Monday, July 23, 2012

Morning Market Analysis

The daily charts of the three major ETFs still show a reluctant rally; prices are moving higher, but there is hardly a sense of this being a strong rally.  Instead, this is money seeking out some place to go, but not thrilled about where it lands.  All are above the 200 day EMA, indicating we're in a bull market.  However,  the QQQs have a muddled shorter EMA picture, while the same EMAs are losing their intensity on the IWM chart.  The IWMs MACD has given a sell signal, and the same indicator on the SPY and QQQ chart is weak as well.

There is further good news, however.  The weekly top performing sectors were
  1. Energy
  2. Basic Materials.
  3. Technology
  4. Utilities
  5. Industrials
  6. Consumer Discretionary
  7. Health Care
  8. Consumer Staples
  9. Financials
This is a more bullish orientation than the previous week, when the 2, 3 and 4 top performing sectors were utilities, health care and consumer staples, respectively.  Over the one year time horizon, we still see that utilities, staples and health care are the top sectors, so we're not out of the woods yet.

The weekly chart of the euro shows that prices are in a clear downtrend, and have been in one for nearly a year.  Prices are trading below the 200 week EMA; all the shorter EMAs are below the 200 day EMA, and all are heading lower.  Momentum and the RSI are weak, the CMF is negative and volatility is rising.  In short, the next logical price target is the low established last summer.

The yen is still trading sideways.  This currency is caught between two currents.   Bulls are looking for a safety bid -- a place to park money to ride out the overall economic storm.  However, there is still concern about Japan's overall growth rate, leading to downward pressure.  There is also the possibility that the BOJ will engage in further easing, adding downward pressure to the yen.

The Australian dollar is now in an uptrend.  Prices are above the 200 day EMA and the shorter EMAs are rising.  The MACD shows positive momentum, relative prices are strong and money is flowing into the market.  There are several reasons for this.  First, Australia has a higher interest rate.  Secondly, the economy is, overall, still doing fairly well.