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Monday, July 2, 2012

Daily update 7/2

Stunned!  Shocked!  That is what the traders I heard interviewed on TV today sounded like.  The market did not react a great deal to the much worse then expected ISM report this morning.  However, I think that was largely the shock factor.  People don't know whether to buy because we may get QE3 or sell because the economy is slowing much faster then anticipated.  After people have a chance to think about it tonight there may be more reaction tomorrow.

Here is the daily SPX chart.


We have a hanging man today, but I find this chart pretty confusing.  It is possible we will make a double top here at resistance and the 100 SMA.  However, price is going up and is bullish until it clearly reverses.  Both breadth charts are still strongly positive.  Here is the SPY 130 minute chart.


I have added a new support line at 134.85 which was Friday's low.  I suspect there will be a lot of stops somewhere slightly below there.  If we break that line there should be enough selling pressure to completely fill the gap. 

With all the earnings warnings we are seeing and the economic data slowing rapidly it is hard to believe that stocks are going to break out and race higher.  Strange things happen sometimes in the markets.  We are technically in buy the dip mode with green price bars on a lot of short term charts.  However, price is so extended there is room for a sizable pullback.  Bears certainly have fuel.  We will just have to see if they decide to use it.

Bob

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The information in this blog is provided for educational purposes only and is not to be construed as investment advice.