8:15am EST While the futures are showing a weak start for the day, I think we will see some strength. Even though most of the end of quarter window dressing for portfolio managers is finished, we are seeing strength in the commodity space and a weakening dollar. That has recently been very supportive for the equity market.
The other part of the market I am watching is the overall technical levels. Of course, the strength is in the Nasdaq. The technicals on the Nasdaq chart are starting to look more and more bullish. The 200 day moving average is beginning to flatten out and the month of July will be very supportive for the 200 day. We will see some of the nasty days in October and November fall off the back of the 200 day and the flat-to-up days coming in July added in. If we don't see a dramatic sell off in July, the 200 day MA may begin to turn up for the Nasdaq. Of course, the charts for the other indexes look similar, but the Nasdaq will be the index that leads us out of the recession.
The stock I am looking at today, believe it or not, is Merck (MRK). Going back to the capitulation day on March 9th, the stock hit a high on March 24th and then another high on June 2nd. Both highs were within about $.30 of each other. The move yesterday brought the stock close to the recent highs and above the 200 day moving average. If the stock can get strongly above the $28.20 level on good volume, it is time to put a position on. My stop would be around $26.50 with an initial take-profit in the $30 range. Be sure to buy at a proper buy point and manage risk properly. Until next time, stay low risk..
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