Early weekly Report 8/12/10

I’m making my report a day early this week because I will be out of town Friday and Saturday to celebrate my brother-n-laws 50th birthday.

Damn, talk about 2 days of total destruction in the market as a whole!! We went from a nice up trend in development, to what the hell do you call this. There are even professional traders out there talking on the TV and on the internet that have no clue what is going on. But does it really matter? No, cause we are going to follow the trend and if by next week it is telling us to bail, we will bail. But for now, we have to stand down and watch, even if it is painful.

The S&P the last two days dropped 4% to put us back to the July 21st levels. If you take a look a the chart on the left first, which is the weekly, you will see that we have re-straddled the 50 week ma. The RSI slipped back below 50. But if we can create a higher pivot low next week off this down move it would be a great positive. Also if you look a few weeks back, you will see a weekly price bar that looks almost as identical as this current week, so this just could be a test of support or bear/bull strength.

The daily chart on the right is so more devastating because it only took two days of trading to take out to support pivots. That is almost 2 weeks worth of trading, destroyed in just two days. Today after the opening gap down, the market finally seem to settle down and the buyers returned to the market to find support at $108.29ish. This is good, but no proof that the down trend is done. Another good point is that we are just a point or two from a 50% retracement from the July 1, low of 101.13 to the high of August 9th, 113.18. A 50% retracement would put us at $107.16 and normally when this is hit, the market will bounce back in the direction that it was previously in, which was an uptrend. If we blow through that Friday, the next resistance point will be the last pivot left at $105.82.

All of the above sounds bad and most people would bailout completely at this point, but we just do not have enough data in two days of trading to make that call. We have already banked that loss, so waiting for a confirming trend reversals is only the really smart thing to do. If the market snaps back up, then all the returned profit will be lost. We have also bounced off $104.82 so many times since May 6th, the Bears will have to prove to me that they can take that point out.

The EFA – European Index and the Small Cap - $DWCPF are all in the same exact shape, so I would be saying the same thing over and over again. We need time, and time is the only thing that will tell us what to do. I’m positive that if this current trend continues through this time next week, we will be in a down trend and pulling our money from all funds. I do not see that happening, but I have been wrong before.

Let’s hope all the bulls return Friday and I will post more if possible later this weekend.