Market Summary

This last week painted a mixed picture or so called “fractured market” in the financial markets. In a trending market the major indices tend to travel together in the same direction all going up or down together. When they become disjointed with some going up and some going down on the weekly price performance numbers it can be a sign of consolidation or an impending market reversal. For the week gold per the GLD did the best up 5.28% and gasoline per the UGA did the worst down 4.30%. Click on table to enlarge.

The sector graph below shows the same number of green and red sectors as last week however what is notable is the improved performance of the Industrial goods sector compared to last week and the worsening of the Financial sector from last week. Could it be that a report by the Commerce Department that US Durable Goods fell less than expected produced the uptick in Industrial goods? It is funny how once the bad news is out that the markets will rally. As for the big banks many of them came out with earnings this last week. And while they reported better than expected earnings the question remains why then do they need a federal bailout? I am keeping an eye on the financial sector as it has been the leader in this market both to the downside and upside. Click on graph to enlarge.

As I mentioned last week we have a rising wedge formation as a chart pattern on the S&P 500 which broke through the support line on Monday. And while the market did not continue going down after the break of the support line on Monday it was not able to get back up to the prior weeks high of 875.63 or this weeks high of 868.27. A break above 875 and the next level of resistance is the 930 area. However, a break below last weeks low of 826.83 and next target is in the area of 800 and then 750. The weekly chart candlestick pattern is that of a hanging man which is bearish. The daily chart of the S&P 500 below shows the break in the rising wedge and the cross of the MACD indicator (blue line) below its moving average signal line (red line) which is also bearish. My feeling is that we have more to go to the downside however which way the markets go we will just have to wait and see. Click on chart to enlarge.

Market Summary

Another good week in the markets, but we are fairly overextended. This has been six weeks in a row now the markets have been up and we are due for a pull back. We have had the best rally in 76 years comparatively speaking off the March 9 lows. The S&P500 is up 30% and the Dow is up 25%, the NASDAQ is up 32%, and the Emerging Markets are up 40% off the lows. Since the markets move together they form similar chart patterns and now we have a rising wedge formation which is bearish and indicates a move to the down side in the markets once the bottom support line has been broken. While I can not say for sure, that move to the down side could occur next week.

The Russell 2000 small cap index was the best performer last week up 2.39%. The worst performers were the commodities with oil down 4% and gold down 1.26%. If we have a big move to the down side in the other markets gold could rally. GLD is currently resting on top of its 200 day moving average. Click on table to enlarge.

We have added another sector to the upside from last week and now have 3 sectors in the green. Click on graph to enlarge.

As I mentioned we have a rising wedge formation chart pattern which portends of a correction to the downside in the market. We are at a critical place in the market at the apex of a triangle where it will either have to break out to the upside if the rally is to continue or break down. A breakout above 885 and the next target would be in the area of 943. The more likely scenario would be a break down to the downside. A break below 850 or lower and the next target would be the 790 area, then 775, and 750. Click on chart to enlarge.

Note that since markets move together we can get feedback from the other markets as well. When the generals are starting to roll over the market is likely going to follow them down. Remember, markets go up three steps and come back two steps. A break in the Dow below 7960 and the next target in the Dow would be the 7500 area. Many of the markets are up against their 200 day moving averages which is overhead resistance and a place from where they are likely to bounce off of. Other markets up against or near their 200 day moving averages I am following include $HGX, $NDX, $SOX, $TYX, $XAL, $XAU, $XBD, AAPL, EEM, EWH, EWZ, FSAGX, FXJ, GLD, GS, INTC, NEM, PTR, QQQQ, RTH, RYL, S, XLK, XLY, and XRT.

Happy Easter

Today we celebrate the resurrection of Jesus who has demonstrated that there is no death. And while the markets have not died how much they can rise remains to be seen. The rally off of the March lows has given new hope to the faithful bulls and eased the pain of the many who have watched their 401k’s plummet to half their value in the recent past. What has become obvious is that the fall in the stock market was the result of a collusion between borrowers and lenders acting together to make liar loans on real estate which were then sold off with AAA rating as Mortgage Backed Securities. And while the worst of it may be behind us there is no guarantee of that and how long this recovery takes is also uncertain.

This past week the big gainer was the Russell 2000 small cap index up 4% followed by the EEM emerging market index which is also in the lead spot behind gasoline for the year to date performance. Click on table to enlarge.

We are finally seeing some green in the sector graph below in technology and basic materials. Success in investing may be more about being in the right sector than in picking the right company to invest in. Picking the right company in the right sector is the best way to go. I do not have an Elliott wave chart to share this week but will try to make that a regular part of my weekly posts. Click on graph to enlarge.

Market Summary

Another good week in the markets. This is the 5th week in a row now for this mini-bull market. From the 666.79 low in the S&P 500 on March 9 we closed Friday at 842.50 and that is up 26.35% off the lows. Other indices are similarly up. Large cap technology, as measured by the $NDX index, outperformed both the Dow and S&P 500 this last week. Other than the rising price of gasoline as seen by the UGA, the EEM was the best performing index for the last week and for the year. It appears to be leading the market. Friday we got terrible unemployment numbers which the market ignored. Is the market undervalued and is that the reason for the rally? Is this the beginning of a new bull market or is this just a bear market rally?

This is not the same market as it was 20 years ago. The markets have changed, technology has changed, and the speed with which these markets move has changed. The number and composition of the people who trade these markets has changed too. It is important to identify the leadership and direction of the markets quickly and to react accordingly. And reacting to market changes quickly is the name of the game. Click on table to enlarge.