Insufficient Evidence

European output (industrial production) was slightly higher than expected and the markets in Europe & the US started out their respective sessions strong. Earlier overnight Asia was strong with our better than expected US consumer sentiment, which is paramount to them as we buy their products/output.

However, the "robustness" wore off and our markets are flat going into the close with 15 minutes left. The NASDAQ is still marginally up. The European markets trimmed some of their gains as well, but were positive.

And true to form and always ahead of the game (sarcasm), Moody's downgrades Greece to junk status. Don't they read the newspapers or do any kind of due diligence at all? Why do people and institutions pay them? Oh well, back to the markets.

As I talked about yesterday, we have had five 90% Days - 2 90% Down Days (Junes 1st & 4th) and 3 90% Up Days (May 27th, June 2nd & 10th). Statistically, 90% Down Days are much more significant because historically it will be followed by a 2 to 7 day rally & generally marks, at the very least, a short term bottom.

Additionally, we want to see Buying Power (Demand) increase and expand, with a corresponding decrease or contraction in Selling Pressure (Supply). This has happened very modestly and without any conviction, which is vital for a sustainable rally. This is why we are still holding some cash. Fortunately, the largest percentage of our equity exposure is in NASDAQ stocks, which have shown the greatest strength.

Remember I also said sometimes doing nothing (being in the money market) is doing something and is the best, most appropriate place to be when you are unsure. This is a time to be patient and let the market show you which way it intends to go. It will break out one way or the other, we just need to be ready to take advantage when that time happens.

I hate to sound somewhat redundant, but we are in a "trading range" and need to "break out" one way or the other. For this very reason and because it is NOT definitive yet, we are in a holding pattern. I do not want to guess which way it will go, but want some clarification.

I have attached a close up Graph of the DOW right at critical support/resistance at 10,200. This will be key over the next few days to see which way the "breakout" will be. As I said, there is some "supply overhang" we must breakthrough for a rally.

If any of you reading this newsletter are Short Term Traders (which I am not), a short term buy was registered Thursday June 10th by a 14 day Stochastic moving above its 3 day moving average.

The bottom line, right now we have to be patient and wait for further evidence. Otherwise, we will just be guessing.

Keep studying,
Dan Stewart CFA®