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GLOBAL EQUITY REPORT January 23, 2010 COMP: 2,205.29 GOLD: $1,091.50 $USD INDEX: 78.26 S & P 500: 1,091.76 SILVER: $ 16.97 VIX: 27.31 The action in the $USD index remains ‘constructive’ where the ‘greenback’ bounced off of support at the 76.50-77 zone early in last week’s trade and proceeded to put in an all-out assault at its 200-Day moving average by mid-week as the ‘Buck’ did indeed recapture its 200-Day, closing out the week of trade with gains of 1.4% at 78.26. With the index now resting above its 20; 50 and 200-Day moving averages respectively, as well as relative strength remaining strong with further room for advance, we may just witness additional upside in the days/weeks ahead after a bit of pause/consolidation, allowing both the 20 and 50-Day to play ‘catch-up’. Nonetheless, while the long-term trend in the $USD index remains ‘little to be desired’ and we suspect substantially lower levels in the future (months/years), the short-term posture of the ‘greenback’ has turned decidedly positive and should be acknowledged and respected. With that said, we’ll reiterate our thoughts from last week when we noted, “the index continues to find congestion/resistance in the 78-79 zone (78.30ish/200-Day), as well as the 80-81 area, while the 77-77.50 and 76 levels provide ‘potential’ support”, which remains viable today and such levels providing potential clarity as we move ahead. Short-Term: Bearish- SPX Below 20 & 50-Day MA’s/Oversold Intermediate-Term: Neutral- Grinding At Weekly Resistance Long-Term: Neutral- SPX 1,100 Has Been ‘Re-Captured’ (Yet, within the confines of a secular-Multi Year Bear based on Weekly charts) DJIA: 10,020; 9,865; 9,675 10,395; 10,512; 10,730 COMP: 2,180/90; 2,155; 2,114 2,230; 2,277; 2327 S & P: 1,085; 1,060; 1,045 1,113; 1,130; 1,151
DJIA: 10,172.98 10-YR TSY: 3.59% CRUDE OIL: $74.09
“I'm more concerned about controlling the downside. Learn to take the losses. The most important thing about making money is not to let your losses get out of hand." - Marty Schwartz
US MARKETS:
Greetings stock fans. After pressing weekly resistance at the S&P 500 1148-50 zone early in the week, as well as all three major averages (DJIA; COMP; S&P 500) closing at our noted primary/first levels of resistance on Tuesday (1/19), US markets took a turn for the worse as heavy distribution/selling pressure set in during the latter part of the week weighing on equities and sending the major averages slicing through all three ‘potential’ short-term support levels.
As a result of last week’s action and pounding of the tape, we continue to find slightly more favorable (Longs) set-up’s versus unfavorable (Shorts), albeit, our proprietary ratio has shrunk significantly from last week’s reading of 8.5:1 to today’s 1.4:1 reading. Remember, it was just two (2) weeks ago where we noted to members that, “While such an extreme jump from last week’s proprietary indicator (to 15.5:1) has certainly garnered our attention and perhaps provides us with some ‘pause’, the facts speak for themselves and we will continue to allow the tape to do ‘the talking’ and act accordingly.” It now appears that the 15.5:1 reading was indeed a ‘shot across the bow’ (warning) and that the tape may have gotten a bit ahead of itself and was flirting with frothy levels.
Moving on to the markets themselves, after attempting to overcome weekly resistance at the SPX 1148-50 zone early in the week, the tape was unable to go ‘topside’ and ‘clear the hurdle’, thus ushering in a flurry of selling pressure that prompted three consecutive daily lower closes with the DJIA shedding 4.1% for the week, while the COMP posted losses of 3.6% and the S&P 500 finishing out the week lower by 3.9% and in the process, taking out both its 20 and 50-Day moving averages as evidenced via the chart below:
As is evident above, the Spoo’s have endured a rapid and sharp decline on large volume where the index now finds itself trading below both its 20 and 50-Day moving averages, a short-term negative. While relative strength has declined from near overbought conditions (RSI 70), the good news is, that the tape finds itself rapidly approaching short-term oversold conditions via its present RSI 36 read, as well as MACD well below the 0-line, both suggestive of present conditions.
While it’s a bit premature in determining whether last week’s action is indicative of a ‘rolling top’ formation or, merely profit taking from weekly resistance levels, we suspect a bounce/reversal forthcoming in the days ahead and it will be the strength or lack thereof, of such bounce/reversal which may lend further clarity as to whether we are witnessing the beginnings of something new (trend) or, consolidative/corrective action. Our best guess is the latter, however, as always; we’ll defer to the ultimate judge and jury itself, Mr. Market, in delivering the verdict.
Moving forward, our eye’s will be monitoring the SPX 1080-85 zone should such level come into play this week, perhaps as early as Monday, for potential support and perhaps a level from which to reverse last week’s course, while former support (SPX 1095/1110/1130) will more than likely pose as potential barriers/resistance above in the days/weeks ahead.
GLOBAL MARKETS:
Global markets/bourses traded with a negative bias in last week’s trade as selling pressure was broad based across all regions. Whether it was Asia; ‘Down Under’; South America or Europe, global markets succumbed under the heavy hand of Mr. Market and closed a shade of crimson across the board. While last week’s late distribution/selling dragged many global indices from or near recent highs, much like the US, it’s a bit premature in determining whether last week’s action is indicative of a possible ‘rolling top’ formation, or merely profit taking from weekly resistance levels? Nevertheless, global markets/bourses find themselves rapidly approaching short-term oversold levels, where we suspect a forthcoming bounce/reversal in the not too distant future and such response will more than likely shed further light on whether last week’s action was the start of something new or, consolidative action. Thus, members may wish to monitor the strength or lack thereof, should such reversal of fortune play itself out in the days/weeks ahead. In the meantime, while short-term conditions have deteriorated from a technical standpoint and may require some pause/consolidation, both the intermediate and long-term trends remain in a neutral to slightly favorable posture as global indices continue to hover just a few percentage points from the upper end of their respective ranges.
BONDS:
Last week we referenced, “After flirting at the upper end of the range (4%) in past weeks, the ‘Note’ appears to be in ‘pull-back’ mode as it continues to consolidate its recent push into higher territory”, which remained the case in last week’s trade. With US equities markets under duress, ‘Treasury Land’ was the direct beneficiary of equity outflows as prices ticked higher, sending yields to lower depths as the 10-Yr shed 8bps to close out the week of trade yielding 3.59% and at short-term support. With the ‘Note’ resting at ‘potential’ short-term support (3.6%), a gap at the 3.55% level lingers and may find itself being filled before the 10-Yr attempts another move at loftier levels. While the gap certainly does Not need/require filling, it’s something we continue to monitor. Moving forward, potential short-term resistance lies at the 3.7% level, while both the 4% and 4.2% remain formidable longer-term hurdles. On the flip-side, potential support resides at the 3.55%-3.6% zone (Gap), as well as at the rising 200-Day moving average at 3.46%. Regardless of the ‘blips and dips’, we remain entrenched within the multi-month 3.2%-4% range.
METALS:
As we’ve been noting for the past few weeks, Gold and Silver remain in consolidation mode as both metals slid beneath their 20 and 50-Day moving averages once again this past week of trade with the former shedding 3.4% to close out at $1091.50, while the latter was tagged for losses of 7.7%, finishing just beneath the 17 handle at $16.97. Should the action in the $USD remain ‘constructive’ and find higher prices in the days/weeks ahead, we may just endure further slippage in both the ‘yellow metal’, as well as ‘Hi-Ho Silver’. Therefore, as we move forward, Gold continues to find ‘potential’ resistance in the $1140-50 zone and perhaps more significantly at the $1175 figure, while the $1050-75 range, as well as the $1028ish level (rising 200-Day moving average) should lend support in the days/weeks ahead. As for Silver, both the $18.50-75 zone, as well as the $19.50 figure continue to act as headwinds/resistance, while the $16.70ish and more significantly, the $16 level, may lend support moving forward. Nonetheless, we suspect range-bound action in the metals over the next couple of months (further work to do) before the next ‘leg higher’ ensues and would continue to utilize periods of softness/pullback as buying opportunities in both physical and Jr’s!
CRUDE OIL:
For the second consecutive week, crude found the footing ‘slippery’ as ‘black gold’ remained under selling pressure with oil sliding another 5% in last week’s trade to close out at $74.09bbl. While crude found itself in a short-term overbought condition just two weeks ago when we penned, “While oil finds itself in a short-term overbought position based on its relative strength reading of RSI 70, as well as experiencing gains in eleven out of its past twelve trading sessions, we would not be the least bit surprised to witness some pause/consolidation in the days/weeks ahead in order for crude to ‘catch its breath’”, which has followed our script to a ‘T’, where we now find crude fast approaching short-term oversold conditions with a relative strength read of RSI 36, confirming such position. Thus, while further ‘slippage’ may be in the cards before a turn higher, ‘potential’ support resides at the rising 200-Day moving average (72.35ish), as well as the 70 level, while the 78-80 and 82-84 zones provide upside hurdles moving forward.
CURRENCIES:
US Markets:
POTENTIAL INDICES SUPPORT/RESISTANCE:
SUPPORT RESISTANCE
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