Slow Going

Averages Treading Water

By Bryan Bottarelli
Monday, June 29, 2009 2:46 PM EDT
Mon, 29 Jun 2009 18:46:00 GMT

Dear Bottarelli Research Member,

It looks like today is a good day to tend to your errands. After all, as the morning has turned into the afternoon, the major market averages have made no significant moves aside from the opening moments of trading. For the most part, the Dow is hovering around a 75-point gain, which still leaves unanswered questions at the 8,500 level.

INDU

And just to follow up on the Transports chart from this morning, we’re also seeing some weakness at the 200-day moving average, noted below:

TRAN

Unless we see a major directional move going into the close of trading, I think it’s best to simply monitor today’s action going into tomorrow. There has been a lot mentioned about month-end “window dressing,” which in my opinion serves more as a convenient rationalization of a market move than anything else. Come Wednesday, we won’t be hearing about this any longer.

One chart that continues to interest me is that of the Pro Shares Ultra Short 20+ Year Treasury (TBT – NYSE). As you know, I’ve been reporting how China (the largest owner of U.S. debt) has been slowly diversifying out of Treasuries and into other assets, primarily gold. They’re deliberately making this move slowly because they don’t want to negatively impact their current holdings. But at the same time, they now feel compelled to safe-guard their interests by diversifying their portfolio. If that’s the case, I feel strongly about owning calls on the TBT. As you can see below, the TBT is just tapping support at the 200-day moving average. This could lead to a strong upside move coming soon. I’ll keep a close eye on this.

TBT

It also makes a case for a broad-based metals play like Freeport-McMoRan Copper & Gold (FCX – NYSE), which is also testing a similar support level at the 50-day moving average.

FCX

If any of these levels prove to be strong bounce points, we’ll follow up with the appropriate play. Until then…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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