The Fred Report - Mid Week Update August 8, 2012

author/source: Fred Meissner, CMT

Previous    Next

The FRED Report – Financial Research, Education & Data

Mid Week Update


Volume 4, Issue 64

August 8, 2012


Download PDF Version here

Update of Market View

Stocks have continued their rally so far this week, and our forecast is for the market to be strong into the end of August. We have had a number of questions and will deal with the most popular question below. 
First question: is the market factoring in QE3, which some firms suggest will happen in Mid September, and is that the reason for the current rally? Our answer: We do not believe QE3 will happen until after the election. We believe the market is rallying into the end of August, for seasonal reasons, as forecast. 
Second: there is a great Standard and Poor’s article suggesting the market is giving out more bullish signals, moving average crossovers, and such. We will deal with this more fully on Thursday’s call, but our answer is that market structure is NOT improving as some indicators go positive. These indicators are going positive late in the move as well which is almost always a bad sign. We show charts of this by looking at daily charts of XMI, OEX, SPX, NYA, RUT (Russell 2000) . Readers can see that XMI and OEX are outperforming SPX, and NYA. SPX and NYA are outperforming RUT. This means the market is narrowing in favor of large cap stocks, which is traditionally been the precursor to a decline of magnitude. Readers should look at monthly charts of these as well, to get more of a feel for this type of action.  We acknowledge that this situation can be reversed without an appreciable decline, and certainly hope that we are wrong about a decline after August, but note that many of the classic signs of a weakening market are present. 
Our strategy has been, and remains, the following: First, look at portfolios with the idea of selling weak, underperforming names and cycling into something like SPLV or at least leading stocks. We will stay with, and re-evaluate the market at the end of August – this month should be the best of this summer rally and while we are overbought there is no sell signal – and we are not sure how high we can go by our “sell date” of August 31, when our summer rally forecast officially ends, and we evaluate it.

weekly_midweek_080812 weekly_midweek_080812
weekly_midweek_080812 weekly_midweek_080812

Other Points of Interest  

We show charts of MSFT. There have been a surprising amount of questions on this stock, which has support in the 29 area and could test 31, then 32.50 by the end of August, especially if the market is strong. This stock is improving slightly, but is basically weaker than something like INTC, which has started to advance and is a stronger chart.

weekly_midweek_080812 weekly_midweek_080812


Fred Meissner is primarily responsible for the research in this report and certifies that: (1) all of the views expressed in this research accurately reflect his personal views about any and all of the subject securities or issuers; and (2) no part of his compensation was, is, or will be directly or indirectly related to the specific recommendations or view expressed him in this research.
This report is for your information only and is not an offer to sell, or a solicitation of an offer to buy, the securities or instruments named or described in this report.  Interested parties are advised to contact the entity with which they deal, or the entity that provided this report to them, if they desire further information.  The information in this report has been obtained or derived from sources believed by Fredco Holdings, Inc. to be reliable, but Fredco Holdings, Inc. does not represent that this information is accurate or complete.  Any opinions or estimates contained in this report represent the judgment of Fredco Holdings, Inc.  at this time and are subject to change without notice.  Fredco Holdings, Inc.  or its employees, officers, directors, principals, agents, affiliates or adviser may from time to time provide advice with respect to, acquire, short sell, hold or sell a position in, the securities or instruments named or described in this report.
Fredco Holdings, Inc. does not have investment banking relationships with any of the companies mentioned in this report and does not conduct investment banking business, in general.  Fredco Holdings, Inc.  and its employees do not receive compensation of any kind from any of the companies in this report.  Fredco Holdings, Inc. , its directors,  officers, principals, agents, advisers, affiliates and employees may maintain a financial position in the securities mentioned in this report, provided however that no buying or selling  activity will be taken with respect to a security referenced in a report by such parties within three days of such report’s publication.
The information contained herein was prepared by Fredco Holdings, Inc., which is solely responsible for the contents of this report.
Copyright 2010-2024 Fredco Holdings, Inc..  All rights reserved. This report is a publication of Fredco Holdings, Inc.  located at 4514 Chamblee-Dunwoody Rd, Suite 112, Dunwoody, GA 30338. 




Who is Fred Meissner, CMT?
Listen here:

The FRED Report is not authorized, endorsed, or affiliated with the Federal Reserve of St Louis and its FRED Economic Data.