As reflex rallies go, last week's was a beaut. After an 800 point round trip between down and up Wall Street ended last week's trade where it started, after taking a steep nosedive in response to the Brexit fiasco.
Just as the crowd panicked out of the market when the Brexit news broke, so did it panic back in again after the world's major central banks assured the market that they would backstop the game and the economy, no matter what.
Add to this that the U.S. economy expanded more than expected, while consumer confidence increased in June for the firs time in three months. Just the kind of stuff that can put a derailed rally back on track again.
OK, so the world's central banks will keep on flooding the financial systems with cash, hoping that this will eventually stabilize the financial markets. That has some market strategists convinced that these recurring money transfusions will keep this rally going forever and ever.
But there are other financial strategists who are just as convinced that these central banks' machinations will eventually cause the "financial sky to fall" in a way that would crush even the big chickens down here.
Check this daily DOW chart [INDU] and note that since this index started to consolidate early last May and despite the volatile spikes in both directions, this market hasn't gone anywhere.
But with the Moving-Average lines configuration totally neutral [red and green lines intertwined] the market has hit the ceiling and it remains to be seen if can break through it, or take another nosedive.
This weekly DOW chart leaves no doubt that the market is setting the stage to rally from in due time. The MA lines configuration in this longer weekly time-frame has turned bullish with the red line crossing above the green.
While the RSI strength indicator has moved into its bullish territory, the MACD momentum bars remain at dead neutral along the demarcation line. All of this suggests that the market is still a waiting game.
Where are the bulls? According to this [BP] index they're in hiding. The MA lines configuration is bearish with the red line below the green. The RSI strength indicator fell right off the cliff and the MACD momentum bars are stuck south of the demarcation line in bearish territory.
No wonder the bulls are a bit shy these days.
For a bullish market to develop the red MA line of this 50R index has to stay above the green line. That it has not shows that last week's rallies were nothing more but "dead cats" bouncing.
That Wall Street's fear index, the [VIX] spiked up to 26 on its scale during last Monday's selloff binge only to spike right back down to 14 by last Friday's close, just shows how investors' psyche is on edge these days.
This NASDAQ 100 index [NDX] signals that the market as a whole is at the verge of a probable steep and prolonged selloff. All it takes is for the red MA line to slip below the green, and the rout will be on.
Technology [XLK] is one of the major sectors of the market. Even though this index zigged and zagged with the rest of this game, that the red MA line stayed steady on top of the green means that this is still a bullish market, for now.
Despite this volatility out there, the commodity market [DBC] appears to be set on a steady uptrend. Not only is the RSI strength indicator solid in its bullish territory, but this index remains also well supported by a bullish MA lines configuration with the red line above the green.
But upside momentum is still missing for as long as the MACD momentum bars remain stuck on the demarcation line.
This confidence index [XIV] shows that market participants have given up on this market ever gaining the strength to reach for higher highs. Sure, this index shot up after last week's selling squalls, but with the red MA line crossing the green on the downside, there is little hope for a sustainable rally.
Not only that, but with the RSI strength indicator in bearish territory and ditto for the MACD momentum bars, investors' confidence just isn't there to trigger a rally that could last for a while.
The bulls in this market [SPXL] have been consolidating since the beginning of May, including the recent sharp nosedive and consequent snapback to the previous higher levels.
Even though the MACD momentum bars are south of the demarcation line in bearish territory, the RSI strength indicator is back on the bullish side, and that is a plus for the market.
The big question mark is the MA lines configuration. For as long as the red line stays above the green, the bulls will be safe to rally. But if the red slips below the green, it's "watch out below" for the bulls.
Despite this turmoil out there, the bears [SPXS] just don't have a chance to claw themselves up the market. This will remain the case for as long as the red MA line stays below the green.
The yellow metal [GOLD] sure developed into a real bull. But it spiked up too fast and needs to pull back a bit to digest the gains and consolidate. But with all the components of this index bullish, gold is geared for higher highs.
Oil [WTIC] appears to be in a consolidation mode and is well supported by a bullish MA lines configuration with the red line above the green.
But with the MACD momentum bars south of the demarcation line there is no upside momentum for oil, especially with the RSI strength indicator sitting at dead-neutral.
Even though this is still an undecided market searching for direction, here are some favored ETFs for any direction the market chooses.
Mid Caps, Small Caps, Energy, Healthcare, Gold;
Leveraged Bull ETFs:
Gold Miners 3x (NYSEARCA:NUGT), Jr.Gold Miners 3x (NYSEARCA:JNUG), Oil&Gas 2x (NYSEARCA:DIG), Materials 2x (NYSEARCA:UYM), S&P 500, 2x (NYSEARCA:SSO), NASDAQ 2x (NYSEARCA:QLD), DOW 2x (NYSEARCA:DDM), Small Caps 3x (NYSEARCA:TNA), Mid Caps 3x (NYSEARCA:MIDU), Technology 3x (NYSEARCA:TECL), Semis 2x (NYSEARCA:USD);
Non Leveraged Long ETFs:
Gold Miners (GLDX), Jr. Gold Miners (NYSEARCA:GDXJ), Gold Miners (NYSEARCA:GDX), Sprott Gold Miners (NYSEARCA:SGDM), Precious Metals (NYSEARCA:DBP) Energy (NYSEARCA:RYE), Mid Caps (NYSEARCA:IWS), S&P 500 Value (NYSEARCA:RPV), S&P 500 Growth (NYSEARCA:RPG), Info-Tech (NYSEARCA:FTEC), Small Cap Value (NYSEARCA:RZV), Small Cap Growth (NYSEARCA:RZG), Small Cap Health Care (NASDAQ:PSCH);
Leveraged Bear ETFs:
S&P 500, 3x (NYSEARCA:SDS), Financials 2x (NYSEARCA:FAZ), NASDAQ 2x (NYSEARCA:QID), Financials 2x (NYSEARCA:SKF), Small Caps 3x (NYSEARCA:TZA), Russell 2000, 2x (NYSEARCA:TWM), DOW 2x (NYSEARCA:DXD), Gold Miners 2x (NYSEARCA:DUST), Emerging Markets 3x (NYSEARCA:EDZ), Semis 3x (NYSEARCA:SOXS);
Non-Leveraged Short ETFs:
S&P 500 (NYSEARCA:SH), Total Market (NYSEARCA:TOTS), Commodity (NYSEARCA:DDP), Gold (NYSEARCA:DGZ), Materials (NYSEARCA:SBM), DOW (NYSEARCA:DOG), Financials (NYSEARCA:SEF), Mid Caps (NYSEARCA:MYY), Emerging Markets (NYSEARCA:EUM), NASDAQ (NYSEARCA:PSQ);
Check my Home-Page for more ETF and market info; and