Weekly ETF Rewind: Maybe a Short Term Pullback Ahead?

Better than expected earnings and improving economic reports catapulted all of the major indices higher, leaving the NASDAQ100 (QQQQ) and S&P500 (SPY) up a whopping +7.0% and +7.6%, respectively. Higher still were the leading Material (XLB) and Financial (XLF) sectors, each up over +9%. Meanwhile, the prior safe trade Utility (XLU) and Healthcare (XLV) sectors lagged by half. In fact, the only real loser was the bond complex, with Twenty-Year Treasuries (TLT) down -5.2% for the week.

(Click Image to Enlarge/ Glossary)

Speaking of which, with longer dated treasuries yielding 30-40 basis points more than last week, the often mean-reverting VIX (if not more so), it wouldn't be surprising to see a short-term pullback ahead.

Week Thirty of 2009 features a lighter economic calendar, but the earnings floodgates open wider still, as follows:

• Yahoo! - U.S. Economic Calendar
• Yahoo! - U.S. Earnings Calendar

The Relative Strength Index charts have little meaning this week due to Thursday's corrupt closing ticks. I have therefore instead posted an update to the "Most Analogous Historical Epochs Projection" series. I find the results interesting since the 25-week look-back period contains the entirety of the steepest portions of both the plunge and recovery.

Note that all five analogous projections suggest at least a mild retracement next week followed by a summer trading range bound by SPX 880 and 1,010. Well, it's good eye candy at the very least -- have a terrific weekend!

Click to enlarge:

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Comments

[jgpietsch:]

It appears SA has reposted an old article, see the blog for this week's. I had some newsfeed problems, which may explain. Anyhow,

marketrewind.blogspot....

Cheers, Jeff

Jul 19 12:00 PM

[SA Editor J...:]

Hey Jeff, it's fixed here, but you may want to check the feed as it is still off.
Thanks!
Judy

Jul 19 01:55 PM

[tobi:]

How long is this "better than expected" going to work ? At some point people want to see real growth, not just "hey, we are only down 35% year over year, party!" and I fear that is the point the market will go into a long, slow and painful retreat because there won't be the strong growth that is already priced in. Unemployment will stay very high and at some point the question who will pay for all the national debt will arise. The China will save the world bogus will fall apart because they are desperately trying to sell their own products, commodities are stockpiled or secured through various investments, particulary in Africa, which will result in a constantly lower at the market demand for commodities. People have the old equity levels of late 2007 in mind and compared to those nearly every stock looks as if it has enormous potential, but compare this to the Nikkei at 30 000, when are we going to see that again ? It might be very similar for US markets.

Jul 19 05:11 PM