Break Above R1, R2, R3 Short Term Resistance - Oil Falls Again

DJIA + 266.41, +2.39% SP500 + 28.83, +2.34% NASDAQ Comp. + 55.40, +2.45% Russell 2000 + 18.44, +2.65% Advancers & Decliners NYSE 2,469 688 NASD 2,050 860 Oil closed at $122.19 down $2.54 Consumer confidence rose to 51.9 in the month of July from a revised June report of 51. This was a better than expected reading as Economists had estimated a reading of 50. Just over a week ago, in our Friday/weekend commentary we discussed how the drop in oil prices coming from signs that demand was slowing due to economic slow down was a major factor if the rally, that was then three days old, were to continue…well here we are 10 days into this rally and again a major market move occurs when oil moves down another 2%. As it has happened during the past two weeks, short-term news about threatening weather or concerns in the Middle East can cause price fluctuation in oil to the up side short-term, however stay focused on the trend that is being caused by a larger macro-economic factor as the primary driver as the time. Each of the indices formed higher lows on Monday, and Tuesday closed above the high of the low day as each index gained more on Tuesday than it lost on Monday. This could be the W bottom with a higher low we have been discussing for the past two weeks. These are support bounce patterns that are conceptually equivalent to bull flags. Be alert to the possibility that this could be a trend reversal point as you review your charts. Don’t let the down trend of the past two months blind you to this possibility…look at all the technical evidence, not just the past trend and then make your decision. Since each of these indices closed above the high of the low day, watch the S1 levels of Tuesday’s candle if a pullback occurs. Index Commentary The DJIA regained Monday’s loss and more as it formed a bullish engulfing pattern and closed above it 20 DMA…Monday is the low day and Tuesday closed above the high of the low day…Monday was a 61.8% Fibonacci retracement level…watch for a break above the 30 DMA. The SPX closed above the high of the low day and formed a large white shaven head candle…broke through R1 and R2/R3 of Monday’s candle…Monday’s low was a 61.8% Fibonacci retracement…watch for a break of the 30 DMA. The Nasdaq bounced off its 20 DMA and closed above it 30 DMA with a large white shaven head candle…Monday’s low was above last Tuesday’s gap low that was caused by AAPL’s gap lower Tuesday morning and was a 50% Fibonacci retracement…Tuesday’s close was just above Monday’s high. The RUT the strongest of the broad indices bounced off its 30 DMA closed above the high of the low day (Monday) forming a large white candle that broke through Monday’s R1 and R2/R3 levels…Monday’s low was a 38.2% Fibonacci retracement…closed above its 50 DMA…we would like to say the RUT is in an intermediate term up trend and once again we will give it one more day to confirm the 50 DMA breakout. The SOX formed a bullish engulfing pattern on a lower low with a bullish divergence in the 2-line MACD and Stochastic…this support bounce is in the area of horizontal support from January to March…a stronger SOX gives strength to a Nasdaq rally. Earnings Watch Monday AMC/ Tuesday BMO Earnings Moving Up: AMGN, CF, HIG, WLT, ANR, GM, NOV, SAP, X Monday AMC/ Tuesday BMO Earnings Moving Down: OMI, NOC, TEVA Tuesday AMC Earnings Moving Up: FMC, Tuesday AMC Earnings Moving Down: LNC, MET, After-hours: MET -5.19 or -9.83% Stock Commentary X BMO strong earnings gaps stock over the 20 DMA, through the 30 DMA and to the 50 DMA BIDU broke through horizontal resistance at 344, chart target of 413…time target 2 to 4 weeks MA formed a bullish harami in the area of horizontal support V broke through its 20 DMA as it formed a large white shaven head candle DECK closed near Monday’s high as it formed an outside day AAPL formed a bullish harami RIMM formed a bullish harami in a horizontal flag BRCM formed a morning star pattern JASO formed a bullish engulfing pattern XLF bounced in a bull flag...breaking through its 30 DMA Tuesday’s Action Moving Up: X, BIDU, FSLR, GS, MA, ANR, CF, STRA, V, CLF, POT, DECK, SCHN, MEE, AAPL, RIMM, IPI, AMZN, NUE, MER,JASO, BUCY, LEH, MS, UAUA, FWLT, IBM, PCLN, MON, BRCM, EXPE, BAM, NIHD, EBAY, DRYS Moving Down: USO, SOHU, GRMN, MTL, CNX Intermediate Term Market Trend: Down Short Term Market Trend: Up