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.

Market comments for Nov. 18th, 2011

Today is Options Expiration for November so you should see high volume both at the opening of thew market today and also at the close. Troubles today in the Eurozone seem to be taking place behind close doors rather than in the press, so the Futures markets are up some as we go into the open. The economic data this week was somewhat better than expected with Initial Jobless Claims at 388K for the first time this low in a long time. Housing starts were also higher than expected. All good signs of a slightly better economy in the US with the emphasis on the word "slightly."

We have broken below that key support level of 1220 on the S&P 500 closing at 1216, but today we may go back above it.

An update and analysis of the S&P 500 chart

Back on Oct. 23rd I posted this chart and commentary about the S&P 500 and where it might be headed. I think a review of that post seems appropriate as not much has changed since then. Let's see the chart and here's what I wrote then.

"I have drawn 2 red lines and 1 blue line. As you can see with the red line labeled 1, that we have broken above this level this past week. The next challenge for the Bulls is to cross over the red line 2 which crosses the axis at 1240. If it crosses above 1240, then the obvious next resistance level is at 1265. The S&P 500 closed Friday at 1238. I can't guarantee that we won't go up to test the 1265 level, so you might want to entertain the possibility, depending on the news coming out of Europe, we could surge up this week and test it. If the news is mixed from Europe, we may stay between that narrow wedge between both red lines, between 1220 and 1240. But there will be a breakout soon in one direction or the other."

At this hour today, the S&P 500 is at 1246 and the chart has been updated below. Again, not much has changed. We are still below the 200 day Moving average and that line is slanting down.

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.

Where's the S&P 500 headed?

I thought I would reward those frequent visitors with a second post this weekend. Today's chart is of the S&P 500 and I have drawn some lines on this 1 year chart, as to where I believe the S&P has resistance and will be difficult to overcome. First the chart and then the commentary.

I have drawn 2 red lines and 1 blue line. As you can see with the red line labeled 1, that we have broken above this level this past week. The next challenge for the Bulls is to cross over the red line 2 which crosses the axis at 1240. If it crosses above 1240, then the obvious next resistance level is at 1265. The S&P 500 closed Friday at 1238. I can't guarantee that we won't go up to test the 1265 level, so you might want to entertain the possibility, depending on the news coming out of Europe, we could surge up this week and test it. If the news is mixed from Europe, we may stay between that narrow wedge between both red lines, between 1220 and 1240. But there will be a breakout soon in one direction or the other.

I do not see a rosy outlook in the markets unless the government would rather continue to prop them up. The day of reckoning will eventually come, both here and in Europe and when it does, it will infect the rest of the world. Much of the media's attention has been on China lately as well. This economic crisis and debt crisis, which has caused a slowdown in Europe and the US, is already affecting China. I am watching India, as I see India as the canary in the coal mine. Here are some headlines from India as of this morning to emphasize my point about India:

- States must reduce fiscal deficit since debt position has become difficult in many states: Montek
- PM wonders if 9% growth feasible. The government now expects growth of close to 8 percent this fiscal year.
- India can achieve 8-8.5 pc growth despite global crisis: PM Manmohan Singh says India can 'swim against the wind blowing from abroad'.
- Food inflation back in double digits. Inflation rises sharply to 10.6 pct for week ended Oct 8 from 9.32 pct.
- Mineral output down 5.99% in Aug. India's production of minerals was valued at Rs 13,378 crore, the government said today.
- Consumer Price Index jumps 1.2% in Sep. Expensive food, clothing and fuel pushed up the CPI by 1.25 per cent in September.

So keep your eyes and ears tuned into what is happening in India. Here's the latest piece of news about the Stock market:

Mumbai: Taking positive cues from the US markets, Indian bourses may open with gains but the mood is likely to stay cautious as the RBI meets on Tuesday to take stock of inflation and European leaders moot a solution to the eurozone debt crisis, say analysts.
The BSE benchmark Sensex last week shed 1.73 per cent on high inflation and mixed global cues with downward bias.

"Stock market will trade taking cues from day-to-day basis as this week is going to be an eventful one.

If you too would like to follow the news in India click here to India's Financial Express.

Market commentary for Oct. 4th, 2011

Tuesday's charts are of a longer period than previous charts for a while. I have put together charts of the Dow, S&P and Russell 2000 each for 3 year periods. I have drawn a number of red lines showing where support is and where you can see we may be headed. First the charts and then some commentary:



The Dow broke below recent previous lows and while it barely is below those lows, the trend looks like we are going lower. The bottom of the Dow's range is 10,000, which is 655 points lower from where it closed today. We could just as easily climb above today's lows, but we should be going lower, as the news in Europe has not solved the Greek Debt crisis and Greece today said they did not reach their goals around there promised austerity targets they had committed to the EU. That was a major reason the markets ignored good news today regarding the ISM number which came in at a 51.6 reading against an expectation of only 50.0.

The S&P500 shows a larger drop against the previous lows and the Russell 2000 shows an even greater drop. By the way, Germany's DAX Index is also going lower as is the CAC40 and FTSE, but I didn't put up those charts today. News isn't mattering these days. Lowering ones risk is what is driving the world markets now!

Stock market direction? Nothing has really changed!

Since the beginning of August, when the stock market had its big drop based upon the announcement of the Fed that they were going to keep Interest rates low until 2013, nothing much has really changed. We have been in a tight range that does't feel so tight because of the high volatility. One week we are just below 11,000, wondering if we are going to hold support here or go lower and the next we are back up to 11,500 wondering if we can break much above this apparent resistance level. It has been worrisome for most investors but not for day traders. The best day traders are making some money, but the rest of us watch in disbelief.

I have compiled some 1 year charts below to reiterate and reenforce previous posts where I said we are in a tight range but now we are closer to a breakout, one direction or another. I have stated many times I believe this direction is lower, so no sense repeating much more than that.

This week Germany's Lower House of Parliament approved increasing the proposed EFSF (European Financial Stability Facility) expanding the euro-area rescue fund's fire power to stem the region's debt crisis. To read more about this Fund and the politics in Germany over this issue, click here. This seemed to move their stock market higher but as the week progressed you can see in the charts below, it pulled back.




You can see I have drawn red lines showing support levels and Blue lines showing resistance levels. You will also note that since the drop in August we have stayed below the 50 day moving average consistently. This line might be a good indicator to track market direction so that you are not fooled as we many during the Bear Trap so noted on a number of charts by the blue circle covering their mistaken purchases. Use these charts as a reminder of where we are and above all remember the Fed doesn't think we are going to get better until at least 2013!

This coming week on Friday, we will get the Unemployment rate for September. This could move markets. Also on Monday be watching for the ISM Index at 10:am EST or 7:00am PST. Expectations are for a reading of 50.5 and the previous month the number was 50.6. I expect the number to come in at 50.0 or less, given the lack of business activity there was in September. Earnings also will be front and center now for the next 4 weeks. You will be hearing about "beating expectations" by companies. Remember, these predictions were lowered last time so that beating these expectations should not be difficult.

Stock market summary and look ahead.

As predicted in yesterday's post, the markets sold off. The Dow closed down 303 points to 10,992, again breaking below the 11,000 level. Looking at the 3 month chart of the Dow, it has been easier for the Dow to go below 11,000 than it has to go over 11,500. The pressure is to the down side. And all the news is to the downside as well. You can see from the chart below that the blue line of the 400 day MA is proving to be resistance as well.

A big test for the Dow is soon coming. The 52 week low is at 10,458 and this will be tested and new lows will be set, in my opinion.

I was at a Berkeley Art Gallery (ACCI) opening show for some of my wife's art and her friends last night. It was a good show. One of the artist husbands and I were discussing the big drop in the market yesterday and he suggested that the drop was because of President Obama's speech. I suggested that this was not the reason for the drop and that it was the European Central Bank's Chief Economist quitting over disagreement with the purchasing of Eurobonds by the ECB. (read yesterday's post). European turmoil will continue to lead our markets direction and I fully expect it to get worse with all markets eventually returning to test the lows of 2009. This level corresponds to 6,400 on the Dow, 675 on the S&P 500 and 1300 on the Nasdaq.

Caution is the word going forward. If you are in cash, you have no worries about the market. If you are long this market I would be protecting my assets by either selling some stocks and taking some money out of the market, or I would hedge my longs with some shorts or even buying some ETF's which go in the opposite direction of their underlying stock Index. This is no time to be taking big risks. The Put to Call ratio has been over 1.00 for the past 29 out of 31 trading days. That is extraordinary!

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!