Technical difficulty?

By looking at VIX alone, it seems like the sentimental of market is improving, the index stands a tad below its 50 day MA and more than 30% off from its high of 37 set in January.  Yet the market went no where last week, and the chart pattern of major indexes (DJIA and SP500) is forming a "pennant".  So, who to believe.

There is no denying that the overall market is in a downtrend. Other than commodities and basic material, there is no leaders to lead the market out of this funk.  As a matter of fact, the usual leading stocks performed even worse than their peers.  for example, out of 100 stocks from NASDAQ 100, 12 stocks stand in the lowest point for last 60 days, among them, APPL, MSFT and ORCL.  

However, given all these bad news from economic front (inflation, growth and jobs), it is a remarkable achivement for the market to hold at this level and not failing further down.  Whenever he bears seem have the upper hand,  the bull is able to wrestle the control away.  It feels like the bears cannot make their mind either.

Technical side, the indexes sit right at the resistance level.  however, the technical trades have worked so well for so long, it might already attract a lot of counter moves by the "smart" traders.  and I suspect the reverse of last Friday is one of those counter moves.  Just when the support level of the "pennant" seemed breaking, thus attracting short sellings, the "smart" traders came buying and forced the "short" to cover.  And there might more these kind of moves in the weeks ahead, so, the volatility will be high.

The world market is in the same dilemma, except EWZ , and interestingly, EWT.  EWZ is eay to understand because of resource play, but why EWT?  maybe the wall street somehow decided that the KMT is going to win the presidential race and thus the peace will dawn on the strait of Tawain?  One of the stock, CHT, from tawain, seems keeping make new highs with ever incresing volumn.  If you do not read its full name, you would mistaken it as a commodity stock.

The week ahead is full of economic news about inflation, housing, retail and job. Chairman Ben will make another appearnce.  If recent history is any indication, we may see market goes up leading to his speech and begin to sell off as soon as his speech finished.   Also, many financial firms will report their earnings this week, hopefully, it will shed more light on this credit mess.

It is our belief that the market is in a tight range (DJIA 12000-12700) waiting for more news to decide to go higher or lower.  until then, hold tight and be prepared because you never know where the next surprise comes from

Have a good week