Stock Market Update Caution Alert
Gold and silver bounced up today as we expected from being oversold and with some short covering. Hopefully they are putting in a bottom and base now. Natural gas sold off early but recovered and unleaded gasoline and WTI Crude Oil held steady. We are still looking for a bounce for gas and oil fairly soon as well.
As for the US markets, the DJIA was up almost 90 points in the futures last night and a good bounce seemed likely today. Unfortunately more scares of runs on European banks and poor US domestic data this morning gave the short sellers ammunition. The very oversold markets continued to move towards the support target we expected near 1,300 on the S&P 500 – just much faster than anticipated.
The problem now is that there are very few buyers willing to step in front of the cascade down. It has the earmarks of some panic selling from funds to avoid the big 6 week stock market losses that we had the last 2 years (May 1 to June 16).
The only positive as we indicated last night is that our oversold indicators are hitting the buy triggers that could start a short squeeze back up starting tomorrow. But the weekend is always dangerous to hold longs with this negative cycle in place.
Facebook’s IPO could help trigger some upside stock market momentum tomorrow but our S&P 500 forecast points to a move lower to the 1,285 to 1,275 area (1,279 is the 200 SMA and next strong support). That would complete the Head and Shoulders Pattern retrace that we have been showing on charts for several weeks. It may happen next week without any good European news – like guaranteed deposits in banks, etc.
We wish we had better news but the Eurozone is unraveling and there doesn’t seem to be any answer close at hand. It could get much worse from here so scaling back even more on your equity exposure on any bounce is recommended. Cash is always a good position until more certainty comes in.
STOCK MARKET CAUTION IS WARRANTED FOR NOW!
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