The Rally Is Rolling Over, Test of 50 Day Moving Averages Likely

I’ll keep it brief and to the point in this shortened Memorial Day weekend edition of the weekly market review/preview.  The market appears ready to roll over with the indices possibly confirming a double top formation in the coming days.  Take a look at the Nasdaq and S&P, both of which nearly retested the May highs before selling off and taking out the 20 day moving averages (the first time the S&P has traded below the 20 dma two consecutive days since the rally began in March).  If in fact the indices take out the May lows (and it looks like they will), that would confirm a double top formation and a likely test of the 50 day moving averages (in blue).

On Wednesday night I made the following comments to my members:

“Today’s high may have marked the top…

After Monday’s big move and the way the gains were held Tuesday, I
commented to Gold members last night that a move to the 200 day
moving averages in the S&P (around 940) and Dow (around 8800) is
becoming more likely. We may not get that far.  While the market
staged a decent rally in the morning today, that rally completely
fell apart following the Fed minutes.  It may have had something to
do with the Fed waking up to reality and revising their estimates for
GDP and unemployment downward. 

Technically, there are a few major bearish implications of today’s
move.  For one, it was another high volume reversal and a close near
the lows of the day.  In addition, the indices confirmed a head and
shoulders top formation on the intraday charts and a possible double
top formation on the daily charts.  Tomorrow’s action will be very
telling.  During most of this rally, the market didn’t follow through
to the downside after days of significant weakness like this, so a
big plunge tomorrow would indicate a change of character and likely
mark a top to this rally.”

Taking a look at the chart of the Nasdaq reveals a break down back below the 20 and 200 day moving averages with a likely retest of 1665 coming soon.  A break below that level confirms a double top and sets up a test of the 50 day moving average at the  very least. 


The S&P has taken out the 20 day moving average as well as the up trend channel and looks poised for a test of the 850ish level at the 50 day moving average.  Volume has been light ahead of the holiday weekend, so we’ll have to see if the deterioration in this market picks up once normal trading volume resumes towards the latter half of next week.  Tough resistance around the 900 level, so a close with volume above that level would indicate bulls are back in control.  I think those odds are slim at this point.



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::: Best/Worst Performers :::

– Top 10 Performing Industries For the Week –

1. Hospitals: 15.15%
2. Internet Service Providers: 13.50%
3. Gold: 11.95%
4. Silver: 10.65%
5. Copper:  9.35%
6. Recreational Goods: 9.05%
7. Steel & Iron: 8.65%
8. Nonmetallic Mineral & Mining: 8.60%
9. Foreign Regional Banks: 8.05%
10. Beverages – Brewers: 7.80%

– Top 10 Worst Performing Industries For the Week –

1. Banks – SE: -7.45%
2. Banks – Mid Atlantic: -6.95%
3. Banks – Pacific: -6.50%
4. Home Health Care: -5.95%
5. Health Care Plans: -4.40%
6. Medical Equipment Wholesale: -4.30%
7. Savings & Loans: -4.25%
8. Banks – Midwest: -4.20%
9. Home Furnishings & Fixtures: -3.65%
10. Industrial Equipment & Components: -3.50%

– Top 5 Best Performing ETFs For the Week –
(excluding leveraged ETFs)

1. WisdomTree India (EPI) 22.75%
2. iPath India (INP) 21.20%
3. Morgan Stanley India (IIF) 18.05%
4. India Fund (IFN) 17.20%
5. Market Vectors Gold Miners (GDX) 11.70%

– Worst 5 Performing ETF’s –

1. US Natural Gas (UNG) -14.45%
2. Morgan Stanley China (CAF) -11.45%
3. SPDR Banking (KRE) -6.25%
4. Herzfeld Caribbean Basin (CUBA) -5.45%
5. iShares 20 Yr Treasury (TLT) -4.60%

::: Upcoming Economic Reports (5/25/2009- 5/29/2009) :::

Monday:        None
Tuesday:       Case Shiller Home Price Index, Consumer Services
Wednesday:  Existing Home Sales, Crude Inventories
Thursday:      Durable Goods Orders, Initial Claims, New Home Sales, Crude Inventories
Friday:           GDP, Chicago PMI 

::: Earnings I’m Watching This Week :::

Monday: Giant Interactive (GA)

Tuesday: Canadian Solar (CSIQ), Cellcom Israel (CEL)

Wednesday: Autozone (AZO), China Finance Online (JRJC), China Nepstar (NPD), China Sunergy (CSUN), Netezza (NZ)

Thursday: Costco (COST), Freeseas (FREE), Trina Solar (TSL)

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