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Friday Stock Market Wrap

|Includes:SPDR S&P 500 Trust ETF (SPY), TLT, USL, UUP

Markets closed down for the third consecutive trading session, but selling seems to be controlled and gradual. The day's ranges haven't been too large, indicating there is still some underlying bid to the market. For the S&P 500, we have hit the initial minor support level at about 1,040, as indicated by the parabola. Caution is still recommended though as we are in the middle of the rising channel range, thus the reward:risk ratio is still not so good. But it would be good to see if we can foster a short-term bounce from these levels as the slow stochastics have already reached oversold levels. Take a look at what has happened recently every time these oversold levels have been reached (red circles). A hold at current support levels would indicate a really strong equity market.

The dollar ended down for the final session of the week, but is conjuring up a small churning area. I do believe we are at a near short- to mid-term lows for the dollar, as indicated by the oversold nature of the MACD. I would expect the MACD to try to rally back to the zero levels.

Crude oil showed some volatility, but clearly it has broken down through two trendline support levels at $70 and $67.50. The oversold stochastics may foster some volatility, but I still expect a test of $62.50 and $60. Stay out of energy-related issues for the meantime.

The story of the trading session is the strong move in bonds. Clearly inflation is not a concern. 10-year bonds have broken out of the small congestion area, and is testing the upper range of the area pattern of about $98. A break above this level may take us to $100.

The confluence of movements in stocks, oil, dollar and bonds seem to be holding. Risky assets (stocks and oil) seem to be on the defensive, with the risk averse (dollar?? and bonds) looking the easier trades for the short-term. Enjoy the weekend!
Disclosure: none

Stocks: SPY, TLT, UUP, USL