Archive for Stock Market Technical Analysis
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Stock Market Analysis – SP-500
Posted by: | CommentsWell, everyone is getting excited! We have seen a 6 day rally in the US Stock Markets and indeed around the world, so where does that leave us?
Are you bullish or bearish?
As mentioned previously the economic outlook is not looking good on the whole, we are seeing a jobless recovery in the US and in most major markets production and demand is still down. The fittest companies are surviving through endless rounds of cost cutting and redundancy programs. However we are seeing good earnings coming in.
But what are the markets telling us?
To assess this we use Technical Analysis.
Chart provided courtesy of Worden Brothers Inc.
Stock Market Analysis
Looking at the chart of the S&P-500, we can take a glimpse of the state of the US Markets
- The most recent rally has reached the top of the down-trend resistance line (top pane in the chart)
- The price has not yet surpassed the 200 day moving average (red dashed line)
- The previous June rally failed to significantly pass or hold above the 200 day moving average, meaning is is a significant resistance line
- MoneyStream (alternatively MoneyFlow) is still remaining very bearish, although it recently crossed it’s moving average, we would like to see it cross its own down trend-line (white arrow middle pane)
- This recent rally has seen a significant drop in volume, meaning that although the market is pushing higher, less people are trading this rally. This infers that people are backing away from the increasing prices and are concerned about a further downside move.
Possible Scenarios
- Most likely – the market will move up to test the 200 day moving average at approximately 1115, then move back down to continue the downtrend eventually surpassing the July low.
- Less likely but still possible – market will move up and break through the 200 day moving average. If this happens we would like to see the price hold above the 200 moving average for 3-5 days, and see increasing volume. This would give us a good indication the up-trend will continue and represent a change of character for the short term.
No Absolutes
There are no absolutes in the stock market, especially when making predictions. We can only make an analysis based on the data we have, form conclusions, rank them in order of possibility and create an action plan based on those likely scenarios.
The market usually continues its current trajectory (in this case down) until it proves that its direction has changed. The most likely proof here is a significant break of the 200 day moving average, preferably on increasing volume.
Good luck with your plans.
Crunch Time for the Stock Market – Analysis
Posted by: | CommentsWell, here we are again, the Head & Shoulders Top, although not text book perfect, it look s to be in place.
What is interesting is that the Dow Jones Industrials, the S&P 500 and the Russell 3000, are all in sync, and that uniformity is not encouraging.
Important to note in the Charts:
- All have hit the medium term support line resting at essentially the November 2009 and February 2010 lows
- Also MACD has turned decisively negative on them all
- RSI has taken another leg down
- All of this on increasing volume
Decisions Decisions !
Lets face it the Economic data recently has been sour, rumors abound of more quantitative easing and lackluster growth everywhere despite an agressive expansionary Monetary policy. Whats more, the G20 have agreed to significantly reduce the debt they hold. Which essentially means cutting back on spending. Which will affect jobs, consumer spending and in essence this will affect the business climate and ultimately Stock Market performance.
I believe the next few weeks will signify whether the market participants believe in the recovery or not.
If they believe, then the market will rise and eventually break through the 200 day MA (dashed white line)
If they do not (which I suspect) we will see a break down through the medium term support trend line I have plotted on each of the 3 charts above.
Let the market tell you what it is going to do!
Stock Market Analysis – A Bad Day At The Office
Posted by: | CommentsWell yesterday was a bad day at the office.
In fact the last 7 days, were bad days at the office with 6 down days and yesterday being punishing. Especially if your office is the Trading Floor. Even more so if you were buying stocks and going long. But if you are a member of the Liberated Stock Trader community, then it might not have been so bad, in fact from my previous market analysis you would have known that this was probably going to happen.
Yesterday was particularly Bearish, with the major US indices averaging over minus -3%. This does not happen often. SO what does this mean for us.
Firstly it signifies the continuing formation of the Head and Shoulders Top I discussed in a previous post.
Secondly, we may get a small bounce upwards today, and tomorrow, but this is unlikely to continue upwards for long
Thirdly, if the support lines formed in most indices at the May and February lows is significantly breached we should expect some further strong downside to the market, as I discussed in this post called Double Dip Danger.
Happy hunting and stay safe.
A great day in the Markets, but should we get excited?
Posted by: | CommentsWhat a day!
June 15th 2010 was a big day in the US Markets, with the Dow Jones Industrials (DJ-30), Standard & Poors 500 (SP-500) and the Russell 3000 (RUA-X) registering an average a 2.27% gain.
I mentioned in a previous market update, that we needed to look out for a change in the market signals to tell us if the downtrend was about to end. Especially we needed to look for:
- Price breaking through the 200 day moving average
- Positive divergences in the indicators
- Be careful if the S&P breaks below 1044
Well how good was the advice?
Here is an updated chart to show you the current situation. Here we will focus on the Russell 3000.
Positive Notes on the Russell 3000 chart.
- Price broke out above the 200 day moving average yesterday (dashed line)
- Price also broke out above the horizontal resistance line. The price may yet fall back to rest around this mark but not fall through it. Breaking back down below it would indicate a resumption of the downtrend, or at least a continuation of the sideways consolidation pattern.
- MACD is moving strongly positive with another new peak.
- RSI is crossing over the 14 day MA of the RSI, strongly.
Negatives Notes on the Russell 3000 chart.
- If we look at the chart on a longer term view we can see that there is the possibility of a Head and Shoulders Top forming. Be careful here! A move up to the 680 mark with a failure to break through it could constitute the final shoulder in the head and shoulder pattern. However do not forget that Volume has an important part to play in a Head and Shoulders Pattern.
- Beware the market is very volatile at the moment, it is also very sensitive to news, especially bad news. Take this into consideration when trading.
Conclusion.
This could be the start of a new short term uptrend, leading to another leg up if the 680 mark or the January 2010 high is surpassed. Now may be a good time to start buying, but be wary of a break down of price through the most recent horizontal resistance line (now a support line) at 654.
Happy trading!
To your success.
Double Dip Danger – Market Technical Analysis
Posted by: | CommentsWell what a week it has been, I take 1 week of vacation and the market, in fact the global economy starts to get the jitters. The fact is these moves have been telegraphed for some time now. My last 3 market updates have warned of the down-turn with progressively stronger warnings, starting March the 30th through to today.
The market is showing signs of seriously increasing fear. We can see this in the volatility of the market moves, more than half of the days recently have seen a greater than 1% move either up or down. Many of them down.
On May 25th the UK FTSE 100 closed below 5000 for the first time since October and the following day the Dow Jones Industrials closed below 10,000, both significant psychological levels. The MCSI World Index is also down 10% since the start of the year.
But why the panic!
The are a number of key contributing factors.
- Europe is in trouble, faced with a lower the rest of the world growth rate and a huge ball and chain around its ankle known as the PIGS (Portugal, Ireland, Greece and Spain). Europe needs to show it will fix it’s Fiscal problems. However fixing these problems will reduce demand in the countries, which may counter-act any remaining gains from the stimulus packages enacted last year.
- The USA shows no clear plan for reducing its huge deficit, the leadership is still discussing stimulus packages.
- China it beginning to attempt to prick some of the huge bubbles that are occurring in its own economy, with little success so far. Bursting bubbles is never easy or painless.
- The governments of the Rich World once the heroes for averting the complete financial meltdown in 2009, are now becoming “THE PROBLEM”. Holding too much debt and still keeping the cost of money extremely low may have some stark ramifications in the future.
- The LIBOR (London Interbank Offer Rate) the rate at which banks lend to each other, is starting to inch higher, although still way below the crisis levels of 2009.
- The Markets are still a little pricey. Look at the S&P Composite Index P/E Ratio, still above 20 and rising.
The Good News!
There are some positives out their which we should bear in mind before we start to fear the worst.
- World output / growth is still expected to rise by about 5% this year.
- Europe has now at least woken up to the challenge ahead, with austerity measures already enacted in Spain, Greece, UK and Ireland.
- The drop in the worth of the EURO is of great benefit to European businesses, especially those economies heavily reliant on exports. Germany is still challenging China to regain the number 1 spot as the world biggest exporter (by value) and the drop in the value of the Euro will only increase its competitiveness and bring in extra revenue.
- American consumers have returned to the shops, and in fact despite huge numbers of job losses the US still shows the rest of the world the way in terms of innovation and determination to succeed.
So what should we do?
Sit tight and watch the market action. Many people say that if you are not long on the market you should be short. But there are times when you should be neither. This could well be one of those times. Look at the charts below of the SP-500, DJ-30, Russell 3000 and the advance decline line.
- All are synchronized
- All the indices have retraced below the first Fibonacci level of 61.8 since the March 2009 low.
- They may be finding support at current levels.
- All have declined on increasing volume which we know to be very bearish
- Normally stocks rise before a US public holiday, but not this time.
So which way will the market go?
There are no clear signs either way, so be careful where you put your money. Wait for the ideal buying opportunity.
