Gregory Spear's blog
The bulls are getting giddy, which is the sentiment indicator we have been looking for as part of our topping scenario. On Monday the Dow rallied about 100 points even though it is quite overbought. In our technical section we pointed out the “speed zone” in this area months ago. We are experiencing the Speed Zone Effect now. Full Article
On Friday the Dow gave back 67 points, its first down day of more than 11 points in 10 trading days. That’s how bullish things have been. We have noticed some selling in the market leaders, however, especially as they report earnings, and we expect that trend to continue. Full Article
Our Dow 10k target was not fully attained on Monday, but the index reached 9931. After a 6-day rally, the index may need a pullback, but we expect it to be benign. Full Article
The major indices marked time on Wednesday, which we consider quite bullish. The market paused ahead of the start of earnings season. Full Article
The daily trendline support in the Dow functioned as expected. We now anticipate a test of an hourly trendline from below in the area of the 1055. If it fails then we would look for a test of the 9300 level and then the 9100 level. Keep in mind that it may not fail.
You might be tempted to ascribe last week’s sell off to fears about a weak jobs report, but it is more likely the result of profit taking and end of year adjustments at mutual funds. This process typically lasts a few weeks. On Friday the Dow only lost 21 points on the ‘bad news.’
We attribute the lack of follow-through selling on Friday’s news to simple trendline support.
We had some continuation of the selling on Friday, but on declining volume. The Dow was down 46 points and is testing support at the August high. As we noted on Friday, however, a slightly deeper pullback would be normal at this stage of the game (see chart below). We also wrote, “We would not get overly bearish at this point.”
We had some continuation of the selling on Thursday, which was expected. Once momentum shifts, it persists. Still, selling pressure was mild.
Of more tactical and strategic concern, however, is the recent plunge in crude to the $66 area, which is key technical support. If crude were to fall lower, there would be two ways to interpret it. One is benign and the other is problematic. Full Article
Yesterday we wrote, “When the music stops, we expect a sharp down day, but the first selling spree will probably be bought after a few days of purging.” The music stopped, at least temporarily, at 2:50 pm yesterday, about 30 minutes after the FOMC announcement. Full Article
September stock options expired on Friday, creating a choppy, sideways market during the day. Most of the significant options- related activity occurs during the week before the actual expiration. This time, the bears were punished, which motivates owners of put options to buy the underlying equities to offset options losses. Full Article
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