Yesterday, the initial rally wore off after the DOW was up 145 points and finished marginally down. The S&P and the NASDAQ were slightly worse. However, two positives came out of yesterday’s market. First, the selling lacked intensity and Down Volume on the NYSE was 50%, and a little heavier on the NASDAQ at 60. Also, it was light volume on the NYSE with 4.5 billion shares traded well below the 6.1 billion 30 day moving average.

Another positive was there was little change in Selling Pressure and Buying Strength. In fact, Supply or Selling actually contracted a little bit. Thus even it is and has been a very choppy market, these positive trends are still in place.

However, we are getting close to the resistance levels after today’s down markets and must remain diligent. The S&P closed at 1095 and just broke below its 200 DMA at 1110. The key resistance level to watch for on the S&P is 1089, so we are close. Virtually all of the short term technical indicators point to an overbought market and suggest a rally.

I am still bullish in the short term and the upward trend is still intact according to all the technical market internals and indicators. It is just choppy! The mid and long term is a different story. The Fundamentals are greatly in favor of a slowing economy, corporate profits squeezed, and higher interest rates (due to high debt loads & risk). This will be bad for US bonds, most stock sectors, and even $US cash if we devalue the dollar.

There will come a time in the not so distant future, we will have to make a fundamental shift into commodities and energy, more metals, and other currency based assets. I will be writing more about this in the weeks to come. But you will have to change your way of thinking as the $US is going to come under severe pressure. The inflation you remember in the 70s might even seem tame.

We will be talking about this extensively today on the radio from 4-6 p.m. on 1190 AM in DFWS, or you can listen live streaming at www.thewallstreetshuffle.com , or podcast later. We will be discussing Congress new decision NOT to issue a budget this year. No budget! Just spend! That will change your life more than you think unless you are proactive and awake.

Keep studying,

Dan Stewart CFA®