It's Sunday afternoon and I hope you readers have been enjoying the weekend so far. It's time to analyze where the market stands as of now and try and figure out what to expect in the coming week. From what I am seeing, it looks like we have in front of us for a very interesting and crucial week for the markets. Why, you might ask. Well, have a look for yourselves....
The S&P index closed right at the MA(50). In spite of the rate hike late Thursday, the markets had a positive day on Friday. Now, anytime you can close in the green in spite of negative news such as this, that's bullish indeed. Volume has been missing throughout this two-week old rally. Is that a cause for concern? Not really. Remember, most of the late 2009 rally took place on low volume. Support for the bulls is at 1085 and 1100 and as long as we dont fall below 1085, it's bulls all the way. But I do expect the bears to fight for MA(50). The Nasdaq chart looks very similar, so I am just putting it up here without any separate commentary.
A word of caution here. The markets are overbought here and have been so for the last couple of days. So, be careful while taking large long positions or in holding too many ovenight long positions. Personally speaking, heading into tomorrow, I am around 40% long and 60% in cash and I like it that way.
What would I like to see here? Like I said before, the markets are overbought right now. This situation can change in two ways - a sharp pullback or sideways movement. While sideways, choppy markets are no fun for trading, that is what I expect to see next week unless some unexpected news comes out. In fact, a little rest or pullback on low volume is good news for the bulls.
I will be back later tonight with some charts for the watchlist. To wrap it up, don't let your perception of the market come in the way of making most of the opportunities that come your way. Trade what you see, not what you think.
Take care and good luck next week!