Look for economic reports to guide the way
The market worked off some its short term overbought condition yesterday
as most of the major indices were down modestly. It is not
oversold yet. Just somewhere in between. Volume was low and
I anticipate that may change as we get the January CPI (Consumer Price
Index) report today.
With earnings season well behind us the market will look to economic
reports to get a gauge on what Dr. Ben Bernanke and the Federal Reserve
will do with interest rates in the months ahead. Any indication
that inflation is still a threat should spook the market pretty good.
Any signs that inflation is in check should trigger a rally.
Today's CPI will be the next test.
Yesterday the S&P 500 put in what we call an outside day. That is,
the day's high was higher than Friday's high, and the low was lower than
Friday's low.
|
|
The outside
day pattern
is considered a reversal pattern but
yesterday's lower volume may make it a less effective
signal this time. |
|
Chart provided courtesy of
www.decisionpoint.com |
Again we are not getting any real clear signals. Even
yesterday outside day drop found support at the old resistance line.
We could bounce from here just as easily as fall through that
support. If we do see some weakness today, the first downside
target could be the 20-day moving average which is sitting at about
1275 for the S&P. After that the next point is the 50-day
moving average near 1268.
Chart provided courtesy of
www.decisionpoint.com
On the up side we have yesterday's high followed by the early January
high as immediate resistance points.
The intermediate term overbought / oversold indicator is still on the
overbought side, as are several others. Nothing is too extreme so
I don't have a high degree of confidence that we will move lower, but
things are leaning that way.
The chart I posted yesterday of the dollar (see yesterday's comments
below) was showing that while the dollar was rising, it did appear to be
slowing some. If it is putting in a short term top, the I fund may
be your best bet out of the stock funds.
The CPI will likely take center stage today so
I'll wrap this up for
now. I'm sure we'll be talking more about it
tomorrow. We'll
need something as the indicators aren't helping too much at the moment.
That’s all for today. Currently 100% G fund. Thanks for
reading.
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