The market's sector performance for the last 5 days -
the beat up sectors were very strong.
A week ago Monday on the sell off there 477 new lows on
the NASDAQ - substantially fewer than the 877 at
the January low. Each day after has had less than half as many new lows as Monday.
This may point to an extended rally - maybe a few weeks even. However when you
get so many new lows it is usually tested in tЗаблокированime so we expect that in the
future.
The Dow closed just under the 50-day EMA. When it moves above the 50-day
it has the 12750 -12768 area resistance but to that level would be a nice gain.
The 200-day is at 12861 and you see a trend line a bit higher just over the 38%
retrace line. So, there are many resistance points in the same 150 point
area. Volume has been pretty high on the latest advance so it may get some legs.
The Dow daily shows first target over the 50-day is the top Bollinger
band which is right at the 12725 line and the trend line. We had drawn their
apex of the triangle a while ago as often there are some decent moves around the
meeting dates. The bounce was from the RSI 30 level and the stochastics move
over 20. You only need to watch for the lower risk entries and exits as they
work quite well.
The Dow Point & Figure chart shows the resistance at 12460. Last time it
failed at this line so worth watching for a possible break.
If you have been trading the ProShares Ultra ETF - good luck. I got a note from
someone who got caught one day without a stop and was down a couple of points
quickly but the next day all was ok.
DXD is the one way to short the Dow by going long but now this looks
like it may test the 53 former support at the 200-day EMA.
DDM is the reveres and used to go long the Dow.
Watch the trend line at about 75 as a possible entry long to the 78.70 area.
The Transportation average has held up pretty well
this year and only a couple of hundred points off the December high. Stochastics
are at 80 again so will watch for possible topping as it gets to the trend line.
The Nasdaq medium term chart shows that is held
support and it is not far from a trend line.
The longer term weekly chart of the Nasdaq shows though that it is back
to the underside of the broken trend line and the 200-week EMA resistance.
And this weekly chart also shows that it bounced right at
the longer term gray trend line. Watch stochastics for a move back over 20
as a buy signal and a move over the 200-week EMA at 2300.
The Nasdaq 100 daily
also shows the trend line overhead as the 50-day
EMA at 1800 so a good target if the trend gets
taken out.
The Nasdaq 100 as shown on
the QQQQ monthly may be forming a
hammer at the 50-month EMA. Stochastics did make
it under 20 so a bounce would be valid though
more time IMO would be better.
The semi conductor index on the weekly
chart shows how it has been steady at the
support area for many weeks - months. Will also
watch stochastics here.
The S&P 5000 monthly chart still in bear
mode while under the 20-month EMA but some good
rallies happen in bear markets.
The S&P 500 weekly chart shows that it
closed back over the 200-week EMA.
While the S&P 500 daily shows the
overhead resistance at the trend and 50-day EMA
and a point to go long if these are broken to
the upside.
The Russell 2000
shows a similar set up to the S&P.
This small cap short fund we show as it got to
resistance of the trend line and horizontal and
there so far has backed off.
We thought the VIX
may get as high as the 38 area again as things
were getting so volatile. It did not get that
high but 35.60 is also pretty extreme.
The Nasdaq advance-decline issues line
has not yet broken the trend line however the
lower part of the chart shows the Nasdaq bounce
near the trend line.
The Japanese Yen looks like it made a
final gap up this week and then gapped down the
next day. This may be the start of a longer term
pullback and that would likely be good for US
stocks.
Gold made it to 1033 before making the
expected swift decline. It is very common when
stocks, though especially these commodities,
make such an extended run that the sell off is
steep. There is not much room for everyone to
get out the door at once. It is at a support and
there may be an oversold bounce but I think it
is too early to buy and more correction will
come - maybe for weeks or months but a bit
too early to tell.
This is the longer term
chart we have use for years and will watch
stochastics as it goes under 20 and see when it
crosses back up.
The XAU gold and
silver index shows that gold stocks took a
decent hit also. I would avoid them for holding
periods of longer than a day or so.
Silver also joined in the steep decline. This commodity is very volatile
and these dramatic pullbacks are expected.
The
US dollar rallied as the Fed cut a bit less
than was expected by many. This may finally be
the start of a longer term reversal as it makes
a base. A dollar reversal would be negative for
commodity prices and positive for stocks.
Gasoline supplies are at a multi-decade high, and the
number of days of supply is rising as well. This is
quite bearish for oil and it has started a sell off this
week. If it closes under its 50-day EMA at $99 than a
test of the 200-day at $87 or the support at
about $84 would be expected. Stochastics are at
the 50 mid point.
Overall I would expect we may see a continuation of a
rally in the coming days and weeks.
|
Butch Cooley Market Comments
(Butch is founder of
Leg Up House
and the
Butch Cooley Worldwide
Hunting and Fishing . He has
been an active trader for decades.)
Market Comments March 21, 2008
I find it hard to get excited in this type of market.
And I'm convinced we are range bound, at least for the
time being. The market refuses to test the 11634 mark
and it can't get above 12767. Sure, there is volatility
and if you can find the right chart, money can be made.
And I will admit to making some this week, albeit
marginal and probably wasn't worth the risk I took to
make it. I find this type of market dull and
mundane.
And the herd is now ignoring bad news, and making not so
bad news good news, hence this week's movements. All of
my charts are broken, so now I am reverting to picking
stocks with the least broken chart. Looking at a 5 day
chart, things weren't that bad on the Dow. But looking
at a 6 month chart of the Dow, we are still a mess. And
mostly likely this type of market will continue for some
time.
We got the 75 basis point cut, and we also got some new
rules from the Fed. They aren't exactly new, but they
have not been used in my lifetime. The Fed is now
opening the lending window to more banks than in the
past and allowing more risky collateral. This should
put more liquidity into the system. The question
remains, will this be enough? Probably not. So far,
nothing the Fed has done has had any direct or lasting
effect on the markets. We still closed 400 points below
the January high on the Dow. For those of us who traded
during 1996 to 2001 in the so called
dot.com
bubble, a lot of what is happening now, happened then.
The Fed slowly took interest rates down to 1%. Big Ben
seems to be doing the same, just at a little faster
rate.
I did get pushed out of my ETF's this week (was trading
DXD and QID), and both of these are now range bound,
which stands to reason, as they are the inverse of the
Dow and the Nasdaq. So once again, I am pretty much all
cash, which might even be the smart play here. But I
confess, being cash is no fun. It lacks the challenge
of trying to make money.
I did do something practical this weekend with Wells
Fargo Bank. It's practical in my opinion as housing
will become very attractive again, particularly if the
markets won't make us any money. So I most likely will
move some funds out of the markets and into housing at
some point.
I applied for a loan on a $218,000 house that I really
don't intend to buy. I did what is deemed a pre
approval loan. First of all, Wells Fargo charged me $20
to make the application. Discussing the loan with the
branch loan officer was a trying experience. They
simply don't want to answer any direct questions. But
in the end, this is what is now required to buy a house
with a 20 year conventional mortgage (in addition to the
$20 you need to fill out the paperwork). With a credit
score of 740, which imo is exceptionally high, and 25%
down, I was offered nothing. My credit score was too
low. I do a lot of cash business and I don't borrow
much money. I have several credit cards, but I don't
carry a balance. They did not give me my actual credit
score, I have to send away for that. And of course,
that probably costs $20 more. But, they would offer me
a 15 year, interest only loan, 25% down, mortgage
$163,500 for a cost of $910 a month. This includes
"taxes and insurance". I was a bit surprised. This
sounds like subprime with a twist. Like banks might
still be dealing subprime, just requiring more cash up
front. Credit and liquidity are still the main issues,
and this type of problem is not going away in a few
weeks or even months. So once again, I guess Cash is
King, and it's time to go fishing!!
BC
|
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