Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
After a rare down week, markets are opening to a potential break of long term support this morning. The S&P 500, aside from a two and a half week period in late June through early July has been traveling along with dark blue trend line, which connects a series of lows for 2013. Last week was very choppy, as the S&P wrestled with that trendline but this morning we look to begin with a gap down below it. Further we see the MACD had a bearish crossover last week – you can see the last bearish crossover led to the one serious correction of the year BUT you can also see in the yellow shaded area from March/April there are periods we get a series of quick bullish AND bearish crossovers and the market just bounces around aimlessly. Of course we won’t know which of the two scenarios we are in until we are down the road and can look back with the benefit of hindsight. But there are now cautionary signals out there. It is also worth nothing the S&P 500 is back below the May 22 intraday highs (that was the day of the infamous Bernanke comments that one day in a galaxy far far away, the Fed may slow down easing).
Last week was a bit surprising because usually low volume, everyone is on vacation weeks have led to gains in the market. While there was not heavy volume selling, there certainly seemed to be a buyers strike. A flurry of Fed officials signaling “tapering” is coming was the main focus as earnings season begins to slow down, and the economic calendar is light. This week is similar in many respects. Retail sales Tuesday will be the big report, with a 0.4% increase expected (the same figure ex-autos). Some inflation reports that almost no one pays attention to anymore plus housing starts/sentiment hit late in the week. Speaking of housing, the sector has been his very hard relative to what is a minor increase in mortgage rates in the big picture.
Last week most areas were flat line (financials were weak) except for one laggard area – materials. This was due to some uptick in Chinese economic data which led to a late week rally in a lot of broken resource type stocks – think coal, iron, mining, etc.
If this is a long term change in trend as people begin to believe in an uptick in Chinese economic activity or just another oversold bounce in a long series of them – too soon to know.
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Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). For a list of the aforementioned fund’s holdings at the end of the prior quarter, visit the Paladin Funds website at http://www.paladinfunds.com/index.php/the-fund/holdings
