By Nicholas Santiago on August 2nd, 2010 3:18pm Eastern Time
Everything is wonderful in the stock universe today. The major market indexes are advancing sharply higher on the back of positive news out of China and the falling U.S. Dollar Index. Investors are even seeing the 10 Year T-Note yield inch higher today to 2.95% indicating that maybe some big fish are taking some money out of bonds today and putting it in stocks. Leading energy names such as Exxon Mobil Corp (NYSE:XOM), and Chevron Corp (NYSE:CVX) are both trading sharply higher as the U.S. Dollar declines to fresh three month lows. Leading commodity stocks such as U.S. Steel Corp (NYSE:X), and Freeport McMoRan Copper & Gold Inc (NYSE:FCX) are soaring higher by nearly 5.0 percent on the session. From the outside this inflation rally looks picture perfect.
However, there is something that is missing from today's large stock market advance; the volume. Today the SPDR S&P 500 Trust (NYSE:SPY) is trading 121 million shares as of 3:00 pm EST. Since the March 2009 low the major indexes have rallied on light volume and declined on extremely heavy volume. This tells us that the true conviction of a bull market is missing. During past years a true bull market moves higher on heavy volume and declines on very light volume. Since 2009 this market has done the opposite and this is why when the corrections occur experienced traders and investors run for cover. Most traders and investors truly feel the the moves to the upside are lacking conviction.
As for now the major stock market indexes have have rallied by more than ten percent since the early July pivot low. This recent rally has been very impressive especially for the many of us that played it and benefited from it. There could still be a little upside left in the tank. However, when markets rally on this type of weak volume you must always be careful because it is truly lacking conviction.
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By Gareth Soloway on August 2nd, 2010 1:24pm Eastern Time
The United States Oil Fund LP (NYSE:USO) gapped higher above the key resistance at $36.00 today. Since then, it has not fallen back below. This shows short term strength and leaves open the possibility of a move to the 200 moving average on the daily USO chart a $37.75.
Gareth Soloway
Chief Market Strategist
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By Nicholas Santiago on August 2nd, 2010 9:53am Eastern Time
This morning the major stock market indexes are all trading sharply higher before the open. The catalyst for this early rally by the media is the as positive news out of China. While the China news might be what the media points to as the catalyst for a rally it is the weakening U.S. Dollar Index that is the catalyst if you ask me. This morning the U.S. Dollar index is trading lower by another 0.35 cents to $81.17. The U.S. Dollar has now declined over $7.50 from it's June high when it traded as high as $88.70. As many of you know when the dollar declines the major stock market indexes inflate higher. The SPDR S&P 500 Trust (NYSE:SPY) and the SPDR Dow Jones Industrial Average (NYSE:DIA) are now higher by more than 10.0 percent since the July low pivot.
The stock market has become a market of extreme swings in both directions. When declines or sell offs occur they are usually violent in fashion. Just look at the May 6th flash crash when the Dow Jones Industrial Average lost nearly 1000 points in a few hours before recovering over half of the intra-day decline. Take this recent rally from the July lows as another example of an extreme move higher. A few years ago a ten percent move was the most that an investor could expect for the year in an index and now we see that type of rally in less than thirty calendar days.
Remember the declining dollar is the driving force behind ever stock market move higher. Certainly a positive Shanghai Index(China) trading higher does not hurt the inflation rally as many believe that China is the savior of the market right now. Remember as long as China continues to grow investors believe that they will consume more commodity products. Just look at Cliffs Natural Resources Inc (NYSE:CLF) which is a leading iron ore pellet producer and you can see the stock is trading higher by 2.03 to $58.61 a share. When China rallies higher expect the commodity stocks to rally as well. Right now stock the stock markets are holding up well. However, when the music stops playing in the communist nation and the bloated fiat currencies around the globe start to lose there inflationary power this rally should come to an end.
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By Gareth Soloway on August 2nd, 2010 12:57pm Eastern Time
Note how after the initial break down on the SPDR S&P 500 ETF (NYSE:SPY) occurred, the markets fell and retraced higher to hit that same trend line again and again. Each time it hit, the short was there for the taking and money would be made. Today was the latest example of that level being hit, The markets have pulled off their highs and that level nicely. Learn the InTheMoneyStocks techniques, make money
Gareth Soloway
Chief Market Strategist
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GBP NET SHORTS against USD fell to 17,940 contracts, the lowest level since August of last year. The chart http://chart.ly/7fxh7s shows GBPUSD is closely correlated with futures speculators interest in GBPUSD. This months BoE inflation report maybe the only viable barrier to further GBP gains in the event that it reiterates inflation to return below 2% at the end of the 2-year horizon. Until then, GBPUSD will seek to recapture $1.5940 after last weeks important break above the 200-day MA for the first time since January. As long as UK services and construction PMIs this week are w/in or better than expectations, the $1.6 can be seen this week, but more GBP gains are viable against EUR. EURUSD eyes 1.3270.
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NEGATIVE USD COMBO: The combination of weak US figures, dovish Fed rhetoric and improving Euorozone figures (PMIs) is proving increasingly detrimental for the US dollar. USDX is at risk of breaking below the 81.40s, marking the 50% retracement of the rally from the Nov 2009 low to the June 2010 high, coinciding with the 100-week MA. The bulk of the decline in 6-currency USD index is occurring against GBP and CAD components, which occupy less than 10% each in the index. Interestingly, EUR, which has the largest share of the USD index at 57%, is showing the LEAST GAINS versus the USD. Therefore, as long as EURUSD is unable to break above the key resistance of 1.3125-30, USDX losses may remain relatively stable. But this does not mean traders can ignore the sharp gains in AUD, CAD and GBP. EURGBP breaks key 0.83 support, eyeing prelim support t 0.84 before key target stands at 0.8140.
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By InTheMoneyStocks.com on August 1st, 2010 4:20pm Eastern Time
The PowerShares QQQ Trust, (ETF) (NASDAQ:QQQQ) lost just 0.25 cents for the week ending July 30th, 2010. Last week started higher and then faded throughout the week. On July 30th the technology heavy ETF opened sharply lower only to reverse all of the early loses and close positive on the session. Therefore, the index could see some early strength this week. The QQQQ's and the other major indexes rallied nearly 10 percent for the month of July and this is very impressive by all standards. However, the volume during this move higher has been very light which could signal lack of conviction by the institutional money. This week could go either way by the current chart pattern in place on the weekly chart. The negative for the QQQQ's are that it is still trading below the weekly 20 moving average and below the June pivot high. Both factors are signs of a weak technical positions on the chart. The weekly support level for the QQQQ's is still the $42.00 area which is the July low. The current weekly resistance area will be the $48.00 level.
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Recently we posted a required reading analysis by Nanex in which the market trading analytics firm presented irrefutable evidence of quote stuffing by HFT algorithms in tens of stocks, in which thousands of cancelled quotes would reappear each second with a definitive periodicity and regularity, around the time of the May 6 flash crash. Aside from the fact that it is illegal to indicate a quote without a trade intent, this form of quote stuffing is in fact manipulative when conducted by HFT repeaters in specific "shapes" as it actually moves the NBBO actively higher or lower, in cases pushing the bid/offer range up to 10% higher without even one trade ever having occurred,read more....http://www.zerohedge.com/article/its-not-market-its-hft-crop-circle-crime-scene-further-evidence-quote-stuffing-manipulation-Read more…
