Saturday, January 05, 2008

Stockcharts.com Weekly review

After the Christmas break it was a busy week for the markets. What had Stockcharters to say about it?

Eric Muathe
is looking for a repeat of 1998. I think Friday's break of the prior low negated this possibility - but the 2007 low is an alternative support level.



His optimism stretches to the Nasdaq:



He has similar expectations for the S&P.

Joe Reed had said this to say in December:
12-14-07 WHAT TO INVEST IN NOW?
The Bull market is still intact. But with Retailing down and Consumer Spending down, the economy is slowing. Stay cautiously bullish and in 'Defensive Stocks' or mutual funds. *Remember this... The Best Investment is owning something that goes up in a Bull market, then still goes up in a Bear market (or at least holds it's Value). And don't forget about Shorting a weak stock for excellent profit potential.
1-2-08 The DOW drop today of -220 pts was the worst drop in history for a new year. Yipes!


His outlook for the housing index is for a test of 2003 lows - will other indices make a similar test


His S&P chart is interesting as it shows the current test of November lows - but stochastics [39,4] are nowhere near oversold; bad news for bulls.


Check out his Summation Index for the Nasdaq. The behavior of the Summation index and Nasdaq from Friday is very similar to that of June/July 2006 - however, full stochatics sit on opposite ends of the spectrum, so it may yet be to early for a bounce


Ted Burge is keeping his eye on Ted Support for the Qs; in this case $47.65


The (unfortunate) SOX is also fast approaching support of 368:


Maurice Walker has his usual commentary - although tellingly it was written before the Jobs report:

1/3 Commentary: I continue to watch for signs of a directional move, via various technical indicators. Today I want to talk about the Money Flow Indicator (MFI) and the On Balance Volume (OBV). Now since our 1576 intraday high on the S&P 500 was made in mid-October, we have experienced a great deal of volatility. But since the recovery that has began since our 1406 low, volatility has somewhat decreased in contrast to the summer and fall sell offs.

The MFI and OBV are designed to spot trends. A positive money flow occurs when the current bar's price exceeds the previous bar. The OBV assigns a positive or negative value based on whether prices close higher or lower for the day.

If a divergence occurs between price and the indicator, it can be a signal that the market is about to change trends. Now we do have a divergence between price and the Money Flow, which formed during the last minor high (see 1st chart below). While this divergence is taking place the On Balance Volume trendline appears to remain in tact, at least there appears to be no definitive break in the trend which is precisely defined.

So the OBV appears to remain in tact for now, while the money flow has moved lower. So even though the money flow has turned short-term negative, it is not getting conformation by the OBV. Therefore, until a decisive breakdown occurs in the OBV, the MFI remains unconfirmed, not featuring any characteristics that the distribution phase will be ongoing.

Which may be why the 60 minute charts have turned bullish on their indicators, as we got a bullish touch on the MACD and the RSI appears to have broken it's downtrend. Stochastics now have positive divergence at extremely oversold levels. Lets see if the jobs report effects the market tomorrow. I am also watching for some type of reversal candlestick pattern to manifest on the daily chart.

His chart tells the real story:


His weekly chart shows a key test for the S&P (and the cyclical bull market from 2003):


Although the 60-min chart shows support and a good chance for a bounce (at least on this time frame)


With The Fan Principle set up favorably for bulls


Richard Lehman reports on the weakening long term channels:

1/5 -- The long term bull is now under serious presure. The Dow remained in its short term downchannel, but most others actually accelerated to even steeper downchannels. The small caps collapsed and the QQQQ got hit by both tech and oil to drop a whopping 4.39%! That brought things down to (or even past) long term support lines, some of which go back several years. Whether we call it a 'recession' or 'bear market' or not, I think its a foregone conclusion that we are breaking the long term bull trend and are entering a new phase of the market. That said, we could get a reflex bounce at any time here, but should be looking out further to riding through the muck for a while.

By the way, I've been using these trend channels to position my 401(k) in either a large cap equity fund or cash -- 100% in or out of equities with no shorting and no intraday trading. Since September (only 4 months!), I am close to 1000 basis points ahead of the Dow and S&P.

1/4 -am- We are hitting some of those major support lines this morning. If you waited to get long, now is a good time, but maintain a tight stop in case we come back and break those lines.

1/3 -- The short term charts all held true to existing downchannels again today. The little blip upward Wednesday morning and subsequent decline confirmed where the upper line of the current declining channel actually is. The big issue is that we are approaching major long term upchannel support. The daily/one-year charts show how close -- for the Dow, that line is at around 12,800 right now. If you look at the longer picture, we are talking about multi-year trendlines. A break will confirm that we are likely entering a bear market phase. THESE ARE IMPORTANT TO WATCH.





 
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