Marginal Decline

July 26, 2006 · Print This Article

After two days to the upside and moving ever so closer to an overbought state the market took a pause today. If the market is to move higher and stay there, we should expect to see days like today. SPY tested the 1260 support area that I mentioned yesterday and bounced nicely off that level early in the trading day. This is certainly a positive for the market going forward. The one troubling aspect of this rally is the lagging tech-heavy QQQQ. The Nasdaq 100, which usually leads the charge in a sustainable move up/down has been running in place while the rest of the market has climbed upward. If we are to see a continuation of this rally then we need to see buyers show some conviction in the riskier sectors. Admittedly, I am a little hesitant at this juncture at least for the short-term. Today’s move was positive and a few more days like today would bode well for a sustained rally , but I think we might start to turn around here and possibly trade around the support levels I mentioned earlier in the S&P. Of course, I would love to see a continuation of this rally and there is still some more room to the upside, but I think once the S&P reaches 1280 we could see some decent resistance as we continue to move within what seems to be (at this point) an established summer trading range. After the trading day tomorrow we move into a seasonally bullish time of year. This might be the assistance the market needs over the next week or so. Be nimble.

RSI Wilder (5) for July 26, 2006