AI
Sunday, September 19, 2004 5:46:18 AM
>>>CYCLE/TREND Update for the week Ahead>>>
Overview:
As mentioned in the previous update with which this post replies, I had mentioned I was looking at the possibility of a couple of scenarios moving forward. Around Aug 20th I had pointed out what looked to be an inverse H&S #msg-3861813 that so far has played out rather well even though the right shoulder took on an odd shape or prolonged formation as the pattern materialized. I had also pointed out in my last update what might be a possible double top on the COMPQ at the 1896 area with what looked like formidable resistance across 1900. As it turns out we cut right through the 1900 area and moved up to 1919. I also stated "it's Options Expiry and with a bunch of QQQ puts at strike 31-35 and a bunch of QQQ Calls at strike 35-38, we will most likely finish the week close or near MaxPain 35. Will we go higher and then come down into Ops Exp or will we dip and go up into Ops Exp?" Well as we now know, once we moved up to 1919 we just meandered around and floated down into Ops Exp with the QQQ finishing out the week at 35.43 and the COMPQ at 1910. The question now is how much more upside can we expect from the inverse H&S before a retrench. Before getting into that, let's review the Econ #'s for the week.
Economic #'s:
As usual we got our usual mixed bag of readings, but for the most part they seemed more troublesome than encouraging. The Treasury Budget and Current Account Deficit went deeper into the red, Retail Sales fell with Business Invetories up slightly. We then got a much improved NY Empire State Index, flat Capacity Utilization and falling Industrial Production. CPI & Core CPI came in slightly lower, Initial Jobless Claims of 333K or 10K less than expected while the Philly Fed took a big hit and Mich Sentiment was off slightly.
As a side note, we have seen quite a few earnings warnings and we haven't even entered warnings season yet, so this may just be the tip of the iceberg. The latest victim of the slowdown was KO, I think it may be worth noting that not only tech companies are warning as we saw AA warn the week before. Warnings, uncertainty surrounding the Iraq War and US elections, new revelations about Iran and N.Korea, rising rates, high crude prices, increasing consumer credit and twin deficits are just not conducive towards sustainable upward moves.
As far as next week goes, we start out with an FOMC meeting in which most believe Uncle Al will raise by .25%, then we get Building Permits and Housing Starts, Initial Claims, LEI, Durable Orders and finish out with Existing home Sales. Of special note, the last two times the FOMC met we got trend reversals. We reversed down in June and up in August. Whether or not the Fed meeting will signal a change in trend is yet to be seen, but worth noting.
What can we expect now?:
The Bradley turn scheduled on/around the 13th seems to have been a non-event and as mentioned earlier we are still in an uptrend working off what is an inverse H&S. This pattern continues to give us a little more upside to work with, but seems to have ran its course for the most part with numerous indicators reaching or about to reach overbought territory. If there is some more upside to be had, I would say it is very minimal although the 1900 area which looked like heavy resistance has now become support. Can we hold the line? We shall soon see... A break below 1900 will most likely signal a change in trend with a break of 1890 being far more concrete in signaling the likelihood of a trend change. We are also near the end of what appears to be a 12 week cycle period that I recently mentioned here #msg-4056131 and seem to be in a repeat pattern sequence mentioned here #msg-4046827. This week should be very interesting indeed.
NOTE: I continue to hold a USPIX position
Disclaimer: This disclosure is not a recommendation to buy or sell or to do as I do. It is to let people know what I think about current market conditions, what it is that I am doing and for no other purpose than to create a track record.
Overview:
As mentioned in the previous update with which this post replies, I had mentioned I was looking at the possibility of a couple of scenarios moving forward. Around Aug 20th I had pointed out what looked to be an inverse H&S #msg-3861813 that so far has played out rather well even though the right shoulder took on an odd shape or prolonged formation as the pattern materialized. I had also pointed out in my last update what might be a possible double top on the COMPQ at the 1896 area with what looked like formidable resistance across 1900. As it turns out we cut right through the 1900 area and moved up to 1919. I also stated "it's Options Expiry and with a bunch of QQQ puts at strike 31-35 and a bunch of QQQ Calls at strike 35-38, we will most likely finish the week close or near MaxPain 35. Will we go higher and then come down into Ops Exp or will we dip and go up into Ops Exp?" Well as we now know, once we moved up to 1919 we just meandered around and floated down into Ops Exp with the QQQ finishing out the week at 35.43 and the COMPQ at 1910. The question now is how much more upside can we expect from the inverse H&S before a retrench. Before getting into that, let's review the Econ #'s for the week.
Economic #'s:
As usual we got our usual mixed bag of readings, but for the most part they seemed more troublesome than encouraging. The Treasury Budget and Current Account Deficit went deeper into the red, Retail Sales fell with Business Invetories up slightly. We then got a much improved NY Empire State Index, flat Capacity Utilization and falling Industrial Production. CPI & Core CPI came in slightly lower, Initial Jobless Claims of 333K or 10K less than expected while the Philly Fed took a big hit and Mich Sentiment was off slightly.
As a side note, we have seen quite a few earnings warnings and we haven't even entered warnings season yet, so this may just be the tip of the iceberg. The latest victim of the slowdown was KO, I think it may be worth noting that not only tech companies are warning as we saw AA warn the week before. Warnings, uncertainty surrounding the Iraq War and US elections, new revelations about Iran and N.Korea, rising rates, high crude prices, increasing consumer credit and twin deficits are just not conducive towards sustainable upward moves.
As far as next week goes, we start out with an FOMC meeting in which most believe Uncle Al will raise by .25%, then we get Building Permits and Housing Starts, Initial Claims, LEI, Durable Orders and finish out with Existing home Sales. Of special note, the last two times the FOMC met we got trend reversals. We reversed down in June and up in August. Whether or not the Fed meeting will signal a change in trend is yet to be seen, but worth noting.
What can we expect now?:
The Bradley turn scheduled on/around the 13th seems to have been a non-event and as mentioned earlier we are still in an uptrend working off what is an inverse H&S. This pattern continues to give us a little more upside to work with, but seems to have ran its course for the most part with numerous indicators reaching or about to reach overbought territory. If there is some more upside to be had, I would say it is very minimal although the 1900 area which looked like heavy resistance has now become support. Can we hold the line? We shall soon see... A break below 1900 will most likely signal a change in trend with a break of 1890 being far more concrete in signaling the likelihood of a trend change. We are also near the end of what appears to be a 12 week cycle period that I recently mentioned here #msg-4056131 and seem to be in a repeat pattern sequence mentioned here #msg-4046827. This week should be very interesting indeed.
NOTE: I continue to hold a USPIX position
Disclaimer: This disclosure is not a recommendation to buy or sell or to do as I do. It is to let people know what I think about current market conditions, what it is that I am doing and for no other purpose than to create a track record.
**Happy Trading**
Your Economy #board- 1948
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