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The Momentrix View of the Markets for August 15, 2011

Monday August 15, 2011- The market staged another rally, its third in a row, the S&P 500 finishing the day up 2.20%. On the positive side, financials were among the market leaders today, an encouraging sign as this group was the worst performer during the sell-off. On the negative side, the GLD (gold etf) rallied steadily today, a sign that some currency stress remains in the system.
The S&P 500 closed above its 10 day moving average, the first time since the correction began. The last time the S&P closed above this average was on July 26. Although this is also encouraging, the trend of the 10 day moving average is so steep to the downside that it will likely be difficult for this to hold over the short term. We generally like to see moving average trends to be in the same direction as price. It just takes time to change directions. We still hold high levels of cash and may initiate some hedges should our stress indicators start to rally.