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Technical Analysis : Week 27/09
June 29, 2009
The S&P500 Index closed at 918 last week. This indicates a fall of 3 points (0.3%) from the previous week’s close.
It was yet another week that belonged to traders and speculators. They once again dominated the market action as it was trading according to a technical point of view. This scenario will continue to play till the next round of corporate earnings releases.
The market had a flat to negative week. The market broke below the 900 level on Monday and threatened to break below the 890 level which has held firmly since May 09. The 890 level proved to be too strong a level to break which led to a bounce as bargain hunters picked up the pieces. The uptrend continued on Wednesday into Thursday as more people scooped up beaten down stocks as they were afraid to miss out on this rally again. On Friday, the market decided to deploy the wait and see tactic.
Looking at weekly candles, the S&P500 Index is suggesting a pause to the upside for the coming week. The weekly candle chart shows a Hammer pattern on a correction trend. This translates into a higher possibility that the market will go sideways with a chance of shooting to the upside.
Looking at daily candles, the S&P500 Index looks like it will have a pause or a down Monday. The daily candle shows a Doji, which signals the end of Friday’s run.
The immediate support levels are S1: 900, S2: 880 and S3: 850.
The immediate resistance levels are R1: 925, R2: 950 and R3: 1000.
The Dollar Index (DXY) had hung on to the 80 levels in spite of all the gloomy news regarding the depreciating dollar. The fall of oil prices is likely to lead to the strength of the dollar.
In summary, the market this coming week should be going sideway to the upside. However if the employment data sucks big time, then the market might just sell-off big time too. The key levels to watch are 890 for the downside and 930 for the upside. Oil price will also be a crucial factor that will influence the market. Once again stay alert for the short week and watch for a possible rally on Thursday as America goes into a three-day weekend before its biggest holiday, Independence Day.
From
Lawrence and
Conrad
Sector Rotation : Week 27/09
June 29, 2009
Financials led the gainers last week followed by Materials (4.32%), Health Care (2.97%), Technology (2.77%), Energy (2.44%), Industrials (2.38%), Consumer Discretionary (2.32%), Utilities (1.28%) and Consumer Staple (1.01%).
Health Care has been slowly gaining momentum amid the reforms. This reform will bring opportunities in the future for this sector. The good news is that the health care sector will not get the full blast from a bear market sell off.
This coming month, July will feature a volatile sector with good potential upside. This commodity in this sector is so significant that countries go to war for it just as civilizations past used to go to war for gold. So precious is it that U.S. decoupled its dollar from gold for it. The price of Oil is watched very closely as its movement will move markets. Its price is indicative of the rate of inflation. The recent tension in Iran and the attacking of oil pipes in Nigeria have a major influence on the oil prices.
The Organization of Arab Petroleum Exporting Countries (OPEC) is a cartel of twelve countries, which accounts for two-thirds of the world’s oil reserve, 33% of the world’s oil production, affording them considerable control over the global market.
In summary, the oil and energy sectors are expected to benefit in the future as oil is a depleting resource that is widely used and consume by the world.
To find out more about the Oil and Energy Sectors, you can go to Pattern Trader Tools’ monthly special report section at:
http://www.patterntradertools.com/?cat=22 .
Market Analysis : Week 27/09
June 29, 2009
The market was very volatile for the week but ended up quite flat with little change. The market started off with a bang to the downside on the first day of the week. The drop did not last long as the market slowly gained momentum towards the upside after the Monday washout. The volumes traded were below average. There was no convincing buying or selling effort for most of the week. The choppiness subsided once again even though the market remained rather volatile.
On Monday, the World Bank predicted that the global economy will shrink by 2.9%, a deeper fall than the 1.7% contraction it predicted in March. This struck fear and it sparked a massive sell-off as investors and traders scrambled to sell off their shares. Monday also marked the biggest sell-off since the March rally started.
On Tuesday, Existing Home Sales came in worst than expected. This news dragged the market further down after the Monday sell-off. The sell-off stopped once the market hit a major support level. Then bargain hunters saw opportunity to scoop up the market which in turn led the market into a bounce off the lows to eventually close slightly to the upside.
On Wednesday, the news was rather mixed. The Core Durable and Durable Goods Orders came in better than expected but New Home Sales came in worst than expected. The market ignored the bad data and embraced the good data to send the market higher at the opening bell. The good opening did not last long as the market sold-off after the Fed released their monetary policy statement. The statement practically said the same things from the last minutes without further elaboration on the health of economy. The market managed to close slightly to the upside in spite of the lack of good news from the Fed.
On Thursday, the Final GDP for this quarter came in in-line with expectations. The Unemployment Claims was worst than expected. The market burst into life with a buying frenzy that kicked in even when data sucked. There was no significant explanation for the rise in the market except for the market being oversold in the short term and hedge fund managers killing the shorts. It was just another crazy day.
On Friday, the market closed flat as buyers and sellers were not keen to hold any position through the weekend.
The market’s breath was bad throughout the whole week even though the market had a huge gained on Thursday. The VIX Index was slightly down as compared to last week.
Major Events
- Fed rate remained at 0 < 0.25%
- 4 Banks failed and were seized by the FDIC on Friday bringing the tally to 44 failures in total for 2009.
- OECD upgraded its global outlook for 2010; IMF may upgrade the outlook too.
- Markets will be closed on Friday, July 3rd to mark Independence Day.
Economic Data
This coming week, the market will have a slew of important economic data starting on Tuesday. Tuesday will kick off the onslaught with the housing index data followed by Chicago PMI and Consumer Confidence. On Wednesday, the market will look into ADP Non-Farm Employment Change, ISM Manufacturing PMI, Pending Home Sales, Construction Spending, Total Vehicle Sales and weekly crude oil inventories. On Thursday, the market will close off with massive employment data followed by the factory orders and Natural Gas Investories.
Summary
This coming week will probably be another volatile week as the market digests the employment data. Speculators will be in the picture as they continue to thrive in the wild swings of the market. Fund managers will also feature as they “portfolio pump” and “window dress” by selling underperforming stocks and buying outperforming stocks.
The market will be watching the bond yield closely in the coming months. The 10-year yield was down last week as the Fed was buying up the bond. The Fed is likely to continue this policy until the market shows signs of strength.
The crude oil price continues to fluctuate violent amid the ongoing news in Nigeria, Iran and others. Last week the crude oil price settled at 68 dollars by the Friday close.
In conclusion, I am expecting the coming week to close lower if the market cannot breach its immediate resistance levels. The market will probably swing wildly in this shortened week as the current market sentiment favors the bullish side.
Foreword : Week 27/09
June 29, 2009
The Dow Jones Industrial Average shed 101 points to close at 8438 (1.2%) followed by the S&P500 which dropped 3 points to close at 918 (0.3%) while the Nasdaq Composite gained 11 points to close at 1838 (0.6%) for the week.
Jun ‘09 - Energy I
June 27, 2009
Unpredictable, volatile, high risk, anti-leader, contrarian indicator … call it what you want, you can’t deny the obvious presence of one of the most prominent and explosive counters in the market – Energy.
This commodity is so significant that countries go to war for it just as civilizations past used to go to war for gold. So precious is it that the U.S. decoupled its dollar from gold for oil. Oil is regarded as more valuable than gold because the metal can be mined and hoarded while oil is mined and continually consumed. It is a depleting resource that is becoming more and more precious as we demand more and more of it. The price of oil is watched very closely as its movement will move markets. Its price is indicative of the rate of inflation. Its price affects the way we live.
To own oil is to be blessed, to want it is an obsession, to have it can be a curse and to need it is a life-long addiction.
Technical Analysis : Week 26/09
June 22, 2009
The S&P 500 Index closed at 921 last week. This indicates a fall of 25 points (2.6%) from the previous week’s close.
It was another week that belonged to traders and speculators. They once again dominated the market action as it was trading according to a technical point of view.
The market had a bad week considering the market had been running up for the past few weeks. The market threatened to break below the key support level 910 of S&P500 Index on Wednesday. The market did hold and made a reversal on Thursday while Friday was trading practically flat. This brings us back to the May trading range of 880 and 925 for S&P500 Index.
The market broke the upside trend on Tuesday. It threatened to climb back up on Friday, but failed and closed below the 925 levels. This basically sets up a revisiting of the important support 880 levels. The traded volumes remained light throughout the week. However on Friday, the volume was twice the amount compared to the past few weeks.
Looking at weekly candles, the S&P500 Index is suggesting a side downside trend for the coming week. The weekly candle chart shows an ugly shooting star formation, which means the buying sentiment has subsided.
Looking at daily candles, the S&P500 Index looks like it will either have a down or flat day on Monday. The daily candle shows a nice Doji, which signals a change of direction. If Monday closes down, then Tuesday will likely follow too.
The immediate support levels are S1: 900, S2: 880 and S3: 850.
The immediate resistance levels are R1: 925, R2: 950 and R3: 1000.
The Dollar Index (DXY) had increased slightly from 80.22 to 80.53 on weekly candles. Gold continued to fall from 941 to 936. Oil had been forcing it way above the 72 levels, however it had to settled at USD $70 for the week.
In summary, the market this coming week should be going down. Investors will likely take their profit and run. If the sell-off becomes too fast and too furious, then the market might trigger a frenzied run led by retail investors. The market this week will take their lead from all the economic data and the FOMC statement. Any disappointing data or news should create lousy sentiment as the market has a higher expectation as compared to a few months ago. The main leading indicator for the week will be crude oil. A fast selling off in crude oil prices and commodities prices will drag the whole market to hell. Stay Alert for the week.
From,
Lawrence Chua
Conrad
Sector Rotation : Week 26/09
June 22, 2009
The Health Care was the only positive sector for the week as the market sold off. The Health Care (4.99%) led the market followed by Consumer Staples (-0.26%), Technology (-0.38%), Utilities (-0.51%), Consumer Discretionary (-1.07%), Financials (-1.07%), Industrials (-2.93%), Materials (-3.73%) and Energy (-5.53%).
The market sell-off last week was led by the Energy, Materials and Industrial sectors. This did not come as a surprise as these 3 sectors basically carried the market since April. It was clearly shown that funds were transferred to the defensive sectors (Health Care, Consumer Staple and Utilities) in the past few weeks.
The reform in the Health Care sectors will bring opportunities however not every company will be benefit from the program. It will be a sector for the future that needs careful research and planning. The good news is that the health care sector will not get the full blast from a bear market sell off.
Energy and Materials sectors are likely to lead the sell off in the market. These sectors have been running up without the real demand from the economy. The nature of Energy and Materials business were very speculative.
In summary, the market is likely to experience a pullback in the energy and materials sectors, which will lead to a sell off in the market. Keep an eye on the Consumer Discretionary sectors as it had went too far from its fair value.
Market Analysis : Week 26/09
June 22, 2009
The market sold off in the first 2 days of the week. After the initial sell off, the market could not pick itself up and remained tepid for the rest of the week. The volumes were missing in action once again. There were no convincing buying or selling effort from the investors and traders. The choppiness in the market had subsided in last week even though the market still rather volatile. The market was quite calm amid the volatility as if a storm is coming.
On Monday, the twice worst than expected result from the Empire State Manufacturing Index sparked a sell-off. Investors and Traders started to evaluate the sustainability of the rising market. The fall in the TIC Long-Term Purchases result also worried investors as the result show a huge amount of capital flowing out of the country. All in all, Monday was just a day for the investors and traders to profit take while waiting for more news to judge the health of the economy.
On Tuesday, the news was pretty mixed. The Housing Starts and Building Permits were pretty good. However, the PPI and CORE PPI were bad. The market reacted positively for the open but sold off in the afternoon. The sell off might have been triggered by profit taking, treasury yield increases and the concern of the strength of the economy.
On Wednesday, the market started off badly until the report from the crude oil inventories was released. The market then sold off due to the rather inline CPI data and the increase of deficit in the US current account. The larger than expected draw down from crude oil sparked the rally as the market saw it as a growth in economy due to the increase of oil spending.
On Thursday, the market was cheering the decline of unemployment claims even though it was higher than last week. The unemployment claim might not be a good indicator to judge the health of the economy as those people who make claims might have exhausted their claims (26 weeks). The better than expected news from the Philly Fed Manufacturing Index and CB Leading Index m/m further provided fuel to the rising market.
On Friday, the market surged up in the opening bell due to the spike in crude oil price amid concern about the situation in Iran. The surge in the market quickly faded as there were pockets of investors and traders concerned with the real demand of crude oil. There was no news to support any direction. The market ended up slightly above where it opened for the day. The “Quadruple Witching” day when contracts for stock index futures, stock index option, stock options and single stock futures all expire, might have inspired the late surge of the market going into the closing bell.
The market’s breath was quite bad throughout the whole week even though the market gained Wednesday to Friday. The market was quite stable into the closing bell as compared to the previous few weeks. The VIX Index was flat as compare to last week.
Major Events
- On Friday, the FDIC, bringing the total number of failures for the year to 40, closed Banks in Georgia, North Carolina and Kansas.
- Obama administration proposes an expansion of the Fed’s power over the economy.
- Growing tension in Iran.
- Missile Threat from North Korea
- The World Bank Predicted that the global economy will shrink 2.9%, a deeper falls than the 1.7% contraction it predicted in March.
Economic Data
This coming week, the market will be bombarded by economic data starting on Tuesday. The market will be looking at the Housing Data (Existing Home Sales, HPI m/m, New Home Sales), manufacturing data (Richmond Manufacturing Index, Core Durable Goods Orders m/m, Durable Goods Orders), Fed Meeting (FOMC Statement, Fed Rate), Employment and Economic Data (Weekly Unemployment Claim, Final GDP q/q, Personal Spending and Income m/m).
The Fed Fund rate should still remain the same however the market will be looking at the FOMC statement for the direction in the coming months. Recently the fed was being pressured to cut off the supply of money due to the concern of the huge national deficit.
Summary
This coming week will probably be a volatile week as the market digests the tons of economic data due. Speculators will still be in the picture as they thrive in the wild swings in the market. Investors are likely to profit take from the slightest bearish sentiment.
The frenetic last hour action, which was created by speculators and big market players, had slow down last week. Some of the speculative views were that most of the banks and major institutions were done with their secondary offering and others capital raising programs. Another speculative view was that the government had achieved the painting of a better economic future in the coming months by supporting the market.
The market will be watching the bond yield closely in the coming months. The 10 years yield was slightly positive last week even though the Fed was doing its best to scope up the bond. The growing concern about rising bond yields is its potential impact on the housing market, which will pass down its costs to the consumer, and thus affect the recovery of the economy. If the 10 year and 30 year yields remain at the 2008 or higher at 2007 levels, the recovery of the market will definitely be impacted.
The crude oil price continues to fluctuate violently between the level of 70 to 72 as its looked for news to break out of the 72 level. The price of crude oil did not break above the 72 level even when the tension had built up in Iran and on reports of renewed attacks on oil pipelines in Nigeria.
In conclusion, I am expecting the coming week to close negatively. This is due to the fact that people are starting to concern about the fundamental demand on the oil and the runaway stock market. The market should continue taking its lead from oil prices as the energy sectors contributed more than 20% of the raising market. (Conrad shares a slightly differing opinion but is in tandem with the downswing this coming week.)
Foreword : Week 26/09
June 22, 2009
The Dow Jones Industrial Average shed 260 points to close at 8539 (3%) followed by the S&P500 Index down 25 points to close at 921 (2.6%) and the Nasdaq Composite falling 31 points to close at 1827 (1.7%) for the week.
Technical Analysis : Week 25/09
June 16, 2009
The S&P500 Index closed at 946 last week. This indicates a gain of 6 points (0.7%) from the previous week’s close.
Traders and speculators once again dominated the market action as it was trading according to a technical point of view.
Throughout the week, the market was trading in a range with the main support level of 930 and resistance level of 950. The market tends to open and close at the 940 levels for most of the days last week. The last hour of action remained the most active throughout last week. The market had been saved by this frenetic last-minute buying a couple of times which prevented any serious sell-off.
The traded volumes remained slightly below average throughout the week. Huge volumes spikes were seen in the last hour of the day throughout the week. These spikes may have been triggered by system traders, software traders and possibly the current rumor of the market, the “Plunge Protection Team”.
Looking at weekly candles, the S&P500 Index is suggesting a sideways to downside trend for the coming week. The weekly candles show a Doji which suggests the end of the 4-week uptrend. If this week stalls (Stalled Pattern) to the downside, then I will be expecting the following week to close further to the downside.
Looking at daily candles, the S&P500 Index looks like it will have a flat or a down day on Monday. The daily candle shows a Hanging Man which signals the end of trend.
The immediate support levels are S1: 925, S2: 900 and S3: 880.
The immediate resistance levels are R1: 950, R2: 975 and R3: 1000.
The Dollar Index (DXY) had decreased from 80.5 to 80.22 on weekly candles. Gold continued to fall from 963 to 941. Oil had been pushing for a higher price for the week and closed above 72 dollars.
In summary, the market this coming week should be mixed with the bias on the negative side. Investors will be digesting the minutes of the G8 meeting and are likely to cash out with any changes to the current monetary policy. Investors will continue watching the bond market to get more information regarding the economy. This week’s housing and manufacturing data will provide a clearer picture for traders and investors to make decisions on the health of the economy. Fund managers will be under pressure to outperform the market which will lead them to sell-off their under-performing stocks and begin their portfolio-pumping (Window Dressing). There will also be a fair share of retail investors that will get sucked into this rally by the financial salesperson. All in all, the market will be headless chicken till a series of events trigger either a sell off or a major frenzy to BUY BUY BUY !!!
P.S. Last week, Market did not react to the increased level of the H1N1 situation.
