Around the Globe

Asia – CLOSED
• Shanghai (China) -0.74%
• Hang Seng (Hong Kong) +0.42%
• Nikkei (Japan)-1.43%

Europe as of 6:14am EDT

• DAX (Germany) -0.17%
• FTSE (UK) -0.36%

Today’s Economic News:

Light today on news.  The German Bubil, a one year note, is negative.. We are not sure how to color that red or green.  It is red because the sentiment is so terrible that investors are willing to give up value for safety.  It is green because it can’t survive long and that money will have to come  back out soon when the grass on the equity side looks a little greener.

Quote of the day:
Computer games don’t affect kids, I mean if Pac Man affected us as kids, we’d all be running around in darkened rooms, munching pills and listening to repetitive music. – Marcus Brigstocke

Current Breadth Readings: (click here to see all our breadth charts)

On Friday we discussed the CVI Worden indicator and today it is the TT2108 or as we call it the 50 DPI.  Simply described, it is the number of stocks trading above their 50 day moving average.  The actual description from Worden for the indicator lies below:

T2107 Percentage of stocks trading ABOVE their 200-day moving average

In this T2, every stock on the NYSE is represented because (except in rare cases) stocks do not trade exactly AT their 200-day moving average. This is why there is no T2 for “Percentage of stocks trading BELOW their 200-day moving average”. One quick glance at the indicator on a day when it reports a value of say 21 instantly tells you that 21 % of stocks on the NYSE are trading above and 79% are trading below their 200-day price moving average.

This is very valuable information because it’s a good general indication of whether the overall market is overbought (spike up in T2107) or oversold (spike down).

T2108 Percentage of stocks trading above their 40-day moving average

Very similar to T2107 above, but this indicator will be a little quicker moving because there is less resistance to a stock breaking out above its 40-day moving average versus its 200-day. Here again there is no complimentary T2 for stocks below their 40-day average because every NYSE stock is covered by this one T2.

Like Friday’s look at the CVI, there is also a bearish divergence on the 50 DPI.  That aligned with a third peak and an attempt to bust on and move higher have us on the outlook for a more protracted correction before eventually moving higher.

ES SP500 Futures Comments:

Short: 1382
Long: 1339

Markets are opening weak today, unable to hold the high established on 7/19 .  We like the 1339.25 bounce from 7/17 for establishing our buy area today with an upside target that remains at 1382.  Our 60 Minute RSI indicator has flagged 3 buy areas that thus far have not produced any rewards, that indicates to us that there is no buy protection under the market as of now.  If we test and fail that 1339 area watch out below.

Our breadth trenders remind us to buy the dips and that we are in an upside trend.  The pullbacks in this up channel fight have been contained to about 3%, which from last Friday’s high puts the downside target at 1332. In our opinion we are going to need a gap up Monday to really indicate that this market is turning to the upside.  We have just the opposite today.

Our counter-market trenders, the US Dollar and TLT ETF and Bonds are at record highs and ready to break out to higher highs with bullish patterns.  This equity market is poised to crash with risk off and safeties on.

US Dollar DX Futures Comments:

Here is the 84 test we are waiting for.  Another cup and handle on the Dollar 81.40 bottom we will rough out with an 84 rim top gives us a possible 2.60 extension to watch out for.  That would be 86.60 in rough terms as an upside watch.  All, of course, which would be extremely negative for the markets.

TLT Twenty Year Bond ETF Comments:

With today’s weak opening developing we would expect to again hit that 130.50 target and even exceed.  That would put the cup and handle in play with an upside target of 136+.

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