Radar Screen: Prepare for the Breakout, Part II?

Charts, Commentary, News, Technical Analysis

“IAM” is the online name of one of our professional trader friends who writes a respected private newsletter to be shared with just a few friends and colleagues. He lets us share the newsletter with you, our readers. We offer it to you largely unedited, so you can see how professionals think and what they talk about. All views belong to the writer.

From one week to the next, Value held, broke out and stretched. Alcoa is scheduled to report Monday. That is the beginning of traditional Earnings Season. Holding weekly value 2100 and possibly a bit lower, or reversals off lower levels, will indicate value extension and attempts to continue to the upside. While this will likely be the fifth consecutive quarter of an earnings recession, modest beats of reduced estimates are what analysts are indicating. As of now, up still appears in order.

We have never had a period of low interest rates this low and this long. Relatively speaking, the market, data, events and analysts are suggesting equities are still the desired place for money to be. The alternative is approximately 1% in the bank. Risk continues to elevate IRHO, as these fully valued equities continue to advance.

All banks are vulnerable to asset-price voids or declines. This may help to explain the European Bank Crises and why Central Banks all over the world must keep rates lower or negative in the attempt to inflate or attempt to keep assets from deflating. When you consider the current state of asset pricing, bank vulnerability, interest rates, government borrowing and spending, you see an extremely gnarly management problem. Failure has so many possible negative outcomes it is impossible to know what will set failure off.

The main risk to this advance continues to be disappointing earnings/growth. Higher interest rates have previously been indicators the Fed is concerned about inflation and begins to govern rates accordingly to address that threat. So far, one fourth of 1% doesn’t seem to indicate an inflation worry. Growth is indicating up/better. Earnings are being indicated up/better. Valuations are still significantly full. This indicates larger risk if the economy stumbles.

The market development will digest data/earnings/events from July 11 through August 31. Also in process is a potentially positive perception in the form of TPP. TPP appears to have support and the implied result would be increased World Trade. TPP is the Trans-Pacific Partnership. This potentially developing multinational trade agreement is highly controversial in a similar fashion as NAFTA. The perceived passage of the Agreement is more trade.

There are bond auctions and a rather normal looking calendar of events out this week. Nothing particularly unusual.

Now for the numbers: Radar’s best guess is modest retracements and breakout extension probes. Event risk is unknown and seemingly the bigger threat to advance this week. 2103’s/2092’s look supportive. High this week 2125.50 looks to be extended this week. 2080/2075’s look like they need to hold.

Take a look at the charts and the most important support levels of value.

http://screencast.com/t/WGEj595DoSR Quarterly


http://screencast.com/t/Wff6ca1r Monthly


http://screencast.com/t/UQR3zkmlI8c6 Weekly


I have written this article myself and it expresses my opinions. I am not receiving any compensation or gratuities for it. Radar follows news sources it believes are highly reliable. There are occasional typos.

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