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US MARKET OUTLOOK
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US MARKET OUTLOOK
July16th 2006 ~~ A Bull to Bear direction change In late April and Early May the World markets hit record highs, the SP500 hit a all time high of 1326 points. In the weeks that followed, were market corrections of 10% and more in some sectors. This global pull back spared no one and in 2 short months the SP500 has dropped to as low as the 1240 for the week of July14th. The SP500 has been very slow to recover and some worry that the market overall lacks the momentum to continue higher, and that a larger pull back awaits. When analyzing the S&P500 on a weekly chart its clear to see that the market is rising on a very thin level of support. Observing the chart below it can be seen that, standard market pull backs typically do not last more then 3 to 4 weeks before the market gets it's legs back and moves to higher levels, but in this recent pull back it can be observed that this pull back deviates from past sell offs for the following reasons.
50 Exponential Moving Average (EMA) Historically going back
3 years, the 50 EMA on a S&P500 Large cap index shows a steady and
stable line of support that has been repeatedly tested serveral
time. Each test has lead to a strong course higher to new
highes. In June the SP500 tested that
Stay tuned Alexander
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level and recovered, but in this last week (July15) it appears that
the momentum appears to be fading and there could be a potential
break lower, below the 1219. Which was the established all time low
for 2006. Other points of uncertainty is the Fed interest rate
situation, the Fed has not solidified its position on whether or not
they are finished raising rates. The government has raised
rates thru out 2005 and 2006 and currnetly rests at 5.25 with the
good possibility of moving higher on inflation fears.