Talking Numbers

Here Are Market Levels You Need To Watch

Talking Numbers

It’s the first day of the new quarter, so what are the key levels are ahead in the market and what can we expect?

It’s the first day of the new quarter, so what are the key levels are ahead in the market and what can we expect?

Well, according to Abigail Doolittle, Technical Strategist at The Seaport Group, and Steve Cortes, Founder of Veracruz TJM, it could be a rough ride.

“The S&P for the rest of the year is looking pretty bearish,” says Doolittle. “I think that we’re looking at a 20% correction before the year is out.”

On a two-year chart, Doolittle sees the index trading within an ascending trend channel. During those two years, three “rising wedges” have appeared, each with broadening tops. In the first two instances of wedges, the index broke below the broadening tops’ support levels. Now, we’re in the midst of a third rising wedge and Doolittle believes it will once more test the support. Ultimately, she feels prices are set to break downwards, sending the index towards the bottom of the long-term trend channel’s support.

“I’m not that bearish but I am bearish,” says Cortes. “It’s not because of what I see in the S&P itself, it’s because of what I see in international markets.”

“Asia, in particular, has been in a free-fall in the month of June,” Cortes continues. Lower prices in the Chinese and European markets, as well as a decline in the Australian dollar, leads Cortes to believe a global slowdown will negatively affect American stocks.

Global weakness may lead the Federal Reserve Bank to hold off tapering quantitative easing program, says Cortes. Since the end of 2010, the Fed has been buying $85 billion worth of US government bonds every month. This adds dollars into the financial system and also helps keep interest rates near its record low levels. However, Fed Chairman Ben Bernanke indicated the program may be reduced by year’s end.

“I think the international markets are going to be weak enough that they’re going to prevent the Fed from tapering,” says Cortes. “So, I don’t think we’re going down demonstrably from here.”

Who do you think is right? Watch the video above and decide for yourself.


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