Thoughts on the Market

 

It has been a while since I last posted anything, since I have been giving my self a fairly descent length vacation until this Wednesday the 23rd.  So there’s plenty of articles that I have to catch up on reading.  So based on technicals only… The market looks to be heading into one MAJOR resistance, dating back to when this whole crisis around the market’s peak in October 2007.  Since the trendline was formed, the market has been responding to it with full conviction.  If the market is to remain strong I am expecting the market to pull back to 1043 before it resumes and attempts to break that trendline again.  If that 1043 level fails than 1020 is my next target.

My thoughts on the S&P 500 on June 21, 2009

Since the beginning of of June, the bulls and the bears are still in a very tough fight with close to a draw.  As highlighted by the purple box above, we had been in a range for almost 2 weeks until June 16, 2009 when we pierced through the 930 support after a slew of ill-favored economic data such as the housing market index, empire state manufacturing index and the gloomy comments made by the FED-EX CEO, Frederick Smith,  noting that there wasn’t much sign of business improvements for the near term. 

From there, we started crashing down breaking that key 930 technical support which sparked a fairly huge sell off beyond normal trading activity with roughly about a -2.4% on the S&P.  But what amazed me most about the trading activity since June 15, 2009, was that the 200DMA, the red line, really acted as a very strong support ever since it was broken on June 1, 2009. 

MACD & Stochastic is telling me that it might be ready for another run on the upside.  But I will be watching out for the 930 level to see if it is capable of breaking it again. 

Alot of people say that this market is tired and is surely due for a pullback and I wouldn’t disagree myself.  But I am going to let the market tell me where to go and not those people on TV.  Thus as of now, my position is not really biased to the bullish side or the bearish side.  I still kept many of my longs with a hedge against those through the purchase of SDS (an inverse S&P 500 ETF). 

With Q2 earnings season coming around the corner, the market has really raised its expectations this time compared to Q1 where anything slightly better than bad is good.  This time, the market is looking for signs of recovery in alot of these companies’ earnings and what will matter most is their thoughts about their future earnings for the remainder of the second half of 2009 as many economist are predicting this recession to end by the end of this year. 

VERY EXCITING INDEED!!!!!

June 10th, Still stuck in a range!!

Between 930 & 945.74 on the S&P 500 since June 1st 2009 and now its June 10th, 2009. 

ZZZZZZzzzZZZzzzzz…….

Little thoughts on Today’s S&P Price Actions

Big surprise today, the S&P finally broke a key technical point and the breakout was to the upside.  At first I thought today was going to be a boring day.  Between the start of the day, 9:00AM and until 3:55pm ET the market just stayed within a range bouncing between –0.3% to +0.3% (roughly).  Thus, what was initially thought to be an indecisive day turned out to be a decisive one when the market pierced through the down trendline, 912 level and closed off strongly at 919 (1.36% gain).  AMAZING!!!

Noticeable in the intraday chart here when the market just just broke through the key 912 level in massive force adding another 7 points in the last 5 minutes before the close.  I bet that caught alot of the bears off guard.  Although this may not be declared an ultimate victory yet for the bulls I would personally say that we are now 75% bullish.  Next Monday and Tuesday will be the day where the price action will be confirmed. 

True fundamentals are still not supporting the bullishness of the market but hey, seems like the market is looking forward to better times ahead.  Say 6 months from now.  Will keep a close eye now on the S&P to maintain itself above 912 levels.

One month of boredom

It is now May 29th, 2009 and its almost the end of may. This is one boring month especially for professionals who prefer to wait on the sidelines waiting for market direction rather than going in right away.  Key technical resistance was broken on May 4th, 2009 around the 875 area.  Since then we have been trading within a range between 930 and 875.  But looking at the the green downward sloping trend line, it does seem to be a key trend line that the market seems to be following quite narrowly.  One of these lines will break soon which will soon dictate where the market wants to go.  Either way, its going to be HUGE!

Initiated my short position on the S&P 500 through SDS

Placed a short position of the S&P index right when it touched the 911 levels. This short position was placed because I do not feel that the market is ready to make a new bull market especially with all the fundamentals that’s really telling a different story. 

This is also evident on the daily chart when the market failed to break the long term green downtrend stretching back since October 16, 2008.  Even though I placed a short position today, I am still not a 100% bear yet.  The market is still in a very indecisive mode and the war is still very much even between the bears and the bulls.  The bulls are still very strong especially around the 875 level, evident from the actions in the past 9 days when the bulls fought hard every time the S&P touched the 875 level.  So unless the 875 level is broken this market is still anyone’s game.

I shorted the S&P as close as possible to the down trendline to minimize my risk just incase the market does decide to go bullish.  Will look on the next couple of days’ price actions to readjust this trade when necessary.

Today’s action on S&P 500

Bulls are still fighting back strong, evident in today’s price action when the S&P visited the critical 875 support level before bouncing off at 3PM EST in the last hour of trading.  Personally, I do not have anymore reasons to go long from here, every news that I have been hearing so far is only giving evidence that the economy is still far from any near-term recovery. 

Tomorrow is going to be a half day due to the Memorial Day holiday weekend and I don’t think I’ll be participating at all.  Will wait until Tuesday when full participation returns to start initiating new positions. 

Today’s FOMC minute summary

Federal reserve expects the economy to improve in the coming months even though policy makers downgraded their outlook for all of 2009.

• Fed now expects the economy to shrink between -1.3 and -2% this year, slightly worse than the earlier forecast of -0.5% to 1.3% contraction.
• Unemployment is now expected to hit between 9.2% and 9.6%, up from 8.5% to 8.9% in the January forecasts. (April’s unemployment is already at 8.9%)
• Interest rate remained unchanged at close to 0.25% and took no other actions to boost the amount of money in the economy by increasing the size of the Fed’s balance sheet.
• But Fed is still considering purchases of mortgage agency and government securities to give the recovery an additional push.

“A further increase in the total amount of purchases might well be warranted at some point to spur a more rapid pace of recovery.  All members concurred with waiting to see how the economy and financial conditions respond to the policy actions already in train before deciding whether to adjust the size or timing of asset purchases." – One minute member said.

• Treasury prices rallied after the minutes were released around 1PM (EST), pushing their yield, which moves in the opposite direction, down to 3.18%.
• Stocks, which have moved sharply higher during the past two months on hopes that the recession may soon be ending, fell Wednesday afternoon.

 

"I read [the minutes] as 'We think it's working, let's wait a few months to see how it plays out” – Gus Faucher (Director of macroeconomics Moody’s)

Source: CNBC & CNN Money

My thoughts on the S&P 500

All the gains that the market gained in yesterday’s trading session was completely given back.  We are now basically at break even again from yesterday’s opening and what was initially thought as a minor pullback for the bulls.  Is stating to look discouraging, at least for the next week as markets still drift lower and lower for the whole trading week. 

Personally, I am not yet 100% bearish, probably around 75%.  There could still be a possibility that the market could pierce through that yellowish-greenish trendline and declare a bullish victory.  But if it goes down, 875 will be the super-duper key technical support level that I believe will make or break the market.

I remembered that week, about two weeks ago from today.  Even I started liquidating on April 20th, 2009 as I thought we touched a key resistance point that were not yet ready to be broken given the very grim fundamentals of the economy.  But the bulls fought hard and well shrugging all the bad news that even I could not believe between April 20th, 2009 and May 1st, 2009 and pierced through 875 all the way to 930.    

My thoughts on today’s S&P move ($SPX)

Today was a win for the bulls as the index managed to bounce off the 20 day moving average.  But I am still bearish and since the top made around the 930 level the index is still going on a gradual decline.  It will only be a matter of time before fundamentals really kick into the market and buyers are obviously exhausted.  As for me, as long as the S&P remains below that yellowish-brownish trendline I am still holding to my shorts.

My Current viewpoint of the S&P 500

Based on what we have seen so far, I would not be surprised for us to see a massive take down in the markets.  Considering that all this bad news taken place is considered good news.  On top of that, I don’t see the latest news regarding the stress tests results as good news at all.  Plus, demand is not going to pick up significantly anytime soon so capacity will either drop further or remain stagnant at these levels.  So I believe global capacity will stay flat for a while until consumers have really deleveraged.

None the less, I see two outcomes coming along for the market. 

1. A heavy resistance is going to be faced at the 940 line on the S&P 500. Once we touch that, I believe we are going to take a nose dive all the way down to the blue line, 740 level.  But just in case, I will also keep an eye on S&P at the 840 line.  Just in case major support holds there.   Thus the first outcome that I see is an inverse head and shoulder pattern.  Taking us down all the way to around July.  Once we have hit that, I see a rebound again, taking us back all the way down to the 1100 line on the S&P by the end of the year.  Once we form the shoulder, I am going to be loading up on high beta sectors such as consumer non-cyclical, autos, retails etc. 
2. Second outcome is that we are going to hit that point and go sideways or correct on a minor level, causing a pull back.  I can also see a probable 1100 line on the S&P 500. 

But I believe the most funniest thing about this market is that everyone keeps on expecting a pull back, and I keep on hearing more and more bears saying that this market is going to fall.  Even I was one of them, but I guess I was wrong and so I got back into the market.