short covering rally last nite

McHugh's Thursday Market Briefing.

www.technicalindicatorindex.com

Congratulations to the Plunge Protection Team for another fine
performance, this time in support of our new Fed Chairman, who
apparently developed an inferiority complex that the markets didn’t like
him. It was a no-doubt-about-’er short-covering rally (check out all the
buying panic numbers — that’s the clue) Thursday, but it didn’t fool our
key trend-finder indicators as 7 out of 8 have been on buy signals for
several days in anticipation of this up move. It is a small degree wave
three inside a final wave {c} up of the wave 2 up correction of the
recent May 10th to June 14th decline in the DJIA. This rally should
persist through July 4th. Large Bull Market rallies climb the wall of
worry, they don’t generate out-of-the-blue buying panics. This rally is
corrective within a new Bear market in equities.


The Dow Industrials rose 217.24 points Thursday to close at
11,190.80, while the S&P 500 burst 26.87 points higher to 1,272.87. NYSE
volume was 118 percent of its 10 day average with upside volume at a
buying panic 93 percent, advancing issues at 85 percent, and S&P 500
upside points at a buying panic 99 percent, about as high as you can
get. NYSE New 52 week Highs rose sharply to 94, about the same as New
Lows at 105. The McClellan Oscillator rose to positive +127.19, with the
Summation Index at minus –583.99. S&P 500 Demand Power was up a huge 15
points to 407, while Supply Pressure fell 11 points to 407. This is
characteristic of short-covering rallies, where both numbers are large,
but the rise in Demand Power exceeds by a substantial amount the decline
in Supply Pressure (was 36 percent more Thursday). This is because those
most pessimistic about the markets are joining optimists in buying. It’s
sort of like the enemy getting confused and shooting his own until he
gets his bearings. These are brief events, and our Plunge Protection
Team Intervention Risk Indicator dropped to minus –28.79, suggesting
that any follow-through should not be significant. Could we see 11,300?
Yes. Should we get a two week drive toward 12,000? No, according to this
indicator.


Gold rose a hearty 18.60 points Thursday to 598.20, while Silver also
rose nicely by half a buck to 10.73, and Oil rose .31 to 72.50. This
occurred while the Dollar fell 0.69 to 85.97. This action tells us the
currency and inflation asset markets will not be fooled by the Fed’s
magic act where they announce higher interest rates to pretend to be
fighting inflation while simultaneously goosing markets with fresh
liquidity to buoy equity markets.


The Russell 2000 rose 24.47 points, or 3.56 percent, to close at 712.51.
Volume was strong at 115 percent of its 10 day average with upside
volume at a buying panic 94 percent and advancing issues also a buying
panic 95 percent. Buying panics are evident when these upside internals
figures rise above 90 percent. It means Demand had more than a little
help from those most pessimistic about the markets, the shorts, who were
fearful of a new rising trend, forced to buy stocks they did not own but
had contracted to sell at today’s prices tomorrow. They couldn’t risk
that prices would be lower tomorrow when they had to deliver stock or
close out a position, in the face of a rallying market.


The Australia SP ASX 200 rose 50.40 points, or 1.02 percent on June
29th, to close at 4,997.20. Volume was at its 10 day average with upside
volume a weak 51 percent, advancing issues a so-so 61 percent, and
upside points a strong 89 percent. So it was a lopsided point rally but
without a lot of participation. And that is what our Demand and Supply
indicators also tell us. Demand Power was up 3 points to 401, while
Supply Pressure was down 4 points to 410. The rally was more from an
absence of sellers than a desire to buy, floating issues higher. The 10
day average Advance/Decline Line Indicator rose to positive 6.6 from 4.8
and is now in a firm upside trend.