Daily Stock Market Update – 08/22/11 © ™

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  • Short Term
  • July 2011 To Present
  • Step 3 Down – Possible Termination
  • Current Action Status – Buy Signal Possible Soon

Presently there is no buy signal.  I wouldn’t recommend bottom fishing yet but we “may” be in the neighborhood.

Nothing definitive took place today but we are “possibly” trying to make a double bottom.  The first chart shows the Nasdaq Composite meandering around trying to make a double bottom (August 9 and today).  In the second chart (SP 500 FUTURES 30 MINUTE BARS), the futures are trying to form a higher bottom than August 8.

Late today we finished a small intraday 3 step correction.  A move up should take place overnight.  The question remains as to the degree of the move upward.

08-22-11 NASDAQ 9 MINUTE BARS

08-22-11 SP500 FUTURES 30 MINUTE BARS

The market “could” be sold out and if that’s true any bad news should be greeted with a yawn.  That would be a good signal that a reversal has or is taking place.

The sentiment in the market is very dark and that is the stuff from which bottoms are created.  As the market rallies from a bottom it climbs “the wall of worry”.  At first there is no discernible reason for the rally and some investors will sell into the teeth of the rally only to discover much later that they have made a mistake.  After the rally has covered a lot of ground will believers begin to get on board.  Such is the way of sentiment and the marketplace called Wall Street.

I am anticipating a possible bottom but at the same time, I am ready to abandon the bottom scenario with a sudden sustained dive into weakness.  And that’s why you ALWAY use stops.  If we are presently making a bottom there should be no sustained weakness at this point.  One must be careful to not force their opinions onto the market.

Jeff Saut (one of the best) and I have been out of sync recently (I was bearish and he wasn’t) but we are in agreement presently.  Jeff usually looks more to the longer scenario than I do and that causes some deviations in our opinions.

Today Jeff Saut said in his comments:

The call for this week: Investors’ worries have leaped to levels last seen in November 2008 as the stock market’s bottoming process began when 92.6% of all the stocks traded on the NYSE made new annual price lows. Before that, the Global Risk Appetite Indicator I use shows “panic levels” equal to their current reading occurred at the “lows” of October 2002 and August 1982. Surprisingly, I was actually bullish at those “lows!” Regrettably, I am not as unabashedly bullish here; I wish I was! I would, however, observe that with the trade-weighted dollar at a record “low” U.S. trade should provide a boost to export growth, crude’s crash should also help, low interest rates are a plus, the yield curve’s shape is noticeably steep (read: bullish), inflation is low, auto production is slated to ramp in the months ahead, Japan’s economy has bounced back, emerging markets’ economic growth is percolating, the inventory to sales resides at levels around the recession lows, suggesting a economic “lift” from an inventory rebuild, capex projects are picking up, the global central bank interest rate “tightening” process is winding down, corporate profitability is exceptional, and banks/businesses have much larger cash buffers now than they have ever had. All of this leaves me in the NO recession camp and with the belief that select stocks are cheap. If that view is correct, we should see a “bottom” this week …

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