Stock Market and Currency Update 28 March 2010

Update as of market close Friday, 26 March 2010.

Another week of solid gains on the market. All technicals are bullish and the mid to long term outlook continues to look bullish.

See notes below (Click on all charts to enlarge):


SPX 10 year monthly:



The monthly long term chart turned bullish in July, 2009 when the monthly closing price exceeded the 12 month simple moving average.

At the close of March price will remain above the 12 mSMA (currently @ 1030.69).

The long term view is BULLISH.


SPX 3 year weekly:



The weekly chart remains bullish. The 13 week exponential moving average (13 EMA) remains above the 34 week exponential moving average (34 EMA).

The technical indicators turned bearish in late Jan (as shown on the chart with the red vertical line) so I was on guard for a possible trend reversal. However, that downtrend did not materialize and price found support near 1050 before it began it's next rise. The technicals turned bullish again in late Feb.

Price looks like it wants to challenge the 1200 level, which is a level of volumetric resistance. Above that the next target is the 61.8% Fibonacci level @ 1228.74. A break above there and there is a VERY good chance we go on to test the last highs @ 1576. A bit early to be that optimistic but I have that on my radar.

The intermediate term view remains BULLISH.


SPX Point and Figure (traditional):



The PNF chart remains BULLISH and has a price target of 1295.


SPX daily with volumetric:



The market correction in Jan/Feb bottomed at 1044 and created a nice symmetrical rising channel with the top rail. Price is currently positioned midway within this up channel.

Price is currently right at volumetric resistance @ 1170'ish so this is a place where short term weakness would be expected. A significant rise above this level would be exceedingly bullish.

Should a short term correction develop, there is nice support near the 1120 level formed by the previous price support and the uptrend line. A break of this level would be exceedingly bearish.


SPX 6 month daily:



The 6 month daily chart shows a nice uptrend channel from the 1044 bottom. The slope of this channel is extreme and cannot last (in fact, I am amazed it has lasted as long as it has).

The technical indicators are positive but dangerously overbought. As such, this market short term is in need of a correction.

The 1st sign of trouble would be a break of 1150. The 50 day moving average is currently @ 1118 and rising. This, along with the support near the 1120 level, would be a natural target in the event this market begins to decline.

The short term chart is BULLISH but DANGEROUSLY OVERBOUGHT.


McClellan Oscillator NYSE:



Of the many, many, many charts I monitor, some of the most important have nothing to do with market price action. They have to do with the "internal breadth" of the market.

When prices are rising and the internals of the market (volume, % of stocks making new highs, % of stocks > 200/50 day moving averages, etc) are all in alignment, then you are dealing with a "healthy" market. When the internals begin to break down, you are dealing with an "unhealthy" market.

The McClellan Oscillator is a measure of internal market breadth.

For those who are interested:

Wikipedia:

The McClellan Oscillator is a market breadth indicator used by financial analysts of the New York Stock Exchange to evaluate the rate of money entering or leaving the market and interpretively indicate overbought or oversold conditions of the market.[

Developed by Sherman and Marian McClellan in 1969, the Oscillator is computed using the exponential moving average (EMA) of the daily ordinal difference of advancing issues (stocks which gained in value) from declining issues (stocks which fell in value) over 39 trading day and 19 trading day periods.

The simplified formula for determining the Oscillator is:

Oscillator = (19 − day EMA of Advances minus Declines) − (39 −day EMA of Advances minus Declines)

The McClellan Summation Index (MSI) is calculated by adding each day's McClellan Oscillator to the previous day's Summation Index.

By using the Summation Index of the McClellan Oscillator, you can judge the markets overall bullishness or bearishness.

MSI properties

above zero it is considered to be bullish (positive growth)
below zero it is considered to be bearish (negative growth)
The Summation Index is oversold at -1000 to -1250 or overbought at 1000 to 1250.

Note in the chart above that the McClellan Oscillator topped the 1st week of March and has been on decline since. Price has continued to advance so when this divergence began we entered the "unhealthy" market phase.

A similar set up occurred in early Jan as noted on the chart. It appears we are setting up for a similar conclusion.

The short term looks dangerous.


Shanghai 2 year daily:



I am monitoring the Shanghai index closely. It was the 1st major index to lead us out of the last major decline/bear market so it is key to watch it for clues as to what might to expect.

This index is not looking nearly as bullish as the U.S. indexes. Price has formed a symmetrical triangle and could break either way. A troubling note is the 50 day moving average has just crossed BELOW the 200 day moving average. This is known in technical analysis as the "death cross" and needs to be watched very closely. A break downwards out of the triangle might be the 1st indication the party is over.


Euro 6 month daily:



I have not bothered to update other currencies today because only 1 matters right now; the Euro. Since it's top in early Dec, 2009 it has declined a little over 12%.

Price has set up what appears to be a nice down sloping channel. It appears a 5 wave pattern has formed and the 5th wave has begun (as shown with the red lines on the chart).

Price projection points to a target of 128.65 for the Euro to complete this pattern; a further decline of approx 4% from current levels. A break of 137.82 would negate the pattern.



Bottom Line:

My comments from my last update remain unchanged:

Overall the markets continue to look positive. The monthly and weekly charts are bullish and the daily chart is also bullish (but overbought). I never buy into an overbought market.

I remain long term bullish on the markets but cannot buy at these overbought levels. I continue to wait for a decent pullback to commit new capital to the provident fund account.

There are no signs (as of today) that a significant decline is forthcoming. However, I am still of the opinion we will have a top some time this spring/early summer followed by a SIGNIFICANT DECLINE into the fall. I expect a bottom to occur sometime in Sept/Oct with a huge rally to follow. I do not expect I will achieve 100% investment in the Provident Fund until then (unless significant resistance levels are exceeded).

As of today my strategic positioning within the Emirates Provident Fund A and B accounts remains unchanged at a 50% Equity/50% USD cash position.**

The ECAM Asset Allocation Fund is currently 70% invested (60% core holdings invested + 10% discretionary invested) and 30% cash. It has been another great month (and quarter) for the fund. I will blog those charts along with the fund's monthly and quarterly performance statistics at the end of March.


**Strategic allocated percentages are as per how funds were originally allotted. Due to daily market fluctuations and ongoing equity monthly purchases within the accounts these amounts will vary several percent from that posted.

Current positions as of 28 March 2010:

-Equities: 59.2%

-USD Cash: 40.8%


Legal Disclaimer: The content on this site is provided without any warranty, express or implied. All opinions expressed on this site are those of the author and may contain errors or omissions. NO MATERIAL HERE CONSTITUTES "INVESTMENT ADVICE" NOR IS IT A RECOMMENDATION TO BUY OR SELL ANY FINANCIAL INSTRUMENT, INCLUDING BUT NOT LIMITED TO STOCKS, OPTIONS, BONDS OR FUTURES. The author will reveal his current market positions and holdings but actions you undertake as a consequence of any analysis, opinion or advertisement on this site are your sole responsibility. The author is not licensed as an investment advisor in the UAE and therefore cannot provide individual account advice to individuals and/or institutions.

dwaynemalone1@gmail.com

Currency update 14 March 2010

Currency update as of March 14, 2010 close.


USD 10 year monthly:



The USD went long term bullish at the end of Feb.

It is currently at long term resistance at 80.39. A monthly close above this level and the previous high at 89.62 would be the new target.

The monthly chart remains bullish.


USD 3 year weekly:



The USD weekly chart went bullish in early Dec, 2009. Price has found resistance at the 80.39 level (as mentioned above) + the 38.2% Fibonacci level @ 80.11. This would be a normal area to consolidate recent gains before a further push upwards.

All indicators remain bullish. A weekly close above the resistance level would be very bullish but has yet to be achieved.

The weekly chart remains bullish.


USD 6 month daily:



The daily USD chart shows the well defined uptrend line that was broken on Friday, 12 Mar. The short term technical indicators turned bearish the previous day.

Key short term support is at 79.51. The 50 day moving average is currently at 79.23 with the 200 day moving average at 78.04. A break of the 200 dma along with the support line at 78.33 would be a very bearish development.

The daily chart is currently bearish.


Euro 10 year monthly:



The Euro went long term bearish in Jan when price closed below the 12 month simple moving average.


Euro 3 year weekly:



The Euro weekly chart went bearish the 1st week of Dec, 2009.

All indicators remain bearish with resistance at 138.82 and support at 134.


Euro 6 month daily:



Short term indicators on the Euro went bullish Wed, Mar 03. Short term remains bullish and appears to be ready to challenge the downtrend line established from the Dec, 2009 top.

Short term the Euro is bullish.


British Pound 10 year monthly:



The monthly British pound chart turned bearish at the end of Feb. Key support remains at 142.


British Pound 3 year weekly:



The weekly British pound chart turned bearish the 1st week of Dec, 2009. It remains bearish.


British Pound 6 month daily:



The short term chart of the Pound turned bearish in late Jan. It remains so and is one of the weakest currencies I monitor.

It has found support at 148.84 and must hold this level. In the last 2 trading days it has had a "pop" but this week will determine whether it switches back to short term bullish. For now, it remains bearish.


Australian Dollar 10 year monthly:



The monthly chart of the Australian dollar turned bullish in May, 2009. It remains bullish.


Australian Dollar 3 year weekly:



The weekly Australian dollar chart turned bearish the last week of Jan, 2010 but has abruptly reversed and turned bullish as of 05 Mar.

It could best be described as being in a trading range until the previous high at 94.06 is taken out. If it were to do so, it would be a very bullish development.


Australian Dollar 6 month daily:



The daily Australian dollar chart went bullish on 16 Feb and continues to remain bullish.

A nicely formed uptrend channel has been formed and it appears to want to test the previous daily high close at 93.24. This level has been tested 3 times this year and each attempt has failed. A close above this level would be very bullish.


Canadian Dollar 10 year monthly:



The monthly Canadian dollar chart turned bullish in May, 2009.


Canadian Dollar 3 year weekly:



The weekly Canadian dollar chart (like the Australian dollar) turned bearish in late Jan but then has put in an abrupt turnaround. It switched to bullish the last week of Feb and has broken the resistance level at 96.68 + the important weekly close resistance going back to 2008 (red line). The next target is the 102 level.

The Canadian dollar is the strongest currency I monitor.


Canadian Dollar 6 month daily:



The daily chart shows a clear view of the breakout on Friday above resistance at 97.79. This should now act as support unless this was a false breakout; this weeks market action will verify this.

The daily CDW remains very bullish but getting quite extended/overbought. It needs to consolidate at this level.



Legal Disclaimer: The content on this site is provided without any warranty, express or implied. All opinions expressed on this site are those of the author and may contain errors or omissions. NO MATERIAL HERE CONSTITUTES "INVESTMENT ADVICE" NOR IS IT A RECOMMENDATION TO BUY OR SELL ANY FINANCIAL INSTRUMENT, INCLUDING BUT NOT LIMITED TO STOCKS, OPTIONS, BONDS OR FUTURES. The author will reveal his current market positions and holdings but actions you undertake as a consequence of any analysis, opinion or advertisement on this site are your sole responsibility. The author is not licensed as an investment advisor in the UAE and therefore cannot provide individual account advice to individuals and/or institutions.

dwaynemalone1@gmail.com

Stockmarket Update 14 Mar 2010

Market update as of the market close 12 March 2010.

It has been an interesting couple of weeks since my update. At that time, the markets were in the midst of the beginnings of an upward reversal following their fall from the 19 January top. At that time, I pointed out the upward bias but stated the markets were still technically vulnerable. This technical vulnerability has since been reduced over the past few weeks.

The markets have staged an amazing recovery over the past 2 weeks. Whether that recovery is based upon sound economic principles or central bank market manipulation (I think the latter) is irrelevant as far as market technicians are concerned. We only care about price; where it is and where it is going.

With this in mind, I turn to the S & P 500 stock charts.


Click all charts to enlarge:



Market Trend Table:



The 1st chart is a snapshot of my market trends table. As can be seen, all stock indexes in all time frames (daily, weekly, monthly) are now bullish.

Currencies have been showing some interesting changes so I will blog them separately.


SPX 11 year monthly:



The 2nd chart is the long term monthly chart of the SPX. Price turned bullish in July, 2009 when the monthly closing price closed above the 12 month simple moving average (blue line on the chart).

Price rose to the 50% Fibonacci retracement level (1121.44) and stalled for several months. Should price close the month of March above this level it would be very bullish. The next price target would be the 61.8% Fib level @ 1228.74.

The monthly chart is BULLISH.


SPX 3 year weekly with volumetric:



The next chart is the second of my "longer term" charts (the monthly being the other one).

As noted on the chart, price turned bearish in late Jan. When price broke below 1121, the next level of support on the volumetric chart was around 1050. A break of the 1050 level and the next strong volumetric support level was all the way down at 900 (with one level of relatively weak support at 980). My fear at that point was if 1050 did not hold we were setting up for a revisit of 900.

The 1050 level did hold (inter day low was 1044) and since then the market has been on the rebound. It has now re-cleared the 1121 level (which is both volumetric support and the 50% Fibonacci) and is now testing the highs from Jan. In the process, all the key technical indicators I use on the weekly charts have now turned back to bullish.

It appears we may have "dodged a bullet" on that decline for whatever reason. The next level of volumetric resistance is at 1200. That is now the target if price can stay above 1121.

The weekly chart is BULLISH.


SPX daily with volumetric:



The 4th chart is a daily chart of the SPX with volumetric levels taken from the Mar, 2009 bottom.

A bearish rising wedge had formed on the chart and was confirmed when price broke down out of the wedge in Jan, 2010. This pattern is still valid so it is still too early to "party like it's 1999".

The current support and resistance levels (as defined by volumetric levels) are shown in the red lines and arrows (1110-1150).

I have drawn a "tentative" new trend line (in dashed black) which will become the new "controlling trend line" should price break above the last high at 1150. We are at this level right now but have yet to break above this level. Until it does, it must be assumed we are out of the wedge, without a controlling trend line, and in a "decline" process.

Having said the above, technically the bearish wedge formation is valid until price can regain the inside of the wedge. It is common for price to attempt to do so (known as a throwback) where price moves up to tag the underside of the wedge before ultimately breaking down. We may be setting up for this type of price action.


SPX Point and Figure (traditional) with volumetric:



Another view of the daily Point and Figure chart I show all the time. This time I have included volumetric levels to give some idea of support and resistance.

Price is still bullish and targets 1295. There is a danger of a "double top" here at 1150. Should price push above this level, that would be a very bullish development.

As can be seen on the chart, the 1090-1100 level shows up as strong volumetric support should price decline from current levels.


SPX 6 month daily:



A 6 month daily view of the SPX. It has been an unbelievable month with a huge decline from 1150-1044 followed by huge rise from 1044-1150. As of today, we are unchanged from 30 days ago. Quite a ride.

The 1150 level has been key so far in this rise. The market is very overbought (as indicated by the blue arrows on the RSI at the top of the chart). Each time over the past 6 months the RSI has reached this level, the SPX has had a sudden decline. I am expecting the same again.

The short term chart is BULLISH but very overbought.


Bottom Line:

Overall the markets continue to look positive. The monthly and weekly charts are bullish and the daily chart is also bullish (but overbought). I never buy into an overbought market.

My plan is to let the overbought condition alleviate itself and watch the market action during the coming decline. A 20-30 point decline from current levels would be healthy for the markets (to alleviate the overbought condition) before the next advance to clear the 1150 level. What would be very unhealthy would be for price to break upwards above 1150 from this point. This would move the markets into further overbought and could set up a "parabolic blow off top".....those always end up in tears for those who buy into them.

A controlled decline from this level followed by a new advance above 1150 will have me adding to my positions in the Provident Fund. Until then, I will continue to wait and watch for the next week to see what unfolds.

As of today my strategic positioning within the Emirates Provident Fund A and B accounts remains unchanged at a 50% Equity/50% USD cash position.**

The ECAM Asset Allocation Fund is currently 70% invested (60% core holdings invested + 10% discretionary invested) and 30% cash. I will blog those charts at the end of each month along with an update on the ECAM funds on going performance.

Should I make any changes to my Provident Fund positions I will blog them immediately.


**Strategic allocated percentages are as per how funds were originally allotted. Due to daily market fluctuations and ongoing equity monthly purchases within the accounts these amounts will vary several percent from that posted.

Current positions as of 12 March 2010:

-Equities: 58.0%

-USD Cash: 42.0%


Legal Disclaimer: The content on this site is provided without any warranty, express or implied. All opinions expressed on this site are those of the author and may contain errors or omissions. NO MATERIAL HERE CONSTITUTES "INVESTMENT ADVICE" NOR IS IT A RECOMMENDATION TO BUY OR SELL ANY FINANCIAL INSTRUMENT, INCLUDING BUT NOT LIMITED TO STOCKS, OPTIONS, BONDS OR FUTURES. The author will reveal his current market positions and holdings but actions you undertake as a consequence of any analysis, opinion or advertisement on this site are your sole responsibility. The author is not licensed as an investment advisor in the UAE and therefore cannot provide individual account advice to individuals and/or institutions.

dwaynemalone1@gmail.com