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Sunday Evening Briefing
Many metrics have reached extreme levels over the past two weeks; levels that have historically shown a high probability of signaling a favorable market environment for bulls over the intermediate- or long-term. Thus, the latest short-term decline may have run its course. Or at least be close to doing so.
The bottom, turn and advance rarely assume the shape of a "V". A far better letter to use as a description of the bottoming pattern would be the "W". The second low of the "W" pattern may be higher than, roughly equal to or lower than the first low of the pattern. In any case, I believe the prospects for an advance beginning soon are fairly good. They are not certain and we must continue to guard against a further violent waterfall decline.
But as I've said, I like the odds.
So apparently do others. Templeton's Mark Mobius believes that Asian markets are at or near a bottom and has stated such during a Bloomberg interview.
Also, if the quotes I've seen are accurate, the U.S. futures have again put in a dramatic change of direction. At about 18:15 hours ET the futures were quite negative and pointing to another unpleasant opening: DJIA -93.00, S&P500 -9.40, NASDAQ -16.75.
Now (22:08 hours ET) they are well into positive territory and with negative fair values the indicated Monday opening action has a much more bullish tone: DJIA +55.00 (Fair Value -21.35), S&P500 +6.50 (Fair Value -2.42), NASDAQ100 +13.25 (Fair Value -3.53). These are the highs for the past several hours.
Much can happen over the next 11+ hours as Asian markets continue to trade, as the European markets open and as the U.S. work week begins. Also, tomorrow is a "Post-expiration Monday" and they definitely have a negative bias. But then options expiration weeks are supposed to be bullishly slanted and last week was anything but. So maybe tomorrow will break with tradition also. Finally, we do get some economic reports next week which may affect trading.
But the real focus is on next Friday and the widely anticipated comments by Ben Bernanke from the Federal Reserve's Jackson Hole gathering.
In any case, so far so good.
Have a good one...
Curtis Bergquist
Options Manager: Daily Decision-PRO
S&P 500 - Last 12 Month
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