After the close on Monday, the
markets received some good news from Europe. It appears the expected deal to
once again "save Greece" is in place. From the Washington
ministers and the International Monetary Fund clinched agreement on a new
debt target for Greece on Monday in a breakthrough toward releasing an
urgently needed tranche of loans to the near-bankrupt economy, officials
Partly due to expectations of a deal
in Greece, markets have stabilized over the past five trading sessions. As
shown below, the NASDAQ held at the lower end of a weekly trend channel
formed by lines A & B. Williams %R, used to monitor market momentum, has
improved in a manner similar to early June.
The primary driver of the recent
shift back toward risk-on was the fiscal cliff press conference held on
Friday, November 16. Since then, technology stocks have led the push higher.
Last week, the NASDAQ ETF (QQQ) cleared the downward sloping blue trendline on the right side of the chart below. Notice a
similar break occurred near the June 2012 low in stocks. A popular momentum
indicator, MACD, experienced a bullish cross last week similar to the one
that occurred at the summer low (see bottom of chart).
The real test for the bulls will come
when the almost inevitable "bad news" starts to surface related to
difficult cliff negotiations. The tone of the Sunday talk shows hinted that
the road to compromise could be difficult at best. From Reuters:
Republicans in the
U.S. Congress on Monday called on President Barack Obama to detail long-term
spending cuts to help solve the country's fiscal crisis, while holding firm
against the income tax rate increases for the wealthy that Democrats seek.The White House has been equally firm in its
position, threatening to veto any bill that does not include the tax rate
increases opposed by Republicans.
Our weekly technical review of the
markets shows a mixed bag. From a bullish perspective the technicals
have improved noticeably. Concerns remain relative to possible "trend
exhaustion" as measured by DeMark counts and
long-term resistance for European stocks. This week's video contains:
risk-on vs. risk-off analysis using a weekly chart of S&P 500 longs
vs. S&P 500 shorts (SPY/SH at 01:26 mark).
- An inflation vs.
deflation analysis using a daily chart of silver relative to long-term
Treasuries (SLV/TLT at 04:14).
bullish progress on the daily chart of the S&P 500 Index (06:51).
weekly resistance for the S&P 500 (08:29).
resistance for German stocks ($DAX at 09:16 mark).
- DeMark count and
indicators for Euro Stoxx 50 (FEZ at 09:53 mark).
500 daily DeMark count and indicators (11:47).
After you click
play, use the button in the lower-right corner
of the video player to view in full-screen mode. Hit Esc to exit
As shown below, the broader S&P
500 Index has also seen improvement from a technical perspective.
On target="_blank" November
16 we postulated the markets were positioned for a rally attempt. Last
week the rally did indeed transpire. Our approach has been to scale back into
risk assets primarily via the beat-up technology sector. If the markets can
continue to digest developments in Europe and Washington, D.C. in a fairly
positive manner, we will continue to reduce our cash position by "buying