Dallas, TX
June 11, 2010, 08:00 EST		 Dr. Joe Duarte's Market I.Q.


The Internet's Intelligence Digest
Intelligence, Market Timing, And Trading Strategy For Traders and Investors

Tug Of War Between Bulls And Bears To Continue
What's Hot Today:

U.S. investors will be trying to take stocks higher as the week expires. We'll see how it goes. It's clear that a trend change is plausible.

News For Thought

Deflation worries are back. According to The Wall Street Journal: "Worries about consumer price deflation are resurfacing in the world's developed economies after weeks of financial-market turmoil driven by Europe's fiscal crisis. The fears are most pronounced in Europe, where policy makers are under pressure to reduce large budget deficits now, before durable recoveries emerge. A combination of spending cuts and tax increases could weigh on economic growth and feed into deflation, which is a broad decline in consumer prices."

U.S. arrests 2200 in drug related busts over several weeks. According to The Washington Post: "The 2,266 arrests over the past 22 months were part of Project Deliverance, a joint effort with Mexican authorities that the Justice Department did not disclose until Thursday. Investigators from more than 300 federal, state, local and foreign law enforcement agencies seized 74 tons of drugs, 501 weapons and $154 million in cash, Attorney General Eric H. Holder Jr. announced.

The crackdown, which included more than 400 arrests on Wednesday, targeted the transportation networks of Mexican drug organizations in the United States, especially along the drug-ravaged southwest border. Among those arrested was Carlos Ramon Castro-Rocha, described as a major heroin trafficker, who was detained by Mexican authorities May 30 and has been charged in federal courts in Arizona and North Carolina."


Tug Of War Between Bulls And Bears To Continue
Some Improvement In Market Internals And Sentiment Sends Some Hopes To Bulls
The S & P 500 may be making a W bottom. We said it on Wednesday, and we're still thinking it's plausible.

Anyone who's been paying attention to our recent columns knows that we're bearish. They also know that we're traders, which means that we could be bearish and still go long on the market.

We're not schizophrenic. But to us, it's all about trading, and trading with the trend, which at this point may be trying to change.

Here's what we mean. Over the last several days, when the market has rallied, volume has been overwhelmingly positive. In fact over the last three weeks, we've had three days where the ratio of up volume to down volume on the NYSE has been greater than 9 to 1. Usually that's a sign of momentum. Unfortunately, there has been little follow through to the up side. But neither have we had a complete break to new lows on the S & P 500 during that period.

In fact, the S & P seems to be trying to form some sort of base, and as we noted above there is the potential for a W bottom.



Chart Courtesy of StockCharts.com


Perhaps the most telling of all signs can be seen in the chart of the S & P 500. Note that the index made a lower low over the last few days. Also note that both the RSI (above) and the MACD histogram, and the MACD oscillator (below) all made shallower lows during the lower low for SPX.

That's a textbook example of a positive divergence. When the oscillators don't confirm the lower low in the index, it's a sign that the bottom is in. In this case, we will qualify it as saying that the technical picture is indicative of a potential bottom now being in place.

That there is plenty of pessimism around and that we recently wrote an article about a "bear market of the soul" should tell you that pessimism in at an extreme.

Conclusion

Market bottoms rise out of despair. And there is plenty of it going around for now, and for good reason.

So the key to making money in this market is whether the pessimism surge and the bullish technicals are enough.

We should know in the next few days. Recent attempts at a bottom have failed. So this one could too. But the technicals are seriously attractive.

It would be foolish to be bearish but to miss a good trade to the up side because we are blinded by bearishness.

We'll be on Twitter some time today before the market closes with some updated comments.

Know when to sell and how to make money when the market falls. Get a detailed trading plan in your pocket. Read Dr. Duarte's All NEW Books "Market Timing For Dummies." and "Trading Futures For Dummies." The Trading Manuals for All Seasons. Also Available As Kindle Books.

 

Market Moves - Stock Of The Day
Google (Nasdaq: GOOG) And Goldman Sachs (NYSE: GS), Two Bellwethers, Two Directions
Google (Nasdaq: GOOG) And Goldman Sachs (NYSE: GS) aren't exactly heading in the same direction these days.



Chart Courtesy of StockCharts.com


Google managed to bounce along with the market on 6-10, while Goldman slunk to a marginal new low. This raises the question about whether Google is again a market bellwether and whether Goldman has lost that kind of prestige.

First Google. The stock seems to have bottomed, but is hardly a bellwether, as it hasn't led the market higher for weeks or has shown any significant amounts of relative strength. Still, if it can rise above 510 convincingly it looks headed for 540. A few well placed call options could deliver some nice profits for the nimble.

Goldman, on the other hand, is failing to participate in this market, which means one of two things.

If Goldman is still a bellwether, then this is another sucker rally and the market will head lower along with Goldman in the next few days.

But if the market shoots up higher, and Google goes along, as Goldman breaks further, we may have something else going on altogether.

Follow Dr. Duarte on Twitter
 

 


Other Subscriber Reports are located on the website (log in required). These
reports are updated on a weekly basis (or as conditions require) and are not emailed:

S&P Timing  /  Bond Timing /  Dollar Timing /  Energy Timing
Gold Timing /  Tech Timing /  Biotech Timing

© Copyright 1996-2010, Market Timing Strategies, Inc., All Rights Reserved.
  • Market IQ reports may not be redistributed without permission.
  • Joe-Duarte.com is independently operated and solely funded by subscriber fees. This web site and the content provided is meant for educational purposes only and is not a solicitation to buy or sell any securities or investments. All sources of information are believed to be accurate, or as otherwise stated. Dr. Duarte and the publishers, partners, and staff of Joe-Duarte.com have no financial interest in any of the sources used. For independent investment advice consult your financial advisor. The analysis and conclusions reached on Joe-Duarte.com are the sole property of Dr. Joe Duarte. Dr. Duarte is a private investor and a financial journalist. He trades for his own account. He discloses any positions that he has open in any stock or exchange traded mutual fund that he writes about. Dr. Duarte offers commentary and analysis about the financial markets. Dr. Duarte is not providing investment advice.