Jeanette Schwarz Young, CFP, CMT
Box 1952
One North End Avenue
New York, New York 10282
www.OptnQueen.com
December 13, 2009
When reviewing the weekly chart of the S&P 500 futures contract, it becomes clear that this market has been overbought, except for two occasions in July and October, since April of 2009. So what are all the pundits carrying on about? Isn’t it reasonable for this market to take a breather and consolidate? We have made great strides since bottoming in March of 2009. It is apparent that portfolio managers are trying to keep their power dry and trying to keep their outperformance figures firm until the end of the year. Wouldn’t you, if you were a portfolio manager with a bonus check at risk?
This week, the FOMC has a two-day meeting with no change in interest rates anticipated. The statement might indicate that the economy is improving but needs to be monitored further for possible support. We also have a quadruple witch this week. We noticed that nothing unusual occurred with the roll last week, and we anticipate a quiet conclusion to the fourth quarter expiration this week.
This year’s holiday shopping has been focusing on what is needed rather than an extravagance. Perhaps the only industries that are enjoying robust growth are industries that supply needs like toilets, sinks, plumbing supplies, and other necessities of life. Things that home owners and renter, cannot live without. Last week our plumber removed most of our discretionary income with a replacement boiler for the house. It isn’t as though we had a choice on that matter and we believe that others in our circumstance have the same problem. What if your car broke down and you needed repairs to fix your “daily driver?” Or, perhaps you hit a pot hole and need to replace two blown out tires? There is nothing that you can do about these bills and repairs. They are not calculated in you weekly allowance and therefore when they show up, poof budget blown back to the drawing board to find funding to pay the bills that you know will be showing up in your mail box. Then there are real-estate taxes to be paid, utility bills, water bills, and breathing bills. The only bills not going up are the grocery bills which, seem to be stable at the moment. Tiffany you will have to wait until sometime in the future for our business.
We really feel sorry for charities during these hard times called a “recovery?” The Salvation Army will have credit card ready kettles starting next week. We feel sure that the contributions will be lighter this year, not because people want to but rather because many can’t afford to make their usual contributions. This is the third jobless recovery; remember the past two recoveries have been “jobless” as well. It speaks volumes as to lack of manufacturing here in the USA.
How can we expect to see jobs created unless we start producing something?
Tuesday: November PPI is released at 8:30, and November industrial production and capacity utilization is released at 9:15. Wednesday: A FOMC two-day meeting end at 2:15 with an interest rate decision and statement, November CPI is released at 8:30, and November housing starts are released at 8:30. Thursday: November leading indicators are released at 10:00 and December Philadelphia Federal Reserve Survey of Business conditions is released at 10:00.
The US Dollar Index enjoyed a rally in the Friday session expanding both the low and the highs of the day. We saw a reversal day in the Friday session. Can the market keep this rally going? Well, the chart seems to think so. We are overbought by all the indicators that we follow, however; not one is pointing lower. We closed above the upper band of the Bollinger band which is a place where we will find resistance. The 5-day moving average is at 75.623. The top of the Bollinger band is at 76.583 and the lower edge is seen at 74.092. We are in the Ichimoku clouds for the daily time-frame but below the clouds for the weekly and the monthly time-frame. We believe that resistance will be seen at 77.72. We wouldn’t be surprised to see some backing and filling and perhaps a small retreat. Should the market retreat become more than shallow, then we will review our findings for a possible change of direction. At the moment, we will give it to the bulls so long as the market remains above 74.21.
The S&P 500 is and has been stuck in a trading range for the past several weeks. The volume is nothing to write home about, and it looks like we are just in a holding pattern waiting for the end of the year. The uptrend line is at 1091.67 for the Monday session, for a longer view, the trendline is at 1086.37. Should we close below that level, we would expect to see the market test 1067 and then 1026. Notice that the Bollinger bands are becoming very narrow. The upper band is at 1115.96 and the lower Bollinger band is at 1085.33. The 5-day moving average is at 1102.41. We are above the Ichimoku clouds for the daily and the weekly time-frame but we are below the clouds for the monthly time-frame. We are overbought on both the weekly and the monthly time-frames, but we do not have a sell-signal. As to the daily time-frame, all the indicators that we follow herein are point higher issuing buy-signals with plenty of room to the upside. The market profile chart shows us that above 1113, there is very little holding us from melting to the upside.
The NASDAQ 100 has a triple top in place. The Friday session saw the NASDAQ 100 decline while the other financial indices rallied. We expect that some of this was due to tax selling as we approach the end of the year. We are concerned about this retreat because the NASDAQ 100 has been the leader in the advance since March. The stochastic indicator, our own indicator and the RSI are all pointing lower issuing a sell-signal. The Thomas DeMark Expert indicator is issuing a buy-signal. The 5-day moving average is at 1788.63. The top of the Bollinger band is at 1816.29 and the lower edge is seen at 1752.97. We are above the Ichimoku clouds for the daily and the weekly time-frames but are in the clouds for the monthly time-frame. We are overbought on all time-frames.
The Russell 2000 is clearly forming a pennant. The stochastic indicator, our own indicator and the RSI are all pointing higher. The stochastic indicator is approaching overbought levels. We are above the Ichimoku clouds for the daily and weekly time-frames. The 5-day moving average is at 596.40. The top of the Bollinger band is at 608.32 and the lower edge is seen at 577.48. We seem to be forming a pennant with a resolution expected late on Thursday into early Friday. 598.50 is a strong resistance area, so any penetration above that area should open the door to higher levels. Should this market trade above 607.20 you will see a rapid rise high to the October high of 624.50. The Russell 2000 had an inside day, in the Friday session. We are curious about the divergence between the Russell 2000 and the NASDAQ 100.
Crude oil needs to stay above 69.50. We are oversold on a short-term basis without any indication that we will move higher in the next session. We are below the Ichimoku clouds for the daily time-frame and in the clouds for the weekly and the monthly time-frame. The 5-day moving average is at 78.89. The top of the Bollinger band is at 81.51 and the lower edge is seen at 70.22. We closed below the lower edge of the Bollinger band and we expect to see a bounce back into the range within a day or so. This chart really looks awful. That said, we believe that crude oil will bounce back within a day or so. We have to see a close above 78.89 to turn this chart to the bullish side. At the moment, we would sell rallies rather than to buy the dips.
Gold had a bearish engulfing candle in the Friday session. We are above the Ichimoku clouds for the daily, weekly and monthly time-frames. The 5-day moving average is at 1163.22. The top of the Bollinger band is at 1219.40 and the lower edge is seen at 1104.82. We see some good support for gold at 1106.60. The market profile chart tells us that we could find ourselves in trouble below 1116 and 1107 causing the market to retreat to 1062 where, some support should be seen.