4:00pm
To recap the important technical events today, the S&P hit and pulled back from resistance at 1291/92, which represents a 38.2% retracement. The XLF closed below its 22.50 resistance level. Oil finished lower by about $4 and has now retraced 38.2% from its initial move higher in February. Stay tuned for today’s video.

Read the rest of this entry »

Tomorrow and the Next

Tuesday, the S&P logged an impressive reversal and closed near session highs at 1277. The rally was led by financials, with the XLF gaining more than 5%. The SPX has rallied 6.4% in six sessions, closing above its 20 moving average. The rally has come on decent volume and appears healthy, as long as it consolidates. If the market continues to rise without pausing, the move will be unsustainable more more vulnerable to a nasty reversal. Watch for consolidation over the next couple of days.

Read the rest of this entry »

Since last Tuesday’s short-term bottom, the S&P has rallied 6.4% and the XLF, which tracks the financial sector, has rallied a massive 34%. Bear market rallies are known for their large moves in short time periods. Traders should be careful chasing a rally that has come so far so quickly. In the chart below, you will see that the XLF pierced its 50 moving average in today’s session. This was the first hit of this level since May 19 and should serve as strong resistance. Also, make note that the XLF has retraced 50% of the move from the peak on May 2 to the low on July 15.

4:30pm
In the last 15 minutes of ETF trading, the XLF spiked higher to 22.49, piercing its 50 moving average. This is a significant resistance level. And with the S&P finishing at session highs, I do expect a pullback consolidation period beginning tomorrow.

Read the rest of this entry »

This article from The Economist is a must read. It explains how the United States got into this mess and the implications it faces now that its financial system is unraveling. The article draws the conclusion that Paulson’s current plan would essentially turn FNM and FRE into a printing press. The alternative would be to nationalize the companies, which would transfer huge sums of debt onto the governemnt’s balance sheet. Either way, the US dollar will weaken further. The article’s last sentence reads, “Perhaps it is no surprise that traders in the credit-default swaps market have recently made bets on the unthinkable: that America may default on its debt.”