About Me

Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!

Monday, September 13, 2010

Stock Market -- Short Term

The market has been in a trading range for the past four months,
with most of the action confined to 1040 - 1130 on the SP 500.

Stocks have been in rally mode since the end of Aug., and the
market has been pushing higher to get confirmation of a more
durable rally. The SP 500 has been closing in on resistance at the
1130 level, and most traders are eager to see if the current upturn
can successfully challenge and break through resistance to the
upside.

My Weekly Cycle Pressure Gauge -- a decent fundamental
coincident indicator of the market -- has also been in a tight range
since early Jun. after falling sharply from the end of Apr. This
tells me that players remain especially sensitive to key weekly
data such as sensitive materials prices, unemployment insurance
claims, market short rates and monetary conditions. The gauge
has increased by 2.5% during Sep., and has reinforced the stock
market.

The pressure gauge will probably improve a bit more over the
next week or two, but not enough to signal that the economy --
now running flat -- is about to start lifting again.

When it comes to the weekly gauge, periods like this, when the
gauge has minor bouts of volatility but remains essentially
trendless, can be very frustrating and can last for extended
periods, such as occurred for lengthy intervals in 2004, 2005 and
2006.

On the technical side, the challenges right ahead are to see if the
25 day m/a for the SP 500 turns up and whether the market can
break through 1130 resistance. To make the situation more
complicated for traders, the 14 day RSI would get into overbought
territory on a near term run up and through 1130.

SP 500 chart .

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