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%


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