Monday, August 29, 2011

Equity Week in Review and Preview of the Upcoming Week/Month

Last week, I wrote the following about the market:
The good news is it looks as though the market found a temporary bottom. But we are hardly out of the woods. An upside testing of the declining EMAs is in order, followed by a retest of the 112 level. If the 112 level holds, we'll be in far better shape. But that bottom is new and still very tenuous. Any rally should be considered suspect until we see prices advance through the 200 day EMA. Any move below the 112 area should be shorted.
Last week, the market continued its move to find a bottom:

The 112 area is now providing stronger support for prices, as this is the area where prices stopped two different sell-offs. Also note that prices rallied to the 20 day EMA at the end of last week before halting their advance -- another positive sign. Finally for the positives, the entire short-term pattern looks like a double bottom. However, notice the volume is heavier on both recent sell-offs than the rallies -- a sign of concern. Also notice that the bars comprising the rally are weaker than the bars of the sell-offs. In addition, the EMAs are still very bearishly aligned, although the 10 day EMA is moving with a slight upward trend now.

This is still not a market I would buy -- there is tremendous downward pressure both technically and fundamentally. I would still place trading triggers below the 112 area with in the money put options.