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July 05, 2009

Weekly Update
by Angelo Campione

7/5/2009 8:25:52 PM

Current Positioning:
SPY: Nil (Cash)
QQQQ: Nil (Cash)

General Commentary:

SPY: Short 50%
QQQQ: Short 25% (going to cash on Monday)

General Commentary:

The last couple of months have been tough for both bulls and bears, it seems both parties have been exerting relatively equal strength and the result has been a sideways market.

For us, we're in cash now as the market works on making a decision as to which way it's going. If the markets break down further from here, that'll be confirmation of the new down phase beginning.

At this point it seems that the bears do have an edge but it's not a done deal and I wouldn't rule out another pounce by the bulls just to create a little more doubt.

The VIX seems to have found support at 25 and finished strongly on Thursday, however more work is still needed to say that the market sentiment has finally changed.

On to the analysis..

SPX Chart - Bigger Picture

The bigger picture is still showing a sideways pattern although the weak finish to the week has had the linear MACD begin to turn. We could be seeing the beginnings of a down phase here.

SPX Chart - Shorter Picture

The shorter picture seems to be following the head and shoulders scenario discussed last week. A break below 880 will be confirmation that we have in fact seen a head and shoulders top and the target region becomes 800 - 820.

Note, we did close the week below the 50 DMA again, although this happened on low volume and so it could easily reverse now. Also note that the linear MACD was about to turn higher and then Thursday's weakness opened the door to the potential of a bearish break in the week ahead.

For the week ahead, support on the SPX is 880 - 900 and resistance 930 - 950.

NDX Chart - Shorter Picture

The Nasdaq seems to be putting in more of a double top rather than a head and shoulders here and the fact that it reversed quickly after approaching 1500 during the week means it is vulnerable to further falls. The key now will be the 50 DMA, which also coincides with support around 1420.

Unlike the end of May, the MACD took has taken a sudden turn lower and now has potential to continue lower. It all depends on how the market responds in the week ahead.

At this point the gap down on open from Thursday might get filled before this one finally breaking down, time will tell and we'll wait for clarity from the market before entering a position again.

For the week ahead, support on the NDX remains at 1400 - 1440 and resistance at 1500.

The VIX Picture

The VIX found support around the 25 level midweek and finished higher by the end of trade on Thursday. The 50 DMA is now the next target at around 31, if we get a close above that a change in sentiment will be in the air.

Notice the MACD wanting to cross higher here, if it goes higher the bears have a chance to gain control in the markets, although while it stays below zero, the bulls remain in control.

The VIX measures the premiums investors are willing to pay for option contracts and is essentially a measure of fear i.e. the higher the VIX, the higher the fear in the market place. It tends to move inversely with the markets.

Performance

We're using a starting capital of $5,000 for each market and allocations are based on 25% of this or the remaining balance.

QQQQ

SPY

Quote of the Week:

The quote this week is from. Denis Waitley, "Life is the movie you see through your own eyes. It makes little difference what's happening out there. It's how you take it that counts."

Feel free to email me at angelo@stockbarometer.com if you have any questions or comments.

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Angelo Campione
"Improved Speculation Through Timing"

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