Friday Technical Outlook: Expecting Lower Prices Ahead

by: Wall Street Sector Selector

Red Flag: We Expect Lower Prices Ahead

Daily Technical Sentiment Indicators; Moderately optimistic (bearish short term implications for market)

Short Term Market Condition: Extremely Overbought (bearish short term implications for market)

Short Term Trend: Neutral

Medium Term Trend: Up

Long Term Trend: Down

% of Stocks Above 200 Day Moving Average/Daily Change: 49.7%/-0.6%

% of Stocks Above 50 Day Moving Average/Daily Change: 51.3%/+0.5%%

Market Closing Price % Change

Dow Jones Industrials (NYSEARCA:DIA) 10,359 -0.07%

S&P 500 (NYSEARCA:SPY) 1096.48 +0.12%

Gold: $1210 +0.2%

Oil: $76.96 +0.44%

VIX: 25.14 +1.0%

Shanghai Composite: 2424.30 -1.87%

Commentary: Thursday's significant earnings reports were mixed with JP Morgan delivering results widely perceived as better than expected and Google missing expectations.

On the economic front, the news was uniformly poor with the July Philly Fed declining to 5.1 from a previous reading of 8 and widely missing the consensus of 10. The New York Empire Manufacturing Index was equally terrible, declining to 5.08 from a previous of 19.51 and expected of 18.0.

Manufacturing has been leading the recovery and these numbers point to a significant slowdown in this important sector.

On a technical basis, the S&P 500 is encountering the heavy resistance we expected at 1100 and at its 200 Day Moving Average of 1112. The major indexes remain vastly overbought and subject to a short term correction.

As we discussed earlier in the week, we are at a significant crossroads in the future direction of the markets that will be resolved one way or other over coming days. For tonight our positions remain on “buy” signals but could reverse at any time as the market struggles to find direction in the coming days.

Disclosure: Holds positions in PSQ, RWM, SKF, SH and SPY Put Options