Foreword Week 4/10

January 27, 2010 · Leave a Comment 

Last week, the mighty bear awaken and sent the market into bloodshed. The Dow Jones Industrial Average lost 436 points to close at 10173 (4.1%), and closed 5.5% off its recent 52-week high. The S&P 500 vomited 45 points to close at 1091 (3.9%) and 5% from a recent high. The Nasdaq Composite tumbled 82 points to close at 2205 (3.6%).

Market Analysis : Week 4/10

January 27, 2010 · Leave a Comment 

Obama dominated the market with the proposal of restructuring the banking operation. The banking industry sells off immediately amid the concern of the policy. Traders and investors adopted the sell first ask later attitude. There are other factors that cause the market to be very jittery in last week.

China latest policy to tighten up the money supply to curb the excessive speculation in housing and stocks had also send the investors and traders running out of the risky assets. Evident can be found in the selling off of the commodity industries and commodity currencies.

Ongoing worries in Europe did not help the market too. Greece continues to be the bashing sheep and the bond yield spread had skyrocket in last week. Greece will have a hard time surviving in this crisis without the external help.

Fed Chairman Ben Bernanke completes the hat trick on last Friday in bringing down the market to earth as the market worries about Uncle Ben not getting another term as Fed Chairman.

Earnings reports continue to be excellent for most of the companies that had announce theirs report in last week. However, the streets do not seem to like the result as they had high expectation in last quarter earnings.

The latest unemployment claim and Philly Fed Manufacturing data came out disappointing. The data suggested that the underlying weakness is still lurking in the economy.

Overall, there are plenty of bad news and data in last week. Furthermore, the stock markets had been quite over-value and expensive. Investors and traders see no reason to book some profit amid all the uncertainty in the market.

Earnings

This coming week will mark the peak of the earnings season, with 12 Dow components reporting and 130 companies from the S&P 500.

A broad range of companies will report results, including industrial bellwethers DuPont, Boeing Co. and Caterpillar Inc.

Energy companies Chevron Corp. ConocoPhillips and Halliburton.

Technology heavyweights Microsoft Corp., Apple Inc., Yahoo Inc. and Amazon are also on the tap to release in the coming week.

Economic Data

The first estimate of Q4 GDP on Friday will cap a very busy week for economic news in the coming week. Also on schedule are estimate for home sales, consumer confidence and durable goods orders.

An economist for Goldman Sachs expects the GDP number to be an eye-popper. Economists surveyed by MarketWatch are forecasting a 5.5% annualized increase after a 2.2% gain in the Q3. It would be the fastest growth since 6.9% growth rate in the Q3 of 2003.

Fed Chairman Confirmation Vote and the FMOC meeting will add more volatility into the market in the coming week.

Summary

This coming week will be very interesting with so many earnings and economic news coming out. The streets will slowly digest the information to decide on whether to be risk on or risk averse. The streets will also be watching the development of Obama’s proposal on the banking industry. The streets will be watching closely to the speech and action of the FOMC meeting and also the confirmation of Uncle Ben as the Fed Chairman.

The market in the coming week will likely continue to fall as traders and investors pull out the money first while assessing the market. Furthermore, there are too many uncertainties in the market that will cause it to turn red. And if the markets fall again in the coming week, it might cause a mini panic in the market. Lastly beware of the awakening Bear!!!

Lawrence Chua
Patterntradertools.com

Sector Rotation : Week 4/10

January 27, 2010 · Leave a Comment 

Last week, blood is seen everywhere in the market as Materials (-6.42%) lead the charge followed by Financials (-5.07%), Energy (-4.99%), Technology (-4.41%), Industrial (-4.23%), Utilities (-3.53%), Consumer Discretionary (-3.20%), Consumer Staples (-1.79%) and Health Care (-1.74%).

Cash is king when there are many uncertainties in the market. Another favorite will be government short-term bond. Lastly, Defensive sectors will also likely to outperform than any other sectors in the coming week.

Technical Analysis : Week 4/10

January 27, 2010 · Leave a Comment 

The S&P500 Index closed at 1091 last week. This indicates a lost of 45 points from the previous week’s close.

The market had a nightmare in last short trading week. The market tumbled down due to plenty of bad news and uncertainties surrounding the market.

Technically, S&P500 Index had plunge below the 20 and 50 days moving average and 1100 level convincingly, indicate that the bearish momentum is forming. The S&P500 will likely to test 1100 again. Failure to establish above the 1100 level will bring S&P500 down to 1050. S&P500 will likely to have further weakness in the coming week as it broke below the 50 days moving average.

The Plunge Protection Team (PPT) went missing in action on both Thursday and Friday when the market experience heavy selling pressure. Trading volumes were recorded a few times higher than most of the day.

Looking at weekly candles, the S&P500 Index is suggest a negative week. The weekly candle shows a solid fat candle pattern that indicates a further weakness in the coming week. The 1050 levels will be a key support level to watch.

Looking at daily candles, we have 2 huge red candles that punch through 2 major supporting moving average. This indicates that a 3rd red candle is very likely in the coming day.

The immediate support levels are S1: 1050, S2: 1025 and S3: 1000.
The immediate resistance levels are R1: 1100, R2: 1125 and R3: 1150.

In conclusion, the market this coming week is likely to go down again due to the fear in the market. Furthermore, the market will unlikely be able to keep up with the high expectation of earnings from the streets. Overall the market does not look very good in the coming weeks. So once again stay alert and trade carefully.

Lawrence Chua
Patterntradertools.com