lots August data to pounder, HUI flat
BlackBox Newsletter
A New Month
by MarketWise University
With July coming to a close and the major indices all near fairly recognizable levels (S&P 500 and 1100, Dow and 10100, Nasdaq and 1900 and QQQ’s and 35.00), traders have to make adjustments for August. For one, a new month means new support and resistance calculations for our Pivot Matrix (levels from Support 2 (S2) and Resistance 2 (R2)); moreover, remember what economic events always take place during the first week of the new month? For one, the ISM Index generally falls on the first trading day of the month (August 2) and estimates are for 62 versus 61, month prior. Following the ISM will be ISM Services and then the Non-farm payroll report, with estimates of an increase in jobs of 225k versus 112k, July reading. Few notes: The ISM report is at its lowest level since October but well above the “expansionary/contraction” inflection reading of 50. As far as the non-farm report, remember to look at revisions of the month prior and the 5.6% unemployment rate – lowest level in four of last five months. The employment picture has improved over the last six months; however, bears certainly could use a number under 200k and lower revision to conti! nue the recent move lower.
Speaking of the move lower, we missed our short in the QQQ’s by one-cent (“IF 35.11 trades, sell 35.08” – day high was 35.10) and now we have to take a step back and see if it makes sense to sell there again. Not likely. Looking ahead to Monday, let’s once again recap sentiment – this time starting with a daily chart of the QQQ’s. This ETF closed under its declining 20 DMA but the 50 DMA remains flat. Bears in control, but risk is a little high for shorting with large positions. Taking things to a 60-minute c! hart, it looks to be neutral to slightly bullish; however, the moving averages we look at are not in a bullish alignment. A 5-minute chart does look bullish, however. Ok, now time for some levels.
With the QQQ’s closing at 34.89, we are in-between some important pivotal confluences. One is above from 35.33 to 35.43 and this is a solid shorting level (in fact, IF 35.43 trades, short at 35.39 with a stop at 35.55 and objective of 34.56). To the downside, the key level is basically 34.50; however, not exactly sure what the market will do if it gets there. A move below could suggest a move to 34.03, but there is a better chance the QQQ’s simply find a bid and 34.50 remains support by day’s end.
Looking at some of the other macro factors, bond yields (moving opposite of price) pulled back into the 4.47% level and the 10 and 20 DMA within the 10 year sector; however, the 50 DMA is declining and the recent cross of the 10 above the 20 DMA may not hold. Since May, we have seen lower highs and lower lows; however, in July we have seen higher lows and higher highs. With that said, look for yields to rise above 4.6% if tested again and also look for lower yields if 4.3% comes into play. The upside projection is 4.8% and the downside is 4.12%. Odds are yields continue to fall, playing into the bigger picture and election seasonality.
What about the AMEX Gold Bugs Index, or HUI? Since going neutral in late-June as this index took out 184, it shouldn’t be too surprising we are back at these levels after failing to test the 163 low set in May. Look for 190 as the key inflection point and odds are this index rolls back lower and we don’t see the zone of 190 to 200 cleared anytime soon.
Few side notes: Don’t forget about the FOMC meeting on August 10th.
Pennies not a zero sum game as much as some zero game.
