June 10, 2008
Interesting day we had on Wall Street. Futures were point to a very weak start, only to see the bulls close the gap before the bears finally pushed the indices back slightly in the red. To say the least, the bears need to pick up the pace some if they are going to push the markets lower, as the bulls are showing resiliency at and around the 50-day moving average. However, we believe that before the 50 DMA is broken, that we will likely see a rally of sorts. The technical picture on both the S&P and NASDAQ has us worried with the NASDAQ giving us a double-top and the S&P showing a confirmed head and shoulders formation. Though a dead-cat bounce is likely, and may very well happen before the end of the weak, especially since we are in oversold conditions, the potential reward of timing the bounce correctly is not worth the risk.
Also worth pointing out is that Benny at the Federal Reserve is starting to float the idea of possible interest rate hikes, believing that the economy is stabilized and downturns are minimal. So now the next task is to fight inflation. However, history shows that rate hikes creates huge problems for Wall Street.
Here’s the NASDAQ and S&P Charts…