Summer Slowdown Kicks In

IMPORTANT UPDATE: I want to thank everyone that attended my webinar on Developing a Universal Trading System. Due to its popularity, I decided to offer it a second time on June 16th. Well, within 48 hours that one was also full! Don't worry though, I will be holding a number of such classes over the next several months. In fact, I will be teaching a class for the CME Group in just a couple of weeks. Ongoing education is extremely important in this profession and since my webinars fill up rather quickly, I'll be sending out registration links to those of you that have worked with me in an educational capacity whether through my courses or mentoring 24 hours before opening it up to the general public, so keep an eye out for it! I will also be sharing an updated version of the class on how to develop a universal trading system at November's Online Trading Expo, so I hope you can make it! It will be fun!!! I'll let you know the details as soon as possible!

Today's Commentary:

Summer Slowdown Sets In

(Note: Unless otherwise stated, the index action described below relates to the EMini futures contracts for the respective indices. Actual index action may differ slightly in terms of pattern formation, although the market bias will remain the same.)



Good day! After nearly two weeks away from the markets, I came back this weekend to discover that the indices are in approximately the same place (give or take a few points) as when I left! As I was heading out on an extended road trip earlier this month the indices were running into strong resistance zones on the weekly time frame and extended on the 60-minute time frame. This limited the potential for strong continued upside and the market indeed had difficulty pressing through that zone. Even though the market has managed slightly higher highs over the past two weeks, each high only pushed the limits of the previous one without clearing the general resistance zone.

Dow Jones Industrial Average ($DJI)


The slightly higher highs on the 60 minute charts and daily time frame has shifted the overall momentum on the upside since late last month and has created a potential momentum reversal pattern on these same time frames. The volume has also been light as we head into summer trading and many, like myself, have taken some time off to ease the transition. This leaves the market vulnerable for rapid flushes on the downside this week, as well as at risk for a larger price correction.

We did see similar action take place at the start of April, however, without the indices able to break the 20 day sma support. That will again be the first major support level for flushes on the downside on the 60 minute time frame. The middle of last month's trading range and the 50 day sma will be the next major support if the pace can shift well enough to break that 20 day sma.

S&P 500 ($SPX)


The Dow Jones Industrial Average ($DJI) rose 28.34 points, or 0.32%, to close at 8,799.26 on Friday. The index ended the week higher by 0.4% and is currently up 0.3% for the year. Pulling ahead compared to the other financials, Bank of America (BAC) posted gains of 5.78% on Friday after breaking out of a trading range earlier in the week. Microsoft (MSFT), which was trading on substantially less than its average daily volume after breaking out of a range three weeks ago, came in second with a gain of 2.19%. None of the Dow's components posted strong losses. The largest decliner on Friday was Alcoa Inc. (AA) which fell 1.88%, but was still up strongly on the week overall.

The S&P 500 ($SPX) rose 1.32 points, or 0.14%, and closed at 946.21. It ended the week higher by 0.7% and is up 4.8% on the year-to-date.

The Nasdaq Composite ($COMPX) fell 3.57 points, or 0.19%, and it closed at 1,858.80 on Friday. The Nasdaq was up 0.5% for the week and up 18% for the year. This has been the strongest index since bottoming out in March and it's up 42% since the lows made a mere couple of months ago.

Nasdaq Composite ($COMPX)


Economic data worth paying attention to early this week will be Monday's Empire State manufacturing survey for the New York region and the National Association of Home Builders housing index. Tuesday will bring further housing data with current housing starts, along with May's producer prices and industrial production data. May's consumer-price index and the weekly petroleum inventories will be released on Wednesday, followed by the Philadelphia region manufacturing survey and weekly jobless claims on Thursday.