Saturday, January 19, 2008 Weekly review

The selling didn't take a break - how much more is there left in the tank? This is what the Stockcharters had to say about it?

Joe Reed
has called an official Bear Market for the Nikkei, will US markets follow?

His additional comments:
THE POSITIVE: ***The Word of the day (and possibly for the year) is 'UNCERTAINTY'. But believe it or not there are TWO POSITIVES to keep in mind... *The Republicans do not want a RECESSION before the Election and they will do everything in their power to prevent it. This MIGHT be enough to keep the market afloat for a while, POSSIBLY. Also, an Inverted Yield Curve PRECEEDS most recessions which has not happened yet.

1-18-08 *THERE IT IS, I KNEW IT. (per the above)
Today Pres Bush came out with an Economic Stimulation Package to hopefully ward off recession. A $145 Billion in tax relief so people will have more money to spend. (As you know spending injects the economy and is anti-recessionary).
The way I see it there are 2 big 'IFs' attached. IF he can get it passsed and IF it works. So the jury is still out for now, but we'll see if the market reacts.

The S&P lost support of 2007 lows in decisive manner with a bearish cross of 50-day and 200-day MAs:

With the bullish percents in deep oversold territory:

The Russell 2000 has support from 2006 to look forward too:

For the Nasdaq, Joe's next buy signal will come on a higher weekly close for the Nasdaq Summation Index:

Eric Muathe has come out with a bottom call:


[DOW at $12073.78 01/18/2008 @ 12.09 PM EST] ... THESE LOWS ARE POTENTIALLY VERY SIGNIFICANT...

[01/18/2008] I am sticking my neck out with the SPX at $1318.91 @ 12.23 PM EST AND CALLING THIS A SIGNIFICANT BOTTOM!!

Actually staying with the trend typically makes most sense technically - until a trend is clearly broken... At the moment the trend is to the downside and it has NOT been CLEARLY broken...

I find that most technical analysts or market commentators just want to read the charts and NEVER make any BOLD predictions... So what's the point or reading the charts in the first place?? See People are scared to be publicly wrong - I Am Not!!

[01/18/2008 @2.03 PM EST Dow @ 12102] Assume you are responsible for a few billions under management and you placed some very heavy bets (short or long) this week... Would be more afraid of a HUGE gap down on Monday (eh, Tuesday) or a Huge Gap Up??? Catch my drift?? If we get a weak close then we will be much lower!!

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Ted Burge has the PowerShares QQQ Trust at an important converged support level:

The QQQQ point-n-figure chart has a downward target of $37. That is unlikely to occur anytime soon (you would think!):

The Dow has crossed a large void of support down to 12,035 - can 12,035 save the index?

There is also a support test for the Nasdaq, but not yet for the Nasdaq 100 or S&P.

Muarice Walker had this to say on January 16th:

1/16 A sell off occurred in the early part of the day on the inflation front, but recovered based on a positive Industrial Production Index report that showed Manufacturing production was greater than previously forecasted in December. The Fed's 'Beige Book' showed growth in economic activities in December but at a slower rate than prior months. Which is to be expected with the economy growing below trend.

I have been watching the charts for some type of reversal candlestick pattern. The 60 minute bottom today produced a bullish Engulfing candlestick reversal pattern (2nd chart below), while the daily chart could be setting up a Morning Star reversal pattern. A downtrend has been in place on the daily chart, then yesterday we got a long bearish candlestick. Then today the market gapped lower at the open, and formed a Spinning Top candlestick with a small real body. This has a high probability of being a star in a Morning Star reversal pattern (3rd chart below).

The third day of the pattern brings about a reversal as prices gap higher on the open and close much higher than the previous day. The pattern would be confirmed once another close above the high of the pattern.

Two days ago we got an inside day candlestick, which suggested a reversal off the bounce that we got last week. That reversal played out but in doing so it has allowed positive divergence to develop on the MACD-Histogram and the Stochastic on the daily charts. The selloff also brought about positive divergence on the MACD, the Histogram and Stochastics on the 60 minute charts. We are seeing bullish intraday patterns. The indices have bullish Falling Wedges in place on the 60 minute charts, while the 15 minute charts could be carving out a Double Bottom patterns.

The CPI report revealed that Core inflation year over year was lower this year than last year. In 2007 we had a Core CPI YOY of 2.4, while in 2006 we had a YOY Core CPI of 2.6. So inflation is declining on a YOY basis.

His S&P chart shows potential support from the declining channel:

But his fan principle is no more:

This 5-year chart shows the extent of prior corrections on the weekly chart:

Richard Lehman had this to say:

1/19 -- Most of my time this week was spent adjusting channels to steeper downslopes. The only good news about that (other than if you're short here) is that we'll know sooner when the trend changes back to a short term uptrend. That could happen anytime now -- but hasn't yet in any chart. This is a major recognition by market players that the economics are bad and not getting better anytime soon. That's what happens when every portfolio manager in the country is forced to lighten up equity positions for clients at the same time.

1/17 -- It got ugly today as things just sold off in abandon. Some charts held but most accelerated to the downside. Fear is taking hold. We are oversold anbd due for a bounceback rally, but it could come now or later. The main thing is that every uptick is generating more selling and there is no reason to get long yet.

1/16 -- Sorry, but no real good news to report if you're long. Things not only continued in their ST downtrends, but some longer term down channels actually steepened. Interestingly, gold and oil stocks have taken some dives lately, so the only place to make money was tol be on the short side. Channels are fairly well formed, so its more downside until we break resistance coming back up.

1/15 -- Today is a stark reminder of what the bear can do. The nascent upchannel was cut off at its knees by all the bad economic news today and the markets slid right back into a downtrend. Nothing, however, broke their down channels on the daily charts, though they did come down to lower line support again. Gold may have snapped its 18 day upside streak and oil stocks came right back down into their downchannel. In short, get used to it. We will have countertrend rallies, but they are subject to being spooked. Right now, there is simply no good news on the economic front for the bulls to hang their hats on.

Finally, Robert New noted the key break of trendline support:

The Wilshire is also toast:

and his S&P confirms what has been said before:

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