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Market Commentary For 06/16/2008
Good day!
Friday morning''s action was similar to Thursday. The Indices opened with a gap up. This time we saw more weakness right after the open and the SPY/QQQQ filled their gaps. After that we saw strong moves up above the previous highs, which broke the 60 min trend lines. The buying pace was very strong with heavy volume which suggests that the daily lows will hold this time. After the morning run, the indices started with corrections and until the last 30 minutes there was not much action and trading risk was too high for new setups. On the 60 min charts we can see that the indices formed reversal patterns (phoenixes). I was hoping that the phoenix would hold until Monday, but the strength before the closed brought the Indices to new daily highs and their previous resistance areas.
The DIA was the strongest and closed under its'' 10sma on the daily chart, the SPY closed at its 100sma, while the QQQQ closed at its'' 200sma daily resistance area. With Friday''s strength, the indices broke their intraday downtrends lines and set the stage for possible reversals from daily lows next week. There are plenty of resistance areas and for that possibility, daily volume and pace must increase. For now we can expect that the daily lows will hold for some time. The weekly charts will show us more clearly what we can expect for next week.
The DIA support area held and formed a pivot bar on the weekly chart with heavier volume. We can see the same situation on the SPY and QQQQ weekly charts. Obviously the QQQQ is still the strongest and its weekly pullback was the smallest. It closed above its 10/50sma support area, while the SPY closed above its 20sma support area. The same applies to the daily charts.... there are several resistance areas, especially for the SPY/DIA weekly charts (10/20/100sma).
Now what can we expect for next week? It is option expiration week which usually brings whippy market action and this time the charts support that scenario. The weekly volume is higher, the support areas have been reached and we have several resistance areas very close. We can also see that the selling volume is heavier than the buying volume which leads us to the conclusion that we still have more sellers than buyers. My opinion after all is that is we can expect a consolidation (correction) week with lots of whippy action. I don’t expect strong bounces on the SPY/DIA charts. The weekly divergence can continue, between the stronger QQQQ and the weaker DIA. On the weekly charts, the trend is still down. Generally I will expect that the indices will take a break from the selling pressure continuation, without a strong reversal, but with more choppy daily action.
If anyone has any questions or comments, please feel free to contact me.
Wish you all good trading!!!
Kind regards.
Ivica
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