Market comments for the coming week of Christmas

Oh I hate to be so repetitive. As I said in my last post on Dec. 5th, "I thought it was time to post on the stock market again." The main points to make this week are that all Indexes are now below their 200 day Moving average line, shown faintly with the yellow lines on each chart below. My opinion continues that this shows the tendency is still to remain below the 200 day Moving Averages in the intermediate timeframe. While there was "hope" the Eurozone had "solved" its crisis we all know better now, don't we. Unfortunately it will take a stock market crash or a sovereign debt meltdown causing a market crash before Europe is forced to come to terms with its problems. Here are the updated charts of our major indexes.

Market comments for the coming week of Dec. 5th.

I thought it was time to post on the stock market again. The main points to make this week are that all Indexes, except the Dow, are still below their 200 day Moving average line, shown faintly with the yellow lines on each chart below. The second point is that while the Dow remains above the downward sloping red line, the Russell has remained below it the most. The Dow is most likely the most manipulated Index and the Russell the least. My opinion is that this shows the tendency is still to remain below these red lines in the intermediate timeframe.




This week will have its important announcements. The biggest news item will be the European meeting, scheduled on Dec. 8th and 9th, of Finance ministers to discuss resolving the Sovereign debt issues of Greece, Italy, Spain, Portugal and others. This will be the most important meeting of the last year as it is the first since the coordinated Central Bank intervention to lower the rates banks pay to increase reserves. The Central Banks took this action because there was an immediate concern of a large bank failure in Europe. Our markets will react to what happens there, not here.

Stock market: Where are we going?

I thought it would be worthwhile to look at this past week and see where we ended up. In my last Blog post, I cited the fact that the 200 day Moving averages appeared to be a significant resistance level for all major indexes. This week proved that point again as we ended the week with only the Dow above the 200 day MA. The S&P 500, the Nasdaq and the Russell 2000 all are still below their 200 day Moving averages. Until we can climb above these indexes we are stuck from going higher.

The Put to call ratio closed the week at 0.93, not exactly a buy signal. The sovereign debt issues in Greece and in Italy took center stage in the early part of the week. Then the resignation of Greece's Prime Minister and the signal that Berlusconi of Italy may resign next. ALL THESE MOVES CLOUD THE FACT THAT THE DEBT ISSUES AND AUSTERITY MEASURES NEEDED TO RESOLVE THEM HAVE YET TO BE IMPLEMENTED. Stay tuned as the volatility will continue for the next 6 months. Even if austerity measures are passed by the governments, the people will be heard on these matters in ways that will frighten many. The people have only begun to make their objections known to the world and their leaders. In true democracies, leaders can be voted out or feel enough pressure to resign. This crisis is just in its infancy.

Don't forget that there are now only 11 days left before our Super Committee must agree to cuts in spending or automatic cuts in the military will be implemented. My guess is they won't do what's necessary and the US will be downgraded again by the S&P and Moody's rating agencies.

Here are the charts promised earlier:

Market comments for Nov. 9th, 2011

Sorry I haven't posted recently, I was away back east to see my Mom and when I returned I had caught a very bad cold. But I'm back now and let's get at it.

I have watched the rise of the Dow recently as well as the other indexes over the 200 day Moving averages. But todays drop of between 200 and 300 points this morning, shows the strength of the 200 day MA line as a resistance level. The market actions have not made sense given the news in Europe and the fact that our own government may get downgraded as well for a second time. Greece has not really solved its problem but they did replace their leader. Italy may replace its leader as well, but replacing the leader doesn't solve this crisis in either countries and more than it would here. The problems are similar and the pain will have an impact and it is human to avoid pain. So my guess is that these problems will unfold stubbornly over time. The only solution I can see is a breakup of the EU in some fashion. Either the countries of the south like Greece and Italy will not be part of the EU anymore and possibly Portugal, or the entire EU will eventually dissolve.

Below are the charts for the Dow, S&P 500, the Nasdaq and the Russell 2000 with their 200 day Moving Average lines. Unless the market can stay above these levels we are headed lower. Needless to say, it may be true again that the last rally we had was a bear trap. More on that over the weekend.

Markets rally strongly. What's next?

Markets rallied strongly on the Euro zone deal to solve the debt crisis in Greece. It's just a fact. The Dow surged to close at 12,208, the S&P rallied to close at 1284, the Nasdaq to 2738 and finally the Russell rallied to 765. All of these Indexes, except the Russell, surged above their 200 day Moving Averages. They all made a significant breakout, which can't be denied. And they did it on stronger volume, always a good sign for Bulls. This surge makes it possible for the averages to go back to the previous recent highs. For the Dow, that would be about 12,800. For the S&P 500 that would be 1360. For the Nasdaq that would be 2870. And for the Russell it would be first getting over the 200 day MA at 790, but then going on to 860. All this now becomes possible again. As I said, it's just the facts.

We had good economic news coincidently with this market move. GDP for Q3 came in at 2.5%, healthier than some low predictions of 1.5%, but not as strong as the highest ones which were at 3.5%. Initial Jobless claims were still over 400K this week coming in at

Can the markets reverse where they are now and go down? Yes, but if they do one might consider buying on the dips. Remember when we did that long ago? I do.

I have said to watch Europe and the DAX for clues about this market as we have been following Europe. Well the DAX and France's CAC as well as other european markets also surged today.

I have placed 1 year charts of all the Indexes below.

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.

Stock market trend: Where we're headed

I have a series of charts this morning, but a little different than previous charts in that each are Weekly charts instead of the usual Daily charts. The value in these charts are that it takes out some of the noise and daily volatility, which makes it more difficult to discern trends.

The charts below, with the exception of the German DAX are all weekly charts covering the past year time period. You will notice there are 100 Day & 200 Day Moving Averages on the US Charts. Oh and if you look at World stock market charts, they appear basically the same.





This last chart below is a Dow 5 year chart and I have drawn many lines showing various support and resistance lines. You can see that for our current time period I have drawn the same slanting downtrend, but now there is a larger context to see this timeframe and possible key levels which will either confirm we continue to drop or we have broken above resistance. For those who are believing we are going to go up from here, pay attention to the red line which crosses at 10,500 on the right axis. If we break below that, we go to the 10,000 level. Also see the red line which crosses at 11,500. That is the tiny box which defines either a rally or a major decline.


I think you get the idea now. The trend is down, we have not really gone much above the lows and it looks as though we are going lower in the weeks ahead. If you doubt that, then buy stocks and Call Options. There will be many willing to sell you their stocks.

Stock market trend and prediction going into September and beyond

It's the weekend and we have time to think, rather than do. So this morning I am going to put up a number of stock market charts and analysis to try and make sense of where we are and where we are headed. It has been a tumultuous few weeks and many are glad we have them behind us now. The past 2 days advance to yesterday's August Options expiration got many nervous. They thought we were on our way back up this week only to finish down, back at or near the recent lows, depending on which Index and Country's stock market Indexes you were looking at.

With that background, here are some 3 month charts of selected European Indexes, which should help you conclude that the recent drop in US stock markets isn't just about the US. But first 3 charts are of the US Indexes; the Dow, S&P and the Nasdaq. Then I have followed them with commentary and with charts of German DAX, France's CAC and finally Japan's Nikkei. All are 3 month charts and the thing to focus on is where are the indexes now, the similar patterns and whether the recent drop is slanting down or up or flat. If there is a predominance of slanting down below the other recent low points, we are going down more. Now the charts!

The Dow chart shows we are nearly flat across the low points. You will see in the S&P chart below, the same is true.


You can see the there is a biased slant down on the Nasdaq as this chart above does point a further down move.

The DAX also shows a slanted move down below earlier lows.

The CAC is flat at the lows, like the Dow and S&P.

And lastly, the Nikkei slants down significantly.

So what does this all mean? Well, I ask myself the question, Which world indexes are extremely important right now and which have been long term indicators of either prosperity or leading the way down. Those indexes have been the Nasdaq here in the US, Japan's Nikkei and Germany's DAX index. To me they all say we are headed down lower. You will have to make up your mind which tea leaf you will follow. Good luck on that.

One other important thing I look at. I look at the longer term chart. Here's the Dow going back about 30 years. You can see from the chart below, we are forming a head and Shoulder pattern over this period and it looks as though it has completed the formation of the right shoulder and it is a slanted down pattern.

This signifies we may ultimately be headed down to retest the lows of 6,400 eventually and may not hold at that level. Given world events which seem to be changing daily in a negative direction, I would not be surprised to see this scenario to play out. Anther thing to remember is this, markets tend to rise much more slowly than the speed of which they go down. This chart shows that clearly.

Looking at roughly the same period for the Dow/Gold ratio you will see the high point is at year 2000. All of these points were taken at 1/31 of each year, except the last point and that is Friday's data. So the trend for the ratio is continued down. The implications for this are that either Gold will continue to rise to get the ratio back to the 1-2 level again or the Dow will drop significantly while Gold either stays high at current levels or goes down some at the same time. For the Dow/Gold ratio to be at 2, then either the Dow must stay at 11,000 and Gold goes to $5,500/ounce. Or Gold to stay at $1800/ounce then the Dow must drop to 3,600. Neither scenario will really happen but adjustments to both are a more realistic possibility. Assume for a minute the Dow does go and retest the 6,400 level, and Gold pulls back to last years level of $1200, that would yield a Dow Gold ratio of 5.3, which is very close to where we are today!!

This last chart below is my short term read of the top limit of any dead cat bounce of the Dow. You will notice the last false bounce above the red line and decline to follow the earlier trend down. This was a bear trap. I stepped in it and had purchased some TNA Call Options thinking we were on our way up again as we did before. I was wrong, but luckily didn't buy many. Watch for more of these false moves, as I believe we are in for a steady, but jerky decline. That red trend line shows that we could still reach back up to the 11,000 level, but as the slope of that red line indicates it will be short lived.

So with European debt rising quickly and many countries unable to pay their debt, we are facing country defaults, not just company defaults. Think of Lehman Bros. when you think of market reaction and multiply that by 10 to see the implication of a country default. I wish and hope it is not so, but one must be prepared for the worse and survive it. Good luck to you. Where do you think we are headed? Comment below if you like. I screen comments only for improper language, so there may be a delay before you see your comment posted here. Thanks!

Market comments for Aug. 12th, 2011 (UPDATE)

Yesterday we did rally on the lower Initial jobless Claims data, but let's be honest here, the data was not that great for such a strong rally. Yesterday's charts give conflicting signals to me for a short term read on direction. I have put together 4 charts for today. One on the Dow, one on the S&P 500, one on the Nasdaq and finally the last one on the Russell 2000. I have drawn some lines on each chart. Some show that the trend looks down from here, others show up from here and one shows stagnant and staying at this level. So we will need more days of data for clarity. Here are the various charts:




From these charts above you can see that the long steep downward move hit a bottom, rose back up a bit dropped again and then rose up again. This second move up did not convincingly go much higher than than the first bounce. In fact, depending on which index you look at, the Dow actually came in below the first bounce. I will need today and tomorrow's market action to get a better sense of near term direction. The Volume though has been extraordinary for a summer month.

Also, of interest from yesterday's Volume was the chart below of the Dow in 1/2 hour increments and the Cumulative volume up to that time. In the last 1/2 hour yesterday, the Dow traded 146 Million shares!


Retail Sales data released this morning for July was +0.5%. Expectations were for +1.0% and the data from June was only +0.1%.

Michigan Consumer sentiment data will be released in 1 1/2 hours and I will post it as an update. Futures initially responded slightly up from the release of the Retail Sales data.

UPDATE: 7:01am PST

Consumer Confidence came in at 54.9, which was the lowest reading since May 1980!! When the data was released it reversed, from being up 140 points on the Dow to being up only 50 points. This is a contributing factor to why the Fed most likely thought they needed to keep interest rates very low through to 2013. To put today's number into perspective, last month Consumer Confidence came in at 63.7 for July.

Several US Indexes drop below 200 day Moving Average. (UPDATE)

Many US Indexes are now below their 200 day Moving Averages. These include the S&P 500, the Russell 2000. The Dow's 200 day MA is currently at 11,995, so we aren't far from it now. The Nasdaq 200 day MA is at 2710 and we are not far from that as well. So look for these 2 indexes to get there this week. Whether the 200 day MA proves to be a strong resistance to climb back above will have to be seen. Much depends on the outlook for GDP for this 3rd quarter. But the trend now is not good and it appears the market and the Dow will not have its expected strong rally to 14,000 any time soon.

UPDATE: 10:50am PST

The Dow and Nasdaq have both now gone below their 200 day Moving Averages. The Dow has hit a low at 11961 while the Nasdaq has gone as low as 2696, which means all major US Indexes are below their 200 Day moving average.

Market comment for June 7th

As I said on my post over the weekend, this week i most critical and if we broke below the current uptrend line, we were heading much lower. Well we did go below that line and broke below some key levels. For the S&P 500, it was the 1300 level, for the Russell 2000, it was 800 and both those were broken today. The Dow key level is 12,000 and we are close to breaking below that level as well and on the Nasdaq it is close to going below 2700.

From the chart below of the Dow, you can see that the steepness of the drive down has accelerated as is shown on the 3 month chart and the 2 trend lines drawn in Red.


Expect this drop lower on the Dow to continue as we are going to test the previous low of 11,600 soon. And in my view, this is just the beginning inning of the correction. Don't forget though that markets don't go just straight down. Expect a bounce up but it will be a lower high than previous points followed by new lower lows.

I must make one statement about Rep. Anthony Weiner. The truth is I don't care what he did in his personal life regarding taking and sending photos of his crotch. What did bother me was his lying about it from the beginning. He would have been better served to tell the truth form the beginning and gone on with his life. Instead, he now is living with the embarrassment he tried to avoid from the beginning except now, we know he also lies. It doesn't change the facts that he has been a very good voice for the Democrats, which now has been silenced, at least for a while.

Market comments and a little of politics for Memorial Day weekend.

OK, the stock market month of May ends after the close of trading on Tuesday. Yesterday the Put to Call ratio closed at the lowest level since January 13th, Friday closing at a 0.70 reading. Also the Intraday low of that day, hit 0.56 at 10:00am EST. This might be another signal that next week expect a selloff to a lower low of at or below 12,200 on the Dow, at or below 1300 on the SP 500, at or below 2700 on the Nasdaq and 800 or below for the Russell 2000. If this happens, you can count on a continued decline with lower highs and lower lows occurring as we approach the critical legislation required to increase the debt limit ceiling for our Government. This legislation must be approved no later than the first week of August.

On a side note, it is ridiculous that this debt ceiling legislation is being held hostage by Republicans because even if Democrats folded and agreed to every single debt reduction the Republicans want to make, including destroying Medicare, the debt ceiling would have to be raised.

I want to salute all those who have served in the service of our country and especially the Armed Forces and various branches of our Military. We have paid a dear price in blood and treasure for our freedoms, even while several freedoms have been restricted for the sake of fighting the "War on Terror". Even this week an extension of the Patriot Act was enacted by Congress and signed by the President. You would think with the ability to Wiretap and listen into conversations both domestic and foreign, we would have built some strong cases against those on Wall Street who have scammed the government and the American people of Trillions in tax dollars. Most in the Middle Class are struggling to survive because of the financial crisis, caused by these so called professionals. The only person in jail is Bernie Madoff. It makes me sick. But for now, enough of politics for the moment. :)

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.