Support is holding for now

     World markets are selling off once again today but strong support at 1120 is holding on the S&P 500.

     As you can see from this chart, the 112 level has been support for the last two months on SPY which is the ETF that represents the S&P 500.  Every time prices hit this level, buyers have come in and sent us back higher.  That is why it is called support.  I'm of the opinion that that we are finally going to break through 112 and head lower.   Generally when we break through support, more people start selling and we head dramatically lower.  If we can hold support here, we will probably head higher back to 1200.  We are in a trading range market for now as long as support holds.  If we break support, look out below!

Market Recap
    The big story today was gold which fell 100 dollars!  Gold has formed a double top formation and there could be more downside on the way.

   

    The reasons for gold's selloff is that hedge funds are selling their winners to raise cash.  Also, with the dollar strengthening gold's appeal as a currency hedge is lessened.

    There will probably be a buying opportunity coming up however so I am going to keep my eye on gold.  The Chartographer has a great post on gold here and basically called the top in gold.  I am real glad I sold my gold yesterday, I would not want to ride out this kind of move.

     Stocks finished today in the green with technology stocks showing strength.  The Dow was up 38 pts but the S&P 500 was up 7 and the NASDAQ was up 28.  Support at 1120 has held for now.  Overnight, SPY hit a low 110.85 but we bounced back smartly from there.  We could be heading back up the range, however, I don't know if there is strength enough for us to power to 1200 again.  But we could have a little rally from here to 1160-1170.  

     Foreign stocks did good today with European and Emergent Markets stocks doing well after getting obliterated yesterday.  I thought the selloff was way overdone on foreign stocks and so dipped my toe in yesterday and bought some EM's for my long term portfolio.  That is working out well so far as EM's are up about 2.5% today.  You can track Emergent Market's stocks with EEM.  My friend the Hasidic Plumber likes to track the Brazilian Bovespa and the Argentina Merval and you can track those with EWZ and ARGT or the Argentine Merval index if you like.

     I was away from the computer all morning so wasn't able to track the stock market and did not do anything with my portfolio.  I am definitely looking to get back into AAPL and start a position in MCD at this time.  I like stocks that have shown strength and AAPL and MCD are two of the strongest stocks in the market right now.  Cyclical stocks like CAT and energy stocks like XLE have really gotten bombed recently.  XLE is an energy index and CAT or Caterpillar is a good proxy for global growth.  These sectors are so weak it's best to stay away from them right now and stick with tech and consumer staples.  Utility stocks are also strong right now.

     Being at the bottom of the range, it would seem like a good time to get back in and set a stop at the recent lows.  I will probably do that on Monday, although I will be away from the computer that day as well. 

     

Disclaimer: Nothing in this blog should be construed as a recommendation to buy or sell any securities! Please do your own due dilligence before buying any stocks or bonds!