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How did the market's price momentum fair ending the week of July 25, 1997
and what does history say might be expected in the next two or three
months? See the RAINBOW daily, weekly, monthly charts for some answers.
Friday's market action can be misleading because of lower volume and fewer
participants. Weekends sometimes provide surprises that affect the market
the following week so Thursday's and Fridays are used to even up positions
and take on a slightly defensive posture simply by reducing exposure. The
Rainbow Daily did end the week still on a buy signal although daily
momentum is weakening. This might be more to do with end of week and near
the end of the month phenomena where buying opportunities present
themselves. The Rainbow Weekly is also still on a buy signal also with a
slight decrease in momentum. The daily and weekly momentum should be
watched closely during the month of August and September as these months
have turned out to be profit taking months in previous years. The Rainbow
monthly is still in a momentum expansion unlike the previous summers that
saw corrections or beginnings of corrections. As of Friday July 25 the
VIX, Modified VIX(not displayed) are still in dead neutral. The recent
trend for the VIX has been downward and if that continues then the implied
market direction is up short term. This notion is also supported by the
recovery in the McClellan Oscillators of issue and volume back to the lower
side of the neutral region. The story is still out on the resolution of
trend coming out of this neutral region. It would seem that with the VIX
having dropped from elevated levels and issue and breadth having recovered
from oversold levels that the market is poised for gains in price, month
end window dressing not withstanding.
See July TASC for information on the Rainbow Charts, by Mel Widner.
BobR
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