Monday, August 18, 2008

mkt today

About Shark Watch

Monday, August 18 - 4:30 PM

Afternoon Comments

As we mentioned earlier in the day, the extremely light volume makes it dangerous to read too much into today’s action, but at the same time, it’s hard to disregard the technical conditions in both the Dow and the S&P 500. While the market was able to finish a bit off the lows of the session, the senior indices both gave up their respective 50 day moving averages and were barely able to find support at the intraday lows from last week. More importantly, the burgeoning ascending support lines which had been forming since this recent intermediate uptrend began several weeks ago is looking very precarious.

Certainly, buyers have shown a propensity to buy dips recently, but the question is if they are going to step up to the plate in such a thin trading environment. We’ve been saying that, while lower oil and a stronger dollar have undoubtedly been positives, the issues in the credit, housing and labor markets have not simply gone away. Moreover, lower commodities may not turn out to be the panacea many are hoping it will be, as that is an indication of lower demand and slowing growth. In fact, that notion may be starting to weigh on sentiment as today’s losses came despite another drop in crude.

We’ve also been pointing out that the averages have been forming the same sort of bearish wedges that we saw back in the March/May intermediate uptrend, and now that things are looking shaky once again, the bears have been presented with another chance to press to the downside. We’ll see if the bulls can mount a counter attack, but the thin, end of summer trading environment sure won’t make it easy.

Have a great evening and we will see you tomorrow.

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