Wednesday, July 27, 2011

27 July (Wed), Evening summary

Markets plummeted today, continuously falling as the day wore on and ending virtually at session lows. Losses for the major indices ranged between 1.6 and 3.0 percent.

The broad-market S&P 500 surrendered 2.03 percent, while the DJIA and NASDAQ reversed their relative performance statistics of the recent sessions; the collection of industrials shed 1.58 percent, but the Naz was punished to the tune of 2.65 percent. The Russell 2000, inherently more volatile due to its being composed of small-cap stocks, fell 2.95 percent.

Uncertainty about the debt ceiling outcome continues to bedevil the markets. Indeed, media coverage is getting more frenzied by the day. Of note, there has been no significant positive development since last Friday’s impasse between the President and Speaker – none that has made the media coverage at least. The crisis has surely been a very significant contributor to gold’s ascent from $1480 per ounce to $1631, all since July 4th. Yet, today gold fell.

/GC, 4-hour bars:

Gold futures (/GC) appear to have hit price channel resistance during today’s session, reaching $1631 and then recoiling. But this withdrawal, coming on a risk-off, 2-percent-S&P-selloff day, suggests that investors are not single-mindedly panicking about a forthcoming default, as that might logically entail the purchase of gold.

The story in silver futures (/SI) is similar. Price has rallied impressively over the month (from $34 to $41.5 since Independence Day), but it eased today after touching price channel resistance.

/SI, 4-hour bars:

Among today’s biggest stories was the iShares Russell 2000 ETF (IWM), which declined with a monstrously red candle to price channel support at $80.0. As the discerning reader can infer from the chart below, IWM has made a tight-fitting (and, therefore, significant) nine-month price channel; its high, low and midpoint fit all intra-period highs and lows. Today’s sell-off has come to rest right on the channel’s lower support. Will tomorrow bring the expected bounce?

IWM, daily bars:

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