Thursday, July 01, 2010

Market Outlook July 1

As you can see from the above Intraday chart of the Dow, we are up off the lows, but the last "W" pattern is pointing down. I expect the Dow and other indexes to test the lows of the days. Tomorrow's job's report is only a minor event that the media will make major story. The spin will be on both sides but no mater what they say, the unemployed still represent too many Americans. Whether the number is 10% or it manages to stay below it is irrelevant because the real unemployment number is almost 18%. That's a heck of a lot of people.

We are going to be going down in all indexes. This is a 2 year chart of the Dow and you can see we have broken below the support level and are going much lower. The question is at what pace. But by Sept. and October we will be much lower than now. Some see 9,000, some see 8,000. The real question is ultimately where will be the low. I see much lower than both 9,000 and 8,000, as you know if you have been reading here.

Update: 4:30pm PST

As you can see from the chart above that the Dow did manage to go lower after the first slanted "W" pattern which I commented about earlier. While there are a number of these patterns here, I only want to focus on the last one where I drew another red line. You will notice this one slants down also and when we pick up the market tomorrow, it is most likely to go lower in the morning.

The Unemployment data for June will be announced at 5:30am PST. Many expect the data to be higher unemployment so some of the news is baked in already within a small increase. However, should this turn out to be much more unemployed than expected, we may see a big selloff. Anything else might be a small relief rally for the day. Summarizing what I see might happen, if the Unemployment rate stays at or below 9.9% the market might actually rally. If the Unemployment is at 10.0% we will have a small selloff of less than 100 points on the Dow (1%). If however it is 10.2% or greater, expect a big selloff of 2.5-3%. There you have it. I will be here tomorrow and posting several times during the day. Hope you come by. Remember the overall market trend no matter what transpires tomorrow is negative. Trade accordingly.

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