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Weekly Update

7/12/2009 7:03:28 PM

Current Positioning:
SPY:
Nil (Cash)
QQQQ: Nil (Cash)

General Commentary:

The system for the SPY is now on a Cash signal __ __ __ __

The system for the QQQQ is now on a Cash signal __ __ __ __

While the bears won out this past week, the market has not turned completely bearish at this stage. In fact an upswing from here is not out of the question. Yes the S&P breached the key 880 level, and even dipped to around 870 intra-week but it's still hanging on to support. Also the Nasdaq held its support at 1400 and now has the potential for a rebound.

Having said all that, it could simply be another bounce that only lasts for maybe a week or two before heading south again. In order for this assessment to change, we need to see a new high above 950 on the SPX and 1500 on the NDX, and that's difficult to see in this environment.

For the week ahead the bears still have the edge but if they can't get it lower, a decent bounce may follow. If we begin to see a little strength, we'll most likely be adding a long position.

On to the analysis..

SPX Chart - Bigger Picture

The bigger picture is hanging on to support although it's looking precarious. The linear MACD is on the turn and if this crosses lower, we're in for a period of sustained weakness. In other words a continuation of the bear market (and a confirmation that we've been in a big market rally.

SPX Chart - Shorter Picture

The bears got on with the job straight out of the blocks last week and are now finding resistance from the bulls around the 880 level. While 880 is considered to be the main support point, 875 could in fact turn out to be a more critical level.

A close below 875 in the week ahead is most likely to be the final frontier and at this point, the MACD isn't suggesting that 875 will hold. Also, the linear MACD is below zero for the first time since March, unless we see a rise soon, the sentiment will be confirmed bearish and the best that can be hoped for will be 900 as a level to exit any longs you may have.

For the week ahead, support on the SPX is 850 - 875 and resistance 900 - 910.

NDX Chart - Shorter Picture

The Nasdaq finally broke the 50 DMA last week and found support at 1400, while this was a bearish move, the chart is not as bearish as the SPX chart but a close below 1400 will be decisively bearish.

At this point there is potential for a push higher but 1500 would need to be taken out before we can turn truly bullish. Note, the MACD is bearish right now and unless the market rises soon, the bearishness will be confirmed.

For the week ahead, support on the NDX is at 1400 and resistance at 1430 - 1450.

The VIX Picture

The VIX had an opportunity to run away midweek, however resistance was found around 32.5 and we finished the week below the 50 DMA. It's mainly for this reason that we can't say that the bears in the market are in full control because it seems that the VIX has another opportunity to drift lower, which will be positive for the markets.

Notice the MACD now wanting to cross back down, the bulls can't be written off at this point and still have the potential to regain control in the markets.

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.

QQQQ

Entered

L/S

Price

Qty

Value

Closed

Price

P/L

Balance


26 May

Short

33.21

37

$1,229

26 Jun

36.12

-$108

$4,892

11 Jun

Short

36.72

34

$1,248

29 Jun

36.44

10

$4,902

SPY

Entered

L/S

Price

Qty

Value

Closed

Price

P/L

Balance


21 May

Short

88.96

14

$1,246

26 Jun

91.77

-$41

$4,959

11 Jun

Short

94.05

13

$1,223

30 Jun

92.71

17

$4976

23 Jun

Short

89.47

14

$1,246

30 Jun

92.72

-$45

$4,931

Quote of the Week:

The quote this week is from. Barack Obama, "Change will not come if we wait for some other person or some other time. We are the ones we've been waiting for. We are the change that we seek."

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

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