ECAM Market Update 29 August 2010

Stock Market Update 29 Aug 2010

Stock market update as of the market close on Friday, 27 August 2010 (S & P 500 closing price 1064.59).

Comments below each chart.

(CLICK ON ALL CHARTS TO ENLARGE)


LONG TERM CHARTS:

SPX 11 year monthly:



The monthly chart turned bearish at the end of June, switched to bullish at the end of July, and currently will become bearish once again at the end of August should price not close the month of August above the 12 month simple moving average (currently @ 1093, therefore requiring a +2.6% increase over the next 2 trading days).

The whipsaw nature of this indicator the past 3 months clearly shows we are in a "long term" fight between the bulls and the bears. Currently the bears appear to have the upper hand.

It must be noted that the "bullish" July signal was made with unsupported technical indicators to confirm. Until they do so, any bullish signal must be treated with caution.

The long term MONTHLY chart is currently BULLISH based upon price but will switch to BEARISH unless we have a strong market pop over the next 2 trading days.


SPX 6 month weekly (13/34 ema):



The 2nd long term chart turned bearish when the 13 week exponential moving average (EMA) crossed below the 34 week EMA (13 August).

As discussed previous, this chart also had a bearish/bullish/bearish whipsaw due to the current confusion in the markets.

Note the current "Neutral Zone" I have spoken about in the past continues to hold. Price tried this week to break below 1065 (it did so several times inter-week) but by the close on Friday we were back into the trading range.

The long term 13/34 week ema chart remains BEARISH. Any weekly closing price below 1065 would be an extremely bearish confirming price indication.


Intermediate Term Charts:

SPX 3 year weekly:



The 3 year weekly chart turned bearish the 1st week of May. All technical indicators remain bearish.

It appears the SPX may be forming a large "complex" Head and Shoulders topping formation. A weekly closing price below 1023 (annotated as the "neckline") would put the pattern into place with a calculated price target at 827. This hasn't played out yet but I have it on my radar.

The intermediate term SPX weekly chart remains BEARISH.


SPX Point and Figure (traditional):



The point and figure chart turned bearish on a price print of 1070 and has a current projected target of 1010.

Very troubling on this chart is the loss of the strong volumetric support @ 1090-1100. We are currently holding the next strongest volumetric support @ 1060-1070. A break below here and there is downward slope of reducing volumetric support down to 940.

The intermediate term PNF chart remains BEARISH.


Short Term Charts:

SPX daily with volumetric:



The daily chart with volumetric clearly shows the declining trend channel we are currently within. Also clearly defined is the 2 distinct levels of volumetric support at 1038-1085 (where we are current at) and the higher range of 1085-1132.

As discussed on the PnF chart previous, the next clearly defined volumetric support level if we break 1038 would be 940-950. Interesting to note this price level also corresponds to the bottom of the current price channel and the 50% Fibonacci retracement level from the market bottom in March, 2009 to the top in April, 2010. This is the logical price objective should we break down from current levels.


SPX 6 month daily:



The daily chart turned bearish on Aug 11. Price has formed a down trending channel (as discussed previous) but has still held the 1050 level on a daily closing basis. Price tried twice this week to break 1040 but was unable to do so; potentially a short term bullish signal.

We entered the 1040-1130 zone in May and have been unable to break either upwards or downwards from this congestion zone (as shown by the beige price band). Any close below would be VERY bearish; any close above would be VERY bullish. Until then, we are stuck in a trading range. It is what it is.

The short term daily chart remains BEARISH.


SPX 60 Minute chart:



The 60 minute chart further amplifies the current range. My short term trading signals remain bearish even after Friday's 1.66% gain.

The short term trading chart remains BEARISH.


BOTTOM LINE:

As I mentioned in my Aug 18 update, the markets continue to churn within well defined price zones. There is no clear "winner" at this point in time.

From Aug 18:

For those who are looking for the holy grail "answer" as to which way these market go over the near term, you will be disappointed. Most times the technical picture is clear but some times it becomes very cloudy. We remain cloudy and any market technician leaning one way or another is either "talking his book" (based upon the direction his employer would like him to lean to encourage clients to invest accordingly) or flipping a coin and hoping to be right. I don't do either of these things.

Nothing has changed from that view but the overall "scorecard" is looking a bit more bearish. The "score card" based upon my technical charts now shows:

-The two "long term" charts are still NEUTRAL as they are in disagreement (monthly chart bullish/weekly chart bearish) but unless the SPX can tack on 2.6% in the next 2 trading days the monthly will flip back to BEARISH. As such, the long term is heavily leaning BEARISH as of this weekend.

-The two "intermediate term" charts are BEARISH as they are in agreement (weekly chart bearish/PnF chart bearish).

-The two "short term" charts are BEARISH as they are in agreement (daily chart is bearish/60 minute chart is bearish).

Looking at the above, the only thing keeping this thing bullish is the price support at 1040.

If we could draw a picture based upon the data, we remain within a trading range that could go either way but the "technical score card" continues to point towards a bearish outcome going into the fall.

With all the "technicals" bearish; I am eyeing the only thing that really matters and that is .............. PRICE.

Should we have a daily close next week below 1040 and/or a weekly closing price below 1065 that would be the final piece of the "technical puzzle" needed to exit my Provident Fund positions. This would be the signal to move back into a 100% cash position.

Should this occur, I would expect a price target near 950 leading into the fall elections in the U.S. IMHO this would offer a very good entry price for what I expect will be very strong market performance for the period Nov/2010 until Dec/2011 before the next decline begins. I will discuss this scenario more in a future post.

For now, waiting for next week...............


Emirates Provident Fund:

My provident fund remains in a strategic 75% equities/25% USD cash weighting.*


*Actual positions will change daily based upon price action and market volatility.



ECAM Asset Allocation Fund:

The ECAM fund is currently in a 72.5% invested/27.5% cash position as follows:


-Core Equities: 30% (VTI 10%, VB 5%, VWO 15%)

-Core Bonds: 15% (BND 10%, TIP 5%)

-Core Real Estate: 10% (VNQ 10%)

-Core Commodities: 5% (DBA 5%)

-Core Managed Timber: 5% (CUT 5%)

-Discretionary: 7.5% (VPU 5%, ITB 2.5%)

-Cash: 27.5%


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 18 August 2010

Stock market update as of the market close on Tuesday, 17 August 2010. Comments below each chart.

(CLICK ON ALL CHARTS TO ENLARGE):


LONG TERM CHARTS:


SPX 11 year monthly:



Price remains very near the 12 month simple moving average after last month's close above the 12mSMA. RSI is trying to regain 50 along with the Full Stochastic remaining above 50 (bullish indications) while the ADX and Force index are still bearish.

This chart remains BULLISH based upon the close at the end of July (above the 12mSMA) but the technical indicators are looking bearish. We need to wait until the end of the month to assess the direction but it is "leaning" bearish.


SPX 6 month weekly:



The weekly 13/34 EMA crossover chart shows another cross to the bearish side last week (13 wEMA below the 34wEMA).

This indicator has been whipsawing back and forth the past 6 weeks (which is very unusual for this indicator) indicating there is a huge battle between the bulls "all is good and we are going to the moon" stance and the bears "all is bad and we are going to hell" stance.

I've indicated 2 trading "zones" on the chart; a larger "outer zone" and a smaller "inner zone". I will be watching these zones for a sign as to which way market participants want to move the market going into the fall.

The 13/34 weekly chart is now BEARISH based upon the 13/34 wEMA crossover.



MEDIUM TERM CHARTS:


SPX 3 year weekly:



The intermediate term 3 year weekly chart remains bearish but is trying to show signs of life.

The Stochastic has now crossed above 50 with the RSI and MACD looking like it wants to switch bullish. The ADX remains bearish and the Force index still has a negative print. If these 2 come into alignment it would be very encouraging but they have refused to do so as of today.

Until that happens the intermediate term weekly chart remains BEARISH.


SPX PnF with Volumetric:



The Point and Figure chart turned bearish on a price print of 1080 last week and projects a target of 1010.

Note the very strong volumetric bar at the 1090 level on the left hand side of the chart (which I've spoken about previous). This is the current "line in the sand" and both the bulls and bears are fighting around this level with neither able to gain the upper hand (as of today price closed at 1092).

The PnF chart is currently BEARISH.



SHORT TERM CHARTS:


SPX Daily with Volumetric:



The SPX daily chart from the March, 2009 low with volumetric shows 2 very important support/resistance zones (1038-1085 and 1085-1132). Until either of these zones are violated we are stuck in a trading range with no clear indication of direction.


SPX 6 month daily:



The 6 month daily chart turned bearish on Aug 10 and remains bearish as of today.

Price has regained the 50 day moving average (short term bullish) but remains below the 200 day moving average (long term bearish).

As noted on the chart, the 100 day moving average has been the level of resistance the daily chart has been unable to break above. Until it can do so, it must be assumed the short term remains bearish. Also note a descending price channel appears to have formed and the upper boundary is defined by both the upper trend line and the 100 dSMA. This will be formidable price resistance on any further price rises.

The daily chart remains BEARISH.


SPX 60 minute:



The 60 minute short term chart clearly shows the well defined trading range we are currently in. The 1040-1130 price levels are key going into the next few weeks. Can we break out (or down) from these levels or do we continue to churn? Until a clear answer to that is given, it is pointless to attempt to judge a long term projection forward.

Having said the above, the current short term trading chart remains BEARISH.



BOTTOM LINE:


The markets continue to churn within well defined price zones. There is no clear "winner" at this point in time.

For those who are looking for the holy grail "answer" as to which way these market go over the near term, you will be disappointed. Most times the technical picture is clear but some times it becomes very cloudy. We remain cloudy and any market technician leaning one way or another is either "talking his book" (based upon the direction his employer would like him to lean to encourage clients to invest accordingly) or flipping a coin and hoping to be right. I don't do either of these things.

Having said that, if you look at my "score card" based upon my technical charts we have:

-The two "long term" charts are NEUTRAL as they are in disagreement (monthly chart bullish/weekly chart bearish).

-The two "intermediate term" charts are BEARISH as they are in agreement (weekly chart bearish/PnF chart bearish).

-The two "short term" charts are BEARISH as they are in agreement (daily chart is bearish/60 minute chart is bearish).

If we could draw a picture based upon the data, we remain within a trading range that could go either way but the "technical score card" is pointing toward a bearish outcome going into the fall.

I have numerous technical indicators I follow that support the bearish/falling market scenario over the next month. I will detail some of those in an upcoming video blog.

Having said that, until the trading zones are violated it is wise to sit on your hands, watch, and wait. It is too early to commit new money into the market and it is too soon to withdraw month from the market.

That is the stance I am taking in my Provident Fund and my positions remain unchanged.


Emirates Provident Fund:

My provident fund remains in a strategic 75% equities/25% cash weighting.*


*Actual positions will change daily based upon price action and market volatility.



ECAM Asset Allocation Fund:

The ECAM fund is currently in a 72.5% invested/27.5% cash position as follows:


-Core Equities: 30% (VTI 10%, VB 5%, VWO 15%)

-Core Bonds: 15% (BND 10%, TIP 5%)

-Core Real Estate: 10% (VNQ 10%)

-Core Commodities: 5% (DBA 5%)

-Core Managed Timber: 5% (CUT 5%)

-Discretionary: 7.5% (VPU 5%, ITB 2.5%)

-Cash: 27.5%


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

ECAM Market Update 03 August 2010