Dow -220.40 at 11842.69, Nasdaq
-55.97 at 2406.09, S&P -24.90 at 1317.93
Summer
Solstice
(well winter solstice if you live down under) but for those in the top half of
the world it is the official start of summer as the sun is directly over the
Tropic of Cancer in the Northern Hemisphere, the farthest north it goes before
returning back down south. (of course it is not the sun but our relationship to
it)
This date has been celebrated for thousands of years and
perhaps it will mark a market turning point also.Friday was options expiration
so higher volume and it was on the downside. I guess the
theme of the day was financial worries and Merrill Lynch
reduced its earnings estimates for several banks. Ford
will cut more truck production.
On a non related note I read that
Treasury Secretary
Henry M. Paulson Jr. plans to call today for the
Federal Reserve to be given new, explicit powers to intervene in the
workings of
Wall Street firms to protect the financial system, adapting his vision of
how the financial world should be regulated to reflect the lessons of the
collapse of Bear Stearns.
Yikes - that is scary - The Fed is controlled by banks
that operate for a profit and they have done a horrible
job and now they want even more power to "protect the
financial system". Some instead wish them to be
eliminated all together.
The Labor Department reported that the number of
individuals claiming for unemployment benefits declined 5,000 in the week ended
June 14th to 381,000 from the previous week's revised figure of 386,000.
Vincent Farrell Jr. a commentator on markets about the
claims report said, "..it is
still-acceptable 375,000. Remember, 400,000 for an average would be consistent
with 0% GDP, so we still look to be growing sluggishly." So to him adding
400,000 new unemployed each week still shows growth. He could get a job with the
government.
For the week of the indices shown
only gold was up.
I read someone's comment: "The most frightening thing about this market
right now is how bleak the technical picture looks. The Dow is very close to the March lows, the
S&P500 is getting there fast, and if the Nasdaq
and Russell 2000 play catch-up to the downside, it's
going to be a world of hurt in small-caps and technology
names. There is very little if any support, and the
bulls best hope is for an oversold bounce that somehow
gains momentum, and that is a bad bet."
This worry is being shown in
confidence readings that often are a good contrary
indicator and can help spot market lows.
Sentimentrader.com has a Smart Money/Dumb Money
confidence indicator and it shows that the average
investor continues to be overly pessimistic on the
market and that has pushed this indicator down to a low
of 33%, which is the lowest level since March.
Historically, when readings hit this
level, the market has responded fairly well. However, an
analyst at sentimentrader.com says that the best
short-term edges happen when this indicator drops to 20%
or below.
I read that at the January low there were 1114
new lows on the NYSE and at the March low there were 759 new lows and on Friday
only 275 new lows so no panic in general.
This is the percentage of the 30 Dow
industrial stocks that are trading over their 50-day
moving average. On Friday it hit Zero as all are now
below their 50-day for the first time since February in
2003. In the lower section is the Dow and you see the
rally that started the last time it hit zero. Mike Burk
pointed out that in the past these zero readings came
very close to market bottoms. (ignore
stochastics)
In the S&P 500, 36% of stocks are currently trading
above their 50-day moving averages. A healthy market
typically has more than 50% of stocks above their
50-days, so current levels are weak as we know.
But they can no doubt get weaker. Other averages
and the percent of stocks still over their 50-day
average- S&P500 17.5%, S&P 400 Mid cap
32.0%, NYSE 32.0% and Russell 2000 (R2K)
43.1%.
The Bank Index tested its 2002
low and is oversold via stochastics and RSI.
30 Year bond yield pulled back some this week to 4.7% but still above
their trend line and major moving averages. We must figure that rates will
remain going up now as something must be done to fight inflation. While the
government loves to claim low inflation of under 4%, NBC news on Friday said
that in May food prices alone across the country were up 7% for the month on top
of a 5% rise in April.
Many indexes look weak and if we do enter a real bear
market they could drop a lot but there is something new
since the start of the bear in 2000. Most private
investors and many funds do not short stocks. Many IRAs
or other plans do not even allow this. As a result many
investors stayed long during the several year decline
and had large losses that took years more to make back.
Now with the great number of short ETFs everyone can
short stocks or indices easily so no one has to sit and
suffer draw downs if entering a bear market. If you are
on the fence you can hedge any open long positions with
shorts (using short ETFs) so you at least keep even.
DXD is the ETF for shorting the Dow and it is at a
trend line now and over extended so caution if you own
it. It has rallied nicely from the May low though a
break out could take it to the $62 level.
The ultra short for the S&P 400 mid
caps is MZZ and it is now near horizontal
resistance and the 50-day EMA. The Mid Caps have been
one of the strongest general index so hopefully it will
not break down.
Other UltaShort ETFs in red (ones
that aim to achieve 200% move of the index they track)
QID UltraShort QQQ ProShares
DXD UltraShort Dow30 ProShares
SDS UltraShort S&P500 ProShares
MZZ UltraShort Mid Cap 400 ProShares
SDD UltraShort SmallCap 600 ProShares
TWM UltraShort Russell 2000 ProShares
SJF UltraShort Russell 1000 Value ProShares)
SFK UltraShort Russell 1000 Growth ProShares
SJL UltraShort Russell MidCap Value ProShares
SDK UltraShort Russell MidCap Growth ProShares
SJH UltraShort Russell 2000 Value ProShares
SKK UltraShort Russell 2000 Growth ProShares
SMN UltraShort Basic Materials ProShares
SZK UltraShort Consumer Goods ProShares
SCC UltraShort Consumer Services ProShares
SKF UltraShort Financials ProShares
RXD UltraShort Health Care ProShares
SIJ UltraShort Industrials ProShares
DUG UltraShort Oil & Gas ProShares
SRS UltraShort Real Estate ProShares
SSG UltraShort Semiconductors ProShares
REW UltraShort Technology ProShares
SDP UltraShort Utilities ProShares
And long Ultra ProShares
QLD Ultra QQQ ProShares
DDM Ultra Dow30 ProShares
SSO Ultra S&P500 ProShares
MVV Ultra Mid Cap 400 ProShares
SAA Ultra SmallCap 600 ProShares
UWM Ultra Russell 2000 ProShares
UVG Ultra Russell 1000 Value ProShares
UKF Ultra Russell 1000 Growth ProShares
UVU Ultra Russell MidCap Value ProShares
UKW Ultra Russell MidCap Growth ProShares
UVT Ultra Russell 2000 Value ProShares
UKK Ultra Russell 2000 Growth ProShares
UYM Ultra Basic Materials ProShares
UGE Ultra Consumer Goods ProShares
UCC Ultra Consumer Services ProShares
UYG Ultra Financials ProShares
RXL Ultra Health Care ProShares
UXI Ultra Industrials ProShares
DID Ultra Oil & Gas ProShares
URE Ultra Real Estate ProShares
USD Ultra Semiconductors ProShares
ROM Ultra Technology ProShares
UPW Ultra Utilities ProShares
The top and bottom sectors for the week.
And the best and worst
industries.
The Dow daily chart is close to the March low and closed below
the Bollinger band by over 30 points. This week we expect a bounce
at least if Israel can keep its bombs away from Iran, and the volume
during any advance may point us to if this will be a longer term
bottom. RSI though has not hit 30 but we will watch for stochastics
to move over 20. This could be a double bottom and the end of the
bear for a while as the bears are predicting the worst is about to
come.
Dow renko
chart gave a sell signal in early May but CCI is nearing
over sold reading. An automatic buy will be when CCI
goes under than over -100 and stochastics goes back over
20.
The longer term Dow since 1981 broke the trend line quite some time ago but
still above the 50-month EMA and the horizontal support.
Dow Jones Transports ran back to the broken trend line and fell from
there which is quite usual. The chart however is still not overly bearish and it
is above the 50-day EMA.
The Nasdaq failed at the 200-day EMA and may test its recent low. Failure
there can take it to fill one or both gaps as shown.
The bullish percent for the Nasdaq is at 38.4% and stochastics still over
80.
The VIX is not showing any extreme fear. Some wait for it to get to
former levels of 30 as they think it can mark a bottom. If it needs to get that
high again then we would see more market downside.
The semiconductor index SOX pulled back to first support. Stochastics
have fallen under 80 and that gave at least a short term sell.
The Nasdaq 100 is still above the 38% Fibonacci retrace from the march
low to recent high on this 60-minute chart.
The NYSE fell below its first support level drawn and has another not far
under.
The percentage of stocks on the NYSE over their 50-day averages is now at 32%.
The S&P 500 ran down to the dotted line support below the 62% retrace.
RSI is still above 30 but if it goes below we will look for a buy signal on a
cross back over 30.
The bullish percent gave an S&P 500 sell signal the third week in May. No turn
around indicated yet but set stops.
The weekly S&P 500 showing only the 13 and 34 week EMAs. A cross over
would be bullish.
S&P 400 mid caps now at the 50-day EMA a break there has another possible
support at the 200-day at 839.
The Russell 2000 small caps the support area is clear and a break there
would be a short.
Oil is sitting at the center Bollinger band so to remain bullish short
term this level should hold. If not we expect a drop to the 50-day EMA and trend
line near 125.
The oil chart combined with Exxon Mobile and XOM has broken below it year
long trend line.
Gold was
a winner for the week up 3.5% and Thursday ran into
resistance. It will have even more at the cyan trend
line.
The gold cloud chart shows it is in resistance area now which extends to
the top of the red cloud.
The gold and silver stock index has it sill in the triangle so a break could
come on either side. Other than on select stocks seems not a sector to be long
or short in general.
Silver also in same range for some time now.
An inversion has happened in the next two charts in relation to the US dollar.
This is the EURO to Yen ratio chart and formerly the S&P 500 would go up
if this did. This is no longer valid.
The Japanese yen also
shows this change as it used to be when the Yen rallied
it was bad for the market but as you see it is not
working now.
The US dollar pulled back all week. Hopefully this is only base building
which can go on for a long time. At some pint we hope voters demand that the
government turn off the printing presses and and only spend what it makes. This
flooding the word with dollars has not only created inflation for the e USA but
for the rest of the world.
Weekly economic calendar from briefing.com FOMC
statement is on Wednesday but there will be several
other possible market moving reports this week.
When any of you sign up for a new
stockcharts.com
accounts there is a space to put in a referral name
on that form. If you enter
stocktiger@stocktiger.com they give
us credit. Thanks!
News on stocks of interest:
NNRI Now news just waiting on
the ATOILL final numbers to include in the NNRF ones.
PLTG
We have expected the move back up as the company
goes form building reserves to actually hooking them up
to pipelines and selling them. Investors like that and
the stock ran up 70% last week. The volume on Friday was
extremely heavy and hopefully we will get some backing
and filling then resume the move higher for the rest of
the year. KYUS Kentucky USA you may recall, has a
leased property not far from one of Plantina's
properties. As the company had no wells drilled so no
production and had only $16k dollars we suggested a
short at $4. This week it hit $1.50 and then rallied
back to over $2. We still believe that Platina at this
time is stronger company with more long term
potential. Their press release talks of the additional
wells being connected.
Platina Energy Group Connects More
Wells to Pipeline in Kentucky
PYR.v Pyramid Petroleum shows financial
responsibility as it pays off loan. Stochastics are back
under 20 so a move back over is another buy. Last
quarter the company has $.05 per share profit but I
expect we will see this will significantly grow over the
next several quarters.
Pyramid Petroleum Pays Off Entire
Revolving Demand Loan
New additions to our
watch list.
Remember that we add many stocks to it each trading day.
despite the poor market we had 15 new stocks hit
their trigger point last week. So the charts above give
a general look at the market, the ones below make you
money. Some over the last couple of month have doubled
in price and several more more up 30-50%.
ADTN Over $25.40
MSTR Short
under $72.40
AMGN Over $45.25
WEN Over
$30.65
FOE Over $20.62
SWSI Continuation over high of $32.31
with good volume
ADCT On break of small triangle over
$17.23 - watch $17.45
C Short
under $19.00
ACOR Over $33.00 or maybe $32.25
experienced
PRFT Over $11.91
Photograph by Angela
Photograph by
Sergei Gruzdev
Photograph by
Turist
That's a full lid for today - will see you all during the week.
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