Fred Goodman's MarketMonograph Free Sample

Thursday, August 21, 2008
Fred Goodman
Low volume shows little interest in the market, is everyone watching the Olympics?.

AT A GLANCE: The NASDAQ touched its uptrend line and closed just above it. A Quick Summary Index sell signal is now two negative indicators away as one negative indicator moved to neutral. The Average Signature fell to 413, so another negative day will position it for a buy signal when the market turns higher.

As long as the 30-year mortgage rate remains close to its 12-month high we can expect to see the Mortgage Bankers Association index of mortgage applications remain at its lows.

The Short Trend Indicator remains on its buy signal at 48 and will not change unless the S&P falls below 1234, some 32 points below yesterday's close.

One negative indicator moved to neutral putting a barrier of two between us and a Quick Summary Index sell signal. There are now 5 negative, 16 neutral and 8 positive indicators and the Summary Index fell to 15.25. It will reach 13.65 in a week if there are no further changes in indicators.

If you thought the Daily Rating was as bad as it could get, think again. It will renew its sell signal with a new one at the close Friday, since Monday through Wednesday are expected to be down days.

The S&P 500 14-day Relative Strength Indicator (RSI) increased to 51.9% and will be at 53.8% in a week if there is no change in the S&P -- the indicator remains neutral.

The S&P 500 Price/Volume Chart can make either a counterclockwise basic sell loop or a continuation buy loop depending upon which trendline is broken. However, a breakout will require an increase in volume that must be confirmed by a second big day. Considering that Thursday and Monday have recently been the lowest volume days, neither loop is likely to be confirmed if completed.

There is considerable speculation on the direction of commodities in general and the SPDR Gold Trust (GLD) in particular. Some feel that the recent decline is related to the virtual standstill of business activity in China during the Olympics and expect to see a reversal once they are over.

The two-day advance earlier in the week did not produce a buy loop, although the direction of the chart shows promise. I am not yet ready to add to our position in gold, though the move away from our stop loss in Merk Hard Currency fund (MERKX) was welcome.

The Average Signature of 2000 stocks continued to fall and closed at 413. An upturn from here used to produce a buy signal before we lowered the buy signal trigger to 360, but I am pleased to see it fall since most strong advances have occurred when the majority of stocks were oversold.

Fred Goodman, CFP, is a fee-only Certified Financial Planner based in Los Angeles. To send Fred your questions or comments, click here: Fred@MarketMonograph.com. E-mail sent to Fred may be edited for clarity and brevity and published on this web site, and may include your name unless you request anonymity or specify not for publication. The charts and commentary represent what Fred thinks about the market and what he is thinking of doing for his own account and for accounts he manages at the time of writing. Fred, his clients, or his family may have positions or may make trades in securities mentioned in these commentaries. There is no guarantee that you will profit from trading as discussed herein. You may lose money and Fred assumes no responsibility for what you do or do not do with this information. Copyright©2001-2008 Fred Goodman. All rights reserved. For information purposes only, offered as a periodical of general circulation; not to be deemed to be recommendations for buying or selling specific securities or to constitute personalized investment advice. Derived from sources believed to be reliable, but no warranty is made as to accuracy.