Post by Savant on Jul 29, 2004 7:02:32 GMT -5
A Strengthening Market Tone - For Now? - Published 08:00 EDT July 29 2004
Tuesday was about as good as it gets, from the standpoint of a successful of the lows of Monday and subsequent rapid rebound thereafter to new highs. It is interesting to observe that thus far, the Mid-May lows took a lot longer to establish a bottoming formation over about 10 trading days, before clearing the low end range and mounting a powerful rally that took the Dow up over 205 points of its lows leading to a month long rally thereafter of some 400 additional Dow points to just shy of Dow 10,500 before succumbing to the correction that is now trying to establish and so far looks credible enough, for now.
As further evidence of the developing quality of this bottom, is the fact that on Monday, the amount of time spent below 1080 on the S&P or hovering around Dow 9920 could be measured over a few hours before rebounding strongly from these levels. On Tuesday, the significant pullback we suggested the market was vulnerable to came in right on cue, but this time, the S&P failed to break below 1080 and the Dow barely broke below 10000 momentarily reaching down to 9994.23 before rebounding vigorously and with authority.
In fact, the entire pullback, especially the probing at the low end of the range could have been measured in minutes, rather than hours. What this means at least for the short term is that the less time a market spends testing or re-testing a key support level and the more rapidly that level rejects those prices, potentially the more bullish the situation exits. We also stated in yesterday’s report that following this pullback, thereafter a stronger and more sustainable rally should eventuate and eventuate it did with remarkable force in the face of continuing rising Energy costs.
Does that mean we are out of the woods on this one? Not necessarily. Never say never! In spite of the great action thus far, there a torrent of critical statistical news coming over the next few days that could make or break this rally effort, thus far. And to some extent, US Treasury Bonds may hold the key. A strong rally in Bonds on weak statistics could potentially derail this rally effort at least temporarily. On the other hand a break to new lows, which could be equally dramatic on stronger than expected data, could send Bond prices tumbling into this new downtrend towards 96 we alluded to yesterday and potentially could send stocks soaring at the same time paving the way for that sustainable rally we have been looking for.
Trading Ideas and Updates
Trying to pick the bottom of a waterfall decline in the Grain complex can be tough and dangerous, because you never really know if you going to get one last deathly selloff that could produce an enormous spike bottom, or even a bottom that might not recover or whether the bottom is already within reach and the grains could just as suddenly take off from these levels on some kind of short-covering buying rampage. That’s sort of right where we are at right now. So much as we’d like to take a shot at building some long positions across the board in the grains complex we have to exercise some prudence and give the markets a bit more time to determine the next big trend.
We’re probably in danger of getting bush-whacked on Coffee as the technical structure has likely deteriorated some more in recent days. But on the other hand, a decent bounce or rally could change everything, so we will stick to our plan of yesterday to add some contracts on strength as follows: Buy additional contracts at 69 stop, 70 stop etc or buy September or December 70 calls in the same way. This is still a bit of a crap shoot, but we still consider it worth risking profits from already successful trades to build a position in Coffee.
Orange Juice predictably bounced back a bit from its recent massacre yesterday. In spite of the fall in Juice we want to be buying dips the remainder of this year. So we’re looking to buy soon… We were stopped out of September Cocoa on our short position for a small profit, thankfully.
The Energy Sector is still exhibiting strength with Crude at new contract highs past $43.00
Lumber continues very firm near its highest levels in history, indicating a still strong housing market could be creating shortages.
Have a great Thursday
Trade Well
Savant
Tuesday was about as good as it gets, from the standpoint of a successful of the lows of Monday and subsequent rapid rebound thereafter to new highs. It is interesting to observe that thus far, the Mid-May lows took a lot longer to establish a bottoming formation over about 10 trading days, before clearing the low end range and mounting a powerful rally that took the Dow up over 205 points of its lows leading to a month long rally thereafter of some 400 additional Dow points to just shy of Dow 10,500 before succumbing to the correction that is now trying to establish and so far looks credible enough, for now.
As further evidence of the developing quality of this bottom, is the fact that on Monday, the amount of time spent below 1080 on the S&P or hovering around Dow 9920 could be measured over a few hours before rebounding strongly from these levels. On Tuesday, the significant pullback we suggested the market was vulnerable to came in right on cue, but this time, the S&P failed to break below 1080 and the Dow barely broke below 10000 momentarily reaching down to 9994.23 before rebounding vigorously and with authority.
In fact, the entire pullback, especially the probing at the low end of the range could have been measured in minutes, rather than hours. What this means at least for the short term is that the less time a market spends testing or re-testing a key support level and the more rapidly that level rejects those prices, potentially the more bullish the situation exits. We also stated in yesterday’s report that following this pullback, thereafter a stronger and more sustainable rally should eventuate and eventuate it did with remarkable force in the face of continuing rising Energy costs.
Does that mean we are out of the woods on this one? Not necessarily. Never say never! In spite of the great action thus far, there a torrent of critical statistical news coming over the next few days that could make or break this rally effort, thus far. And to some extent, US Treasury Bonds may hold the key. A strong rally in Bonds on weak statistics could potentially derail this rally effort at least temporarily. On the other hand a break to new lows, which could be equally dramatic on stronger than expected data, could send Bond prices tumbling into this new downtrend towards 96 we alluded to yesterday and potentially could send stocks soaring at the same time paving the way for that sustainable rally we have been looking for.
Trading Ideas and Updates
Trying to pick the bottom of a waterfall decline in the Grain complex can be tough and dangerous, because you never really know if you going to get one last deathly selloff that could produce an enormous spike bottom, or even a bottom that might not recover or whether the bottom is already within reach and the grains could just as suddenly take off from these levels on some kind of short-covering buying rampage. That’s sort of right where we are at right now. So much as we’d like to take a shot at building some long positions across the board in the grains complex we have to exercise some prudence and give the markets a bit more time to determine the next big trend.
We’re probably in danger of getting bush-whacked on Coffee as the technical structure has likely deteriorated some more in recent days. But on the other hand, a decent bounce or rally could change everything, so we will stick to our plan of yesterday to add some contracts on strength as follows: Buy additional contracts at 69 stop, 70 stop etc or buy September or December 70 calls in the same way. This is still a bit of a crap shoot, but we still consider it worth risking profits from already successful trades to build a position in Coffee.
Orange Juice predictably bounced back a bit from its recent massacre yesterday. In spite of the fall in Juice we want to be buying dips the remainder of this year. So we’re looking to buy soon… We were stopped out of September Cocoa on our short position for a small profit, thankfully.
The Energy Sector is still exhibiting strength with Crude at new contract highs past $43.00
Lumber continues very firm near its highest levels in history, indicating a still strong housing market could be creating shortages.
Have a great Thursday
Trade Well
Savant
