Sunday, October 18, 2009

Market Trying to Decide What to Do

Top Line: The stock market is indeed struggling to go up. Friday saw some downside but not enough to convince us that the top is definitely in. We need to see some normal selling.

Friday's options expiration brought in a few sellers after the two days above 10K in the Dow. Tonight the futures are a little weak but we still need some proof for the downside. Yes, we are already short but the market has been indecisive about moving up. With the upward drift, selling has only been enough to relieve overbought conditions, not enough to get oversold.

Every day that goes by, we think the market can't continue to go up but it manages to hold on. The more resistance the market has to selling means that selling doesn't occur. We would say that there is some pent up selling that will come as soon as a little break down happens.

The Update is keenly interested in the market's down move that seems almost around the corner but still illusive. As you see the market turn over, we will be adding more information to the Update. Sometimes we like to comment during the day if we see something happening. If that happens, we need to put those thoughts in the comment section so check those out. We don't have the ability to post at work so a comment has to do.

The technical position of the market is measured in a couple of ways. Our favorite indicators are the dollar, bonds, and gold, not to mention the volatility indexes. Tonight we look at the dollar for a few minutes. It looks like the dollar is trying hard to put in a low. The media is trying to convince everyone the dollar is going down forever and no one cares that it's going down. The possibility is that there is so much negative press that all of the sellers are gone.

At the same time, gold is trying to find a short term top. The media is still trying to look at gold positively. The dollar and gold are polar opposites and normally they should trade opposite. With gold at all time highs the dollar should be at new lows but it's not. Last year, the dollar was even lower than it has been the past few days. This could allow the dollar to drop a little more but we think it is signalling that it is close to a low if it hasn't already put in.

Let's keep a close eye on the dollar to see if it is finding its way higher. If so, that would be negative for commodities in general. This may give us an opportunity if the market can move down. Stay tuned.

6 comments:

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