Stocks Churning in Trading Range: Dave's Daily

This will be short. Perhaps the image and title should suffice as a summary of the week. After all, I indicated "possibly" I might post on Friday.

The current market is a reprise of early July's rally from June's selloff. Now into September the August lows are reversing. How durable will this be is anyone's guess.

Economic data was greeted with bullish enthusiasm as markets were oversold after Monday's slump. The unemployment data was just about the same as previous once you look deeper inside the data. The birth/death model is just an estimate made out of thin air. Once you view the data ex-that, things look pretty grim.

There are very few players involved this week and perhaps in the future. It's interesting many major banks are closing their proprietary trading operations. This removes another important prop to markets as retail investors have left the scene. Further, for stock mutual funds, the exodus continues for the 16^th straight week. Cash balances at these funds are at historic lows of 3% as the outflow continues. Curiously, short interest is also at an all-time low near 4% meaning few for bulls to squeeze. We only have hedge funds and overseas investors in the game. And, it does seem like a game more than ever now.

Bulls jumped on the oversold conditions on Wednesday as a DeMark 9 was registered on Tuesday for most major market daily charts then. A rally on that technical condition was no surprise.

Volume was summertime light most of the week Thursday and Friday while breadth was quite positive.

 

SPY: We still have an operative H&S top formation until the overhead neckline is taken out at about resistance levels. Further you'll note our internal chart with daily DeMark annotations and you can see useful 9's appearing often triggering trend exhaustion. This is especially useful when markets are in trading ranges. These were prominent on DIA, SPY and the Russell 1000 Index. By the way, for those who have asked, "Punch it baby! Punch it!!" is a Steve McQueen line from the original movie "The Getaway".

IWM: More of the same with Small Caps. There wasn't any DeMark 9's here but with correlations high you don't need to bother when it's a follow the leader game.

QQQQ & AAPL: Apple is 20% of the QQQQs so we include it obviously. The introduction of new gadgets for iPods and TV didn't seem to impress all that much but the stock rallied with bullish sentiment anyway. It's a darling of the hedge funds.

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