"No man can become rich without himself enriching others"
Andrew Carnegie

Tuesday, July 3, 2012

Prepare for a Long, Hot Summer

Yesterday, the SP-500 broke an important resistance level. Goldman Sachs and other financial advisors have recommended to their customers, to cover its short position in this important index. Given this situation, it is very important to try to interpret the current market situcion. In particular, try to identify if this bull market will be sustained over time. Or at least if a sufficiently long period to benefit from trade.
Below I present two comments. Both agree in their views but are complementary.

1.- US: Wait for Nasdaq confirmation
By Colin Twiggs

The S&P 500 closed above medium-term resistance at 1360. I am normally wary of quarter-end prices moves as fund managers have a vested interest in boosting their performance bonuses. But the breakout appears to have a legitimate basis, with Germany's key concessions at the Euro summit, and should test the 2012 high of 1420. 63-Day Twiggs Momentum holding above zero suggests the primary trend is intact. Reversal below the new support level (1360), however, would indicate a false signal. Falling 10-year treasury yields warn of another flight to safety (unless the Fed is driving down yields through its "Twist" operations) and we need to exercise caution.

S&P 500
* Target calculation: 1360 + ( 1360 - 1300 ) = 1420
Wait for the Nasdaq 100 to break resistance at 2630 and confirm the S&P 500 signal. Rising 21-day Twiggs Money Flow indicates medium-term buying pressure.

Nasdaq 100

2.- Long-term bull market is intact, but otherwise ...
By Sam Collins, InvestorPlace Chief Technical Analyst
The new month of July and Q3 opened on a down note, with both Goldman Sachs (NYSE:GS) andUBS (NYSE:UBS) cutting their year-end targets for the S&P 500. UBS cut 100 points to 1,375 and Goldman cut its to 1,250. The downgrades were made following a disappointing ISM index reading that showed U.S. factory orders shrank for the first time since July 2009.
However, yesterday’s bad news was interpreted favorably: Traders commented on the likelihood of the Fed ramping up more stimulus with lower interest rates. (Lower than zero?) And so at the close, the Dow Jones Industrial Average fell just 9 points to 12,871, the S&P 500 gained 3 points, closing at 1,366, and the Nasdaq rose 16 to 2,951. The NYSE traded 734 million shares and the Nasdaq crossed 477 million. Advancers led decliners on the Big Board by 2.3-to-1 and on the Nasdaq by 1.7-to-1.