comfort is starting to creep in, so be wary about rises in the market short term (note, this ratio can change very quickly so this is mainly useful when you see an extreme in the ratio).

SUMMARY

The trend in industrials is moving higher but there is substantial overhead resistance and so a major push upwards seems unlikely in the near term, having said that, the down side looks limited also, which leads to the only other option, which is range bound for the near term.

Financials may be bottoming which will help support the overall market from dropping too far. Commodities have found support and are rebounding. Dollar and gold finally broke their tight ranges in an explosive manner and are now retracing. Finally, Bonds seem ready to go higher in the not too distant future.

The conclusion is that the markets are likely entering a period of wait and see which will have stocks lift a little short term but drift down in September and possible October. However, we do remain positive for a move higher post election.

 

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