I left the day on Friday thinking we had a long rough road coming for this market. Now I’m not sure since I charted the Dow Jones Industrial Average (aka DJIA and ticker $DJI). The DJIA closed the week at the point of two trend lines that could offer some support.
Aside from the lines that that offered support on Friday, we can’t say we didn’t have warnings from a technical view earlier. First in mid-May the Williams %R indicator moved below the overbought line, which I’ve pointed out a few times in the past is the point to be concerned. Not long after that, as the fall continued, the trend line that excluded the absolute lows from March broke, but recovered quickly. That was when the red flags should have started going up. The huge move that should’ve shot out the warning flare came at the beginning of last week when the $DJI moved below that same line and traded below again on consecutive days as confirmation and then used that same line as a ceiling. Once that ceiling hit and held the Dow back from a recovery, the next day issued a horrid spanking with a 395 point fall.
I’ve been holding cash back, waiting for a fall like this and I’m not convinced yet that it’s over, even with those two lines above acting as support for a day. Oil is rediculously high still and as I predicted in last week’s USO post, oil shot higher after finding support at its 20 day moving average. The jobs report killed the day, as if any further fuel was needed for the fire. I was feeling pretty bearish all of Saturday and was trying to formulate plans for either buying back a lot of my naked puts or selling naked calls on the same position. Then I went to the Atlanta Braves game Saturday evening and saw 43,000+ fans there buying $6.50 beers, $33 whole pizzas and that’s after thousands of these fans had been out in the parking lots surrounding the stadium tailgating for hours.
Admittedly, Atlanta’s public transportation sucks, but as ugly as Friday’s market was, the majority of the fans (aka consumers) appeared to have driven there and were out spending money like it was 1999. This is clearly an isolated event, but it made me think that consumers are not dead yet and we could find a few more months of sideways price action in the markets still. The world is not ending and when a little more panic enters the market, those of us who have been waiting for the right opportunity will be able to make a killing as we buy back in and ride the next rally.
(The Braves lost, but I was able to see Chipper Jones hit a home run with a man on to tie the game briefly and that was very cool.)