Home > Articles, Technical Analysis > DROP IN CONSUMER CONFIDENCE WEIGHS ON STOCKS AS MARKET ENDS FIRST HALF OF YEAR — A SHORT-TERM TOP MAY BE FORMING — COMMODITIES ALSO SELL OFF AS DOLLAR BOUNCES — TIPS REMAIN A SECOND QUARTER FAVORITE

DROP IN CONSUMER CONFIDENCE WEIGHS ON STOCKS AS MARKET ENDS FIRST HALF OF YEAR — A SHORT-TERM TOP MAY BE FORMING — COMMODITIES ALSO SELL OFF AS DOLLAR BOUNCES — TIPS REMAIN A SECOND QUARTER FAVORITE

June 30th, 2009 Leave a comment Go to comments
S&P 500 MAY END QUARTER ON FLAT NOTE… A drop in June consumer confidence to 49.3 from May’s revised reading of 54.8 has caused some nervous selling in stocks as the market ends the month, quarter, and first half of the year. It remains to be seen if this morning’s selling is enough to overcome the usual “window dressing” that normally takes place at the end of significant time periods. [Window dressing refers to money managers buying stocks that have done well over the prior period (like financials, consumer discretionary and technology stocks) so that they'll show up in their quarterly holdings. We've seen some of that over the past week. Chartwise, however, this is a logical spot for the market to experience some profit-taking. The daily bars in Chart 1 show the S&P 500 having rallied into a potential resistance zone in the 927-930 region. The latter number comes from the top of the May peak (and possible "right shoulder") in a short-term topping pattern. The daily MACD lines in Chart 2 remain negative. The S&P 500 still has to fall below its May low (and possible "neckline), however, to signal a market correction. The hourly bars in Chart 2 show that the 930 level also represents a 62% of its earlier June loss, which is often an excuse for traders to do some selling.

Chart 1

Chart 2

DOLLAR BOUNCES AS COMMODITIES SELLOFF ... Commodity prices are also selling off today. Chart 3 shows the DB Commodities Tracking Fund (DBC) falling more than 3% and falling back below its 200-day moving average (commodities have been closely correlated with stocks). Part of the reason for the commodity selling is a bounce in the Dollar Index. Chart 4 shows the Power Shares Dollar Index Bullish Fund (UUP)bouncing today. The dollar started to stabilize in early June just as stocks and commodities started to weaken. Treasury bonds have also had a relatively strong June. Chart 5 shows the Barclays 7-10 Treasury Bond iShares (IEF) rebounding during June which suggests that investors have become a bit more defensive. None of these June moves look like major trend reversals. They look more like shorter-term counter-trend moves. Unlike Treasuries, TIPs had a strong second quarter and appear to be ending on a strong note. Chart 6 shows the Barclays TIPs iShares (TIP) moving up to the top of its second quarter trading range.

Chart 3

Chart 4

Chart 5

Chart 6

[by John Murphy]

Share and Enjoy:
  • Digg
  • del.icio.us
  • Facebook
  • Mixx
  • Google Bookmarks
  • BlogMemes
  • Live
  • MySpace
  • Technorati
  • MisterWong
  • RSS
  • Twitter
  • Yahoo! Bookmarks
  • Yahoo! Buzz
  • LinkedIn
  • Reddit
  • Tumblr
Categories: Articles, Technical Analysis Tags: ,