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%


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dwaynemalone1@gmail.com