Issue 315

Posted: July 19th, 2010 | Author: WMS

Market Strategies

Covering Investing Success Strategies For
Stocks – Bonds – Interest Rates – Natural Resources – Currencies – Venture Capital – Gold

A Publication of Princeton Research, Inc. (www.PrincetonResearch.com)
Contributing Staff: Michael King and Dr. Jan Vandersande

July 19, 2010; Market Strategies Guide To Successful Trading

We give great entries
Trading Options are a timely event , Since we can only report weekly, Your Own Money Management
on Options Trading may be more timely to Take your Profits/Losses

Technical

The June selloff ended on July 1 with intraday lows at DOW: 9,614, S&P 500: 1010 and QQQQ: 41.77 with the DOW and S&P 500 closing below the triple bottoms of February 5/May 25/ June 8. That was a serious technical breakdown and confirmed that the cyclical bull market has ended and the secular bear market has resumed (this scenario will hold as long as the April 26 highs are not broken on a closing basis). At that July 1 lows the short term advance/decline oscillator was very oversold, the RSI (relative strength index) was at 1 1/2 year lows and put option buying has picked up sharply so we stated that an oversold bounce was expected. The rally came with a vengeance two weeks ago and continued into last week (except for Friday) exactly as we predicted. We pointed out that last week was option expiration week and as often is the case it has a bullish bias because the shorts and option writers usually get squeezed. That is exactly what appears to have happened the first four days of last week. After the sharp selloff on Friday the short term advance/decline oscillator is now neutral and option put/call ratios are also neutral (call option buying picked up last week but on Friday put option buying picked up sharply) so a pullback and/or resumption of the downtrend could continue until the market becomes oversold (similarly the market could rally until it gets overbought but we consider that less likely). The market now appears to have made a lower high at the July 13 intraday highs at DOW: 10,408, S&P 500: 1100 and QQQQ: 45.81 (below the June 21 highs) and has turned down suggesting that it should now continue lower. The next important intermediate cycle is late July (plus or minus a week) and then there is a shorter term cycle in mid-late August. At the moment we expect the late July cycle to be a low. If this is scenario is correct we then expect the mid-late August cycle to be a high. Initial resistance is at the July 13 highs and key resistance is at the June 21 highs at DOW: 10,594, S&P 500: 1132 and QQQQ: 47.68. Closes above the July 13 highs would mean the market is rallying rather than selling off into our late July cycle. As long as the indices hold below the July 13 and the June 21 highs it is still in a downtrend. Closes above those resistance levels would indicate a larger rally was taking place. The parameters to watch are thus very clear and let the support and resistance levels govern your trading and your stops.

We are in a secular bear market that appears to be far from over and we expect another big selloff this year. However, every bear market has several good rallies that can last from a few weeks to many months. We had one of those rallies (called a cyclical bull market in a secular bear market) which lasted into the April-May time frame (exactly as we predicted based on longer term cycles). It looks like the expected top came in on April 26. It is now likely that the secular bear market has resumed. Only closes above the April 26 highs would negate the resumed bear market scenario.

The support and resistance levels to watch now are: S&P 500: support is at 1040 and then 1010 while resistance is at 1100-1106 and then 1132 for the QQQQ: support is at 43.23-43.59 and then 41.77 while there is resistance at 45.81 and then 47.58-47.68 and for the DOW: support is 9,757 and then 9,614 while there is resistance at 10,408, then 10,594 and then 10,920.

CONTACT

Please Direct All Inquires To:

Mike King
Princeton Research
3887 Pacific Street, Las Vegas, Nevada 89121

Phone: (702) 650-3000
Fax: (702) 697-8944
mike@princetonresearch.com
www.PrincetonResearch.com