Saturday, October 17, 2009

Oct. 17th Market outlook and recent news

Well the stock market closed just under the 10,000 level on the Dow Friday, after the Bulls tried to have it close in the positive. But it was Options Expiration for October and that was a mighty tall order. The Unemployment Rate came out yesterday for California and it reached a record 12.2%, which is a full 2.5% higher than the National average. And another Wall St. leader was arrested by the FBI for suspected Insider Trading violations, a very serious claim. They say they had wire taps and certain proof of the charges against billionaire Raj Rajaratnam, founder of hedge fund firm Galleon Group. This should help the Obama Administration and Congress get some backbone finally to pass some tough regulations on Wall Street, although this guy broke laws already on the books and was blatant. I say, if found guilty, with tongue in cheek, "Hang em!" as an example to others. Main Street is in much pain while these thieves are robbing the coffers of investors and their firms, blind! Let's now look at the charts of the stock market .

As I look at the S&P 500 2 month chart (above) and the Nasdaq 2 month chart pattern, I see that the day's close yesterday produced a candlestick Hammer pattern. These markets have done this 2 other times over the past 2 months and each time it had, those markets dropped for about 3-4 days below the close of the Hammer pattern. I expect the same will be true this time. The real question is how far down will the markets go this time. We have gotten the October Options expiration completed, so now maybe the markets will finally have the correction we have been waiting for. Even with a correction, it would correct to only 9,000 on the Dow or 900 on the S&P 500. I must add here that when I looked at the chart of the Dow and observed yesterday's Candlestick pattern it too was a Hammer. But when I looked this morning on it wasn't that Hammer pattern. What's going on here? I don't have a clue but it is noteworthy. I am not the only one who saw the same Hammer pattern yesterday, Try and look up under Indexes the Dow pattern for yesterday. I am convinced all 3 indexes showed a Hammer pattern and that most always signifies a reversal in trend. Stay tuned as next weeks action on Monday through to Wednesday should show this reversal with the market going down. Can't say how much as it doesn't reveal that to me. It's just a reversal. I found this chart from an article by Seeking Alpha's Trader Mark and an article you might want to read by clicking here.

Adding another piece of data to this move down the next few days was the high Volume traded yesterday on the Dow, but this was not the same for the Nasdaq. The Nasdaq market has been relatively strong and with Google's terrific earnings and Revenue numbers this week, many are hoping for a resurgence in Technology to help us out of this jobless recovery. Technology companies have gotten us back on our feet before and can do it again, but the Consumer would need to participate as well, and there has been a generational shift in spending patterns of U.S. Consumers as a result of unusually high unemployment and the record foreclosure levels experienced this year and last.

We have not broken up through the Resistance line (see post Thursday, Oct. 15th) and so I am seeing this resistance line as being very strong. This tells me we are not ready yet to go over Dow 10,000 and stay above this resistance line yet nor are we ready to advance over a similar line for the S&P 500 which crosses at 1100. Therefore one must conclude we are still set for a major market pullback.

My own action of the past week was to buy more shares of Exxon, symbol XOM, for $70.21/share to add to an old position I have maintained in the stock, as well as to buy TBT, ProShares UltraShort 20+ year Treasuries. I bought these shares as I do expect the fear of inflation to be just around the corner as government spending continues to worry many. Price paid was $45.40/share. I still own my TZA shares, in case you were wondering. I have taken a beating on these shares and continue to await a correction to be able to gain some losses back.

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