Weekly Market Master Report
The S&P 500 Index is truly the pulse of the stock market . This index consists of 500 major stocks that are market cap weighted. It is important to remember that most people in the public watch the Dow Jones Industrial Average (INDEXDJX:.DJIA). The DJIA represents just 30 blue chip stocks that are price cap weighted. While the DJIA should still be followed it is important to realize that just one high priced stock will effect the index much more than a low priced stock. Therefore, a stock such as International Business Machines Corp. (NYSE: IBM) is more important than General Electric Company (NYSE: GE), despite the fact that the market capitalization of both companies is very similar. Therefore, the S&P 500 will give a more broad and accurate picture of the market.
This past week the S&P 500 Index lost 42.00 points for the week as the options expiration prop job came to an end. It is very important to note that the S&P 500 Index is still above the May 25th pivot low and that should be respected. As long as the index holds above that critical level it could still bounce around. This market downturn is now nine weeks in length and has been the sharpest of the corrections since the March 2009 low. The weekly support level is 1040.00 at this time. Next week will be interesting to see if the market can bounce back ahead of a major holiday in the U.S. on July 4th. This weekend was also the G20 meeting in Toronto, Canada where the different nations will speak about their economic concerns. Prior meetings of this type have coincided with short term bounces afterward.
Traders and investors can utilize the SPDR S&P 500 ETF (NYSE: SPY) as an alternative means of tracking the S&P Index.
The SPDR Gold Trust (ETF) (NYSE: GLD) finished the week basically unchanged near the all time highs. Gold remains in a very strong weekly and monthly uptrend at this time. The nine year bull market in the precious metal is alive and well. Many people are asking if gold is in a bubble since there are so many people in the public talking about it and so many commercials telling people to buy it. While these are normal concerns and typical signs of a bubble, if you ask 100 people that you know if they own any gold bullion or gold coins the chances are that they will say no. In fact most people who own any gold at all simply own gold jewelry which is not 100 percent pure gold. Therefore, while gold could be due for a pullback or correction at anytime it is still unlikely that there is a bubble in the precious metal. Please remember that gold is not a fad, it has been the currency of choice throughout history. The GLD still remains strong on the weekly charts and will have resistance at the $125.00 level. The weekly support for the GLD is around the $115.00 area.
The United States Oil Fund LP (ETF) (NYSE: USO) captured another gain last week trading higher by 0.25 to $35.66. The weekly chart pattern on the USO is a slightly bearish one especially as price remains below the weekly 20 and 50 moving averages. In any case the USO has held the $31.60 support area and may just bounce around above that level. Please remember that crude is very sensitive to adverse weather, geopolitical events, and the U.S. Dollar. The weekly resistance level for the USO is around the $37.50 area. The weekly support is still around the $31.60 level.
The U.S. Dollar Index dropped again this past week losing 0.38 cents for the week. Normally when the dollar declines the stock markets will inflate and trade higher. That was not the case this past week as the U.S. Dollar declined slightly and the stock markets dropped sharply. The U.S. Dollar chart still remains one of the most important charts to be followed by traders. The dollar will have minor support around the $85.10 area. The next major support after that level will be around the weekly 20 moving average which is $83.00.
Traders and investors that want to trade the U.S. Dollar index to the long side can use the PowerShares DB US Dollar Index Bullish (NYSE: UUP). For the traders and investors that would like to trade the dollar to the downside or short the currency can use the PowerShares DB US Dollar Index Bearish (NYSE: UDN).
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