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March
29, 2009, Traders'
Update
9:25 AM EDT |
Technology, Financials, FXI is near a new bull market ? The S&P500 ( chart ) closed at 815, to rise 6.17% for the week. The close over 800 could be seen as the new support level. The 50 day moving average is 791 and could also be technical support if we retrace below 800. With the March low of 666 and the gains of the past 3 weeks, we may just see a period of quiet consolidation. Financial Bull 3X ETF, FAS $6.34 ( chart ) traded 253 million shares Friday. With this financial ETF near the top volume spot, a technical review is needed. At this point, the upward momentum has slowed and some consolidation is near $7.20-7.40. If FAS breaks above $7.50 on above average volume, a $10 price target is near term resistance. If technology shares lead the next leg up on the market, Proshares Ultra QQQ, QLD $27.82 ( chart ) , should be watched close for a move above $30.50. Since making what appears to be a double bottom at $19.72, $19.46, QLD is in a trading range. Resistance is near $30.50. A close above $30.50 on higher than average volume could clear the target price of $42-$45 over time. Wait for a possible break-out. The less risky Financial ETF XLF ( chart ) could be the way to play the 1X exposure. Resistance is near $10. A continuation of the uptrend would be possible if XLF were to close above $10. Sprint Nextel Corp. S $3.96 ( chart ) is nearing a break-out above $4.20. The stock has moved up in a daily triangle pattern since March 09. If we see a move above $4.10-4.20, a short term target could be $5. Add this to your watch list. The CRB commodities index ( chart ) lost 2.3% on Friday. Some of the CRB weakness could be associated with the gain in the USD. The Powershares US Dollar Index $25.57 UUP, ( chart ) gained 1.1%. At this point, the PowerShares dollar index has bounced off the 200 day moving average, however a double top could have formed at $27.0 and $26.83. As the demand for dollars weakens on any recovery, we could see the CRB index climb as inflationary pressures rise. Freeport McMoran Copper and Gold FCX, $42.12 ( chart ) has been climbing higher over the past 3 weeks of March. The rounding bottom between $15.70 and near $30 is the base formed. As FXC climbs, how could a trader profit in the short term ? Traders will note the 200 day moving average could act as a resistance point at $52.66. So as FCX moves higher, the trade would be to have been to watch for the break-out above $30. Buy into the rising stock price. Review the stock each day and increase stop-losses as the price gains. China iShares FTSE/China 25 index, FXI ( chart ) $29.70 up 12.42% on the week. From a technical view, this index could be in the start of a bull market ? FXI has closed above the 30 week moving average of $28.21. A close above $33.25 would be very bullish. China's car sales rose 24% in February 2009 from the year earlier. 607,300 cars were sold in February 2009. |
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| March
22, 2009, Traders'
Update
2:25 PM EDT |
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Resistance near 800 for the S&P500. Commodities show strength. NFLX at a 52 week high. For the week, the S&P500 768, ( chart ) gained 1.58% on above average volume of 34 billion shares. Technicians of the S&P500 expected resistance near 800 and traders sold off. We are at an inflection point in the market. With the upward momentum slowing, either the market pauses and moves higher, or more profit taking takes hold and a reversal to 730 could be near. The probability is greater than 50% we a pullback next week. At this point, the market may need 4-5 days to just absorb the big gains since March 10. Long shots
Commodities The week's high point was the move higher in the CRB commodities index. ( chart ) 226.The influx of a fresh 1.2 trillion dollars or $1,200,000,000,000 courtesy of Ben Bernanke was indicated by the rise in the CRB index. The interrelation to the printing of money and the Gold price was also apparent with the jump in GLD $93.59 ( Chart ) . GLD traded near 60 million shares higher on the news of the 1.2 trillion dollar infusion. We are keeping GLD on a watch list as indicated on March 8. The break-out needs to close above the $101-105 range or a triple top.
It's been a few months since our stock scanning has found anything breaking new 52 week highs. Since the November 2008 low, we examine one winner:
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| March
15, 2009, Traders'
Update
5:25 PM EDT |
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S&P500 is up 10.7% on the week, now a pullback ? For the week, the S&P500 756, ( chart ) jumped 10.7% on above average volume of 30.6 billion shares. With a local bottom in place at 666, the expected move higher has materialized. The S&P500 has closed above the old low of November at 741 but may hit a some resistance near 775-800. Last week we suggested the S&P500 will return to 1025-1050 area. If this is the case, and the market continues higher, expect each market rally to pullback. Case (2) S&P500. In 69% of double top formations , if we refer back to our February 28 note, a pullback to to 775-800 would be expected. If this were the case, our target of 654 is still possible. Read over the February 28 notes below.
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| March
8, 2009, Traders'
Update
1:05 PM EDT |
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Close to a bottom ? The Case for a S&P500 market rally. Last week we projected the downleg for the S&P500 ( chart ) to bottom at 654. The S&P500 closed the week at 683 after reaching a intra day low of 666.79 Friday. If our calculations hold, we are within 10 points of a major low. Many technical experts are watching the market for a reversal. S&P500 Case 1, 80% probability. The S&P500 holds near 650 and over the next 3-4 months will start the rally to the 200 day moving average of 1025-1050. A reversal could start in March, April, May, or June. After the market reaches the 200 day moving average expect some profit taking. S&P500 Case 2, 20% probability. The final blow-off down to bottom near 600 on a panic event and heavy selling. Add a few months to the rally in case 1, and the market heads back to the 200 day moving average. Many news stories are comparing this downturn to be on par with 1981-82 or 1973-74. The good news is that after both of these periods of time, the market rallied strong. If we take anything away from the historical charts, know the rallies must have included bullish news. Today, GM, Citicorp, and AIG headlines are discounted into the markets expectations of more pain. Another headline from the unemployment report of 8%,9%,or 10% will not change the forward looking nature of the market. A forecasted trend reversal from 10% to 8% unemployment could rally the market. The first news the house market has finally bottomed will not make headlines until it's well underway.
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| February
28, 2009, Traders'
Update
12:35 PM EDT |
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| Are we at a 12 year bottom or
the next leg down ? A new 10+ year low was made for the S&P500, closing down 4.5% to 735 ( chart ) on the week. Volume was 31.1 billion shares or 1.5X average. The S&P500 closed the week below key technical support near 775. If you are short or long on the market, the outcome in the 3-4 weeks will shape the direction of the market for the next 3-12 months. Last week we commented on some rough estimates, this week let's crunch the numbers on the market. We do not need any input from top CNBC stories or Bloomberg news to do the math. What to expect: (1) The S&P500 has confirmed of a double top over the period of 1997-2009, and could accelerate a drop to 654 (15% drop). We have started down this path, but a failure of the double top is possible. Fear would dominate the trade. What is the failure rate ? The probability of the chart failure can be checked in the textbook "Encyclopedia of Chart Patterns" , Bulkowski. If we waited for a downside breakout, the probability of failure is 17%. Pullbacks to the breakout are 69%. So for the non-technical readers, we have a breakout to the downside. From the chart pattern, there is a 83% chance a double top is in place with a 17% chance the S&P500 will fail and move down 10-20% from today. The pullback is a market rally back to 775 and next a reversal downward which has a 69% chance to occur. The S&P500 target of 654 is calculated by taking the top for 2007 (1576 - 775 technical support ) = 801 * .15 (15% drop) = 120 points lower. S&P500 at 775 support - 120 points fall representing a 15% market drop = S&P500 low target of 654. (2) A large rally if we come off these new lows .... a 17% chance. The upside target could be the 30 week moving average of 980 on the S&P500. The market is bearish to the point where all the sellers are out and gloom and doom dominates. Value investors would start the rally and the momentum traders would push the index up rapidly. For the market to rally above the 200 day moving average, a great deal more time is needed. |
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| February
21, 2009, Traders'
Update
10:07 AM EDT |
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The S&P500 770 ( chart ) closed down 1.14% Friday on 1.5X average volumes. The market closed below 800 earlier in the week and remains at technical support. The downside risk is 70% with a 30% chance to bounce out of this hole. If the market moves down, the next leg down could be 15-20% lower. A move lower would confirm a double top from 1995-2009. If this were any ordinary stock, the projection down would be S&P500 below 600. We are hopeful this is wrong, but from pure technicals the market is in the edge of fear. Fear of additional bank failures is driving this market lower. Citigroup C $1.95 ( chart ) is down a staggering 44% on the week on 1.226 billion shares. In the short term, the speculation of bank nationalization could be the catalyst to move this market lower. The VIX 49.30, ( chart ) has not spiked over the past week which could indicate a further decline in the market. In November 2008, the VIX spiked up to over 81. Since we are retesting the lows of November 2008, the market is not as fearful. We may need to gauge the bottom of this market with a spike in the VIX and a corresponding new low. Gold Bullion has broke the $1000 level. Gold Stocks have underperformed the bullion $1002.20 ( chart ) but both remain the best bullish sector on the market. Our current stock scans have turned up 85% gold stocks. If gold can continue past the $1033 high from the spring of 2008, we could see a move to $1100 in the short term. Gold has moved fast and may need to consolidate before moving higher ? From last week, ETF StreetTRACKS Gold, GLD $97.80, ( chart ) has moved up 5.6%. As with bullion, GLD is nearing the old high of $100.44. A break-out above $105 could confirm the direction is higher. |
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| February
14, 2009, Traders'
Update
12:25 PM EDT |
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The S&P500 826 is down 4.81% on above average volumes. A retest of the 800 support level occurred on Thursday intra day at 808.06. The media has a major focus on stimulus efforts which have not translated into any upward move in the S&P500 index. After reaching the early January high of 943, the market has drifted lower.The blue line is the 50 day moving average. At this point, the market needs to see some kind of momentum swing to the upside or we may break below 800.  Gold $942.20 ( chart ) remains bullish for the week. We have anticipated this continuation since our January 25 potential break-out call. If you have made some profits on the move higher in gold and gold stocks, protect your positions and up your stop-loss point. For gold quotes, Kitco.com has been around for years. ETF StreetTRACKS Gold, GLD $92.55, ( chart ) has made a weekly high of $93.74 on a 5X average volume of 50 million shares. Fridays' pull back to close the week at $92.55, still keeps the stock near the upper Bollinger Band. The bullish move to close above the highs of September and October is a signal of a continuation higher. A stop loss could be set near $88-90. Eldorado Gold $8.46 is up 6 % from the $7.98 Jan 25 update. The volumes have not been above average, but the move higher has maintained a fairly steady advance. A new suggested stop-loss could be near $7.75-$8. The chart below shows the break-out above $8 as bullish.  |
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| February
8, 2009, Traders'
Update
1:45 PM EDT |
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| The S&P500 868 (
chart ), has
moved slightly to the upside, but still remains near a double bottom
re-test looking back to 2002. After re-reading the chapter on Double
Tops by Bulkowski ., "Encyclopedia of chart patterns", we still are not
out danger zone. If the S&P500 were close below 741-775 we would
expect a move lower . From
Bulkowski's testing, a close lower than the break-out level would raise
the probability of a move 10-20% down by 83%. The VIX 43.37 , ( chart ) is has been steadily decreasing from the November 2008 high of 89. As the VIX looks to be dropping, on longer term charts, the VIX is still above the 37.50 break-out of early 2008. StreetTracks Gold GLD, $89.59 ( chart ) is nearing the $92 old resistance point. On a 3 year chart, the move higher looks bullish. Gold and gold stocks remain very bullish. Stock Scans: We turned up these stocks , looking for bullish technicals. Autozone, AZO, $143.96 ( chart ), The close Friday up 2.93% and a 3 year high. Autos may not be selling but repairs will need to be done. Watch for a price increase to $150 to confirm a multi-top and year break-out. Set a stop-loss near the break-out. Myriad Genetics, MYGN, $84.27 ( chart ), news, has moved higher breaking out and closing over old resistance at $72.45. The move has been fast and some profit taking may follow. The fast money has been made but it's a good example of a fast break-out on high volume. 4X average. On a 3 year chart, the stock continues to look bullish. Goldfields GFI $10.99 ( chart ). The move higher could reach a short term target of $12 near term. Upper resistance at $13 could be another short term target. The close over $10.04 could be a the neckline of a complex head and shoulders chart pattern. We have a price target of $15 from the charts, a suggested stop-loss could be near $9.75-10 |
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| February
2, 2009, Traders'
Update
11:15 PM EDT |
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| The S&P500 825 (
chart ),
remains near the support level at 800. A sideways market continues
without a clear direction. The risk of a breakdown in the technicals of
the S&P500 continues on each re-test of the 800 support level. ITT Educational Services Inc. ESI $129.43 ( chart ) up 5.6% today. the move higher is nearing the old high of $131.82. Volumes have been high in the last 3-4 weeks. Watch for a close in the next few weeks above 132 for a break-out move. Add the stop-loss to the trade near $120-125 in case of a sudden reversal. Upgraded by Credit Suisse Feb 02. InterDigital Inc., IDCC $33.33 ( chart ) continues to move higher on better than average volumes. On the weekly chart, we are nearing the old highs of 2007. IDCC could move higher if it clears the older resistance. |
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| January
25, 2009, Traders'
Update
11:45 PM EDT |
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| The S&P500 831(
chart ),
closed the week with support on the 800 level. A move above 874 would be positive for a reversal higher. If the S&P 500 closes below 800 in the upcoming week, the next level of support is 741 or the November lows. West Texas Oil , ( chart ) $46.47 is nearing a close above the 50 day moving average. A close in the next few trading days above $47 could be near. Any close above the $50 price target could be partly due to the USD ( chart ) moving lower ? A move lower for the Dollar could push gold and oil higher. Gold stocks have provided bullish technicals in the past few days. Cup and handle formations are present in several chart patterns. As we write this, gold is near $890/oz., trading slightly down in overseas trading. - see Kitco.com ETF StreetTRACKS Gold, GLD $88.53, ( chart ) has closed above old resistance at $87.10 on high volumes of 34 million shares. A stop loss could be set near $84. IAMGold, IAG, $6.86 ( chart ) in a break-out. This would be a pure momentum move as the stock is traveling on the upper Bollinger Band on high volumes. Above $6.0 was the confirmation of the break-out. A suggested stop-loss would be near $5.70 to 5.80 . Eldorado Gold EGO $7.98 ( chart ), 3.8 million shares traded on Friday and near a break-out. We suggest to wait till the move crosses $8.50 on continued volumes. A stop-loss could be set at $7.25-7.50. The volumes are the key to this move higher. Goldcorp GG, $29.32 ( chart ). Some catching up to other gold stocks, Goldcorp could see a break-out if it makes it's way back to the $33 range. The stock would need to clear this upper resistance and move above the 200 day $32.57 average. Barrick Gold, ABX $39.58 ( chart ), up 11.27% Friday on above average volumes. Now trading above the 200 day moving average, Barrick looks to be moving higher out of a "cup and handle" formation. Test yourself, what does it look like ? In any case, a near term target could be $47. Remember to set a stop-loss if gold were to reverse trend. |
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| January
21, 2009, Traders'
Update
9:01 AM EDT |
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| With the drop on the S&P500 (
chart ) Tuesday, we
would caution the chances of a retracement to the November lows has increased. The higher than average volumes in the sell-off are indicating the banking problems could lead to another leg down ? |
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| January
19, 2009, Traders'
Update
11:15 PM EDT |
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| First, we have been testing a
few charting packages on the web for our readers. One of the best pre-set charting packages is from AISTOCKCHARTS.com. A cross-plot of stock correlations can be done on the web for free. In this chart we graphed a few ETF's and Goldcorp for a correlation test ( see charts ). The results are just another way of reviewing the raw data. Another charting website, Stockcharts.com just about has it all. The free charting at stockcharts is one of the best on the web. The S&P500 ( chart ) is at 850, down 4.5% last week. The technical wedge pattern has dropped the S&P500 to a low of 817. The 817 level could be a short term support, going back to mid-November as volumes were very high January 15. As we start the shortened trading week, the world banking heavy weights look to be entering a phase 2 bailout period. The Bank of America $7.18 ( chart ) or the Royal Bank of Scotland both have fallen on troubled times. For the S&P 500, SPY $85.06 , ( chart ) the bounce off the lower Bollinger band and high volume could indicate a move higher. The candlestick pattern on January 15 could also indicate a hammer pattern or reversal. Multiple indicators are often needed to detect or confirm a reversal. It is plausible, the world of politics bring some short term rally to the markets. With uncertainty in the market's direction at this point, we need a few more data points. |
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| January
11, 2009, Traders'
Update
3:15 PM EDT |
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We should start off with the word caution. The overall market is trading sideways looking for a direction. For the week, the S&P500 ( chart ) is down 4.45%, not the best start to 2009. A rising wedge could be developing, a bearish reversal chart. From the first edition of Encyclopedia of Chart Patterns, Bulkowski; the wedge pattern is an upward price trend bounded by two intersection lines. The volume is decreasing for most of the wedge until the break-out. If this is the case, we expect a break-out to the downside with increased volumes. The case for retracing the low (B) could be made. If this does not occur, we have a chance at grinding our way to the 200 Day MA in a zig-zag up move. Volumes must climb with the direction of the move.
The S&P500 was charted to look at the past 60 years for any similarity to today's downturn. The historical charts are referenced as we are bombarded with claims of the worst drop since 1932. Please review some of these charts yourself.( link )With the jobless numbers under 8%, we can't compare this downturn to the 1930's unless we see 25% unemployment. One of the few graphs for a comparison to the current S&P500 is the 1973-74 downturn. Looking at the final down-leg, we see a double bottom ( B) not a V pattern. Today's chart of the S&P500 ( chart ) would have the point B at the same place. More data points are needed to determine the final 2009 outcome.
Break-outs, one of the few.
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