Current Market Psychology
In a word… bullish. (It kinda pains me to say that because I did take on a protective short position via Sept Puts.) So because of my biasness, I have been combing the charts to seek any form of negativity, but I have to call it the way I see it.
The long-term negative trend line was broken, suggesting more potential upside. Along with the recent break, the Ocillators suggest a trend upward, at least to the next level of resistance (around 1410).
To support the bullishness there are multiple indicators…
1. The FXE looks to have broken down its intermediate trend (the long-term trend is intact):
2. The VIX is negative. Even though it appears to be sitting on support, the Stoch and negative DMI suggests more of a consolidation or decline to around 18:
3. The XLF appears to have more upside (via the daily), along with the potential of breaking intermediate long-term resistance (via the weekly). This is important because the banking sector was a major drag on the SP500:
Daily… the SMAs were broken and the Stoch suggests a move to 28 or higher
Weekly… the 20SMA, which basically acted as resistance as the XLF moved downward, is breaking. But there are multiple resistance points for XLF.
Its not all clear sailing on the long side, although the favor, imo, is with the bulls. Some indicators on the potential bearish side:
1. The SH is sitting on support, but if the bullish argument wins, then it may see mid 61-62…
2. The SP500 weekly chart showing the SMA resistance is at hand
All-and-all, the market seems to want to move upward to at least the 1410 level, assuming no negative catalyst is at hand. The Fed Meeting is coming up this week, and a few outcomes may take place. The past week the market rallied as the dollar rose. So if the Fed holds steady or lowers the rate by 25basis points (less than the 50 the market is anticipating) the dollar could rally, and the market continues to go up.
I am still bearish on the market, outside the current condition, because the fundamentals tell me I should be bearish. I really do expect a Consumer Freeze in the next few months. Gas is approaching $4/gallon!!! I paid $240 in gas this past month. I now view gas as a major expense, and I make a decent living with my job and ability to trade. (If someone like me is thinking about this, I can only imagine the majority of America where the cost of gas is preventing them from shopping, food etc.) Also, the jobs that are anticipated to be lost have not been calculated into the job loss numbers yet. Wall Street is anticipated to lay-off 20% of workers. LET ME REPEAT THAT, 20%!!!! That is HUGE.
So, we may rally, but until the Consumer Freeze works itself out, I do not see a sustainable rally. (I am not expecting new market lows from this, just a contained sideways market. Hence my caution everytime the market rallies.)
