The market will have shortened holiday session today and volume is likely to be light. Our portfolios were up marginally in trading on July 2, as the market firmed late in the day, as gold stocks increased marginally versus a down down in the precious metal, and on relative strength in coal. Coal stocks look to have caught some relative interest over the last week, and the news flow/trading look to be more constructive.
As for the market, the SPY closed somewhat higher despite being sold off most of the day following the disappointing ISM manufacturing report for June. As one would expect, volume was weak in 7/2 trading as we approach the Independence Day.
The SPY traded somewhat higher on the day, but is still within the resistance range we talked about in previous posts. The RSI, MACD, and stochastic measures all show the market may be getting tired. The rally that started on June 25 will probably need either better news flows, higher volume, or an improved economic outlook to push it higher.
The commodity index (Dow Jones UBS Commodity Index) has caught a bid in the last few weeks and the price has increased over both the 20-day and 50-day exponential moving averages. The MACD is improving and has crossed over the 0 line, showing that this run may continue. However, the index looks overbought in the short-term.
The components have diverging price charts. Corn (used as an example of agriculture commodities, which have rallied in recent weeks on world-wide droughts... see here http://soberlook.com/2012/07/global-drought-is-damaging-crops-will.html), while the precious metal complex remains flat lined. Crude has garnered some interest from traders, but has run into resistance on volume lighter than in the downdraft, while natural gas looks to be testing the 200-day exponential moving average, as it attempts a durable rally.
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