Weekly Market Review: April 3, 2009

As I said on Tuesday, the market looked like it's going up, and going up it went. In last week's review, I also said we're in a congestion zone around 820 - 830 for the S&P 500. Well, we finally broke above 830, yet, the volume was light. We had acceptable volume on Thursday when we broke through 840 for the first time in this up leg, but the follow through on Friday was disappointing. We reached marginally higher on Friday but the volume was almost non-existent.

Looking at Figure 2, we can see that 840 is exactly the point when we ended our first crash in October 10, 2008. If we are to break that resistance, we definitely need more momentum than what Friday provided us. As it stand now, this 840 is a critical pivot point in both the long and short term. Thus, we could be in for some more range-bound trading as the market bounces around this level prior to a big move. However, note that we've been in this range for over a week already ... so this is a good time to manage your risks in case the market gaps against your favour.

Also, Thursday's gap up provided a nice point to draw a new bullish channel. And what do you know, the supports are pegged at 820 and 800 again ...This is going to be one big move one way or the other with everything seemingly coming together in the short and long term!

[caption id="attachment_1198" align="aligncenter" width="500" caption="S&P 500"]S&P 500[/caption]

[caption id="attachment_1199" align="aligncenter" width="500" caption="S&P 500"]S&P 500[/caption]

GICS Sectors Review

From the 6-month chart, we see that the Financial (XLF) and Industrial (SLI) are still testing their respective resistances from February. On the other end of the run, the Technology and Telecom sectors (XLK, IYZ) has broken above several resistances and is leading the pack. This is definitely something to keep in mind, i.e. find values in the Techs/Telecom to ride upon on the way up. Basic Materials (XLB) is a close third.

From the 1-month chart, it's pretty clear that the financial made a dead-cat's bounce this month and led the pack by a good margin. Healthcare (XLV), Consumer Staples (XLP), and Utilities (XLU), a.k.a. the defensive sectors, are at the bottom of the pack. This is no doubt yet another mark of a bear rally as people are pulling money from these safe havens into more riskier sectors.

More importantly though, of the top 5 leading sectors in this month's rally, only the Industrial (XLI) failed to make a new high in this week's run compared to the week before. This is definitely a big thumb down for the Industrial. Which coincides with my analysis for General Electric (GE), in particular, so far. Correction: Upon closer inspection of the individual tickers, both XLF and XLI are making a short term double top.

The 5-day chart is basically a zoomed in version of the 1-month. Thus, we're still in a bear rally mode this week. Actually, we see that the Healthcare (XLV) is lagging even farther to its two other friends (XLP, XLU) for the week.

[caption id="attachment_1194" align="aligncenter" width="500" caption="6 months: XLE XLB XLI XLY XLP XLV XLF XLK IYZ XLU"]6 months:
XLE XLB XLI XLY XLP XLV XLF XLK IYZ XLU[/caption]

[caption id="attachment_1195" align="aligncenter" width="500" caption="1 month: XLE XLB XLI XLY XLP XLV XLF XLK IYZ XLU"]1 month:
XLE XLB XLI XLY XLP XLV XLF XLK IYZ XLU[/caption]

[caption id="attachment_1197" align="aligncenter" width="500" caption="5 days: XLE XLB XLI XLY XLP XLV XLF XLK IYZ XLU"]5 days: XLE
XLB XLI XLY XLP XLV XLF XLK IYZ XLU[/caption]