Weekend notes on the market -- Feb 17 ,2008

Waiting for the catalysts?

The market recouped some loss from the previous week while the major indices remained range-bound for 3rd week in a roll.
On the weekly charts: for all major indices, the negative momentum either stalled or diminished somewhat; overall volumes declining for the 4th week in a roll; indicators nearly neutral for the near-term future.
On the daily charts: for all major indices, the momentum are all in the positive territory; bullish movement in the early part of the week was largely negated by the bearish counter-move in later part of the week; indicator mildly bullish for the near-term future; overall volumes continued the contraction pattern ever since the mid-January bottom.

Thoughts and observations about the current market conditions and near-term outlook:

1. The macroeconomic environment remains treacherous as the distinctively negative tone in headlines persists. Any rally in such environment would often attract more sellers than buyers, which was exactly what occurred this past week.
2. As long as the overall volume contraction continues, the market is likely to remain within the trading range since the Mid-Jan bottoming.
3. Oil, along with other commodities, is once again advancing. If next week’s inflation data comes in worse then expected, the stagflation scenario may start to gain traction, which would be a clear negative for the market.
4. The major players seem to mostly stay put in the past 3 weeks, they are obviously waiting for some kind of catalysts before committed to either side. Until that happens (large move+large volume), CTT near the upper and lower boundaries of this 3-week trading range seem to be the most sensible approach.

Will post weekly calls on Monday.