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Technical Analysis : Week 4/10
January 27, 2010
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
Sector Rotation : Week 4/10
January 27, 2010
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.
Market Analysis : Week 4/10
January 27, 2010
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
Foreword Week 4/10
January 27, 2010
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%).
Technical Analysis : Week 3/10
January 19, 2010
The S&P500 Index closed at 1136 last week. This indicates a lost of 9 points from the previous week’s close.
The market had started the week looking good until the earnings results came out to spoil the market on Friday. Early of the week, earnings results from Alcoa had already starting to warn the market of potentially weak earnings in Q4 2009.
Technically, S&P500 Index had manage to stay above the 20 days moving average and 1130 level convincingly, indicated that the bullish momentum is still intact. The S&P500 will likely to be tested in the coming week. If the S&P500 break below the 1130 level and 20 days moving average, it will likely to move down towards the area of 1110 and 1120 levels.
The streets will be extremely cautious if S&P500 index break below the 20 days moving average and threaten to break the 50 days moving average. If the 50 days moving average is broken in the coming week or next, a correction of 20% will likely to occurs.
Looking at weekly candles, the S&P500 Index is suggesting a negative week. The weekly candle shows a rather fat shooting star that indicates a reversal or pause in the coming week. The 1,130 levels will be a key support level to watch.
Looking at daily candles, we have a huge red candle that bounce off the key support level 1,130. We need another candle to confirm the movement of the market. A red candle the following day will likely to mean a negative week ahead.
The immediate support levels are S1: 1130, S2: 1110 and S3: 1000.
The immediate resistance levels are R1: 1150, R2: 1175 and R3: 1200.
In conclusion, the market this coming week is likely to go down, as the market will unlikely to be able to keep up with the tepid earnings from Q4. Furthermore, the chart shows that the market had a difficulty in challenging the resistant week after week. All in all the market does not look very good in the coming weeks. So stay cool and trade carefully.
Sector Rotation : Week 3/10
January 19, 2010
Last week, Health Care (1.54%) is the leading sector followed by Consumer Discretionary (0.13%), Utilities (0%), Consumer Staples (-0.07%), Energy (-0.15), Technology (-0.18%), Financials (-0.47%), Materials (-0.79%) and Industrials (-0.89%).
Most of the sectors posted negative results in last week except for the defensive sectors. Health Care is one of the promising sectors in this year especially with so much tension and unknown in the market going forward in 2010.
In conclusion, Defensive sectors will continue to attract investors to park their money in the coming weeks as they scrutinize the earnings reports.
Market Analysis : Week 3/10
January 19, 2010
The stock market started the earnings season badly with Alcoa suffers the most. Even good earnings from Intel and J.P Morgan could not save the market as the streets sell on the good news. Furthermore, there are some concerns among the traders on the negative outlook from the J.P Morgan.
On the economic front, the Core Retail Sales (Dec) -0.2% V.S. 0.3% expected, surprisingly came out worst than expected as the consumer tightens up their budget in last years holiday Christmas sales. Besides the ugly results from the Retail Sales data, the Consumer Sentiment and Unemployment Claims did not fare pretty well too.
Google Inc. pull out its operation in China had cast a shadow of the ongoing international trade affair between China and United States. The streets will be keep an eyes on it as some of them fear that it might triggers a trade war between China and U.S.
Earnings
Earnings will be in the spotlight in the coming week. The streets will be looking for a good earnings result from the blue chip companies. Other than the good earnings reports, the streets will be much more interested to find out and look for good guidance from the major companies.
IBM and Citigroup will be kicking off the earnings season in the coming Tuesday. On Wednesday, Bank of America will be schedule to report the earnings result. Bell-weather companies such as General Electric and McDonald’s will be releasing the earnings results on Friday.
Others notable companies such as CSX Corporation, Starbucks, U.S. Bancorp, State Street Corporation, Coach Inc., American Express Company, Capital One Financial Corp., Fifth Third Bancorp, SunTrust, Schlumberger and Kimberly-Clark will also be schedule to release the earnings report in the coming week.
Economic Data
This coming week, the economic data will be quite light. There are only a handful of important data such as the Producer Price Index, Building Permits, TIC Long-Term Purchase, Philly Fed Manufacturing data and Weekly Unemployment Claims that will likely to move the market.
Summary
Earnings will be the key indicators to decide the fate of the market in the coming week. Last week earnings had already given some clue to the market players of the upcoming earnings. Investors and traders will be extra cautious after the bad results and lousy guidance from Alcoa and J.P. Morgan respectively. The streets are also wary about the sustainability of the market going forwards as the market sells off even after the good earnings result from Intel. Overall the Q4 earnings season did not seem to be very positive.
The on-going worries surrounding countries such as Greece, Spain, Italy, Dubai and others will likely to cause the market to be very volatile. The streets are worries about the dominos effects of the fiscal default that will cause a panic in the market, which will likely to result in another recession.
In conclusion, the market will likely to go lower in the coming week. The earnings result will likely to be better than expected. However, the streets will be looking at the forward guidance from most of the companies. Most of the companies will be unable to keep up with the high expectation from the streets in the coming quarters. Furthermore, there are many worries in European countries about the fiscal debts and the ongoing trade problems between U.S. Companies in China. Overall, the markets do not look good in the near future.
From
Lawrence Chua
Foreword Week 3/10
January 19, 2010
Last week, the mighty Bear awaken on the last day of the week to spoil a good four-day run. The Dow Jones Industrial Average fall 9 points to close at 10,609 (0.1%) followed by the S&P 500 Index lost 9 points to close at 1136 (0.8%) and the Nasdaq Composite lost 30 points to close at 2287 (1.2%).
Technical Analysis : Week 2/10
January 11, 2010
The S&P500 Index closed at 1145 last week. This indicates a gain of 30 points from the previous week’s close.
The market started the week and the year 2010 positively as traders and investors betting that the major economy will have positive strong growth in this year. Furthermore, positive comments from the Fed members regarding the low interest rate environment has also fuel the rise of the stock market. This had also confirmed by the lousy job data (-84k) from December.
Technically, S&P500 Index had manage to stay above the 20 days moving average and 1120 level convincingly, indicated that the bullish momentum is still very strong. Furthermore, the consecutives 5 positive day in the New Year seems to set the stage for a powerful rally in 2010. This week the market will likely to test 1200 level, with the objective of establishing itself above the psychological level of 1200. The catalyst might just be the retail sales figures.
This year 2010 seems to be the roaring years for the market. The extremely positive market’s action says a lot on the high level of the street’s optimism and confidence in this year. Traditionally, if the first five days of the trading days is positive, the rest of the January will be positive. Positive January will likely to means positive year for the market.
Looking at weekly candles, the S&P500 Index is suggesting a rally. The weekly candle shows a bullish Marabozu pattern that indicates a continuous strength in the coming week. However the psychological level 1200 will likely to be a hinder for the market.
Looking at daily candles, we have positive candles that establish a higher high, signaling that the S&P500 Index looks like it might be starting the week positively.
The immediate support levels are S1: 1125, S2: 1100 and S3: 1075.
The immediate resistance levels are R1: 1200, R2: 1250 and R3: 1300.
In conclusion, the market this coming week is likely to be quite bullish. The market will be looking at the result of the retail sales, consumer sentiment and Beige book for direction. The market will also continue to look out for the Fed action. The market will continue to rally as long as the Fed continues to delay the timing on raising the interest rate. Be carefully as the 2nd part of this year will likely be a tough environment for investors.
Sector Rotation : Week 2/10
January 11, 2010
Last year 2009, the top 3 sectors goes to Technology (49.45%), Materials (46.23%) and Consumer Discretionary (40.24%). Financial (29.41%) also did quite well as it manage to outperform the S&P500 Index (27.65%). Industrials (22.34%), Energy (21.90%), Health Care (19.69%), Consumer Staple (16%) and Utilities (5.61%) fall under expectation.
This year, the main growth should be Energy and Material in the first few quarters. This is because of the excessive dollars that have already flooded in the market. They should be pushing for the higher price levels before the Fed decide to tighten the monetary policy. Once the Fed decided to tighten the monetary policy, mid to small cap local companies will likely to benefit from it.
Health Care will be another sector to look out for this year 2010. This is because they are one of the essential sectors to the economy and most of them are cash rich. Stability will also be the key for Health Care in this year. Safe money will likely to flow into the stable growth sector, Health Care.
The fate of the Technology sector in this year will be on the hand of the Tablet PC market. If the response from the public is good, then technology will likely to be the leader once again in this year. The main beneficiary will be the semiconductor company.
In conclusion, there are many promising sectors going forwards in this year. However, the confirmation is still not yet clear. Therefore there will be a certain amount of risk involve in each sector. The street will also look upon Oil and U.S. Dollars as guide to decide where to park their money. Lastly, trade with cautious will likely to emerge as a winner in this year.
