Market Analysis: Riding A Wave Of Worry
17/08/08 01:04 PM
Again, it’s really been a trader’s market as of late.
For the trades that have been made, they’ve been quick
and dirty, in and out, simply because it seems like
every day brings some new data or news that force the
markets in a different direction. Let’s look at where
we stand going into next week:
Resistance on the DJIA continues to be at that 11,750 area. We actually managed to break above that level a few times last week, only to be held back by the 50-day moving average. Volume was pretty pitiful last week, but that was sort of expected really, as this market looks for some sort of direction. Unless some really excellent economic data comes out next week, the trend is lower.
The Nasdaq has been the strongest index of the past few weeks. In fact, it has actually managed to close above its 200-day moving average, which is somewhat bullish. That being said, however, volume last week was languishing and often, as history shows, these low volume rallies often end to the downside. The index is currently overbought and this may be an interesting short trade into next week.
The XLF continues to have strong resistance at the $22-23 level. If you were able to catch this trade last week, you definitely made a nice return. Volume towards the end of the week was pitiful as the XLF attempted to rally aboe the 50-day moving average. We continue to believe that the trend on the XLF is down.
Well, we said there would be a battle for direction on the oil chart last weekend, and indeed, that was exactly what we got last week. Inventories came in below estimates last Wednesday, providing at least a short-term case for the bulls and we expect this battle to continue on into next week. That 200-day moving average has not been violated in over a year and that will provide a strong defense for the bulls. However, if it is broken on strong volume, there could easily be a very strong selloff. This chart is not for the faint hearted and stop losses are a must.
Gold finally broke what had been a year-long support area last week on the basis that the US dollar is broadly being accepted as having bottomed. Volume confirmed this support break. We would not be surprised to see gold come back up to kiss what is now considered to be resistance, before heading lower again. Ideally, a short position would be initiated at that resistance “kiss.”
-Andy and Sul
Resistance on the DJIA continues to be at that 11,750 area. We actually managed to break above that level a few times last week, only to be held back by the 50-day moving average. Volume was pretty pitiful last week, but that was sort of expected really, as this market looks for some sort of direction. Unless some really excellent economic data comes out next week, the trend is lower.
The Nasdaq has been the strongest index of the past few weeks. In fact, it has actually managed to close above its 200-day moving average, which is somewhat bullish. That being said, however, volume last week was languishing and often, as history shows, these low volume rallies often end to the downside. The index is currently overbought and this may be an interesting short trade into next week.
The XLF continues to have strong resistance at the $22-23 level. If you were able to catch this trade last week, you definitely made a nice return. Volume towards the end of the week was pitiful as the XLF attempted to rally aboe the 50-day moving average. We continue to believe that the trend on the XLF is down.
Well, we said there would be a battle for direction on the oil chart last weekend, and indeed, that was exactly what we got last week. Inventories came in below estimates last Wednesday, providing at least a short-term case for the bulls and we expect this battle to continue on into next week. That 200-day moving average has not been violated in over a year and that will provide a strong defense for the bulls. However, if it is broken on strong volume, there could easily be a very strong selloff. This chart is not for the faint hearted and stop losses are a must.
Gold finally broke what had been a year-long support area last week on the basis that the US dollar is broadly being accepted as having bottomed. Volume confirmed this support break. We would not be surprised to see gold come back up to kiss what is now considered to be resistance, before heading lower again. Ideally, a short position would be initiated at that resistance “kiss.”
-Andy and Sul
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Market Analysis: It's A Trader's Arena
08/08/08 09:54 PM
Up 300 points one day, down 300 the next. This market
has definitely been a trader’s arena as of late. Fannie
Mae and Freddie Mac both reported heavier than expected
losses last week, leaving us with little evidence of
any fundamental changes within the economy. That being
said, the oil chart has rolled over entirely as short
term resistance areas were broken on heavy selling.
However, key technical resistance areas remain in tact
on the major indices currently and until those are
broken, look for some near term weakness within the
markets this next week:
The DJIA remains trapped below the 11750 mark. Last Friday’s 300 point rally came on relatively light volume leading us to believe we may see some immediate downside here. The 50-day moving average is also providing some hefty resistance around this area.
With regards to the XLF, the trade continues to be on the short side. Both Fannie Mae and Freddie Mac helped us reach that conclusion last week. Again, resistance can be found at the $22-23 dollar range. Similar to the DJIA, the 50-day is proving to be a solid defense for the bears.
The oil chart has just filled with nothing but straight selling for the past few weeks, with the exception of that brief $5 rally that we caught a couple posts down. However, this is a year-long trend line and we believe that something dramatic will have to happen in order for it to be broken. Will this decline in oil bring about a rally in the markets? Possibly, but we believe that this trend line must be broken first in order for that to happen. The 200-day moving average will also provide some hefty support and we expect the bulls to put up a fight here.
Look for a revised market sentiment addition later this week.
-Andy and Sul
The DJIA remains trapped below the 11750 mark. Last Friday’s 300 point rally came on relatively light volume leading us to believe we may see some immediate downside here. The 50-day moving average is also providing some hefty resistance around this area.
With regards to the XLF, the trade continues to be on the short side. Both Fannie Mae and Freddie Mac helped us reach that conclusion last week. Again, resistance can be found at the $22-23 dollar range. Similar to the DJIA, the 50-day is proving to be a solid defense for the bears.
The oil chart has just filled with nothing but straight selling for the past few weeks, with the exception of that brief $5 rally that we caught a couple posts down. However, this is a year-long trend line and we believe that something dramatic will have to happen in order for it to be broken. Will this decline in oil bring about a rally in the markets? Possibly, but we believe that this trend line must be broken first in order for that to happen. The 200-day moving average will also provide some hefty support and we expect the bulls to put up a fight here.
Look for a revised market sentiment addition later this week.
-Andy and Sul
Market Analysis: Merrill Lynch and the Economy In Focus
03/08/08 02:05 PM
Quite a crazy couple of days last week. This market
continues to search for some sort of direction. News
from Merrill Lynch saying that they had liquidated the
last of their mortgage linked securities for 22 cents
on the dollar (yes, 1/5 of their actual value) sparked
a flurry of buying in the financials. Jim Cramer even
called the bottom in financials on one of his shows
last week, leaving CNBC in nothing but party mode. We
are much more cautious though.
To start, let’s recap what Merrill Lynch’s CEO, John Thain, has had to say regarding their position in the markets over the past six months:
January 30th: “We're very comfortable with our position. We could have raised substantially more money. We turned people away.”
July 17th: “We believe that we are in a very comfortable spot in terms of our capital.”
Last week: “Our consistent focus has been to opportunistically reduce risk, and in order to take advantage of this sizeable sale on an accelerated basis, we have decided to further enhance our capital position.”
Coming from the CEO of one of the largest financial institutions in the world, his statements have been far from honest. That in and of itself should make investors cautious of calling bottoms in any sector. Furthermore, for this to happen just two weeks after the companies last quarterly earnings conference call is really “surprising.” Let’s just say that we would not be “surprised” to see even more writedowns as we continue into the second half of this year.
The fact of the matter, however, is that the economic data that we saw last week was far from encouraging. The US economy shed another 51,000 jobs last July, leaving us at a current unemployment rate of 5.7%. GDP came in at 1.9% annualized growth. Analysts were expecting something closer to 2.4%. Auto sales were pretty much terrible and Greenspan stated last week on CNBC that US home prices are “nowhere near a bottom.” Simply put, this economy continues to struggle.
On a chart, the picture is clear and the trend continues to be down:
The S&P500 continues to have very strong resistance at the 1275 area. Until we break that level, we will continue to be strongly bearish on this market. For the time being, however, we believe that this market will be range bound between the 1200 and 1275 area for the next few weeks.
The financial sector has been nothing short of a trader’s dream as of late. However, before we start calling bottoms on this sector, we’d like to see a break above $23.5 on strong volume. Until that happens, in our view, this is nothing but a short-covering, bear market rally.
-Andy and Sul
To start, let’s recap what Merrill Lynch’s CEO, John Thain, has had to say regarding their position in the markets over the past six months:
January 30th: “We're very comfortable with our position. We could have raised substantially more money. We turned people away.”
July 17th: “We believe that we are in a very comfortable spot in terms of our capital.”
Last week: “Our consistent focus has been to opportunistically reduce risk, and in order to take advantage of this sizeable sale on an accelerated basis, we have decided to further enhance our capital position.”
Coming from the CEO of one of the largest financial institutions in the world, his statements have been far from honest. That in and of itself should make investors cautious of calling bottoms in any sector. Furthermore, for this to happen just two weeks after the companies last quarterly earnings conference call is really “surprising.” Let’s just say that we would not be “surprised” to see even more writedowns as we continue into the second half of this year.
The fact of the matter, however, is that the economic data that we saw last week was far from encouraging. The US economy shed another 51,000 jobs last July, leaving us at a current unemployment rate of 5.7%. GDP came in at 1.9% annualized growth. Analysts were expecting something closer to 2.4%. Auto sales were pretty much terrible and Greenspan stated last week on CNBC that US home prices are “nowhere near a bottom.” Simply put, this economy continues to struggle.
On a chart, the picture is clear and the trend continues to be down:
The S&P500 continues to have very strong resistance at the 1275 area. Until we break that level, we will continue to be strongly bearish on this market. For the time being, however, we believe that this market will be range bound between the 1200 and 1275 area for the next few weeks.
The financial sector has been nothing short of a trader’s dream as of late. However, before we start calling bottoms on this sector, we’d like to see a break above $23.5 on strong volume. Until that happens, in our view, this is nothing but a short-covering, bear market rally.
-Andy and Sul
Oil Looking Bullish
28/07/08 02:10 PM
Just a quick update today. This market continues to
look for a short-term bottom and we will let you know
when that happens. The trend for now, however, is still
down.
Oil, on the other hand, is beggining to show some signs of life here as we continue to look for a valid support level in this trade. Check out the chart:
If I had to take any guess, I’d say oil is headed higher from here. Demand continues to outstrip supply worldwide, and honestly, its not as if the United States has quit using oil overnight. Furthermore, the trendline is very intact. That, coupled with the fact that oil is quite oversold, makes this a very interesting trade on the long side.
-Andy
Oil, on the other hand, is beggining to show some signs of life here as we continue to look for a valid support level in this trade. Check out the chart:
If I had to take any guess, I’d say oil is headed higher from here. Demand continues to outstrip supply worldwide, and honestly, its not as if the United States has quit using oil overnight. Furthermore, the trendline is very intact. That, coupled with the fact that oil is quite oversold, makes this a very interesting trade on the long side.
-Andy
Trades To Keep On The Radar
22/07/08 12:25 PM
The XLF and GM are two trades we are looking into these
next few weeks:
The XLF has seen a nice rally from $17 thus far. Some banks actually beat their shockingly low estimates (applause). However, there is big technical resistance at $22 a share and we don’t believe this rally will last. The XLF is currently overbought and ideally, we would look to initiate a short position at $22 with a tight 2.5% stop.
The same goes for GM. The stock has seen a nice run from around $9 (yes, $9/share) to its current price of around $13.5. The fundamental story remains the same, however: they still do business in the automotive sector and they still have massive inventories of trucks and SUV’s that they will simply not be able to get rid of anytime soon. There is big technical resistance at around $17.5. Ideally, we would loook to initiate a position in this price area with a 2.5% stop loss.
-Andy
The XLF has seen a nice rally from $17 thus far. Some banks actually beat their shockingly low estimates (applause). However, there is big technical resistance at $22 a share and we don’t believe this rally will last. The XLF is currently overbought and ideally, we would look to initiate a short position at $22 with a tight 2.5% stop.
The same goes for GM. The stock has seen a nice run from around $9 (yes, $9/share) to its current price of around $13.5. The fundamental story remains the same, however: they still do business in the automotive sector and they still have massive inventories of trucks and SUV’s that they will simply not be able to get rid of anytime soon. There is big technical resistance at around $17.5. Ideally, we would loook to initiate a position in this price area with a 2.5% stop loss.
-Andy