For technical analysts today is one of those days that we just can’t say with
certainty what the next 24 hours will bring. The major indices are oversold,
which would lead some to believe that a technical bounce is near. But, at the
same time the support and resistance price levels tell us that there is
currently more ease of movement to the downside than the upside. I am talking
about short term only here, the long range market conditions still point to the
markets going much lower.
But, back to the near term. From the technical analysis perspective the
market can have a bear market rally at any time. And in time that rally will
fail once again and we will go lower. However, the FOMC meeting announcement
tomorrow puts an unknown variable into the works and creates a situation where
any announcement from the Feds that is interpreted by the market as bad for the
economy could result in a panic selling event. And during panic selling events
the technical levels almost become secondary. Another technical indicator that
tells us that there is still more selling to come (in the longer term) is the
volatility index (VIX). This measurement is not yet at levels where we can say
that any short term capitulation has occurred. And in that we see the recent
selling as things potentially only getting started, a warm up lap if you
will.
With the divergences in the technical indicators and the unknown impact of
tomorrows FOMC announcement, it is very difficult to gauge what tomorrow will
bring. At this time the S&P 500 is roughly 57 points from the mid March
lows. It would take one heck of a panic sell off to bring us down to those
levels in one session. But, we are still watching those levels, along with many
other chartists, for there will be a concerted effort to rally the market once
that price level is tested. Again, longer term picture tells us that we will
still be going lower, but for now we are caught in a technical conundrum.
This mornings economic data was just simply bad. Dow chemical (DOW) raising
their prices a total of 45% in the past two months with the threat of having to
raise them further, the Governments own data on consumer confidence falling to
the 5th lowest reading ever…
JUNE CONSUMER CONFIDENCE: 50.4 V 56.0E; FIFTH LOWEST
READING EVER
- prior revised from 57.2 to 58.1
- 1-year inflation
expectation at 7.7% v 7.7% prior (matches record high reading)
-Conference
Board states "Consumers’ assessment of
present conditions grew dimmer in June. Those claiming business conditions are
"bad" increased to 32.5 percent from 29.7 percent, while those claiming business
conditions are "good" declined to 11.5 percent from 13.0 percent last month.
Consumers’ appraisal of the job market was also more pessimistic.