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A Mid-Summer Pause . . . Perhaps July 7, 2012

Posted by Tom in Thoughts.

This was a shortened holiday week in the US, although the rest of the world enjoyed just a regular week.  But we are getting into the Summer Doldrums season where things traditionally slow down.  August in particular is a slow month with many in the northern hemisphere taking vacation.

Looking at the market charts I am seeing that hesitation.  The market has moved up sharply in the last 2 weeks, a pause or small correction is to be expected.  We got a hesitation bar (low range with the open and close being nearly the same) on Thursday, followed by a down day on Friday.  I note that the post 4th holiday volume last week was light.  So even though prices fell sharply on Friday there was no rush for the exits.

The markets still “want to” be effected by news and I think that adds to the hesitation.  I’ve drawn two price levels on the NASDAQ Composite chart that seem to be containing price action.  If we were to break above the 3000 level, and hold it, that would be a positive.  If we break below the 2900 level, and hold it, that would be bearish.

Next week starts the 2nd quarter earnings season, with Alcoa kicking it off.  Many will be focused on earnings as a bell weather of profits and hence the strength of the world economies.  Things are slowing, mainly due to the situation in Europe, which will continue for a while.  This looks like a time to be selective as I doubt if there will be a general “rising tide” untill after summer has closed; maybe longer with the US elections coming.

Sector strength has not changed much since last week, so I won’t rehash that area.  Note there is a new monthly newsletter posted under the Newsletter tab above.   Have a good week.


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