Ok, new week, new month. To get the statistics out of the way, the Dow has risen in only three of the 13 post-election Junes since 1950. Personally I tend to view these types of statistics with some degree of suspicion, what better way to manipulate the public into acting in a particular manner, than to produce statistics like this, but there it is for what it's worth.
The week past was by and large a range trading consolidation week after the previous weeks sharp move up and ended near the highs of the range. The daily chart to me looks bullish, as does the weekly. Volume overall continues to contract. Economic data was perceived to be generally good, remember in the short term it's not the data itself that is important, but how the market perceives it.
The interesting thing for me last week was that on Tuesday we had an inside NR7, Wednesday we gapped down and initially sold off, a perfect opportunity for the bears to strut their stuff, instead we had another lackluster volume day with an afternoon rally to take us back into the middle of the days range. Previously a moment of weakness like this was being pounced upon by the sellers and we would go down significantly and on heavier volume. What that tells me is that neither bulls or bears are confident of direction anymore. This week brings a raft of economic data, so maybe this will help one side or the other take firm control.
I have noticed a lot of calls for a top here, and while I can't argue with the logic being used, low put / call ratios, low VIX etc, it makes me nervous, I like people to be talking about the next level up when I look for my tops. If you were following this thread in March when we moved up for the highs, while there were people talking about a top, there were also people talking about how much higher than 11,000 we might be going.
Ok levels for the coming week, short term trend is up, initiative with the bulls, so resistance first. Convergence of underside of longterm uptrend line and highs of a range from late March early April 10,569, following that we have 61.8% fib ret Mar highs to Apr lows at 10,608. I also have an upper channel line of the expanding range which converges with the 78.6 fib at 10,773.
Downside support, the lows of this range at 10,423, followed by the 200 day sma currently at 10,412 and the 50 day sma currently at 10,356.
One other thing that has occurred to me, and I will throw it out for some thought. A lot of rumour and speculation have been floating around about potential trouble in Hedge-fund land. Now whilst i appreciate that in the longterm the demise of any of these funds would likely have damaging implications for the market, in the shortterm they may not have an immediate negative impact. Since hedge-funds speculate on both sides of the market, (I am talking of those speculating in equities here) whose to say that the positions they have to unwind are not short positions?
