Sunday, July 31, 2011

Futures Update Week of Aug 1 Sun Night Open

News of a deal is sending risk trade higher. Equity futures, commodities, and commodity-related currencies are all rallying. We have one possible negative: Mrs. Pelosi & Co., but I think she just wants her say in the thing, as well as some spotlight back (after losing House speaker title). Come Monday afternoon or night, we will have a deal, and signed by President debt ceiling raise. I predicted it all a month ago, a race to the wire, eleventh hour fight, but a final outcome just had to be a deal. I said that all of this would weigh on equities in July. We did not lose 777 Dow points in one day, but we lost 670 points since July 7.
Due to this circus in Washington, we now have a well-defined picture-perfect double top on Dow @ 12751 (on 7/21), which itself is a lower high compared to 5/2 high of 12876. This technical picture along with deteriorating economic conditions will put a question mark on a long-term rally. But rally nonetheless will happen, as we just broke out of a falling wedge on YM_F Dow futures I mentioned a few days ago Give the rally a few days and about 350 points. Just to inflict maximum pain on shorts, longs may take the price above 50 dsma, but my view is the end comes at a 8/21/50 dema and 50% fib crossroads. Not a bad idea to be long to that point. Hey, all we traders do is ride the wave, after all. Trail your stops though, as u-turn could be fast and vicious.

Watch Chinese Mfg PMI report tonight. The only hope we have left is world economy rebounding, as ours is slowing down to a halt. Somehow I think that world economy is going to be a problem as well.

Update 1
Chinese Mfg PMI is out. Barely above 50. Saved by 0.7 of a point from contraction. Next important number is ISM Mfg PMI tomorrow morning.

Update 2
HSBC Chinese Mfg PMI out @ 49.3. Oops... Contraction is a number below 50.
Taiwan PMI out @ 46.1 - oops again.
Folks, are you getting the picture yet?? 

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