Market comments for the week ahead: Germany in focus

The market ended the week down. Many did not want to go into the weekend holding stocks, because any news in Europe can quickly devastate stocks here. So caution is the rule, especially in September and October, the 2 most volatile months for the stock market. This morning's charts have a new discovery for me. I have the usual 200 day Moving Average lines drawn on the chart but also have included a 400 day Moving Average line, as well. As you can see from the 4 major Indexes below, it looks like the 400 day MA is the resistance line for the market and can give someone a better gauge as to whether to believe market moves or not. The last move up proves now to be a false Bear trap as anyone now knows after buying stocks when they appeared to be breaking above the downtrend line drawn in previous posts of a week ago. Here are today's charts.




This last chart below clearly shows that the last move up was a Bear trap for those unsuspecting traders. They would be wise to stay on the sidelines and watch rather than lose their money. This zig zag pattern downtrend will continue as there is no good news coming in the world as it pertains to their economies and this coming Wednesday all eyes will be not on the Republican debate but on Germany's vote as to whether they will be bailing out other countries. Watch this news as it will move our markets more than any other news.

Germany's Merkel is vulnerable to losing control. This analysis from Berlin:
"Merkel's coalition has a comfortable 20-seat majority in the lower house of parliament. But if she is hit with dissent in her own ranks, and is forced to rely on opposition parties to pass legislation to expand the single currency bloc's rescue mechanism -- the European Financial Stability Facility (EFSF) -- then her coalition could collapse, sparking early elections.

'The euro crisis entered a new phase over the past week,' influential German weekly Der Spiegel said on Sunday.

'Before the main question had been how the common currency could be saved. Now it is also about saving Merkel's chancellorship. If her coalition does not deliver a majority for the enhanced euro rescue mechanism in the autumn, people close to the chancellor say, the coalition is all but finished."

So this is what to watch on Wednesday. Good luck in the market next week and don't forget to watch President Obama's speech to Congress on Thursday evening on his Jobs program proposal.

Market commentary for the week ahead

The stock market ended Friday with the largest point loss in quite a long while for the Dow, giving up 166 points and closing at the 11,823 level. It broke below its 9 day and touched its 18 day Moving average. Volume Friday was the highest day in the week on the selloff. We hadn't had a gain or loss of this many points since Dec. 1st when the market made a big leg up.

The S&P 500 ended the week at 1276 with an amazing 23 point drop on Friday as well. It did break below the 9 day MA as well as the 18 day MA. The Nasdaq closed down to 2686 for a whopping 68 point loss for the day.It broke below not only the 9 day MA, the 18 day MA, the 27 day MA, but touched the 36 day MA at the close. It too had the highest volume day of the week in the selloff.

It seems to me that we should have a bounce on Monday but the trend down will continue, as the charts show the formation of a small slanted "W" pattern is forming for all these indexes and the final pieces are being put into place for the slow downward trend that will have most shaking their heads in disbelief. I have placed all 3 charts below. I have also added the 30 year chart of the Dow to show that this downward leg and slanted "W" pattern is part of a much larger "W" pattern, which is also slanted down. Yes, we are headed down and there is nothing Bernanke can do to stop it when it gets going. From yesterday's posts and the day before you can see where Gold started this decline phase. It is all part of a larger cycle about to show its ugly face to all. To this end I purchased ZSL as Silver is headed for a larger precipitous decline and will make the decline in gold look like a cake walk.

Summary of yearend 2010 and looking at 2011 in the stock market indexes

One thing from 2010 to report on the last day of Trading. In the first 1/2 hour to 1 1/2 hour, the Put to Call ratio was extreme at 1.33 to 1.37 as reposted by the CBOE. That was actually a buy signal in the morning and that followed through as the Put to Call ratio closed at about 0.99 for 2010 in the final minutes. The last time it was that high was Nov. 29th. The Dow closed at 11,557 for 2010, the S&P500 closed at 1257, while the Nasdaq Comp. closed at 2652. Watch the markets rise again in the morning.

The 52 week high for the Dow was 11,625.
The 52 week for the S&P 500 was 1262.
and the 52 week high of the Nasdaq was 2675.

As you can see from the 52 week highs, we closed near the highs on all 3 Indexes. The best way to see where the market is headed is to keep track of the 9 day Moving averages. For example, as you can see from the chart below, the Dow & S&P 500 have managed to stay above the 9 day MA for the entire month of Dec. Any cracks in trend will show up here first. The Nasdaq was the only index during December, of the 3 Indexes, to go below the 9 day MA and that happened only on Friday. The markets will keep breaking below more Moving Averages if we are headed down. But if we break below them and manage to rise back above in a day or two, we won't be going down yet.



Let the Games begin for 2011. Good luck to all.

Just a short note on the stock market for today

Today's Futures on the Dow and other Indexes are pointing down at this hour in pre-market. European markets are down about 1% or more in the face of the Ireland bailout over the weekend. One note here was that on Nov. 26th in our markets, the Put to Call ratio at 9:00am hit a new low of 0.57 which was another sell signal. It recovered during the day to about 0.85, but today, with the market looking to go lower, the Put to Call ratio will rise. Watch for the Dow and S&P to stay within the range of the 25 and 50 day Moving average because a break up or down will signal a new trend.

As promised the hype about the Shopping this weekend being very good, arrived on time and with the gusto I predicted. That is all they have been saying on CNBC this morning. They trotted out Abby Joseph Cohen to tell us she expects the S&P500 to go to 1350. Here we sit at 1189 as of the close on Friday. That would be at least another 10% gain.

UPDATE: 9:00am PST

The Put to Call ratio hit a peak this morning at 10:30EST of 1.19. This could signal another reversal to the up side for today.

Market comments for the week of Nov. 29th

Good day everyone. Hoping you are resting and catching your breath this longest of holiday weekends. You all work hard and once in a while you get a chance to rest so I hope you are taking it and resting as hard as you work.

Today I have 3 charts I am posting below. All 3 charts cover the past 3 months and all have 25 and 50 day Moving Average lines on them. You will notice that both the Dow and S&P500 are in a tight range between the 25 and 50 day Moving Average lines. The 3rd chart is of the Russell 2000 and it has a noticeably different chart pattern. It has remained above both the 25 and 50 day Moving Average recently. I believe that this Index is in an overbought condition and should have a larger drop when the breakout occurs to the downside. The Russell 2000 Candlestick pattern was a Hammer on Friday. So we shall see if this reverses the uptrend.



I have received many questions as to whether TZA will ever recover from the losses piled up on this Ultra Short ETF. That's a great question, but like all market moves, I can't tell you. All I can say is that I firmly believe we are eventually going to have a major market correction and retest the lows on the Dow of 6440, and when that happens many are going to be very scared. Whether the trigger is a Sovereign debt issue in the Euro zone or an economic trigger here as many believe QE2 from the Fed is killing us by death of 1000 cuts at a time.

In the meantime, live life the best you can to its fullest, as life is short. Spend quality time with family and tell them you love them. And as the Christmas holiday approaches, do something for the least of us, as you will feel good when you do. Whatever you have it's more than many in this world.

What's going on in the market right now?

It appears to me what is driving the market is not the Dow 8,000 level but rather where the 50 and 75 day Moving averages are and what range of the Dow are we currently between. Both the Dow and S&P are above the 75 day Moving average but that trend is going down, not up. As I posted recently a chart of the various ranges of the Dow and have added it here today, you can see the range we are in is between a Dow of 7,800 and 9,200. As long as we stay above 7,800 we remain out of the bottom range of 6,400 and 7,800. If we drop and test the 7,800 we could be dropping back to the lower range and then retesting the lows of 6,400 but I do not believe this is going to happen. This is why I bought more shares this morning of TNA at the $19.90/share level.

News will drive the direction of the market, where data looking backwards will not have the impact it had 5 months ago like unemployment data or Factory orders. These pullbacks are opportunities but a frightened investor will simply watch by the sidelines, like a deer in your headlights. This market is not for the weak of heart or those of low risk tolerance. Don't use money you can't afford to buy shares.

Market action week ending Dec. 26th

Well a very quiet week in the market as volatility calmed and the VIX Index dropped to 43.38 to close out the week. The Put To Call ratio ended the week at 0.78, which is much lower than it has been these past 2 months. It has been as high as 1.47 since October. All 3 Indexes are below their 20 day Moving averages, and to me that adds to my confidence that we are headed lower in early January.

Not enough volume to draw any conclusions as to emerging trends. We are in a tight range and will stay there for the next 4 market days next week. It is time to raise cash and pay any bills to reduce taxes you might need to pay this year. I will pay my Property taxes in full before year end. Besides the State of California is almost broke and probably need the money as soon as they can get it. For those not familiar with statistics regarding California, the Unemployment rate is currently 8.7% compared to 6.7% nationally.

Happy New Year. See you back here often. I try to publish something daily but don't always succeed. Leave a comment and don't forget to vote in my Mini Poll on the right margin about the recession.

Market Outlook for next 3 plus weeks

Well the week was a calm one with the range on all 3 indexes much tighter than in previous weeks and months. It got everyone settled down but it was difficult to make any money in the market with such a tight range. We have not been able to get above the 60 day Moving averages. We have settled in between the 40 Day and 60 day Moving averages. With the coming slow 2 weeks of the holidays, I don't see much going on except tax loss selling by individuals. Then in the first and second week in January I see a pullback in all three of the Indexes.

The main indicator for what was happening this week was the Volatility Index, symbol VIX. It went down to close at 44.93 for the week. It opened the week at about 56 and closing at about 45 results in a 20% reduction in Volatility. We are not yet back to the August lows of 20 but the trend continues down. As the Volatility Index drops, it is more difficult to make any money on Index trading of the Dow, Nasdaq or S&P 500. So that is why for the week the ETF's didn't gain much nor lose much. I am hoping for a breakout the first 2 weeks in January. That will be the time to cash in to the upside should that be the direction or to the downside, which I see more likely.

Several stocks I watched this week were these. Ford for example has not returned to where I sold it, $3.26. The bailout created some buzz at the opening but then fizzled as I had predicted. I also own a stock called Beacon Power, symbol BCON. It has been shorted since July and that has driven the price down significantly. But there was life returning to the stock this past week on increased volume, a good sign. I look in the coming month for a retest of the lows in MGM timed with the market drop. I have heard the impact continues on the Stip in Vegas so I think they will have a disappointing holiday season.

Unemployment is rising with no relief in sight going forward. This is going to have a continued negative effect on the psyche of everyone. Just yesterday while Christmas shopping I overheard people talking about the poor state of the economy, their jobs and concerns they would get let go by their employers but were going to buy a few small presents for their kids anyway. I have never heard anything like this before during Christmas shopping. I heard similar conversations in 2 separate stores. That stinks. Let's at least try to be more positive out there folks!

Merry Christmas, Happy Hanukkah and Happy New Year.