DJIM #25 2010
Monday, June 21, 2010 at 07:12AM Early last week, we noted ..’it’s technical matter'…” We should just be happy we closed above the 20ma for a second day and the fact we are basing in the 1040-1110 day now for 4 weeks (21 trading days), which will make any breakout to the upside that more important and credible". After the breakout from this range, we got a bunch of lacklustre days that many were knocking. To ‘us’..the flat action and dips that started Wednesday was…“perfectly fine with us. Actually, even better than fine if you consider the 200ma provided support. Even though, we didn't see a lot of new buying/ conviction to push this market even higher (let’sbe realistic short term..digestion needed), it is almost as good because we saw dip buyers come in". The action following up to Friday close was perfect digestion, consolidation action despite clusters of 'softer`eco data and corporate data that couldn`t derail the recent push because Euro land calmness, manageability was more important for the market.
So, the ducks were lining up and tonight we got an unexpected Yuan decision from China and ES is up nicely. This is going to become part of the global rebound we are in the midst of, since May's derisking. This is definitely a US TSY- China co-ordinated move as relations had recently been heating up. This relieves "overhang" tension. To us, this duck lining up is the effect on commodities and commodities linked stocks it will have over the longer term as the significance is the probability of more China purchasing power. Now, we can look at trading commodity stocks as early as tomorrow.
As far as the rest of the week, last weeks 'softer' data will be followed by much more important data from both eco/corporate fronts this week. As with every catalyst, the market has short term memory and if we get soft data this week, the market will re-focus on this noise.