Market Comments 6/1/2011

There you have it on the daily chart - all the ingredients for a nice little bounce.

1. Candle today was a hammer - often a sign of a low.
2. Slow Stochastic has reached oversold and bounced - a cross of its signal line appears imminent
3. RSI.14 hit the mid-line and bounced.
4. Stock Chart close to the 50-Day SMA and bounced.

On the weekly chart, the Slow Stochastic is heading down, below its signal line and falling away from the overbought level of 80. That's not supportive of a medium term up-trend.

Fundamentally, the Ozzie market has to battle against the negative sentiment set up by recent catastrophic rains in New South Wales and Queensland.

So - if the market can bounce here, it's likely to be short-lived.

The American market is over-bought. The RSI on the Dow is around the 75 level. Rarely can it sustain those heady heights before a retracement occurs.

Tomorrow could be up. But I'll be surprised if next week is higher than the recent high.

Good luck

Red