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Technical Analysis : Week 22/09
May 26, 2009
The S&P500 Index closed at 887 last week. This indicates a gain of 5 points (0.5%) from the previous week’s close.
The market was down throughout the week except for Monday as bargain hunters (those who missed out the recent rally) come into the market to scoop up the stocks and short seller covered their position at the critical support level (880). The market was having a paused on Tuesday. On Wednesday, the market open up higher but closed off lower as the market sell off once it had hit the critical resistant level (925). The sell off continue on Thursday and Friday was a flat to the negative day.
The market internal has been very week throughout the week except on Monday. The traded volume for the week has also been very low as compare to the average traded volume.
Looking at weekly candles, the S&P500 Index is suggesting either a paused or a downside for the coming week. The weekly candles show an ugly inverted hammer. This suggests that the bull is rather weak or the majority of the buyers are still sitting sidelines waiting for an opportunity.
Looking at daily candles, the S&P500 Index looks like it will have mixed day on Tuesday. If Tuesday manages to open below 880 levels, then it will likely to close off negatively.
The immediate support levels now are S1: 880, S2: 870 and S3: 850.
The immediate resistance levels are R1: 900, R2: 910and R3: 925.
The Dollar Index (DXY) has dropped from 82.9 to 80 on weekly candles. It has been free falling last week due to the major concern on the credit rating of US. Gold has been steadily raised due to the inflationary concern. Gold went to 958 from 931 from last week. Oil raised a little and currently sitting at the 61 levels.
In summary, this coming week, the market should experience a mixed week with bias on the negative side. A strong break away from the critical support level will lead to the sell off for the week. However failed attempts will likely to push the market higher up to 900 level which then the bear might just take over the control to form a mini “head and shoulder” pattern formation.
Sector Rotation : Week 22/09
May 26, 2009
Last week was pretty mixed as Consumer Staple lead the gain with a 2.5% gained followed by Consumer Discretionary (2%), Materials (1.8%), Energy (1.2%), Financial (1.1%), Technology (0.8%), Health Care (-0.1%), Utilities (-0.4%) and Industrials (-0.5%).
Consumer Staple leading the gain this week with Materials and Energy followed closely behind the pack. These 3 sectors will likely to prosper under the influence on Re-Inflation trade. People are likely to buy into the commodity as a hedge against the fear of the falling dollar.
Consumer Discretionary sector will likely to come back down for this coming week, as the news in auto and housing industry seem likely to be bad.
Safe haven sectors like gold and educational sectors will continued to edge higher as the market searches for a safe place to park their cash amidst the uncertainty in the market.
In summary, the Energy sector is the most likely to continue edging higher up followed by the safe haven stock in this choppy market.
Market Analysis : Week 22/09
May 26, 2009
Last week the market had a flat to negative week even though it manages to eke out a rather small gain for the week. The market only gained big time on Monday followed by the gradual sell off from Tuesday to Friday.
On Monday, the market experienced a huge gained due to better than expected earnings result from Lowe and the slightly better than expected result from the housing index. The other reasons for such a huge gained were because the bargain hunter went to scope up stock at the support level and short sellers covered their position after a week of gained. The massive rally in India has also aid the market on Monday.
Tuesday was a rather flat to the upside day even though the housing data come out worst than expected. On Wednesday, the markets open up higher. However once it reaches the resistance level, the sell off quickly followed through as the buyer back off from the market and the short seller came back in again. Thursday was a bad day for the US markets as the S&P rating agency given warning on the UK triple AAA credit rating. The event caused a great concern from the investors on the US triple AAA credit rating as it has a higher debt compare to the UK. On Friday, the market was open higher again and it stays flat positively throughout the day. The markets sell off towards the end of the day due to the renew fear from the bankruptcy of GM.
Last week, it seemed that it was a trader’s market and the volumes throughout the week were lower than average. The markets react heavily on technical and the traders looking for news and economic data to justify the gain and the sell off. Last Monday was a typical technical rally without any substantial fundamentally support argument. It seemed to me that the market maker had an agenda for the week. The markets finish just nice at the level it’s opened for the week.
The market’s breath was negative throughout the week except for Monday. The short covered activity and bargain traders bring positive market’s breath on Monday as the advancer was clearly outpacing the decliner by at least 2:1 ratio. However the market internal was week on Tuesday and Wednesday even though the market edge up towards the opening of Wednesday. The last hour action throughout the week has been a sell off except for Monday and Thursday.
The VIX (a measurement of the market risk/fear factor) decreased slightly from 33 points to 32.5 points. The slight decreased in the VIX suggests that the market has not been bothered about the ongoing negatively news and economic data. The VIX has not been moving much for the pass 3 weeks as it has hovered in between the level of 32 to 33. The VIX should likely to trade around the level of 30 to 35 for the next few weeks.
Major Events
2 banks from Illinois were close by the regulators on Friday, bringing the total number of bank failures for 2009 to 36, according to the FDIC.
BankUnited Financial Corp had filed for Chapter 11 bankruptcy protection on Friday.
Home Depot did not raise its profit forecast for the year. It cautioned that the housing market may have bottom but there are still mixed signals.
Standard & Poor’s affirmed the UK’s top-tier credit rating, but lowered its outlook for the country to “negative” from “stable”. S&P said its revision was based on the possibility that the UK’s debt burden could reach 100% of its GDP, despite the British government’s “further fiscal tightening.” The news triggered concerns that other major economies that have borrowed heavily to fund economic stimulus efforts, including the US, could face similar downgrades.
Economic Data
There are only quite a handful economic data in this coming short week. Consumer Confidence for May will kick out on Monday followed by Existing-home sales for April on Wednesday. On Thursday, Durable-goods orders (April), Weekly jobless claims and New-home sales (April) will be released. On Friday, the GDP for Q1 and UMich consumer sentiment (May) will be released.
Summary
This coming week, the market will likely to be once again dominated by the traders. This would translate into a choppy and technical market. A catalyst (economic data/major news event) would either trigger a sell off or a massive gained. The market will be looking for a direction as it bounces between positive and negative regions. The housing sector will likely to ease off a little this week. The retail sectors will also continue its downward pressure, as profit taking will likely to resume. Basic materials and Energy should continue to edge higher due to the reflation trade. Financials should be under enormous pressured due to the credit rating issues.
I am expecting the market to be very choppy this week. I’m slightly more convinced that the market will likely to be negative this week due to the fundamental/technical reason. However the big players out there might have a higher agenda for this week again, which will result in massive gain without any reason.
From,
Lawrence Chua
Foreword : Week 22/09
May 26, 2009
Last week the Dow Jones Industrial Average gained 9 points to close at 8277 (0.1%) followed by the S&P500 index gained 5 points to close at 887 (0.5%) and the Nasdaq Composite Index gained 12 points to close at 1692 (0.7%).
May ‘09 - Defense & Aerospace
May 21, 2009
The International Paris Air Show – the biggest and most significant supermarket in the world that only opens once every two years. This is the showcase event for everything defense and aerospace and this year, the 48th International Paris Air Show will be held at Le Bourget Exhibition Centre from the 15th to 21st of June, 2009. There are expected to be 4 hours of flying displays everyday but the trade show is only opened to the public on the 19th, 20th and 21st.
Technical Analysis : Week 21/09
May 18, 2009
The S&P500 Index closed at 882 last week. This indicates a plunge of 47 points (5%) from the previous week’s close.
The market was down throughout the week except for Thursday as bargain hunters (those who missed out the recent rally) come into the market to scoop up some of the stocks that have consolidated for a few days. The market sold off heavily on Wednesday because of the worse-than-expected retail sales data in April. On Friday, the market continued to wash out even though the economic data came out slightly better-than-expected.
Last week, the last hour of market action had been very negative. The market ended negative or lower at the end of the trading session, suggesting that the institutional players had been selling into the rally and traders might be short selling some of the stocks that are about to crack.
Looking at weekly candles, the S&P500 Index is suggesting a downside for the coming week. The Bearish Harami pattern indicates a high possibility of a sell-off in the market.
Looking at daily candles, the S&P500 Index looks like it will have some downside on Monday. An ugly Bearish Harami formed last Thursday and Friday to suggest a possible gap down below 880 which could signal a heavy sell-off in the coming week.
The immediate support levels now are S1: 880, S2: 870 and S3: 850.
The immediate resistance levels are R1: 895, R2: 910and R3: 930.
The Dollar Index (DXY) has dropped from 83.8 to 82.9 on weekly candles. The dollar index might just continue its free fall as more inflationary pressures kick in. Gold has steadily risen for the past few weeks. It went to 931 from 914 from the last week. Oil remains unchanged from last week as it failed to break above the 60 levels.
In summary, this coming week, the market should experience a mild to heavy sell-off. There are hardly any reasons for the market to go higher except for the more-than-$5 trillion sitting on the sidelines of the money market fund, aching to get in on some unlikely late action.
Sector Rotation : Week 21/09
May 18, 2009
Last week, the bears were in rampage mode as Consumer Discretionary led the charge with a -6.11% loss followed by Financials (-5.95%), Energy (-4.5%), Industrials (-4.43%), Utilities (-4.39%), Materials (-2.20%), Technology (-1.98%), Consumer Staples (-1.24%) and Health Care (0.72%).
The top 3 sectors of the year continue to show further signs of weakness last week. Consumer Discretionary was the top decliner for the first time in many weeks. This is clearly a sign that the consumer market still remains weak.
Health Care is the only sector in positive territory as it is perceive as a safe haven. It is likely to gain strength as investor and traders are shifting their funds to safe havens for the coming months.
Safe Haven sectors like gold and educational companies are also likely to benefit as the market searches for a safe place to park their cash amidst the uncertainly in the market.
In summary, the Consumer Discretionary, Technology and Financial sectors will continue to sell-off for the next few weeks. Consumer Discretionary should lead the charge to the downside if housing data is dismal and the earnings guidance from Home Depot and Lowe are bad.
Market Analysis : Week 21/09
May 18, 2009
The market had a negative week as the bears were looking for any excuse to trigger a sell-off. On Monday, the market experienced a huge sell-off due to profit taking. Tuesday saw the market take a plunge initially before it recovered some ground and closed flat, betting that the next day’s retail sales will be a good. On Wednesday, those speculators got smacked in their faces as the retail sales result was worse than expected. The dismal retail sales result triggered a wave of sell-offs which caused investors and traders to panic. This led to further sell-offs later in the week. On Thursday, Wall Street cheered on good earnings from Wal-Mart and other retailers. However the joy did not last long as investors and traders were looking for every opportunity to lock in their gains especially after the dismal retail sales result on Wednesday.
Last week, it seemed that there were increasingly more investors and traders closing their positions and selling into the rally. The investors and traders are looking for reasons to stay on a bullish course but it seems that the market is losing its ‘green shoots’ (good economic data/better-than-expected earnings) looking ahead in the weeks to come. The dismal retail sales result provides a strong argument for the bears to short sell the market. The bulls saw it as a good excuse to lock in their profits.
Recently there was a big surge in secondary stock offerings from the market. The banking companies have been actively offering secondary stock amidst this bear market rally to raise capital. The activity will no doubt send a clear signal that investors are willing to take more risk and this is likely to benefit the stocks in the long term. However the risk of secondary stock offering is the dilution of the current stock, which will put pressure to the stock price in the short-term. Overall the increase in the activities will also likely trigger more sell-offs in the market in the coming week.
The market’s breath was negative throughout the week. The internal indicators showed extreme bearishness as decliners clearly outpaced advancers by at least a 2:1 ratio. The short covering activity had stopped for the week as it evident in that the last hour action that was quite stable unlike the previous few weeks. The last hour action in the coming week will be very interesting as it might show latecomers in this rally getting slaughtered by margin calls.
The VIX, a measurement of the market risk/fear factor, increased slightly from 32 points to 33 points. The slight increase in the VIX suggests that the market is getting used to the this kind of volatility. It also suggests that the market’s risk appetite has been quite stable even when the market takes a dip. The market had been getting greedy in the past few weeks following the so-called market bottom on March 9. This extreme greed might just be the catalyst to fuel the next extreme fear in the market. This will be clearly shown in the VIX in the near future. Overall, the market should continue to trade in the range of 33 to 35 in the coming week. A spike above the 35 level will trigger a massive sell-off in the market as fear returns to grip the market yet again.
Major Events
U.S. consumers pulled back again in April as retail sales dropped a seasonal 0.4%, the eighth decline in the past 10 months, the Commerce Department estimated.
U.S. foreclosure filings rose to a record in April, affecting one in every 374 housing units. Bank repossessions, in particular, may spike in the next few months, RealtyTrac reported.
Microsoft Corp. pulled in $3.75 billion from its first-ever long-term bond offering last Monday, raising money that may go towards funding a large share buyback and possibly acquisitions.
Economic Data
This coming week, the economic data will be quite light. The whole week will be focused on the May housing market index from the National Association of Home Builders, April housing starts and building permits, minutes of the Fed meeting from late April, weekly jobless claims, Philly Fed manufacturing index for May and lastly Fed Chairman Bernanke will deliver a speech on Friday.
Earnings
The Q2 earnings season has officially come to an end with 461 S&P500 companies having already reported earnings. This coming week, another 16 S&P500 companies will report, including the last two of the Dow Jones Industrial Average components: Home Depot and Hewlett-Packard.
Their earnings result should be better-than-expected. However expect some more downside guidance and missed revenues.
Summary
Overall the market should continue its sell-off as investors and traders continue to lock in their profit. Short sellers and the fear sentiment in the market may trigger new waves of selling too. Financials are likely to pressure the stock market as more banks make secondary offerings in the coming week. The Housing sector might just take a correction after the cooling-off of the housing data. Technology, Consumer Discretionary and Retail sectors will also have downward pressure as profit taking will resume heavily in the coming week.
I am expecting the market to experience a mild to heavy sell off this week. Bad economic data and the weakness in the Technology sector will be the catalyst for huge sell off.
Foreword : Week 21/09
May 18, 2009
Previously reported …
“In summary, this coming week should experience a sell-off for the Nasdaq Composite and a pause or mild sell-off for the S&P500 index. The Dow Jones Industrial might just get a slight gain as it has still some room to gain till it reaches the top resistance. Overall, the market is likely to go into profit taking mode and a sell-off should ensue if the retail sales data does not come up to expectations.”
The bear has awaken to spring multiple attacks on the bull! The market reversed the uptrend that started in Mid March with the Dow Jones Industrial Average falling 306 points to close at 8268 (3.6%), followed by the S&P500 Index plunging 47 points to close at 882 (5%) and the Nasdaq Composite falling 59 points to close at 1680 (3.4%).
Technical Analysis : Week 20/09
May 11, 2009
The S&P500 Index closed above 929 last week. This represents a surge of 50 points (5.9%) from the previous week’s close.
The market skyrocketed on Monday due to the good news from the pending home sales and construction spending. The market took a pause on Tuesday as profiting taking was occurring. On Wednesday, the stress test result was leaked to calm the anxiety of investors and traders. A rally took off followed by the good news from the ADP report. The market staged another noteworthy rally on Friday after the initial sell off in the opening stage of the market. The market on Friday took comfort of the better-than-expected report from the employment data.
The last hour action in the market has been very volatile recently. The market usually ended up positive or higher at the end of the trading period. A huge massive volume surge has boosted the market at the last few minutes. This suggests that short covering activity has been very active for the past few weeks in the last minutes of market action. The true color of the market might just be a short covering market with little true buying interest. There is still trillions of dollars sitting on the sides at the money funds.
The VIX and VXN have started to show conflicting information when compared to the market price action for the past few weeks. The VIX and VXN have slowed their declines and yet the market has been rallying at double the rate.
Looking at weekly candles, the S&P500 Index suggests a downside for the week. This is because the market has reached the top of the resistance level of 930. The 3rd candle reversal might just happen. The second week of May is usually a sell-off week.
Looking at daily candles, the S&P500 Index looks like it will have a downside on Monday. Profit taking is likely to occur after the massive runs in last weeks. The market should test the 930 levels and 950 levels if it seeks higher ground.
The immediate support levels now are S1: 925, S2: 900 and S3: 875.
The immediate resistance levels are R1: 930, R2: 950and R3: 1000.
The Nasdaq Composite has been positive for 9 consecutive weeks since March 9th. The Nasdaq managed to close above the 200 day moving average for the first time this year on Monday. However, the Nasdaq could not hold the gain for the week and closed below the 200 day moving average for the week.
Looking at weekly candles, the Nasdaq Composite is suggesting a pause or reversal this coming week. The weakness in the technology ETF has given investors and traders excuses to take profit. If investors and traders react too strongly to the profit taking this week, it might just create a sell-off which could pull down the rest of the market.
The Dollar Index (DXY) has dropped from 84.5 to 83.8 on weekly candles. The dollar index might just continue its free fall as more inflationary pressures kick in. Gold started to rise again and close at 914. Oil has been steadily climbing up for the past few weeks to close at 57 levels.
In summary, this coming week should experience a sell-off for the Nasdaq Composite and a pause or mild sell-off for the S&P500 index. The Dow Jones Industrial might just get a slight gain as it has still some room to gain till it reaches the top resistance. Overall, the market is likely to go into profit taking mode and a sell-off should ensue if the retail sales data does not come up to expectations.
