Golden Cross In S&P 500

About a week ago the S&P 500 50-SMA (simple moving average) crossed up through the 200-SMA. (See chart below.) This is known as a “Golden Cross” because it is interpreted by many as a sign that the market is turning long-term bullish. Of course, this generated enormous optimism among the market cheerleader crowd, most of whom do not use technical analysis unless it supports their position. On the other hand, a highly regarded economist/market analyst blew his stack that anyone could be so lame-brained to use such a simple event to imply that the market was about to go ballistic. Since both sides of this argument regarding a technical event are offered by people who are fundamental analysts, I thought it would be useful to present a technician’s point of view.

First of all, a 50/200-SMA crossover means nothing to this technician because I use exponential moving averages, and a golden cross has not yet occurred on the 50/200-EMAs. (See my article of June 19.) Second, if we were to get a 50/200-EMA golden cross, it would be an important event, but it would not be a sign to pile back into the market with both feet.

A golden cross applies only to the price index where it occurs. With the S&P 500 it means, based upon price movement, the broad market is turning positive, and, in technical terms, we will have entered a long-term bull market. At that point we would shift our emphasis away from shorts and toward longs. We would start assessing indicators and setups based on the assumption that we were in a bull market.

Sure, false signals are generated, but we can only act on what we know. In this case we would begin to look for medium- and short-term setups for long positions. If the LT buy signal fails, chances are that good setups will not be very common, and good position management will limit losses. A golden cross is not useless, nor is it a signal to throw caution to the wind. It is really an information signal, not an action signal.

The next chart shows the current market conditions using EMAs. Note that we are still awaiting the golden cross. More immediate to our attention is the fact that a fully developed head and shoulders pattern has formed, and Thursday’s decline appears to be setting up challenge to the neckline. If the pattern executes (the price index violates the neckline), the minimum downside target is about 810.

If the pattern fails to execute and prices rally off the neckline, it will tell us that medium-term bullish forces are still in effect.

Bottom Line: The golden cross is a positive sign and gives us information about the market’s condition and trend. If it occurs, don’t overreact or ignore it. There is currently a head and shoulders pattern that is on the verge of violating its neckline. If that happens, it would be a pretty good sign that the rally is over.

 

Could Hard Times Lead People To Gravitate Towards More Committed Relationships?

Over the past several decades, a growing number of Americans have decided that married life is not for them, while those who choose to tie the knot have waited longer than before to get married.

Although there are many explanations for the trend, including more educational and vocational opportunities for women and changing social mores, economic conditions have also played a role. Among other things, the boom of the last few decades has made it easier for individuals to set up home and live on their own.

Now, though, with the economy undergoing a hard landing and millions of jobs being lost, perhaps forever, could that be setting the stage for a far-reaching change in attitudes about the benefits of being (or staying) single?

In other words, could hard times lead people to gravitate towards more committed relationships, which offer economic, social, and emotional advantages that are often unavailable to those who live on their own or in more casual arrangements?

While it is much too early to say for sure, I wonder if the following Associated Press report, “Downturn Dating: Hearts Flutter As Markets Stutter,” though focused on the dating scene, is actually describing the nascent stages of a broader societal shift?

Credit the recession for “staycations” and bringing us more game-night parties at home. But also give it a shout for spurring more first dates.

Economic woes, it seems, unleash something practically primal in many of us who find ourselves without a partner: a hard-wired desire for companionship.

Some singles are now hunting for dates with the same fervor others are showing hunting for jobs. On matchmaking Web site eHarmony.com, membership is up 20 percent despite monthly fees of up to $60, and activity has soared 50 percent since September at OkCupid.com.

It’s not just the frequency of our dates that’s changing - it’s also the people we’re choosing to spend time with.

“They’re looking for something that’s genuine in a world that isn’t very secure,” said Bathsheba Birman, co-founder of the Chicago dating event Nerds at Heart. “With headlines full of why you can’t trust established institutions that you thought you could … people are re-examining their own values.”

Attendance at the monthly gatherings, where mostly young professionals pay $25 for a drink and a chance to spend the evening clustered around trivia and board games - was more than double expectations in April and has stayed high since.

“Misery loves company, especially if the prospect of romance and or sex looms large,” said Craig Kinsley, a neurologist at the University of Richmond. “Really, dating, rather than being considered as expensive, can be a thrilling and inexpensive distraction. Like getting drunk without the wallet-hit or hangover.”

Kinsley said stomach-fluttering first dates also release brain chemicals that can temporarily erase worries, even about 401(k)s and layoffs and falling portfolios and upside-down mortgages.

Still, Sam Yagan, the founder and CEO at OkCupid.com, sees the changing dating climate as a matter of dollars and cents.

The way he figures it, a man can spend $100 buying drinks at a bar trying to pick up a stranger and leave with little more than a cold shoulder. But, when he’s in a relationship, a Saturday evening can be as simple as Thai noodle takeout, Netflix and some fun under the covers. All in all, Yagan said, that’s “more bang for your buck.”

It’s more than just the recession. Experts say changes in behavior can relate to other world events - with upticks when news is bad.

Last fall, comparing periods when the stock market fell more than 100 points and when it rose by the same amount, eHarmony found more members searched for matches when the financial news was grim. Activity also grew in the days after a tragedy like the Virginia Tech shooting, while it stayed the same during “good” global events, like the Olympics.

Unlike those one-day or weeklong events, the recession already has spanned more than 18 months, and its effects are expected to last just as long - and that likely will mean more discernible changes in human behavior.

“It ends up being a reminder that you need to look for the important things in life,” said Gian Gonzaga, eHarmony’s senior research scientist. “It isn’t that surprising when you see people gravitating toward the most fundamental human relations.”

But the trend isn’t uniform.

Recessions can make some romances more challenging, experts say, especially for those who’ve already said “I do.” The stress that comes with fear, financial problems and economic uncertainty can drive a wedge between partners.

And the most committed bachelors aren’t developing a sudden hankering to buy princess-cut engagement rings.

Instead, the shifts are subtle: a devoted singleton going on more first dates; casual daters seeking long-term relationships; partners who might not have been attractive a while back - someone younger or older, someone who lives in a “geographically undesirable” area - looking much better.

At the Chicago wine bar In Fine Spirits, the changing dating culture has lead to a roughly 30 percent increase in the number of parties of two, said general manager Brandon Wise.

“With such a tenuous climate right now, I think people are looking for stability in their partner,” he said. “I think it’s less haphazard dating and more pointed dating.”

A gentler tone is taking over, daters and observers say, with substance gaining over style.

For Mili Thomas, a 28-year-old graduate student in New York, that means she now spends time with men who didn’t show up on her radar screen before the recession. Among them: a Ph.D. who would have been nixed because he lives in New Jersey and an employee at a marketing firm who wouldn’t have made the grade because he is two years her junior.

“I figured this was the best possible time to explore other options since people’s lives have been turned topsy turvy,” she said. “I think everyone is more open to bucking convention given that ‘the usual’ has gone out the window.”

 

Day Of Reckoning For California

This is a day of reckoning for California and, ultimately, for all of America.

Will our nation’s largest debtors meet their massive financial obligations? Or will many ultimately default?

In California, the answer given by the state Treasurer’s office was a commitment never to default, seeking to directly refute my forecast issued here 13 days ago under the headline “California Collapsing.”

According to the BusinessJournal:

“The California’s state Treasurer’s office on Monday refuted an analyst’s recommendation last week that investors dump California municipal bonds and that the state is likely to default.

“Analyst Martin Weiss of Weiss Research said in a June 22 report that California’s financial woes create ‘a very high probability’ that California will eventually miss debt service payments.

“Mr. Weiss’ analysis and recommendation, to put it kindly, is misinformed,” responded Tom Dresslar, a spokesman for state Treasurer Bill Lockyer. “Even the credit rating agencies said, in announcing possible downgrades, that the likelihood of default is low.”

Ironically, just two days later …

California Defaulted on Its Short-Term Debt Obligations

In lieu of cash, California issued i.o.u.’s to meet obligations to vendors and citizens, postponing payments on its current liabilities.

But current liabilities are short-term debts. Ergo, based on this standard definition, California is already defaulting.

It’s not the same as defaulting on its bonds. But for reasons I’ll explain in a moment, I’m now more convinced than ever that a bond default is also coming.

Consider the importance of this week’s events …

If California’s creditors had a say in the issuance of i.o.u.’s, Sacramento officials might be able to deny they’re in default by implying mutual consent. But that’s far from the facts. The creditors had nothing to do with this decision. It was unilateral, a telltale aspect of debt defaults.

If the i.o.u.’s were as good as cash, Sacramento might also deny the D-word. But the sad reality is that, if you’re among those stuck with California i.o.u.’s, you have only two choices: You have to either hold them while you sweat and cross your fingers or you have to sell them at a steep discount - exactly the same choices facing bond investors after a default.

If all major financial institutions accepted California i.o.u.’s, that might also help Sacramento justify a continued denial of default. But the reality is that most banks are not accepting the i.o.u.’s, and no one could argue their reasoning is financially unsound.

Why accept a piece of paper at face value when it’s worth significantly less than face value on the open market? The nation’s largest banks already have enough troubles with toxic mortgages, toxic credit cards and toxic loans on commercial real estate. They’re not exactly anxious to pile on toxic California paper.

If, as in past episodes, California’s budget mess were mostly due to a political snafu, it could be argued that the i.o.u.’s are merely a temporary stop-gap. But that’s clearly not the case either.

To the contrary, California’s budget crisis is rooted in an unprecedented economic depression with 11.5 percent unemployment and the greatest concentration of mortgage delinquencies in the nation. Even if the i.o.u.’s are ultimately paid in full, California’s debt troubles are not going away.

Why I Expect a Default on California’s Bonds

Short of an 11th-hour rescue from Washington - where political resistance to bailouts has grown dramatically in the wake of recent federal rescues - it will be extremely difficult for California to avoid a default on its bonds.

The fundamental reason: A vicious cycle of budget tightening and falling state revenues.

The state cannot balance its books without inadvertently making the California economy - and its deficit - even worse.

When it cuts spending, it merely creates more unemployment and forces consumers to slash their own spending or default on their own obligations, driving the economy into a still deeper depression. And when it raises taxes, it has a similar impact.

Either way, the end result is lower revenues flowing into the state’s coffers.

But now California has over $28 billion in bonds coming due between now and October. How will it come up with the cash is a great mystery to me. Bond holders are certainly not going to be among those accepting i.o.u.’s.

Wall Street Rating Agencies Also in Denial

The business model of Moody’s, S&P and Fitch is to sell their ratings to bond issuers; the ratings are bought and paid for by the very institutions being rated, including the state of California.

After multiple investigations of the Wall Street ratings agencies, Congress and the Obama Administration are proposing radical changes. But right now, it’s business as usual, and the egregiously conflicted business model of the Wall Street rating agencies still stands.

I believe that’s a key reason the rating agencies have not yet fully recognized the obviously dire state of California’s finances. And that’s why California’s state Treasurer can still claim Wall Street “doesn’t agree” with more realistic analysis like ours.

In effect, the state virtually pays them to hold their punches.

But despite these blatant conflicts of interest, the truth cannot be bottled up forever. Here’s what I see coming next:

1. Downgrade massacre: A series of multi-notch downgrades by Fitch, Moody’s and S&P, making it extremely difficult - if not impossible - for California to roll over maturing debts at any cost.

2. Worsening deficit: Surging interest costs and greater than expected declines in cash inflows, bloating California’s deficit even further.

3. Washington snub: A last-ditch effort to persuade Treasury Secretary Geithner and President Obama to reverse their earlier decision not to bail out California.

But Washington’s arguments against a California bailout are relatively firm: They’re already giving California billions through the stimulus package. If they bail out California, what will they say to the dozens of other states that line up on the White House lawn asking for theirs?

In contrast, arguments supporting a federal bailout of California sound like a hollow rerun of last year’s “bailout-or-meltdown” ultimatum by former Treasury Secretary Paulson to Congress. It’s a long-ago discredited approach to financial emergencies.

4. Default on California bonds: Despite Sacramento’s official mantra that a default is impossible and unthinkable, it happens.

5. Cascade of defaults: If giant California can default, the new assumption is bound to be that almost any issuer of tax-exempt securities can do the same. A cascade of downgrades and defaults by other states and municipalities ensues.

What to Do …

If you’re a U.S. citizen or resident - whether in California or not - don’t count on borrowing money. Prepare yourself for a return of last fall’s environment in which consumer credit was either too expensive or unavailable.

Pinch pennies. Sell off unneeded assets and possessions. And raise as much cash as you can - for emergencies and for your family’s future.

If you’re a bond investor, better to be safe than sorry. Unload your tax-exempt bonds and tax-exempt mutual funds. With few exceptions, the benefits do not justify the rapidly growing risk.

And if you’re a more aggressive investor, seriously consider transforming the inevitable market volatility of this crisis into a series of substantial profit opportunities.

The key: Timing the market!

 

How To Capitalize On Golden Outlook For Gold Miners ETF

The interest put toward gold and the mining companies that extract the metal are great, as inflation fears loom and investors seek havens. There is a related exchange traded fund (ETF) that tracks the exploratory aspect of this commodity.

Although the equities market has rallied over the past few months, the price of gold has stood its ground and kept most of its gains. The inflation fears have sustained as the Federal Reserve has continued to print money and fund stimulus packages, creating more demand for gold as of late, reports Chris Zappone for Brisbane Times.

Meanwhile, the smaller mining companies in Australia are pushing the movement to merge, as they want to bulk up and meet the investment demand. At least two multimillion-dollar mining deals have been tabled in the past few weeks and investment bankers and analysts are counting on more to come, reports James Pethokoukis for Reuters.

The goal is to put assets together so that the companies can do better together than they could do apart. The names of the companies have not been disclosed.

Market Vectors Gold Miners ETF (GDX: 38.31 -1.10 -2.79%): up 16.3% year-to-date

 

Monthly Elliott And Fibonacci Analysis Of India’s Nifty

Per multiple reader request (thank you to all my followers in India!), I am updating my analysis on India's "Nifty 50″ Index, beginning this week with the long-term 10-year Monthly Structure.

Let's take a quick look at a possible large-scale Elliott Wave count and also a Fibonacci Confluence (three price levels) chart on the monthly timeframe - a key turning point may be ahead soon.

The market rallied sharply off the 2003 lows near 1,000 and peaked in January 2008 at a price high of 6,350 - an absolutely impressive rise to be sure.

Look closely and you can see an 'arc' rise (not drawn) off these lows as price went 'parabolic' in its last few months - a classic warning of a top being formed.

We see the Elliott Wave count (from 1 to 5) as the market rose 600% in value.  We now appear to be in a corrective phase, and perhaps are finishing the "B" (second) wave of a larger corrective move to retrace a larger portion of this price rise.

This count would assume that the final "C" Corrective wave down is on the horizon, which could take price back down to test the 2,500 level yet again in the months and perhaps next year to come.

We have already retraced 61.8% of the move from the 2003 lows to the 2008 highs, so perhaps the corrective phase has run its course - that would be the alternate scenario.

The "alternate" scenario would assume that instead of the 5-wave decline I have labeled as "A," we instead had a complex corrective move down - perhaps in the order of ABC - X - ABC to end the correction, which places us squarely in Wave 1 now of a "new bull market" and expecting a corrective Wave 2 down (not to the lows - but perhaps to the 3,500 level) to begin.

I think it 'counts better' as a correction instead of a new bull market, but we need to be open to this possibility.

Either way, the "Next Likely Swing" appears to be a down one, whether it be the final Wave C or just a corrective Wave 2 - that is where I find Elliott Wave helpful - not in absolute forecasting, but in confluence counting in regards to the "next likely swing."

Speaking of confluence, let's take a look at a "Confluence Fibonacci Grid" using three price lows to begin our retracement to the closing high in January 2008.

Two of the 3 grids overlap about the 4,400 level, which you see is exactly where price is located now.

In fact, that is the only major overlapping confluence level we see using these grids on the chart.

This implies that price is at a "critical node" and could be unable to overcome this confluence level to the upside - in other words, it could serve as key resistance.

Last month also formed a "Spinning Top" candle, which is often seen and associated with key turning points in a market.

As a caveat, there's no guarantee of any absolute prediction into the future, but for now, we have the following:

Possible Wave C (or Wave 2) down about to begin
Price at a critical Fibonacci Confluence Node around 4,400
A Spinning Top candle formed in June on the confluence node

A solid close above 4,800 and especially 5,000 would overrule these bearish omens, but until then, it might pay to be defensive on the long side at these levels.

(Note - for US readers, understanding that the Nifty is at confluence resistance ties into the thesis that the S&P 500 is forming a possible reversal pattern down (Monthly "sell signal" and also Daily Head and Shoulders with momentum/volume divergences) - and adds a layer of confirmation that both markets appear poised for corrections).

 

Has The Humungous Bank & Broker Lost It’s Trading Edge?

This was an impressive week for the New Age day trading market, false break-outs in both directions, trading done for the day in less than an hour off the opening bell, the rest of it just for show. It’s strange to be pondering events that seem so manipulated on this day, of all days, Independence Day in the USA.

What I think is happening here is that Humungous Bank & Broker (HB&B) is trying to stay in control of market trends and cycles, at least until they fill their coffers with new funds and where they have the time to see how the new securities industry rules and regs are going to play out.

But, the bottom line, I sense, is that HB&B has lost its trading edge, and now has to pump and dump daily to screw over the Great Unwashed. Now that the public realizes the importance of technical analysis and has killed the myth that was buy-and-hold (so-called) ‘investing’, what’s a banker to do?

I’ll tell you what I think is going to happen - just my observations from watching and reading the mainstream media, which is controlled by HB&B - and it’s not good for independent traders.

Ha, and you thought America was independent and free. Well, had you read my book Lessons from the Trader Wizard, you would have noted the People are really spenders first and thinkers second, only realizing later that spending more than after-tax income makes them dependent on banks, and also chattels of governments (federal, state and local) that spend more than they can tax and have to make up that deficit by borrowing, also from banks and the fortunate few who can afford to live on fixed income even at ridiculously low yields.

Now that we know our place in the world order - slaves mostly - just when we start to get ahead by beating the trading pants off HB&B in the capital markets, we are, I fear, about to get burdened with a trader tax. If you want to day trade, ie, battle hand to hand in the trenches against these banks, you will soon have to pay a price in the form of a transaction tax that for all intents and purposes will be an eradicator of competition from the independent trader.

You see, when banks day trade, and they do and will continue to do that forever, regardless of taxation, because that’s how they make their profits, trading against the client, they will also pay that tax; but who really pays any tax on bankers? That, my friends, will be the customers, in the form of higher costs, and the shareholders, due to lower profits, who shell out. In other words, you will pay for the bank. The bankers will still compensate their staff the same personal bonuses regardless. In fact, now that the public is on to that bonus charade, the banks are doubling the salary components of their employees. Nothing, it seems, will keep those bankers down.

Now, as for you independent traders, you may soon find yourself paying transaction value fees, like a half percent in and a half percent out. If you are lucky enough to make say two percent on a short-term trade, if the added transaction tax is one percent and the income tax is much of the rest, you can see the uphill fight ahead. Moreover, that’s only if you are a good trader. If you happen to be one of the many - in fact probably the majority as studies showed about ten years ago that maybe 80 percent of day traders actually lose money - then you will still be hit with that asset-based transaction tax. The bankers’ lobbyists will not want a transaction income tax legislated because that would mean the majority of traders would have tax loss credits against other income, and so they might stay in the game.

Ultimately, the banks want to have this capital market to themselves and that’s the plan. It’s no different than the monopoly they have on banking and the use of the word ‘bank’; how they intend to treat you as an Asset Under Management (AUM) is with a number, just like an ATM number or credit card number. Yes, the only independence permitted will be your PIN number.

Now, all this is not happening just this week, and this is supposed to be a Week In Review, but it is happening and it’s on my mind. I haven’t a clue as to the legislation being drafted, but I can feel it in my bones. I know my enemy, and I know they are bullies who refuse to fight fair and square. It’s going to be up to us in this dark hour to pull together to fight the good fight.

Yes, we’ll have to look our elected representatives in the eye and tell them they are crooks who are taking money under the table from HB&B to give them legislation and securities industry rules and regulations that put us at a disadvantage. They won’t like that, but just like Barney Frank when accurately accused by Fox TV’s Bill O’Reilly of being bought off by Fannie and Freddie, it will be water off the duck’s back. These people are, after all, politicians and they know the public polls already show them as having less credibility than a used car salesman (not that selling anything these days is bad). So, they don’t care what you call them, including to their face. They will still lie through their teeth as we saw with South Carolina Governor Mark Sanford, who apparently thinks he has done nothing wrong. Isn’t his case all too common in politics?
http://www.miamiherald.com/news/politics/AP/story/1126722.html

Well, same for bankers. After changing their status from SEC-regulated investment bank to Fed-regulated bank holding company so they could take down tens of billions of taxpayer monies from the US taxpayer, these banks are now stating, quite clearly, they never really needed those funds, but Treasury Secretary Paulson made them take billions. Why? They refuse to honor the deal with the warrants sold to the government along with the stock they now, profits in hand from trading those billions in capital markets, intend to repay to Treasury. You see, no longer is a transaction a transaction once a banker is involved. It’s a maybe transaction. It’s either they win or else you lose. Bankers don’t lose unless they are incredibly stupid, and stupid people don’t get to head these banks. And, with their people ensconced in the White House and in many of the central banks of the world, these bankers do not intend to play fair and, with the help of legislators in Washington, they don’t have to.

HB&B caused the global financial crisis, along with their lackeys in the government, the regulators and the media who conveniently looked the other way as they greased the skids, and now they are busy re-writing the history books and creating PR campaigns, hoping the public soon forgets. But, je me souviens, I remember, and I hope you do too the next time you see legislation intended to shore up the defenses of HB&B.

On this historic day in America, we must understand that fighting for freedom is a continuous struggle. Yes, it’s important to celebrate freedom today because of the great people in history that won it for you - none of whom, to my knowledge, were bankers — but freedom to be self-reliant is a precious notion that can also be taken from you unless you continue the good fight.

Now, let’s get focused on the events and price action of this week, the first one of the second half, one that is starting out with a lot of question marks.

At the end of the day, while I could be wrong, I think we’ll discover, despite Thursday’s rather large sell-off, there is still ample power in the US equity market to boost the S&P from 896 to 950, and perhaps even 1000, but beyond that there are still numerous negative economic and corporate issues that need to be addressed and resolved. After the shocks of 2008 and February-March 2009, market stabilization may take time. It’s a process. So I continue to look for sector rotation as the S&P tests 880, and briefly lower possibly as short sellers get set up to be squeezed.

Yes, I see 880 ahead. After all, that’s only 16 S&P points (-2%) away. Whether this test is a legitimate break-through to the cyclical Bear phase that many believe is somewhere ahead nobody knows. If I see $GOLD spike to 1000 and then crash, along with $WTIC (Crude Oil), and a higher $USD, then, yes, I believe it will be game over for the Bulls and the lights will be turned out in the old ball park for a couple months.

But, you know me; I like to stay until the end of the game, to finish what I start.

Financial Stress Moderating, At Least By Some Measures

The measures of financial stress based on short-term markets are looking much better, though bond-market related measures are slow to improve.  The most popular measure of stress is the TED spread, which is the difference between interest rates on inter-bank loans (LIBOR) and Treasury Bills.

We’re getting so close to normal that some complacency–but that would be a mistake.  The low TED-spread probably reflects central bank and government guarantees of bank borrowing.

Another measure of stress in short-term markets is the interest rate spread between the safest commercial paper and somewhat riskier paper, which is the difference between A2P2-rated paper and AA-rated paper.

There may be some implicit guarantee helping the spread, but not as much as in the case of bank debt.  This is very good news.

Bond market stress measures continue to improve, but have not yet come down to normal levels.  BAA bonds are investment grade (if you believe the ratings agencies), and we can compare their yields to 10-year Treasury Bonds.

My final measure of stress is the spread of junk bond interest rates over the 10-year Treasury

Economists at the Kansas City Federal Reserve Bank have recently developed a more comprehensive index of financial stress that incorporates 11 components.  The developers of the index, Craig S. Hakkio and William R. Keeton, have written up their results in a good article, which though somewhat lengthy provides a good primer for those who want to learn more.  They don’t seem to be posting their data online yet, but the charts in their article suggest a relatively small drop in financial stress since the October 2008 peak.

 

Stock Picks For Next Week: Ciena, Sirius XM Radio And Capstone Turbine Corporation

Sirius XM Radio (SIRI: 0.4475 -0.0125 -2.72%) has made a sharp recovery from a low of 0.34 on the basis of short-covering. In the short-term, i expect the current reversal in trend to continue. The technical daily chart shows the stock is in a bull market as MACD is on top of signal line K line is on top of D line, both indicating buy. In addition, the stock is on top of 50 day and 200 day moving average showing the stock is in bull market. The chart also shows that there is a limited evidence of downside pressure on the stock, for example on Friday the stock dropped 2.7% on low volume (no selling).This is a clear evidence of the strength of bulls. They are controlling the stock.

Chart courtesy of www.stockcharts.com ( click to enlarge )

Ciena (CIEN: 9.90 -0.43 -4.16%) - Despite seeing a steady declining trend in the last trading sessions of the week, the stock managed to hold on the crucial levels of 9.54, amid some volatility. Since the begining of March the stock has show sign of recover as it has reversed the downward trend and began to go north. Moreover when the Golden Cross was formed in early May, we have been expecting the major rally. However the weak market in June drove the stock down a little bit and delayed the rally. At the moment, I’m still convinced the stock will move up again, due to the fact that it has been falling on low volume with MFI rising.

Chart courtesy of www.stockcharts.com ( click to enlarge )

Capstone Turbine Corporation (CPST: 0.83 0.00 0.00%) - The 50-day moving average at $0.78 is acting as a strong support currently. As long as it doesn’t break down 0.78, the chances of going to 0.98 is always there. The stock has bounced off from the above mentioned levels on three occasions. The daily RSI is also showing a sign of reversal, currently trading above 49. If CPST can go up again to bring K line up then you may want to consider buying the stock as it has pletty of room to go since ROC is at oversold level. Short-term traders can buy the stock in the range of 0.78-0.79 for a target of 0.89. Maintain a stop loss of 0.78 and go long. Increase the position if it closes above 0.85.