Monday, June 11, 2012

Monday Market Conditions 6/11/12

Over the weekend we saw reports of Spain getting the bailout it's been looking for.  Overnight futures gapped up to just under 1340.  Everyone was eagerly anticipating the new bull run that was about to start.  The S&P (SPX) shot straight to 1335.  But as we know, the market rarely does what the masses expect.  By the end of the day, SPX had given up all its gains and closed down 1.3%.

Lots of important macro data coming out in the second half of the week.  I used today to close out almost all of my June positions.  While I feel that the numbers may disappoint, expectations appear to be revised lower.  Regardless, I'm not going to let a surprise one way or another sour any of my winning trades.  Instead I'll use these opportunities to initiate new positions.

1340 is still a key resistance point.  The fact that we failed there again today leads me to believe we are going to see another leg down.  Note today's bearish (semi-) engulfing handle.  Also note that the stochastics continue putting in lower highs.

The VIX produced an ominous engulfing candle today, signalling that last week's drop may be done for.  Look for volatility (read: fear) to continue up over the coming weeks.

Volatility futures also made an outside day on the chart and ended up right back into the channel.

The McClellan Oscillator took a sharp turn down today.  While technically, +80 is overbought, +60 is the high of the year so far.  Only a few times since January has it poked above +20.  Until we get a sustained stay above that level, I am using it to estimate a short-term top which, IMO, should be shorted.

The number of stocks above their 50-day moving averages closed just above what would be an oversold condition of 20%.

The last chart is a new one that I'm going to start tracking.  It shows the ratios of four different sectors compared to SPY.

After greatly outperforming the market, technology has spent the past two months consolidating.  Keep an eye on this as it could turn into rolling over.
Financials were doing well after the stress tests.  Now, post-JPM, they appear to be crumbling.  Generally not good for the markets.
Energy has been underperforming for months now.  IMO, if macro conditions were improving, you wouldn't see this.
Materials are acting even worse than energy, only adding to my argument about the worldwide growth slowing.

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