Weekly Market Review: May 10, 2009

I am speechless about this rally. It just keeps going and going and going…

Right now, I’m just going to wait this out until a break of the trend (at least below 900 on S&P 500, Figure 2) with good volume.

From the channel of Figure 2, S&P 500 at 920 – 950 seem like a likely trading range for early next week.

As a side note, the May options max pain for SPY is pegged at $86. Are we going to retrace to that level by this Friday?

S&P 500 ETF

S&P 500 ETF

GICS Sectors Review

After taking a breather last week, the Financial sector is back to fueling this week’s rally. Apparently, all is well and dandy for the financial system (note the sarcasm) according to the FED, see WSJ: Banks Won Concessions on Tests.

6 months: XLE XLB XLI XLY XLP XLV XLF XLK IYZ XLU

1 month: XLE XLB XLI XLY XLP XLV XLF XLK IYZ XLU

5 days: XLE XLB XLI XLY XLP XLV XLF XLK IYZ XLU

Weekly Market Review: May 3, 2009

Volume continues to be low this week. The negative divergence as shown in Figure 1 (right) is staring everyone in the face now. However, we’re still within an uptrend channel (Figure 2). And if we were to break up from here on good volume, we’d be forming an inverse head and shoulder. Thus, it’s anyone game within this trading range around 840 – 880.

S&P 500 ETF

S&P 500 ETF

SMB Capital has a good review of the week.

GICS Sectors Review

From the 6-months chart, we see that Technology (XLK), Telecom (IYZ), and Consumer Discretionary (XLY) are back to their previous level 6 months ago. The resistance is clear as the sectors are now jammed together around that 0% level on the 6-months chart.

From the 1-month chart, we see that the bottom 3 sectors (XLE, IYZ, XLU) ran up in the last week to overtake Healthcare (XLV).

For the 5-day chart, we see an interesting picture. The recent bear rally leader, Financials (XLF), has ended the week at the bottom of the pack and looked weak for the entire week actually. Energy (XLE) looked strong all week and the Telecom (IYZ) made a friday run up to catch up to it too.

Comparing this to last week’s market review, this is clearly a money flow rotation between sectors in progress as the previous leader became the bottom fish and the mediocre ones became the leader. This is a sign that we may be breaking out of our trading range soon as the big money are prepping their front row seats.

6 months: XLE XLB XLI XLY XLP XLV XLF XLK IYZ XLU

1 month: XLE XLB XLI XLY XLP XLV XLF XLK IYZ XLU

5 days: XLE XLB XLI XLY XLP XLV XLF XLK IYZ XLU

Weekly Market Review: April 24, 2009

This week’s market action is practically a carbon copy of the week before. We started on Monday with a huge gap down, regained some footing on Tuesday and Wednesday, dipped lower on Thursday, then climbed back to the level of the Friday before. Obviously, we’re in a trading range these past two weeks around 830 – 870 on the S&P 500.

From Figure 1, we’re still in the over bought level, with signs of divergence, etc. etc. You’ve heard this tune before, so I won’t repeat myself. The only thing for certain in this volatile market is that … it’s volatile. So no matter which side of the trade you’re on, I’d be more picky in this market.

Obviously, the support is at 830 and resistance is at 870 as I’ve said. Also, notice from Figure 1 that volume has been relatively low in this range so far. If there is any breakout either way, volume and momentum would be the things to watch.

As of right now, my portfolio consists of SRS, USO, and ESLR (from way back). Needless to say, my SRS is at the bottom of the sea with a 50% loss for the trade. This is just unacceptable. I have since written my trading rules in stone and vowed to never break a stop.

On the plus side, this has certainly woken me up again as I’ve been getting complacent lately in my trading regimen. Thus I’m relieving myself to just light trading and heading back to trading development and would spend most of my time improving my systems and skills.

S&P 500

S&P 500

GICS Sectors Review

This week there isn’t any particular sector that was way ahead of the pack. The ones that lag have been the usual defensive plays, Healthcare, Consumer Staples, etc.

6 months: XLE XLB XLI XLY XLP XLV XLF XLK IYZ XLU

1 month: XLE XLB XLI XLY XLP XLV XLF XLK IYZ XLU

5 days: XLE XLB XLI XLY XLP XLV XLF XLK IYZ XLU

Weekly Market Review: April 18, 2009

The market has continued to chug along upward this week. In last week’s review, I said the market was obviously in a short term rally run. And just like last week, this up run is looking weak from the indicators (Figure 1). Yet, as weak as it might seem, the fact is that the market is breaking resistances one after another. We ended the week on another significant resistance at 875 on the S&P 500. This is definitely a level to watch next week. However, do note that we have tested this level on a lower volume on Friday. So it’s likely that we’ll fail to break this resistance.

On the other hand, from Figure 2, you can clearly see that we’ve been adhering to a tight uptrend channel formed from the beginning of March. From that chart, we can glean that our support is about 860. Thus, our narrow trading range is 860 – 875 in the short term for next week. And the major levels would be 830 and 900, from long term lines shown in Figure 2.

My conclusion is that we’ll be seeing 830 before 900 from the weakening rally. However, I’ve been proven wrong many times before. In any case, just watch the levels I noted and let the market tell you where it is heading.

S&P 500 ETF

S&P 500 ETF

GICS Sectors Review

On the 6-month and 3-month charts, it’s easy to see that although the Financials have been playing catch-up lately, they still have a lot of grounds to make up for. The Telecoms still remain the top performer with the Techs in the second spot.

Notice that on the 5-day chart, we can see the top performers (Financials and Industrials) have retraced in the last hour for most of the week. This is a bearish sign.

6 months: XLE XLB XLI XLY XLP XLV XLF XLK IYZ XLU

3 months: XLE XLB XLI XLY XLP XLV XLF XLK IYZ XLU

5 days: XLE XLB XLI XLY XLP XLV XLF XLK IYZ XLU

Weekly Market Review: April 14, 2009

I’m back from my long weekend. S&P 500 has broken above 850 and tested 860 on Monday while I was away.

On Monday, we made a failed attempt to rush through 860. A similar scenario happened at 830 and 840 in the past 2 weeks. Each time, the market dipped slightly but managed to climb even further up (Figure 1). Would history repeat itself the third time?

The 10 day MA for S&P500 (SPY) has stayed above the 40 day MA since March 26 now. That’s more than 2 weeks of run. This hasn’t happened since Sept 2008, and even then it wasn’t that long. This is definitely the longest up run we’ve had since 2006!

On the other hand, the indicators are looking as toppy as ever (Figure 1). In addition, the down trend as shown in Figure 2 is still intact, and this decreasing volume rally can only confirm it.

In the intermediate term, I’m still bearish. Yet, I must admit that this run has been pumping up and up for a lot longer than I expected. As a trader, the most easiest way to make money is to go with the flow. As of now, the flow of the market is up, unless proven otherwise. So my strategy now is to wait and observe the retracement before rebalancing my positions, if needed. I’m net short since last week.

Some key intermediate term levels for the S&P 500 are: 38% Fibonacci at 790, 40 day MA at 780, 200 day MA still high above at 970 or so.

S&P 500

S&P 500

GICS Sector Review

From the 6 months chart, we can see that the Financials (XLF) is fast approaching the support from December of 2008. The V-shaped bounce has been fierce particularly for XLF.

This XLF bounce is even more evident in the 1 month and 5 days charts. It’s common knowledge that this type of climb up is hardly sustainable. Thus, everyone is watching the Financials as usual for any signs of weakness. And if that happens, the market can quickly turn ugly. However, the inevitable retracement doesn’t have to be deep. It could very well dip, consolidate, and rocket up again.

Given the longer term perspective of the market as described in the first section, I doubt that though. In any case, just watch the Financials as an indicator.

6 months: XLE XLB XLI XLY XLP XLV XLF XLK IYZ XLU

1 month: XLE XLB XLI XLY XLP XLV XLF XLK IYZ XLU

5 days: XLE XLB XLI XLY XLP XLV XLF XLK IYZ XLU