WMA 30 May 2010 - for week ending 4 June 2010

TIP
TIP had a weak week, until Friday where is gapped up, closed the intraday gap and then rallied to end above the EMA lines. It tells of further rallying next week, which would put at least another two weeks of rally in place.

JNK
The coporate bonds on the weekly, if it is to equilibrate the bearish divergence appears to have much more to go in time period, but in price it appears to have gone the distance. Three of the past four weeks have resulted in long shadows which are indicating that there is a lot of buying power when prices fall. A number of indicators are also telling of building up underlying strength. The daily charts have a higher low in price and indicators and ended the week with a gap up. IF this is a runaway gap, we would be in for a rather huge rally.

/HG
Copper prices have not looked very well recently, but one can notice the long lower shadows in the recent weeks. A less convincing indicator bounce is suggested. In the daily charts, copper registered a higher low but for now, but the indication of a rally is less convincing – at least for now.

Napier’s indicators are aligning towards a downtrend reversal into a potential rally.

SPX/SPY (S&P500)
Last week’s call for a bullish week ended nicely with a long legged small body candle which looks like a spinning top. The coming week, ending bullishly would complete the morning star candle formation, which would be very bullish on a weekly chart. Note also the 3 of the past 4 weeks had long lower shadows on the weekly candles indicating a lot of bottom buying that follows market dips.
The weekly SPY charts looks as if there is more to equilibrate the bearish divergence, but indicators are starting to show a short term rally. This rally should not close above 1111, otherwise the rally would be continuing. Similarly, the daily charts have indicators that are showing short term bullish divergences. However, Friday ended with a matching high that closed down more than 50% of the previous candle… looks like Tuesday may close down, and if so, we are looking for a higher low (>1074) to form later in the week.

/DX
The USD futures weekly charts did go parabolic, and appears to have strength for another rally. However, a possible double top could be in the making, with bearish divergences forming on the daily charts along with falling open interest, although the rate of falling open interest is less this past week. Appears that there may be another spike, and then a correction should be in place.

/GC
Weekly gold futures is building up a bearish divergence but a spike is indicated in the charts. The daily charts show the previous week’s correction in gold to the trendline having a fake breakdown and a small rally, with more to follow. Gold looks bullish for the short term.

/CL
Crude finally got a reprive from its rather extreme fall. Early in the week, a long dragonfly doji started a strong reversal to the upside. This should follow though above 75.80, otherwise a resumption of the downtrend would be in place. Let’s see what happens to this one…

VIX
The VIX has a bearish divergence forming… if it is to go down further, it would mean that the weekly bullish divergence completed. However, the daily chart containing the bearish divergence looks weak on the RSI, but possibly may spike higher in the coming 4 weeks. Watching the VIX breaking below or staying above 30 would be the key to the coming market direction.

SYNOPSIS
From last week’s WMA - “I am expecting a bullish week. Be it a minor bullish retracement or otherwise, there is one thing that would be clear… it would be volatile.”
Indeed it was so.
This coming rather short week (Monday is Memorial Day holiday) and the NFP on Friday, should put a great deal of volatility in the markets. The initial rally has been done, and with markets “near value” for the time being, it is getting difficult to make a good call. However, the leading indicators as well as underlying indicators are pointing to another bullish week.

Note: Any material posted here is of my sole opinion, and my opinion may differ from others. It is definitely NOT a solicitation to do anything else as a consequence of reading this material. The material presented here is intended for educational purposes only.