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August 9, 2014 – Weekend Market Comment

August 9, 2014 – Stocks finish the Friday session and the week on a strong note, with the S&P 500 and Dow posting their biggest one-day point and percentage gains since March 4. The major indexes all see weekly gains as Ukraine fears moved to the back burner. Investors on Friday proved that they have been a lot more worried about Ukraine and the potential for a deeper conflict between the West and Russia than they are about fresh U.S. military action in Iraq.

We have been in a corrective mode over the last two weeks, but I don’t think the geopolitical risks have become noticeably worse, and the earnings season, which should matter the most, has turned out to be good,

S&P 500 — up 22.01 points, or 1.2%, at 1,931.59. For the week, the S&P rises 0.3%. DJIA — up 185.66, or 1.1%, at 16,553.93. That leaves the Dow up 0.4% for the week after two consecutive weekly losses. Nasdaq Composite — up 35.93, or 0.8%, to 4,370.90, booking a 0.4% gain for the week.

That was a nice day Friday, but one day does not change a pattern that otherwise has been like driving off a cliff. Many of the indicators I am going to show you have hit the limits we expected, and next week they will either turn around as expected or this is being caused by something much bigger. From what I can see there is little on the horizon to ruin the party, so I do expect this to be the bottom. That said we don't bet money on hunches, lets see what Mr. Market has for us, there is lots of time to get in when the up turn is confirmed. 

Lets begin with the Long Term Bull and Bear Lines. This pattern could well end up like February 7th and as you can see, the slope indicator in the bottom window is down about where it often turns up. 

Here we have the NYSE High Low chart, again it could easily repeat what happened February 7th. 

Again some promising looking bottoming activity in the Primary Sell Indicator

The VIX (the fear gauge) looks like it has also hit the top of panic with a nice solid green peak in rsi in the top window.

Also the stocks over their 50 day moving average graph is looking like it has reached the extreme end of oversold. This is the point where often it must turn around. As you can see less than 25% of the stocks that make up the S & P 500 are above their 50 day moving average. 

So lets see next week if this is the bottom.