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The major indexes closed up Friday on the lightest NYSE volume of the week, at 1.36 billion shares. The SPX and $INDU were +.02% to 1409.84 and 12307 while the QQQQ was +0.4% to 43.90. The internals were neutral, with the volume ratio 53 and breadth only -68. The short-term overbought condition has worked itself back to neutral as the SPX has remained at the same price level. The 4 MA's of the volume ratio and breadth are 50 and -27, so it doesn't get any more neutral than that. This is a big option expiration week ending Friday the 15th, so there should be some volatility. There are many technical and economic divergences, and any short-term weakness is more likely to occur this week, because the generals are not likely to let that happen the last two weeks of what is so far an excellent year, with the SPX +12.9% year-to-date. It will take some significant news to prevent the generals and hedge funds from blatantly marking up portfolios into year end.
If there is any weakness this week, the SPX initial minor support level is 1390 and for the $INDU 12150-12050. The QQQQ initial levels are 43-42.75 and a close at 43.90. Energy stocks remain a daytrading focus as the OIH is in a seven day consolidation after a breakout above the previous 3-week trading range at the .50 retracement level to the bull cycle 169.75 high from the 10/4/06 118.19 low. The OIH hit a 148.47 intraday high Friday which is +25.6% in 46 days off the 118.19 low.
The primary reason for the equity markets right here is the $US dollar, as the economy has obviously slowed and the Fed will be hard-pressed to ease without creating more pressure on the $US dollar, because the two primary players, China and Japan, are diversifying their $US dollars into euros. Lest you forget the inverted yield curve, slumping housing market and many commodity prices still pushing higher. Next on the economic agenda is the higher tax push and protectionist measures by the Democratic congress, which will probably be the killing blow to any soft landing. This will also put an end to the primary bull-cycle trend.
Check out Kevin's strategies and more in the 1st Hour Reversals Module, Sequence Trading Module, Trading With The Generals 2004 and the 1-2-3 Trading Module.
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