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Market Recap for Friday, July 10th, 2015 - SPY QQQ IWM IWO HACK TLT GLD GDX ASHR USO

7/10/2015

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This was indeed a volatile week for the stock markets. On Wednesday the S&P 500 actually closed below its 200-day moving average. The 200-day moving average is a widely watched benchmark - even by the fundamental investors. Many consider a price closing below the 200-day as a sign that a security now entered a bear market. Thursday $SPX tried to rally, but closed near the lows, while Friday was a strong day with a close above the 200-day moving average on a strong candlestick. Few divergences still remain on the charts of $SPX, but I think they have  basically “worked off”. $SPX went on our buy signal and breadth momentum for $SPX is on an upswing.
Charts of SPX, QQQ, IWM and their market breadth

Chart of the NASDAQ 100 ETF – QQQ, still has a few divergences on it. As long as Apple holds up, we may see a push to new highs in QQQ, hopefully on better volume (the On Balance volume (OBV) indicator for QQQ is still lagging somewhat.)

       I think the best opportunities in the market right now are in the small cap universe. The charts of IWM have the least divergences. Unlike its large-cap brethren, IWM did not even break its first support by holding above the $122 level on closing basis.        

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IWO – the small cap growth ETF – also went on our buy signal today. IWO is more volatile then IWM, so both the potential gain and the possibility of loss are amplified. Should some sort of a resolution be reached regarding Greece, I think we may easily see new highs for IWO. 
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Another high momentum opportunities of the market still remain in cyber security. HACK, the cyber security ETF, hit new all-time highs just a few weeks ago and corrected steeply. Yet its relative rank remained very strong. I think it found support in the $29.70 area and now rebounded. HACK also went on our buy signal today.
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Bonds gained during the beginning of the week, but sold-off sharply on Thursday and Friday, as the Greek crisis seemed nearer to a resolution. Bonds are considered safe-haven in times of market uncertainty. TLT is again near its critical support. Should the $114.64 level give, I think TLT will officially enter a bear market. TLT may provide a good hedge, should the Greece fiasco continues unresolved or Grexit materializes. 

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Gold just can’t catch a bid. This week gold again slid a fraction of a percent. This marks a third week in a row that gold has been sliding. Most importantly I think is the fact that on Tuesday gold decisively broke the May and June supports by closing at $1153.70. Next stop for gold is March low at $1141.60. Could the new 52-week lows be in the cards for gold?

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If gold had a bad week, GDX had an even worse week. GDX already broke below its March and December lows and is now threatening to retest its 52-week lows from November. I see very little signs of buying pressure in GDX: new lows outnumber new highs, Bullish percent index is only at 16%, there were new very recently registered in the On Balance volume, AD-line and the AD-Volume lines. GDX is bearish and to me it makes more sense to short rallies rather then try to pick bottoms. 
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       The demise of Chinese stock market was greatly exaggerated. Talk about volatility! ASHR was down over 38% in 17 trading sessions and is now up over 28% in just 3 trading sessions! Looking purely at the technical picture and ignoring the blatant market manipulation by the Chinese government, I still see a bullish chart long-term. If you can stomach this kind of volatility, hopefully via proper position sizing, then today’s close may not have been such a bad entry point.

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Oil broke key support on Monday with a gap and run lower. Oil is in a bear market and our short signal was back in the beginning of May. All this week $WTIC has been tracing out what appears to be a rising wedge. The rising part is bullish while it is rising. Should this wedge stop rising and move below its rising lower trend line, we would have what is called a rising wedge break. This is bearish and would call for $WTIC to fall to around $45 or even to retest its lows in the $42 area.

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That’s it for this week’s market recap,

Best Regards and have another great trading week!

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Alexander Berger (www.MasterChartsTrading.com)

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