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Market Stage
(7/26/2010)

From Friday's report: 'Flat SBV readings indicate market uncertainty. However, SBV values on this chart setting are at high, positive levels and thus suggest the possibility of a flat to positive market.' - Today, we had another positive trading session

60-day charts with a 20-period SBV are now showing a small decline in SBV oscillator readings. At session's end, the following SBV values were registered: Plus 35% on the Nasdaq 100; plus 42% on the S&P 500; plus 42% on the Dow. Flat SBV readings reflect market uncertainty while declining SBV values suggest the possibility of a change in market sentiment. Currently, SBV oscillator readings on this chart setting are still at high, positive levels which would thus favor sideways to positive trading. We will continue to monitor this chart setting to see if SBV values continue to decline; this could suggest increasing odds for a down-move.

1.5-year charts with a 10-period SBV are showing flat SBV oscillator readings. Currently, these SBV readings suggest a weak market. Even if we did see a further advance on the indexes, the chart suggests that this up-move could not be considered a strong up-trend, but rather should be seen as a weak advance.

Market Status
(7/26/2010)

Market Performance:
�
Last Change Volume A/D Ratio
S&P 500 1,114.89
12.27 (1.11%)
3,245,724 8.04
NASDAQ 100 1,890.40
15.02 (0.80%)
681,733 4.00
DJI 10,524.83
100.66 (0.97%)
709,949 14.00

US equity markets continued to rally today, with the major indexes pushing toward the June 21 swing highs. The Dow has now seen three consecutive sessions with triple digit gains, adding more than 400 points over the past three sessions. With today's gains, the S&P 500 is now off a mere one hundredth of a percent for the year; some of the indexes are now trading in positive territory.

NASDAQ 100 - 7/26/2010. 1-day Intraday, Modulated Volume.

Volume Analysis:
From a volume analysis standpoint, there was not much to report for the Nasdaq 100 today. The index put in an overall low-volume session (see a five-day chart and compare overall volume levels to those seen on Friday), and no significant intraday volume spikes were noted (view a one-day chart). Between roughly 11:45 and 14:50, the index was in a drawn-out but shallow pullback during which the index accumulated a surplus of bearish volume (seen in red on the SBV oscillator pane). An accumulation of bearish volume can build support for the market, laying the groundwork for a rally. Sometimes this manifests in large bearish volume surges, but sometimes - as was the case today - there is simply an accumulation of bearish volume over some time. Note today's late-day rise after said buildup of bearish volume. A five-day chart of the index shows that there was however no conclusive volume bias for the day, and that overall volume output was anemic.

Short Term (lasts a few hours to a few days): In Friday's short-term outlook, we had suggested the market could see a flattening out / pullback after first pushing somewhat higher and that overall upside was believed to be fairly limited'. Today, the market did indeed push higher again, but no significant pullback materialized as the indexes closed at or near session highs.

Based on our volume analysis, we now see a stronger chance that the market could start to stall / pull back modestly after initially drifting somewhat higher. Additional upside over the short-term should be limited, the risk for a leveling off of the recent upswing has grown, and the reward-to-risk relationship for new long positions is starting to deteriorate, in our opinion.

Analyst's Daily Tip:

Volume moving average (VMA):
The Volume Moving Average (VMA) is a key indicator used in our charts and technical analysis. The VMA refers to the volume of a security, commodity or index averaged over a given period. For example, a 5-minute moving average consists of the last 5 volume bars, each representing the volume activity of one minute summed and then divided by 5. After the next minute has elapsed, a new value is added to the 5-minute VMA, and the oldest value is dropped from the calculation.

Critical Levels:
In order to establish the optimal critical levels for the SBV indicator, specifically when to enter a position, where to set profit targets, where to place stop-losses, traders should consider the current market situation. This also includes reviewing historical charts to study volume surges and their magnitude (i.e., the level the SBV indicator reached).

Financial Press Overview:
Positive earnings thus far, a good outlook from FedEx, a strengthening Euro, and some surprisingly strong housing sales numbers did their part to keep the recent stock market rally going. Some market performance data has been posted above.

According to the Commerce Department, June brought an almost 24% surge in new home sales month-over-month. This brought the annualized rate of new home sales to 330,000 (consensus estimate: an annualized 310,000 units). Just in May, sales had hit a record low of an annualized 267,000 sales. In contrast, in the summer of 2005, sales had hit an annualized 1.39 million units. Market observers commented that while the withdrawal of government stimulus money from the housing sector has been felt hard, it should not lead to another housing meltdown.

Shipping company FedEx today added $0.20 to its Q1 earnings per share outlook, with the company now suggesting that Q1 fiscal profits are expected to fall within a range of $1.05 and $1.25 per share, exceeding earlier consensus estimates (made some six weeks ago) of $1.01 per share. FedEx said overnight and ground delivery businesses are performing better than expected; the company is also speaking of a 'moderate global economic recovery'.

Part of the reason for the recent rise in US equities has been attributed to the steadily strengthening Euro. The Euro was again strong today, climbing 0.7% against the greenback, and it is now close to putting in a two-month high. In contrast, the US dollar has tumbled to its lowest level in since early May. European markets traded positively today following last week's release of the bank stress tests (where merely seven of 91 banks failed).