LeveneOMurray's Blog : The Week Ahead

Howdy, LeveneOMurray!

-- Any idea what this trading week will bring . . . ? --

Personally, I believe the Standard & Poor's 500 (http://www.zacks.com/research/report.php?type=estimates&t=SPX&x=0&y=0">SPX) is currently in a trading range between 741.02 and 1,007.51. My operating theory is buying pressure is greatest at the lower end of the range and selling pressure is greatest at the higher end of the range.

With the S&P 500 now at 896.24, I think it could first move toward the higher end of its range and then move toward the lower end of its range. Employing quintiles to divide the range into fifths, I would therefore be biased toward bullishness on large-capitalization equities when the index trades below 794.32 and toward bearishness on them when it trades above 954.21.

Of course, I actively seek either confirmation or nonconfirmation of such biases via my fundamental, sentiment and technical analyses of the market, various sectors, various industries and various exchange-traded funds and stocks.

Four elements I will bear in mind during this week are as follows:

1. Automaker-Based News in Washington: If the politicos indicate a bridge loan may be available to the so-called Big Three, then I anticipate it would be positive for U.S.-based equity prices. If the politicos suggest a bridge loan may not be available to the so-called Big Three, then I expect it would be negative for U.S.-based stock prices.

2. The TED Spread: If the TED spread -- the difference between the three-month U.S. Treasury-bill interest rate and the three-month London interbank offered rate (LIBOR) -- narrows, then I anticipate it would be positive for U.S.-based equity prices. If the TED spread widens, then I expect it would be negative for U.S.-based equity prices.

3. The Chicago Board Options Exchange Market Volatility Index (http://www.zacks.com/research/report.php?type=estimates&t=VIX&x=0&y=0">VIX): The http://stockcharts.com/h-sc/ui?s=$VIX&p=D&yr=0&mn=6&dy=0&id=p53695624302">VIX fell during four consecutive trading sessions before bouncing above its 60-day simple moving average yesterday. If the VIX can get below its 60-day SMA and stay there a while (as it has not done since August), then I anticipate this condition would be positive for U.S.-based stock prices.

4. Currency-Exchange Rates: If the euro weakens and the U.S. dollar strengthens compared with each other (as they did yesterday), then I expect this condition would be negative for U.S.-based equity prices. The European Central Bank announcement on interest rates Thursday will be especially significant this week.

Good luck!

MackTheKnife