Thursday, July 1, 2010


Hello All,

I have been extremely busy lately. However, i will try and do a catch-up game now.

This week has been brutal and there is one more day to go. Tomorrow is a big day with Payroll data coming in. However, current setup clearly shows which way market is going to go. Market has bottomed today with a LONG hammer.

Few reasons market will go up from here.

  1. Long hammer.
  2. Positive divergence on NYMO, NAMO and host of breadth indicators. If we go up tomorrow, they will all be confirmed.
  3. High yield bonds have barely budged and are actually starting to go up now.
  4. Though SPX made a lower low from Feb, certain sectors did NOT even come close. Take RE for example.
  5. Market is extremely oversold.
  6. TNX is already showing positive divergence. TLT is extremely overbought right now.
  7. Gold to spx ratio is at weekly extremes. So, either GLD drops dead or SPX rallies. It is possible that both happens. But it is highly likely that SPX rallies harder than GLD dropping. GLD started dropping already a copule days back.
  8. Some of the international indices, namely India is still hovering near 52 week highs. If US goes down, everything will go down. This shows divergence and a much more bullish case than anything else.
  9. NYSI weekly is still heading up as you can see from stochastics.
  10. Less than 5% stocks are above 50DMA. That tells we will see rally of historic proportions as equity market is all about buy and sell. If the balance is lost, then there is NO market. :-)
I could actually go on. But will rest here.

Looking for either a) A whole summer rally b) At least a retest of 1100-1150 area in the next 1-2 months.



The above chart was created and posted yesterday. I asked a question, if you'd go long or short this chart. If your answer is Short, then you are right as you would have gone long today when market tanked. The above is a complicated inverse ratio chart. Today it reversed hard and confirmed the theory of why one should go long here.
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