Jul 262010

Institutions lead the buying on strong earnings through the weekend and overnight despite sell-off though overnight volume is much lighter compared to Friday which was quite heavy. For this reasons we can’t trust the overnight deltas so much though we are paying some attention to them. As I write this in fact, they have rolled over negative and volume has come up a bit. I’m pretty confident the OL will break and we will see some sort of retracement. All eyes on new home sales though I doubt the number could be very good. Earnings are all that is holding us up with all these poor economic numbers. Employment has not improved and I doubt housing will show improvement either. That said the OL is weak and likely to break IMO. Depending on the timing, a number in the 200s for homes will likely spark a correction at least down to the interim support around the S1 and if the number isn’t too bad we may hold there. The Euro, Treasuries and the carry trade are relatively flat despite a strengthening Yen and oil and gold are selling off which of course are both inversely correlated of late so those both serve to help hold us up at the moment. Earnings are pretty unreal with 85% of companies beating estimates. Then again maybe estimates are too low? In any event we continue to see some big dogs show good numbers across all sectors really – Honeywell, McD’s, Johnson Controls, Ford and more all looking good. Nothing much on the docket today though. We may trade in a fairly narrow range and have some good rotations today actually, which given the last week and a half will be welcomed with open arms. If we do manage to rally, there is lots of resistance on the high side from the 10 handle through 18 or so and there should be some good fade action up there. FYI, the 18 handle is a major level on the composite at the moment and is the dividing line to get us out of the single biggest volume trading range since October of 2007. I guess we could say that is a major level. Expect greater than normal volatility there whenever we get to it today or otherwise.

 Posted by at 8:59 am

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