Browse Articles by Issue : Week 47/09

Technical Analysis : Week 47/09

The S&P 500 Index closed at 1093 last week. This indicated a gain of 24 points (2.4%) from the previous week’s close.

The market had to thanks the Dollar for another great run for the week. The dollar weakens on Monday after the negative comments from the official. Traders and investors gladly took it on stride as it bid the market furiously on Monday.

The market continues to ignore the bad economic data such as consumer sentiment and IBD/TIPP Economic Optimism. The market look set to close higher for the year of 2009.

Technically, S&P 500 Index had blast through the 20 moving average and the 1075 level convincingly, indicated that the bullish momentum is still very strong. However, S&P 500 Index fail to establish itself above the 1100 level, will cap the movement of the bull. This week the market will likely to test 1100 level again, with the objective of establishing itself above the psychological level of 1100. Looking at the chart, S&P 500 Index failed to close above the red color trend line on Friday, might indicate that the bull have exhausted from the great run off the March low.

The street’s optimism and confidence in the market remain high after the officials stated that the Dollar is still slightly overvalued in the world. Throughout the week, most of the articles have pointed a weaker dollar for the next couple of months.

Looking at weekly candles, the S&P 500 Index is suggesting a pause. The weekly candle shows an ugly shooting star that indicates a reversal or pause in the coming week. The psychological level 1100 will likely to act as a strong resistant for the market.

Looking at daily candles, we also have an ugly shooting star candle signaling that the S&P 500 Index looks like it might be starting the week slightly to the downside. The market will likely to be flat.

The immediate support levels are S1: 1075, S2: 1050 and S3: 1025.
The immediate resistance levels are R1: 1100, R2: 1125 and R3: 1150.

In conclusion, the market this coming week is likely to be very volatile as there are many economic data that are schedule for releases. The market sentiment remain bullish and this likely means that the market will test the psychological level 1100. If the market able to establish itself above the psychological level in the coming week, it will be able to surge higher for the end of the year. The market will have to find support from the weak dollar as it propels itself higher in year 2009. Therefore, the weakness of the Dollar will be the key towards the bullishness of the market.

From,
Lawrence Chua

Sector Rotation : Week 47/09

Last week, Consumer Discretionary (1.08%) after several companies being upgraded by analysts. Materials (1.01%) took the second spot followed by Technology (0.74%), Health Care (0.44%), Consumer Staples (0.34%), Industrials (-0.22%), Utilities (-0.27%), Financials (-1.08%) and Energy (-1.55%).

Gold continue to be in the limelight. Gold seem to be unstoppable in recent weeks as it making new high for the year. Everybody seems to love gold recently as it is the best investment tool currently. Gold offer the protection of weak dollar, a defensive play by nature and also benefit from the commodities rally.

While many people are buying gold, I would like to point out that Gold trade might be overbought recently. Alternative to gold, silver is another option to be considered. So far, Silver had not been in the limelight and it is at a better buying price than gold. Thus, Silver seems to be the best alternative for Gold trading.

In conclusion, Silver will likely to benefit from the rise of the Gold.

Market Analysis : Week 47/09

Last Monday, IMF official hinted that the Dollar is not undervalued even when it had already drop 14% in this year. The market took the cue and spike on the Monday opening as traders capitalize on the weak dollars to scoop up more stocks. After the surge on Monday, the market hovers sideway for the rest of the week, as the earnings and economic news are light.

Consumer sentiment and the U.S. trade balance are the limelight for the week. Traders and investors are worried that the weak consumer sentiment will curb the spending on the holiday season with less than 40 days to go.

The Reuters/University of Michigan index of consumer sentiment fell to 66 in November, down from 70.6 in October. Analysts had been hoping to see the measure rise as high as 72 in the latest report. The negative numbers in the consumer sentiment will likely to weight on the market going ahead of the holiday season. In the coming holiday season, consumers will likely to buy only the quality and essential stuff for the celebration as some of the companies are still firing people in this week.

The U.S. trade balance widened more than expected in September, with import prices rising faster than export prices. The trade deficit widened to 36.5 billion in September, compared with expectations for an expansion to $32 billion, according to economists polled by MarketWatch. The Dollar suffered immediately after the release of the U.S. trade balance report. While the Dollar suffers losses, the rest of the markets such as equity, commodities and gold gained on the “Risk-On” trade.

Overall, the trading volumes in the market were below average throughout the week. The market basically went flat after the great start on Monday. Traders and investors were seen traded lightly as they are looking for the direction from the APEC meeting in Singapore later in the week.

Major Events

• Orion Bank closed as the federal deposit insurance fund take $1 billion hit.
• U.S. Trade balance widens more than 18%.
• Gold surge to a high of 1128 on Globex on Monday 16/11/09

Economic Data

There will be a glut of important economic data coming out in the coming week. The October U.S. Retail sales will be in the limelight and set the pace and sentiment for the week. Economist estimate a 1% seasonally adjusted increase in sales for October, a strong rebound after a 1.5% decline in September.

The street will be watching the inflation number from the Producer price index and the Consumer price index. The market will likely to feel the pressure from the Fed, if the data indicate a much stronger inflation reading.

Housing Start and Homebuilders’ index will shed more light in the process of the economy recovery. The October reports will be significant as the buyer and builders did not know that the Congress will extend the home-buyer tax credit past its Nov. 30 expiration and expanded it to repeat buyers.

Manufacturing data such as Industrial production, Capacity utilization and Philly Fed Index will be on the tap.

Lastly, the street will look at the weekly jobless claims and leading indicators to guide them for the rest of the year.

Earnings

The third-quarter earnings had finally come to an end in the coming week with the mildest profit decline in two years, easily topping low expectations, even as revenue growth is still out of reach.

80% of S&P 500 companies have beat analysts’ estimates for the third quarter, according to Thomson Reuters. Profits dropped about 14%, far better than in recent quarters.

While the street had an easy third quarter earnings expectation, the fourth quarter is likely to be a different story. This holiday season will hold the key for the fourth quarter earnings.

Summary

The streets had been watching on the leaders, especially from China at ongoing the APEC meeting in Singapore. The U.S. dollar and the Yuan issues had brought up at the meeting. One of the China official joint a renown Hong Kong businessman warn against the risk of the Asia asset bubble due to the ultra loose monetary policy in the United State of America.

The market will be watching closely on the economic data and looking for direction from the Fed Speeches in the coming week. However, the market will give number one priority to the U.S. Dollar, regardless of the economic data.
In conclusion, the market will likely to go higher as long as the Fed favor the cheap credit and refuse to tighten up the monetary policy. The market will continue to stay volatile in the coming week, as there are many economic data that are schedule to release. Furthermore, President Obama will likely to say something from his visit to the East.

Will we experience Santa Claus Rally in this year?

Foreword Week 47/09

Last week, the U.S. market headed off with a good start on Monday as the Dollar tumbled on the speeches of the IMF Official. The Dow Jones Industrial Average gained 247 points to close at 10,270 (2.5%) followed by the S&P 500 Index rose 24 points to close at 1093 (2.3%) and the Nasdaq Composite added 56 points to close at 2168 (2.6%) for the week.