Tuesday, August 10, 2010

Another Critical Junction

Crazy action on the market continues. I'm not very optimistic medium term, my thinking is close to that of Doug Kass, who thinks that this year will be spent in a range. But look at a short term picture!
Second week in a row, market starts with a boom. And then falls on Tuesday. And now we are coming to a critical juncture, in technical terms. If you take a close look at S&P chart, you will see that 13-day moving average crossed over 200-day MA today. At the same time, index is still trading just a little bit above 13-day MA. If we don't have a down day tomorrow, it would be a strong bullish confirmation. Yeah, and 50-day MA is going up lately, which is bullish too.
Of course, fundamentals, to put it mildly, suck. Which was confirmed by uncle Ben (Bernanke) today. But sentiment is quite bearish lately, which is bullish. So, if we have bullish technicals tomorrow, things will be looking bright. On the other hand, if S&P closes under 13-day MA, that would be a problem and possibly sign of another leg down.
Interesting picture in fixed income for the last three weeks. Everything is going up, Treasuries, munies, high-rated corporate debt, junk bonds, bank preferreds, everything! Looks like some big guys are gearing up for deflation, although it beats me how junk bonds can be any good in deflation and associated depression.
Staying focused, careful and hopeful.

Seeking Alpha Certified

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