Market call: For several days, I was looking for 1225 on the COMP. I heard Zeev say 1222, so today I looked for that range.
Below that, I had 1205 as a possibility, followed by 1195. In no case did my charts project to a break of the July bottom, though going to 1195 off the H&S pattern on the COMP would have me sweating bullets. We came 11 points from 1205, so little risk there, after considering the other indexes....
My charts say this:
SOX - I went back, for a 3rd time, and redid the multi-year chart, this time magnifying it so I could get the diagonal line across the bottoms, perfect. Still, over 8 years, even the line thickness can make it a point or 2 off. But this line says the SOX can't break 250. As it closed at 252.44, there is almost no downside risk there.
BKX - I can find nothing conclusive, either way, in this index.
BTK - Ditto. But both sectors look to be headed lower, overall.
DJIA - I was looking for 7894 max low. I got 7939. Little downside risk there.
$USD - The longterm diagonal across dollar bottoms was intersected perfectly on 7/19 and has not been breached since. From that time, the dollar has zigzagged as it carves out a rising trend channel. It's a little uncertain where the exact parameters are because it's peaked twice and bottomed twice, since, and it needs a third to confirm the exact channel edges.
However, the next bottom should be 106.20-6.25. The only other possibility would be 105.35. We closed at 106.84. It's quite possible we could hit the first target overnight and be back to the closing point or higher by the time the mkt opens.
Common sense analysis from typical mkt. movements and the charting (above)- Typical market performance around a Fed meeting generally has a bottom the day before or the day after, before the market can begin a significant reversal. Almost always, FOMC day brings a rise in the first 30-90 minutes, followed by limited range movement as we idle into the announcement. I'm anticipating no rate change this time.
One or both of the possible dollar bottoms could occur overnight tonight, on the weekend, or as late as next Wednesday, and any of these scenarios could occur without the COMP breaking 1205.
The least bullish sign was JPM's close, below 20 today. However, unlike the goldbugs, I don't view JPM's present weakness being directly caused by its multi-trillion dollar derivatives exposure. Instead, its $20 billion worth of holdings in telecoms & fiber optics has dropped it this far, as that sector has fallen. Thus, while JPM is likely to move lower over the next week, it can be countered if other sectors are reasonably strong, because its next support point (if it breaks its July bottom) is 15.
Going into options expiry, max pain theory indicates many stocks have to rise to reach max pain. As noted in a previous post, this is what QCOM's doing after today's AH announcement.
As different sectors are signalling different things, choosing to go long in the right semiconductors is likely to payoff long here, since it's the one sector at or VERY close to its bottom.
(Who reaffirmed AH in this sector? TQNT? TEK? They may gap & crap, so look for others that rise in sympathy.
Many traders remain worried about pending earnings warnings. That's why it's good to know exactly when, in October, each major company reports. Because most companies warn 4-5 weeks in advance (EDS just warned 5 weeks before its probable 10/24 date). So in another week, we'll likely be past warnings of all the bigs reporting in the first 3 weeks of October.
Another factor that seems to have been overlooked by many traders as we test and retest July's bottom, is a very common earnings-run pattern. I've noted over the years that stocks start making their run 18-21 days before the earnings date. This move could be an advance or a decline, depending on what's anticipated.
The first of the bigs to report will be INTC, which reports 21 days from next Tuesday. 21 days from next Wednesday, AAPL, BAC and others report. If the market does its usual thing, selling off Wednesday post-FOMC, these are some of the stocks to be considering at Wednesday's close.
It's also a common BEFORE the earnings run begins, to see movement OPPOSITE what the earnings run will yield. Thus, don't count on rises 4 weeks before earnings if you're expecting a runup the final 3; expect the reverse.
I doubt we'll see many great rallies in this period, other than 1 day wonders. That's because of the rotational impact of the bigs. For example, since MSFT reports in the week after INTC, INTC could be rising as MSFT falls, keeping the indexes relatively flat.
If we close the August 5th gap at 1206.01 between now and next Wednesday, that could certainly trigger a nice little rally in the COMP.
From next Thursday through 10/8, when INTC reports, offers the best rise time ahead for the indexes. From there till mid-November, during the 5 weeks when most of the bigs report, the rotational factors will come into play, giving us a yo-yo kinda-horizontal market again.
Three final factors to consider:
1) This year has so many falling knives that it'll be hard for funds to sell off all the losers during tax-loss selling season. Winning sectors, like housing, should do fine in October, as will popular bigs that have largely been range-traders this year. October's not a good time to be bottom-fishing.
2) Don't ignore the election season impact. We could run up to Intel (10/8), drift down for 2 weeks with tax-loss selling, and rally again into Election Day.
3) To avoid claims of playing politics, it's VERY unlikely war will erupt before Election Day. However, between the running out of bigs to report, and an increased likelihood of hostilities, and a common annual oil price rise after 10/15 (as we enter heating season), trading long can get risky after Election week. My charts indicate a fairly strong possibility of a bottom retest that could occur as early as mid-November and as late as mid-December. If we're gonna get a REAL panic day or panic week, that's where I'll be looking for it.
The dollar's been basically flat since the close. The bear seems to be hibernation.... mebbe we can get a nice gentle 2 day rise now...
Good luck!
-kevin
AI
Market Data 
Markets 
