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Trade the Markets 7-6-2009

admin on 07 7, 2009

We’re only a few days away from Alcoa kicking off the earnings season so we expect to see the volatility remain with us for some time.  We’ve noted that several commentators are calling this summer range bound or boring but we’ve actually seen a good amount of respectable/tradable movement from our perspective thus far.  It’s possible that with so many catalysts out there and with earnings about to go full swing over the next month or so that the summer doldrums may only apply to the back half of August.  For things to become “boring” and thus remain range bound we’d expect that the markets need to remain above the lows set this morning or not very much south of there to keep that prognosis healthy.  We comment on it in our technical section below but for now we’ll leave it that there’s a very thin margin at present.

We got neutral several weeks ago on the rally that launched in early March and we’ve been growing more and more bearish generally speaking since then.  Given the way that the market action and price structure have unfolded however, we’ve found it necessary to point out scenarios that could have unfolded on the other side of the argument.  We’ve always tried to espouse the simple “keep your eye on the ball” approach to factoring in the macro fundamentals when conjecturing with the additional aid of charts.  It’s not different for us now.  As some of the recent commentaries and Options Specialist newsletters have highlighted, there are several states that are in dire financial straits.  We also believe that the machinations that have occurred in the banking sector to raise additional capital and to produce FANTASTIC results of late are highly questionable.  Looking forward, especially when we factor in all of the insane meddling the D.C. has done in short order, we see many reasons as to why a recovery when it arrives really wouldn’t pack the usual punch that we’ve seen in recoveries from the recent past.  However, we have allowed for “goosing” on several occasions because we’ve seen manic behavior in the last 20 years too many times to rule it out completely.  The bottom line at this point for us is that we have a hard time believing the optimistic spin and manipulation cycle that we’ve just witnessed.  THEY seem to be trying just a little too hard to sell us on this and that tells us something.  When it comes down to it we just don’t think that we’re completely out of the woods yet and believe that it would take something akin to a complete overhaul of the foolhardy Stimulus package so that it was overwhelmingly front end loaded to mask things effectively for any sustained length of time.  Without that we believe that we could see many of the problems that have been removed from the TV screens for the past few months resurface with a vengeance in the near future

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The Technical Picture:

Since we put out a video that focused on the technicals as well, we’ll keep this brief.  We’ve highlighted the 88.00ish support line drawn from the pattern and also the 200 SMA.  The SPYs are clinging to and near these this morning and they really need to or at the very least “neckline” monkey business will be a part of our immediate future.  We put out support levels and targets a few weeks ago at 87.50 and 82.50 and for now we’d stick with those.  Of course 87.50 may not provide the support that it would have given how things have unfolded price pattern wise to this stage.  All in all with the internals slightly deteriorating as we noted in our video, this would be a time to be prudent on many levels.