As we make our way through the summer-doldrums the stock market has moved very little. As has been the case for some weeks now:
1. 'Investors' ought to be sitting on the sidelines in cash (from the most recent 'investor-sell-signal' issued 9 weeks ago) waiting for the 13 EMA to cross back above the 30 SMA.
2. 'Traders' ought to be short from the most recent breakdown (just below 103.89) with corresponding stops above resistance (just above 113.20). While I do think this trade is getting a little old, as long as we continue to see lower highs and lower lows one ought to stay with it. With this in mind, one ought to have moved their stop now to just above last week's highs (just above 113.18).
The market rallied into the July US Employment situation report only to fail. In fact, we came within .02 points of the significant resistance - talk about a close shave!. The fact that we came so close and then failed suggests that the 113.20 area is a significant pivot point for the market. So much so, that if the market can move back above it, I would fully expect a rally to test the most recent highs (at or near 121 area) and traders should act accordingly.
A rally such as this could easily materialize as we head into the Labour Day weekend. Quite often in low volume times such as these, traders will search out markets for 'stop-orders' to try and make a quick buck. I wouldn't be surprised to see them do the same thing to the 113.20 area in the hopes that if they can push prices up there a whole bunch of stop-buy orders will be triggered. With this in mind, SHORTS BE CAREFUL....
That's all for this week,
Brian Beamish FCSI
The Canadian Rational Investor
the_rational_investor@yahoo.com
the-rational-investor.com
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