Market Summary

As can be seen on the chart of the S&P500 below we have broken out above the 1170 resistance level which should now act as support. The next level to the upside is the 1200 mark. However, should the market turn lower we have support at the prior area of support/resistance at 1150. The financial sector (XLF)has taken a hit with the freeze on foreclosures and the Bank Index($BKX) has sold off hard the last three days. Technology, on the other hand, has done well up a similar amount to what the financial sector is down. This could be a turning point or simply an area of consolidation. We will just have to wait and see. Click on chart to enlarge.

Gold continues to outperform up nearly 22% for the year. For the week the China market per the FXI was up the most up over 4%. Click on table to enlarge.

Market Summary

Last week was a very good week in the markets and a continuation of the uptrend that began in September. And while September and October are historically the weakest months of the year in the markets the announcement that the Fed will begin another round of Quantitative Easing (QE2) to stimulate the economy has meant that good news is good news and bad news is good news. The worse than expected jobs data released Friday then became good news to continue the rally. The next FOMC meeting is set for Nov. 2-3 and the market is already pricing in an announcement of further stimulus which if it does not get could be cause for a downturn.

The chart below of the S&P 500 shows that we are approaching the next level of resistance at 1170 which we should reach. After that I would say the areas of resistance are the round number 1200 and then the April high in the area of 1220. It is interesting to note that the $VIX again broke below two standard deviations of its 20-period moving average today which has in the past been a sell signal for the market approximately a week later. Will it happen this time we will just have to wait and see. Click on image to enlarge.

The table below shows that gold has outperformed this year up nearly 20% followed by the emerging market ETF EEM up 8.24%. For the week gold was up 2.13% followed by the EEM up 1.76% and the small cap index up 1.20%. Click on table to enlarge.

Market Summary

As can be seen from the chart below we were not able to maintain a closing price above the 1150 level which is where we saw resistance back in January of this year. Resistance levels often take several attempts to break through if we are to go higher. A failure at this level would be noted by a closing price below 1131 and the Volatility Index $VIX above 24. Click on chart to enlarge.

For the year gold is up 17.40% followed by the EEM up 6.37% and the small cap index up 6.12%. For the week gasoline and oil were up the most up 7.83% and 6.68% respectively, followed by the EEM up 2.97%. Click on table to enlarge.

Market Summary

As can be seen in the chart below of the S&P500 prices have broken out above prior resistance level at 1130 and are now up against the next area of resistance at 1150. Should the market break above this level the next area of resistance is the 1170 area. While historically September and October are the worst months of the year in the market September has so far proven to be exceptional. It appears very unlikely we will have a double dip in the economy if the stock market is our guide. How long the current rally will continue we will just have to wait and see. Click on chart to enlarge.

For the YTD period gold continues to outperform the rest of the markets. Over the last several weeks more and more of the funds followed have moved into positive territory for the year. For the week EFA was up the most up 3.26% followed by the small cap index up 3.00%. The US dollar and natural gas were the only losers for the week down -2.67% and -3.04% respectively. Click on table to enlarge.

The chart below is of the daily S&P 500 using a modification of My ETF Trading System found here. What this chart shows is that we are at the top of a range in an uptrend. The two blue bars on the right side of the chart indicate that last Thursday and Friday the momentum had declined from that of the green bars that preceded it in this uptrend. The last blue bar is a doji like bar indicating indecision. The MACD indicator, which is set to a very sensitive setting, will indicate a downtrend once the zero line is crossed to the downside. We are at a critical point in the markets where we will either break out above the 1130 area and move higher or breakdown and move lower from here. Which way we go we will just have to wait and see. Click on chart to enlarge.

The performance chart below shows that we have several ETFs that have moved from negative to positive territory on the Year-to-date basis over the last week and these include the Russell 2000 small cap index, the emerging market EEM, the Nasdaq index, and the Dow Jones index. This is a positive change but will it last? Again, we will just have to wait and see. Click on table to enlarge.

Market Summary

From the chart below it can be seen that the market has been going sideways for several months in a range from 1020 to 1130 on the S&P500 and has the shape of an inverse head-and-shoulders formation with the neckline at the 1130 area. If the market breaks above that area it would be very bullish. We are between the most recent high and low of August and so will have to watch and see which of these two areas is crossed first. Click on chart to enlarge.

Gold remains in the number one spot for the YTD period at 10.87% and natural gas is the dog of the group at -39.00%. Click on table to enlarge.

Market Summary

This last week was a good week in the market with the major indices showing gains and the S&P500 gaping higher on Friday. With 3rd quarter earnings season behind us for the most part market participants are looking to the release of economic numbers for a sense of direction in the economy. The 1st Friday of every month is the release of Non-Farm Payroll (NFP) from the Department of Labor which is one of the biggest movers of the market. This last release, while not spectacular, was better than expected and the market gaped up in response. The Federal Reserve also watches these numbers closely to determine when or if to do Quantitative easing, in other words, to print money and to buy bonds which gives the US Treasury cash. With the better numbers they are less inclined to do so.

One of the interesting indicators I follow is the Volatility Index ($VIX), the so called 'Fear Index' as it is called. When the $VIX goes down there is less fear in the market and the market goes up, and when the $VIX goes up there is more fear in the market and the market goes down. In other words it is inversely correlated to the market and that is how it works. When the $VIX gets to below two standard deviations from it moving average and comes back up that means it has made a low and is a buy signal on the $VIX which is a sell signal on the market. But it does not correlate immediately but has a little bit of a lag time. The first time it occurred this year was on January 12 and then about 8 days later the market dropped about 10%. The second time it occurred this year was on April 13 and then the market hit a high on April 26 and dropped about 20% to the July lows. See the first chart below and the highlighted ovals and compare those dates to the S&P500 chart below that. We again had the $VIX drop below its lower standard deviation on Friday. Will this be followed by another drop in the market? It is interesting to note that the market often reverses course over long weekends. We had a reversal at the beginning of July after the long July 4 weekend. How we fair after this long labor day weekend remains to be seen. The markets are coming up to their 200 day moving averages and if they can get above that level it would be a good sign and indicate strength in the markets. If however they get up to that level and reverse it would be a good shorting opportunity. How the markets go we will just have to wait and see. Click on charts to enlarge.




The ETFs followed had a good week with natural gas, the laggard for the year, doing the best up nearly 5%. For the YTD period gold continues to outperform. Click on table to enlarge.