Market commentary for 07/01/2009
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Good day,
June is finally over. Let us look at the monthly chart. The DIA chart we can see the 10sma resistance area and the first red bar after the bounce from the low. The bounce was strong enough to expect that the low will hold if we see a pull back. The same action is with the SPY monthly chart despite the close above the 10sma. We can see the resistance on the charts suggests a correction. What kind of correction we can’t tell from the monthly charts but since the volume decline and resistance is here it is hard to be a buyer at this point. The QQQQ reached the 100sma resistance area on declining volume also. Its bounce is stronger than the SPY/DIA charts. Another thing that I see is a very narrow range bar, narrowest from August 2008 and doji bars. Technically that mean indecision and the direction we can expect is unknown and because of that it is good to mark June's high and low.
Looking back to Tuesday's action. On the daily charts we can see the DIA made a new high and after the strong pull back on higher volume. The SPY did the same and it tried to break the 20sma resistance area and pulled back. The QQQQ reached Monday's high but as the others it closed lower, but still above the 20sma which is the support are now. If it continues with consolidation above the 20sma the odds for a break down increase.
On the 60 min charts we can see the DIA 200sma was too strong and after it touched that area we got a strong move down based on bad economic news which was the trigger. The move down in the morning was the only chance for a low risk setups since the indices reached their support area and the rest of the day was slow without much chance for low risk setups. All indices closed under the possible 10/20sma crossover and that is important area for Wednesday's action. If the 20sma will hold, I will look for selling continuation and if the indices break above them, my bias will be neutral. For now it is best to stick with intraday setups on smaller time frames. Since my occupation is swing trading I will use that for partials and I will leave the rest in case that market will to give us continuation. It is same that we did on Tuesday. I expect the volume will decline coming to the end of this holiday week.
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