Last Sunday, I said that bears had a minor advantage starting trading the week of March 14 2011. For the next week, my outlook is similar: bears have got a slight advantage starting trading next week.
Take into account that the advantage bears have over bulls is incredibly small. This is not a yahoo strong downtrend rating so let's short this market.
The Dow is in a weak downtrend. The Dow Jones attempted to retake the 50 day moving average on Friday, but was denied. Now that is just a Friday so we're going to need to hold out and see if the 50 day moving average becomes resistance next week.
The S&P 500 has a sidelines rating. This means that you should be in cash right up until a dominating group, either the bulls or the bears comes forth, and then place your bets on that dominant group. A sidelines rating isn't really bearish, nor is it bullish. It simply means there is not any clear trend in either case.
In the small cap universe, the Russell 2000 is in a very weak downtrend which is surprising as small caps are holding up a little better than large caps. The Nasdaq is in a weak downtrend rating..
The trend with all the different major indices sustains my thesis that bears have a bit of a advantage going into trading next week.
For the first time within seven months, the number of stocks trading above their 50 day moving averages on the NYSE has slipped below 50% to close the week at roughly 42%. This also props up the thesis that bears have a minor advantage entering trading next week.
The percentage of stocks trading above the 200 day moving average line on the NYSE is 76% which shows a bullish bias.
The United States dollar is in a strong downtrend and is testing the November lows.
Gold continues to be discouraging for gold bugs so far with a sidelines rating. With the largest earthquake ever in Japan, a giant Tsunami wave that wiped out over 10,000 people, a nuclear power plant melt down in the world's third largest economy, and war planes bombing Libya, gold should be over $2,500. The very fact it's not is the market supplying you with a really clear message: gold is overbought and there's very little buyers planning to buy it up here.
Silver continues in a strong uptrend.
The VIX has been downgraded to a sidelines rating. The VIX measures the amount of put buying on the futures market and so it is an important leading indicator. Three weeks ago, I alerted you to the point that the VIX was in a very weak uptrend. That uptrend rating was downgraded this week with a big pullback Thursday and Friday of last week. The pullback was so massive, it did technical damage to the vulnerable VIX very weak uptrend rating. The sidelines rating suggests that the VIX is no longer giving us a trading signal: either bullish or bearish. We'll have to wait and see what goes on next week.
On the fundamental analysis front, two key economic indicators are coming out in a few days which have the potential to move markets. The Durable Goods Orders shall be published on Thursday, March 24, 2011. After that, to end the week, on Friday, March 25, 2011, the GDP report shall be released.
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