Weekly Market Review: June 26, 2009

The market dropped almost 20 points on Monday followed with Tuesday touching 888 on the S&P500. Then starting Wednesday, the market steadily climbed its way back to exactly where it started at the Friday close at 918. Doesn't this get monotonic? I seem to be writing the same thing every week for the past month because the market is getting nowhere. Obvious to everyone, our big trading range is the low of May at 880 and the high of June at 950. Everyone is watching it closely.

However, the bears are at an advantage now. The downward channel seems to have started already with the price level and 10 day MA below the 200 day MA and 40 day MA, respectively. A more aggressive resistance is at 930 from last week.

From Figure 2, we see that in a long term perspective, the market is still adhering to its downward resistance from September 2008. Furthermore, there's a negative divergence in the RSI at the current price level as compared to May 2009 when we were topping around 920 also.

In any case, this sideway but volatile action is difficult for me to trade. So rather than keep trying to play the swings in equities, I've started an options strangle position in Gold (GLD) this week. The risk is just lower there.

[caption id="attachment_1544" align="aligncenter" width="500" caption="S&P500 ETF"][S&P500 ETF][][/caption]

[caption id="attachment_1545" align="aligncenter" width="500" caption="S&P500 ETF"][S&P500 ETF][][/caption]

GICS Sectors Review

The chart below is taken from CaraCommunity’s RSIApp. The RSIs are slightly higher this week compared to last week. Otherwise, the overall picture remains the same between various sectors.

Ticker![][] Last![][] RSI7d![][] RSI7w![][] RSI7m![][] Zone (estimate)![][]
[XLE][] \*
47.89 36.2 47.55 40.84
[XLB][] \*
25.82 44.83 53.94 44.1
[XLI][] \*
21.97 44.82 52.78 38.39
[XLY][] \*
22.96 49.13 57.72 47.65
[XLP][] \*
23.03 53.65 62.05 46.99
[XLV][] \*
26.37 68.51 69.38 48.04
[XLF][] \*
11.92 52.4 60.98 38.47
[XLK][] \*
18.16 58.49 74.38 52.1
[IYZ][] \*
17.90 58.46 61.23 47.35
[XLU][] \*
27.74 60.95 63.84 42.59

[S&P500 ETF]: http://traderpau.files.wordpress.com/2009/06/2009-06-28-spy.png [S&P500 ETF]: http://traderpau.files.wordpress.com/2009/06/2009-06-28-spy_prop.png