7/23 - Market Analysis

Starting with the most important chart, SPY, we are more likely to face a pullback leg next before another push up. I see SPY going as far north as the 132.50 level on this current leg. Technically though, any day now a pullback can occur to take us back to the 125 levels and if it holds, it will be very bullish for the market.



USO is a very important chart as oil has recently been the main reason (along with financial earnings) for the huge leg up in the market. USO is definitely oversold and in need of a pullback. A very sharp push up in the next few days would be very healthy, scaring many shorts and giving the SPY a much needed pullback. the oversold levels in the SS should make many shorts take profits now.



XLF has been the best performer in the past few weeks. It has moved up huge, almost in a straight line since a bottom was put in place early last week. but now it is hitting resistance. A gravestone candle was formed today and if tomorrow shows a lower candle, i would say that XLF will most likely pull back to the 19-20 level. And if XLF falls, it will be very likely to see the entire market fall. I would avoid buying financials at this moment as they will be the sector to lead the pullback down as they are the most overbought.




Game Plan: Take profits in longs. OK to hold AAPL and GOOG as they have seemed to have found a nice bottom and i doubt their investors would sell at levels like this. I would get ready for the next leg down. It can be a weak pullback, but since we are in a downtrend, it might fall much lower than i expect, therefore, it would be good to put on some short positions. A sector i like to short is financials. Specific stocks i like are NILE, ICE, CY, MGM, LEH, and WB. any one of these shorts should be good hedges on whatever long positions you might still be holding. A huge pop in the market tomorrow will cause me to sell most of my longs.