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![]() CCM Short Takes Intermediate-Term Bias Remains Bullish Sentiment Is A Little Extended - 1,163 to 1,168 Within Reach
03/11/2010: Monthly chart shown below; on a weekly chart, potential resistance comes in at 1,163, 1,168, 1,176, 1,190, 1,200, 1,219, 1,223, and 1,229; all remain possible at some point in 2010.
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The composite rankings can help us make better allocation decisions in the coming months. 03/05/2010: As of 2:40 pm ET, it appears as if we are going to get a close above 1,125 on the S&P 500. That move, along with recent strong market internals, increases the odds that stocks will attempt to make new highs within the context of a rising trend. We can expect some backing and filling in any market; so some weakness next week would not be a big surprise. However, the market’s overall tone has improved quite a bit since Monday of this week. Given the market’s improved risk/reward profile, we may begin to redeploy some cash over the next few trading days.
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How to read the chart below - Compare A-1 to A-2, B-1 to B-2, C-1 to C-2, etc:
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Could market internals weaken? Sure, but until they do we will continue to give the bull market the benefit of the doubt. We still have some concerning overhead resistance nearby in several markets; so we need to keep a close eye on all these indicators. As stated above, a close on the S&P 500 above 1,125 would be a good next step since current resistance may be a tough barrier to crack. 03/02/2010:
![]() The market's reaction near 1,122 - 1,125 on the S&P 500 may help us better understand the odds of (a) seeing higher highs, or (b) more corrective activity. First chart (above) from the close; second chart posted at 12:30 pm ET.
![]() 03/02/2010 - Before The Open: In addition to yesterday's positive market breadth and intermediate higher-high in the S&P 500 (see 03/02/2010 entry), some favorable developments came from consumer staples. During corrections and bear markets the relative strength of consumer staples, health care, and utility stocks tend to be strong (relative to the S&P 500 Index). With Monday’s broad gains in stocks, the relative strength of the consumer staples sector broke its rising trendline, which allowed it to join health care and utilities. Yesterday’s break by consumer staples sends bullish signals for retail, consumer discretionary, small caps, mid-caps, technology, higher-yielding fixed income, commodities, commodity stocks, and commodity related nations. If we add yesterday's action to still contained interest rates, favorable monetary policy, and sentiment measures that have backed off extreme (and bearish) readings, we may still have conditions that are favorable to economic recovery assets.
![]() 03/01/2010 - After The Close: The S&P 500 has now made three intermediate higher-highs (green arrows below) and two higher lows (blue arrows below), which looks like an uptrend rather than corrective action. The upward-sloping green trendlines appear to again be bounding prices, which improves the odds of additional upside in the coming days and weeks. It simply means the big picture looks better after Monday’s close then it did in the middle of last week.
![]() 03/01/2010 - Before The Open: With the Fed needing positive asset inflation to help impaired balance sheets, gold remains a good way to monitor the health of the risk trade. Gold is trying to make a stand near current levels and there are some reasons to be optimistic, but it has not yet made a convincing move higher relative to the pink trend lines shown below. Recent dollar strength vs. a weak Euro and a weak Pound are related to concerns about deficits and debt, which could harm asset prices.
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Chris Ciovacco
Chris Ciovacco is the Chief Investment Officer for Ciovacco Capital Management, LLC. More on the web at www.ciovaccocapital.com Ciovacco Capital would like to thank StockCharts.com for helping Short Takes create great looking charts. Terms of Use. The charts and comments are only the author’s view of market activity and aren’t recommendations to buy or sell any security. Market sectors and related ETFs are selected based on his opinion as to their importance in providing the viewer a comprehensive summary of market conditions for the featured period. Chart annotations aren’t predictive of any future market action rather they only demonstrate the author’s opinion as to a range of possibilities going forward. All material presented herein is believed to be reliable but we cannot attest to its accuracy. The information contained herein (including historical prices or values) has been obtained from sources that Ciovacco Capital Management (CCM) considers to be reliable; however, CCM makes any representation as to, or accepts any responsibility or liability for, the accuracy or completeness of the information contained herein or any decision made or action taken by you or any third party in reliance upon the data. Some results are derived using historical estimations from available data. Investment recommendations may change and readers are urged to check with tax advisors before making any investment decisions. Opinions expressed in these reports may change without prior notice. This memorandum is based on information available to the public. No representation is made that it is accurate or complete. This memorandum is not an offer to buy or sell or a solicitation of an offer to buy or sell the securities mentioned. The investments discussed or recommended in this report may be unsuitable for investors depending on their specific investment objectives and financial position. Past performance is not necessarily a guide to future performance. The price or value of the investments to which this report relates, either directly or indirectly, may fall or rise against the interest of investors. All prices and yields contained in this report are subject to change without notice. This information is based on hypothetical assumptions and is intended for illustrative purposes only. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
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