In Lieu of a Review

In lieu of a Short Term Review, tonight’s blog will deal with points of interest from last week’s action.

1) The S&P 500 rallied 2.3%. Both near and medium term momentum oscillators are positive for both the index and a majority of the 27 industry groups. In addition, the annual rate of change broke out from a point and figure triple top formation, Breadth was solidly positive for the S&P 500, 400 (mid cap), and 600 (small cap) indexes and the dominant uptrend line is still in force. All of this suggests that, while the rally is increasingly mature, we still need to give it the benefit of the doubt for higher highs. Our resistance focus remains on 982. We are raising the first support/trading stop level to 923.

2) The long bond fell 3.8% for its 10th decline in 11 weeks. The low for the week was 112:31, which is just above key support at 112:14-112:17. We have been concerned that bond may have reversed from an historic top (and 10-year yields from an equally important low). A break of key support will increase the likelihood of the existence of such a top. Resistance begins at 117:13.

3) Oil rallied for the sixth time in seven weeks, gaining 3.2% from the week. During the week, oil crossed 70.00. In past reports, we have noted that a minimal 38.2% of 2008’s decline implies a move to at least the mid 70s. While the breach of 70 is a step in the right direction, the fact that we can now count five waves from April’s low suggests that oil needs a rest. First support is at 63-60.

4) A late rally allowed the US Dollar Index to gain 1.8% for the week. The greenback rallied against all six currencies in the index. Momentum, however, is weak and may remain that way into late June or early July. However, a rally through last week’s high would indicate that at least the short term trend has turned up, but key resistance is in the 84.87-86.87 range. Nearby support is at 78-77.

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