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07262010 July 26, 2010

Posted by easterntiger in economic history, economy, financial, gold, markets, stocks.
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Weather Report  07262010

Current Positions  (No Changes)

I(Intl) – exit; S(Small Cap) – exit; C(S&P) – exit ; F(bonds) exit;  G(money market) – remainder

Weekly Momentum Indicator (WMI***) – last 4 weeks, thru 07/23   -33.99, -22.19, -5.68, +32.14

(3wks ago/2wks ago/1 wk ago/this week)
Generally speaking the major markets worldwide have been lower since my last report, only approaching those June levels after a lot of effort,  only to be held or turned back at those same, late June levels.

The S&P500 & Nasdaq are reaching upon a 3rd level of  ‘lower highs’ (1114 & 1888), since mid May (1173 & 1983) and late June(1131 & 1939) and seem now due for a turn in direction within the next week; whether that is up or down is not clear.

The S&P100 appears to be ‘drawing’ the ‘right shoulder’ of a ‘bearish’ head and shoulders formation.  Generally downward trends follow these formations.

Wide price ranges are seemingly baked in to recent short-term trends, while a true low-to-higher or high-to-lower direction is not.

With respect to trend lines, these markets are at or above the 200  – Nasdaq, Wilshire 5000, S&P 500 (by about 1 point), Dow Industrials,  Russell 2000,  DAX (Germany).

However, the FTSE, Nikkei, New York Composite, S&P500, Wilshire 5000 & CAC are far below their highs earlier in the year, trending sideways to lower.

Only the DAX, Hang Seng, Dow, Russell 2000 have some appearance of near term stability at/above the bull/bear marker, while the S&P 100, Nikkei (Japan), CAC (Paris), FTSE (London), Hang Seng (Hong Kong) are all below the 200 day moving average .

Still other markets, including the Brazil Composite, the Malaysia KLCI and the Russian RTS appear poised on extended sideways moves at or near recent peak levels, in preparation for another trip down toward last years lows.

The Daily Momentum Indicator (DMI) is slightly positive, however it was also positive 6/10-6/18 & 7/6-7/15, just before downturns.

The composite 9-day moving average is at the 7/15/10 level and falling; this indicates that the daily trend is close to weakening.

Longer term, the 3 week rate of change (RoC), similar to my weekly momentum indicator (WMI) at the top of the report, is still negative since 5/10; the 5 Week moving average is rising slightly, but, still not enough to break the negative trend in place since May 20th; the 7 week moving average is positive but, peaking and subject to flattening or stalling.

The 40 week moving average (more like a yearly trend) is peaking and possibly falling.
***When last seen in this same position, in early 2008, the market started a slow fall that accelerated within 5 months.***

Interest rates have reached yet another multi-decade low in the past month, which does not bode well for stock safety, if this lower rate trend continues.

Oil, gold, silver and other commodities have been staging a 3-4 month ‘flattening’, symptomatic of what some call consolidation.  Gold actually fell to a 9-week low last week, so there is likely to be a trend change.  With a further development of trend in the next 3-4 months, there is not enough information to suggest whether it will be of the ‘advancing’ or the ‘correcting’ nature.  Only in the context of the longer term positive trend is it a great time to be a buyer.

* According to the Wall Street Journal, “The pace of failures has nearly doubled that of 2009 when 140 banks were shuttered by regulators.”    Seven banks were closed this past Friday,including one in Jasper, GA with over $1 billion in assets.

* On July 21, the headlines proclaimed, “Housing Market Stumbles.” The article starts out by reporting, “In major markets across the country, home sales are deteriorating… and builders are cutting back construction plans.”

There is a rule which says that when the debt is 90% of gross domestic product (GDP), a country does not move ahead economically, but stagnates.  The U. S. is at 87.5% and expected to hit 93% before the end of the year.  Japan and Italy are already above 100%.  This same trend is in place in other developed countries, so, the U.S. has company with this unfortunate trend.  These trends are created over decades and then take many years to correct or dissipate, as the debt destruction process continues to unwind.

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