Every Sunday evening a full market review is sent to members of SelfInvestors.com which provides commentary on the technical and economic picture, a review of the SelfInvestors Model Portfolio, the best/worst performing industries and ETF’s for the week, IPOs to watch, upcoming economic reports as well as notable earnings reports. In addition, on days when the market makes a significant move I’ll highlight the technical action discussing price/volume movements and support/resistance levels, industries/sectors leading and lagging the market as well as a Stock of the Day. In the past these were sent in the middle of the trading day but I’ve since begun publishing them and sending them to members after the market closes. These reports will be archived here as well.
In my last weekly report I commented on the hope and optimism of the looming Geithner announcement and highlighted the fact that the euphoria of government bail out plans usually wears off quickly, often resulting in sizable sell offs. Geithner’s press conference on Tuesday which was heavy on rhetoric but lacked sufficient details, was no exception. It was met with a prompt and fairly intense sell off on Wall St leaving the indices badly bruised and once again in position to take out critical support levels. On Thursday that’s exactly what happened. Both the Dow and S&P broke down out of their bearish, descending triangle formations and with 45 minutes left to go in the trading day and the market on the verge of complete collapse, Reuters broke the news that the Obama administration was working on yet another bail out by subsidizing mortgages to help avoid the continuing avalanche of foreclosures. ….
Well, those battle tested bulls were able to hold the line for another week and even showed a bit of life at the end of the week, rallying in hope and anticipation that Super Geithner will swoop in and save the day Monday with his bank band-aides. Let’s just keep in mind what has happened in the past following these government initiatives.. the euphoria wears off in a hurry.
Whether that happens this time around remains to be seen, but for now the indices maintain critical support levels but still confined within bearish descending triangles with much overhead resistance to contend with. The song remains the same in this market: don’t chase rallies and only buy on pull backs. If in fact this market rallies again either before, during or soon after the Geithner press conference (update: it looks like this may be delayed until Tuesday), do avoid chasing it!
In my report last week, the theme was resiliency. I highlighted the fact that the indices were able to hold onto key support areas in the face of bad news, setting up the possibility of a retest of the 50 day moving averages. I’ll call this week’s theme a “return to frustration” with the Nasdaq and S&P failing again at the 50 day moving averages.
While the indices have been showing an increasing amount of resiliency and improving technicals over the past 2 months, any rally has been short lived with that 50 day moving average proving to be tough area of defense for the bulls to push through and hold above. That was certainly on display again last week. The market rallied with good volume on the day of the Fed announcement closing near the highs of the day. Both the S&P and Nasdaq even managed to clear the 50 day moving averages as it appeared the market may be ready to start moving higher again and once and for all use the 50 day moving average as a springboard for further gains. I certainly liked the action and put on just a bit more exposure on the long side, but remained a bit skeptical of the move knowing the market often traded the other way the day after a Fed decision. At the end of the day on Wednesday, I sent the following note to my premium members:
The theme for this week was a return to resiliency. We began to see good resiliency in the market back in December despite the constant barrage of negative news and managed to attack the 50 day moving average 3 times, eventually pushing significantly above at the tail end of 08. The oversold conditions set the market up for a profit taking situation but as the financials began to fall apart again, traders took profits… and took profits.. as the indices find themselves once again submerged below key resistance of their 50 day moving averages.
I’ll call last week’s trading resilient stabilization. The market didn’t go anywhere, but let’s keep in mind that despite a 350 point plunge on inauguration day the market was unable to follow through and quickly bounced back above support. The next 3 days, the market sold off in the morning to key support levels and held each time, staging healthy rallies. This despite another financials free fall, awful earnings from Microsoft and GE as well as an avalanche of job losses.
I’m back! After more than a week in beautiful Troncones, Mexico I’m ready to get back to work and recharged for the coming year! While I was away the market worked off overbought conditions in a way that was .. I’d say a bit less than healthy as the indices broke through support of the 50 day moving averages with increasing sell volume. I really wanted to see the indices work off overbought conditions by trading somewhat sideways along the 50 day moving average, but traders clearly wanted to lock in profits after a nearly 30% move up offer the late Nov lows.
The action didn’t look good heading into late Thursday morning. We got a big distribution day on Wednesday, sending the indices convincingly below their 50 day moving averages with a continuation of that downward pressure Thursday morning. However, with the market getting into very oversold levels and the Dow down 7 straight days, it was time for a bounce ..
It’s been some time since I’ve put together the weekly report. Between the power outages, the holiday festivities and a big upgrade here at Self Investors of all software and a move to a new server, I’ve had little time to post here at the blog. That will continue through the middle of January as I’m taking off for a week of vacation in Mexico to recharge the batteries for 2009. I’m excited about the coming year and hope you’ll continue to join me as I navigate the wild waters that is the stock market.
The market has certainly improved over the past several weeks and I’ve been highlighting the ability of the market to shrug aside bad news and hold steady or even rally for decent gains. In recent days the indices have begun to battle that pesky resistance of the 50 day moving average and last Friday managed to really bust through in a big way, albeit on light holiday volume. On Dec 30th I sent members a report on the current market discussing the renewed vigor of the indices as they tested the 50 dma again.
“Is the 2nd time a charm? For the 2nd time this month, the indices are attacking major resistance of their 50 day moving averages. With the first test a couple weeks ago, I cautioned against getting too aggressive because of overbought conditions. The market had just come too far too fast off the Nov lows and needed to rest and work off overbought conditions. With a bit of holiday rest, and overbought conditions no longer an issue, it appears the bulls may have their legs back with a nice follow through today on yesterday’s late day recovery.
Last week I discussed the resiliency of the market and the increasing ability to hold up or even rally in the face of bad news. That resiliency was on display again Friday morning as the indices sold off ahead of the open on news the Senate failed to pass the auto bailout and more details surrounding the Bernard Madoff 50 billion dollar ponzi scheme, but began rallying almost immediately and closed with a decent gain. Traders were probably pricing in to some degree that a short term resolution will come from the White House with a longer term plan implemented once the Obama administration takes control of the ship. My feeling is that once some kind of plan is officially announced, we’ll get a decent move up but just as we’ve seen from other government intervention, the rally will be fairly short lived as reality sinks in. Continue reading Madoff Ponzi, Failed Auto Bailout Not Enough To Spook Market→
One of the key ingredients for me in trying to determine if a market rally is near after a sustained sell off is how the market reacts to bad news. That was the theme over the past week and I discussed it with my members a few times. On Monday traders came back from the Thanksgiving break and took profits in a big way resulting in a nearly 700 point plunge in the Dow. However, my sentiment changed over the course of the week as the market not only held up, but managed to rally following a flurry of bad news.
On Wednesday evening I commented to my members that my sentiment was changing a bit to the bullish side…
“Yesterday the market was not able to follow through on the sell side. In fact, as quickly as the market fell off a cliff at the end of the day on Monday, the market wiped away those losses very quickly yesterday morning. Most of the gains were wiped away late in the trading day, but the market rallied furiously on hopes that an auto bailout is on the horizon. As I mentioned to premium members last night, it was a positive day in that the bleeding had been stopped in its tracks and support levels in the Dow and S&P held up. However,it wasn’t until today that I decided to shift the portfolio from slightly bearish to slightly bullish. Why? Continue reading Much Of Bad News Priced In As Market Showing Increasing Strength→
Was the last second Geithner rally on Friday enough to save the indices from the abyss? That is the question I ponder this week. In last week’s report I discussed the developing triple bottom and the well defined support levels that had held for over a month on a few different occasions, setting up the potential for a market rally heading into a historically bullish time for the market….
But it all fell apart on Wednesday afternoon as buyers were nowhere to be found. My notes to premium members captured my change in sentiment.
(10:34:50 AM): That relief rally fell apart in a hurry and the Nasdaq
has taken out the lows of the correction now. I should have scaled
into a hedge up there.. still looking to add one but want to see some
sort of a bounce.
(10:35:48 AM): SPY and Q’s still have support of yesterday’s lows..
just barely.