Here’s the Deal:
Last night I watched a show about NASCAR
racing at Talladega. It is a huge race track and to keep speeds
down they use a “restrictor plate.” It limits horsepower making
all the cars virtually even. With all the cars running the same
flat out speed, they run a big pack and that means anything can
happen at any time. They call it “The Big One.” If, I should
probably say when, something small happens, because the cars
are in such a tight pack, a small accident tends to collect a
lot of cars in total mayhem. When “The Big One” hits it is
exciting for the fans, frightening for the drivers (wives &
girlfriends) and expensive for the sponsors. Usually five to
ten cars get knocked out of the race. And once the mess is
cleaned up, they keep on racing.
Today, thinking about what may or may not
happen in September, I couldn’t help but think about Talladega
and The Big One. It doesn’t have to happen. It might not
happen. Then again, if there is a month for it to happen, you
have to go with September or October. If it does happen, what
will we do? Just like the NASCAR teams, we will assess the
damage, fix anything that needs to be fixed, and we will keep
on going. (continued Below)
It was critical for the Dow to hold support at
13,200. The huge opening gap lower pulled it below the key
level for a very brief early morning moment; I think we can let
this one slide. There was a late day pullback that did
challenge 13,200 and it held so with that we can confidently
say the Dow is holding above the key 13,200. And, because it is
holding above 13,200 and because the Dow traded above 13,300,
we can focus our attention on 13,400. Of course if Bernanke
says the wrong thing at 10 AM, all bets are off.
Repeat from last time: 13,200 is the 38%
retracement line and 13,300 is the 76% retracement line. Going
above 13,300 is good for the bulls. Breaking 13,200 is good for
the bears.
July Personal Income, July Personal Spending,
and July Core PCE, hit the tape at 8:30 AM. Q2 was revised
higher, we know July was good and this is old news. At 10 we
get July Factory Orders, and again, that was then and this is
post credit crunch time. Finally at 9:45 we get the Chicago PM
report for AUGUST. This one just might have some real meaning
to it.
But who cares are all that stuff. Ben the Banker’s friend
Bernanke speaks at 10 AM in Jackson Hole. After the reaction,
everyone will probably leave for the long holiday weekend.
Here’re the Details:
The Dow gapped lower and rallied 130points
until it was up 25 at 13,315 (above the 76% retracement line.)
It then turned lower but this time it held above 13,200. It
bounced to close at 13,238 down 50 points, almost the middle of
the day’s range.
There were no big movers in the Dow.
The Big One: From a technical stand
point the market has done everything needed to call August 16
THE LOW. While bottoming in August seems as uncommon as a
NASCAR race without a big crash, it can and has happened
before.
With the market having done enough technical
work to suggest an important low is in place, what are the
things that could cause The Big One. First off, when I say the
big one for the market, what I really mean is seeing the
indices make lower lows below the August 16 lows. It might be a
quick move or a slow drawn out sequence, either way the end
result will cause serious mayhem.
The market is expecting the Fed to cut rates
at the September 18 meeting. If the Fed fails to meet market
expectations (the cut might not be big enough) it could go down
as a small mishap that quickly collects a bunch of cars. I
won’t even discuss the potential of no rate cut at all as I am
confident Mr. Bernanke understands he must deliver at least a
portion of what the market is craving or risk serious
repercussions.
Another factor is the anniversary of 9/11 and
the thought that some yahoo out there has crazed delusions
and.. I would rather not think of this. However improbable, it
is a valid anxiety point. I should also through the calendar /
seasonal tendency / year-7 pattern into this category for an
anxiety riddled month.
Finally, there is the credit crunch and the
ongoing possibility there is yet another shoe to drop. Then
again, on this one, the Fed is supposed rate cuts to fix the
problem. So, at the end of August we have technically sound
market action vs. the fear and or potential for The Big One in
September.
Interest rates, expecting a lot from the
Fed: The IRX slid lower presumably in anticipation of good
news from Jackson Hole Friday morning. With the IRX back down
to 37.30 the T-bill market is expecting a lot from the Fed.
The BIX moved lower on a series of
downgrades: By the time analysts get around to downgrading
high profile stocks, a lot of the damaged as already been done
and or discounted. The variable rests with the magnitude of the
damaged relative to what has already been discounted.
The BIX closed near Tuesday’s lows. 357 is key support and if
we see 357 break in reaction to Bernanke’s comments on Friday,
it will be like taking a gun to the market’s head.
S&P 500 is setup for the seasonal thrust
higher: The SPX held up better than the Dow holding well
above the key line at 1450. A push above the simple short-term
down trend line at 1463 sets the stage for a push above 1470
which should then target the 1480 level. Of course, none of
that counts until after 10:00 AM on Friday.
Sliding below Thursday’s low, 1451, on Friday will set a
negative near-term tone suggesting a likely test of 1430.
The Russell 2000: was unable to hold
its move above 789. Overhead resistance remains from 789 to
800. The Russell needs to close above 800 to confirm it is
making a move back to the old highs. Until then the Russell
remains in a wide consolidation / bottoming pattern.
The NASD and NDX bounced around in thin
trading. While the last hour recouped some of the earlier
gains, (the NASD was much stronger because it didn’t open as
weak the action after 12 was generally to the downside. From a
short-term pattern stand point, falling below 2538 opens the
door back to 2500.
2550-2560 remains a constructive support line for the Bulls.
Even with the negative open, all the daily
trends are now pointing higher. The 3-day trends turned down on
7/20 and remained down until 8/17 when they all turned up in
unison. Friday they will turn down if the Daily trends turn
down. If that happens, it will suggest lower prices in the week
ahead.
The Detailed Trend report, CLX Charts, Weekly Trend Signal
Count Charts, have been moved to a new location at this link.
This link now has a Chart of NYSE 8-day Buying and Selling
pressure, plus a few others.
Total breadth was -1115. Not exactly a bad
reading, but it wasn’t good either. Total volume was even with
Wednesday making it one of the slower days of the year. Friday,
post Bernanke should be really slow. Directional volume was
balanced due to strength on the NASD that more than offsetting
weakness on the NYSE.
H-Buy given on 8/28 remains active through the
close on 9/7. Another H-Buy was given at Thursday’s close and
is active through the close on 9/11.
The McClellan Summation Index is ~ -1100,
which is extremely low and indicative of an important low. The
TEI is extremely low. The CQI is again below 1 indicating a low
is at hand. 35-day Selling pressure is above 55%, which is
typically only seen near important lows. So, how do you feel
about The Big One?
Folks were cautions Thursday afternoon as they
trimmed back going into the Jackson Hole. My guess is Ben
repeats what came out in “the Letter,” but will that be enough
to satisfy the bulls?
I will send Friday’s report after the close. I
hope you don’t have to work that long and can start your long
weekend early. Be safe and enjoy the day off.
Jim Patterson
Most Obvious chart resistance levels:
()
Dow
13,000, 13175, 13,295,
13,350, 13,490, 13,580, 13,630,
13700, 13,825
SPX
1420, 1439, 1455, 1460,
1470, 1489, 1496, 1505,
1517, 1527, 1535, 1547, 1562
NASD
2490, 2500, 2520, 2558,
2580, 2605, 2629, 2649, 2664, 2680,
2700, 2735
NDX
1855, 1895-1900,
1920, 1945, 1954, 1962, 1982,
2000, 2018, 2045, 2056, 2100
NYSE
9189, 9340, 9395, 9470, 9530,
9620, 9730, 9860, 9920 10,000,
RUT-2K
765, 772, 789, 794, 800,
813, 822, 832, 838, 842, 848, 854-856, 861, 876
Most obvious Chart Support levels:
Dow
13,580, 13,490, 13,350, 13,290, 13,200 - 13,175,
12,985, 12,815, 12,677, 12,547
SPX
1483, 1475,
1470, 1453, 1444,
1428, 1418, 1400, 1395, 1380, 1360
NASD
2655, 2635, 2606, 2592, 2578, 2570, 2558,
2529, 2498, 2450, 2423, 2400
NDX
2000, 1973, 1965,
1956, 1945, 1923,
1896, 1875, 1860, 1838, 1810
NYSE
9800, 9720, 9620, 9585, 9525,
9405, 9308, 9220, 9186, 9025, 8925, 8800
RUT-2K
834, 828, 820, 808- 810, 803, 794, 787, 782,
777, 772, 765, 760, 746, 736
Here’s where we are now:
NASD 100 Index (NDX) Trading System,
trade the QQQQ:
The opening strength stalled just above the
listed 1925 level, but a sharp round of PM buying obliterated
it sending the NDX up near last week’s high. If all the other
indices were as close to last week’s highs, we would have a
screaming buy, in a low volume environment of course.
Long-term 3-peaks
and domed house pattern target, 1720.
S&P 500 (SPX) Trading
Friday we will see thin trading. All the
action is at 10:00 AM. Technically the market is saying we
should go higher.
Tactical Stock Trading Powered by the PRS Stock report
CHINA announced an agreement with GOOG to use
some of their Search Technology.
BBD rec long 5/31 @ 25.39, stop 23, Target
29.5, closed at 23.80
CHINA rec long 6-14 @ 8.56, stop 8.01, closed at 8.54
WFR rec Long 8/22 @ 58.95, stop 54 closing, closed at 60.17
BRLC rec Long 8/24 @ 6.38, stop 5.80, closed at 6.48
**
PRS Open Actives making noise:
WFR, CLB, WWIN, SIGM, and MBT looked strong on
Thursday.
Jim Patterson
Editor
Tactical Trading Outlook
|
