 |
 |
Dallas, TX
May 19, 2009, 08:00 EST |
 |
Dr. Joe Duarte's Market I.Q. |
 |
 |
|
|
 |
The Internet's Intelligence Digest
Intelligence, Market Timing, And Trading Strategy For Traders and Investors
|
|
Stock Market Passes First Test
|
|
|
 |
 |
What's Hot Today: |
|
U.S. stock futures were pointing to a higher opening. Overnight Asia was mixed,
Europe was mostly higher. Oil was pulling back slightly.
Today's Economic Calendar:
- 7:45 a.m. ICSC Chain Store Sales Index For May 16:
- 8:30 a.m. Apr Housing Starts: Previous: -10.8%.
- 8:55 a.m. Redbook Retail Sales Index For May 16:
- 5:00 p.m. ABC/Wash Post Consumer Conf For May 16:
News For Thought
American Express will cut 4000 jobs. CNBC.com reported that American Express will cut 4000 jobs in order to save $800 million per year.
Credit card companies will change their approach to top clients. As Congress moves to tighten credit card company rules and standards, issuing companies are expected to tighten the reins on the perks on their best customers. According to the New York Times: "to make up for lost income, the card companies are going after those people with sterling credit. Banks are expected to look at reviving annual fees, curtailing cash-back and other rewards programs and charging interest immediately on a purchase instead of allowing a grace period of weeks, according to bank officials and trade groups."
|
|
|
Stock Market Passes First Test
|
|
 |
|
Key Support Held For S & P 500
|
 |
|
|
|
Just as the bears were looking to make their move, the S & P 500 (SPX) held its fall at its 20-day moving average, giving the bulls another chance to try for new highs from the March bottom.
Chart Courtesy of StockCharts.com
The market is clearly showing some resiliency here. Yet, at the same time, it is not out of the woods either. There is overhead resistance at three points, which are so closely clustered that you have to wonder whether they can be breached to the up side. First, there is the 930 area, the May 8 high. Above that is the 935 area, where the upper Bollinger Band was at the end of trading on 5-18. Bollinger Bands are above and below the market, and move with the market, as dynamic envelopes. You can find an excellent treatise on Bollinger Bands in "Market Timing for Dummies" and "Trading Futures for Dummies."
What's important about Bollinger Bands is that as volatility decreases, they start shrinking around the price action of the market. And that usually means that a big move is coming. The most recent signal from the Bands came on April 30th, right before the current rally. The bands are starting to close in around the market once again. It will take a few days before they squeeze down far enough to predict another big move.
The next important resistance level for the S & P is 950. If the index can move above that it has a fairly clear path toward 1000.
Here is where we are. There is a good deal of uncertainty about what the Obama administration will do over the summer. Health care reform and energy policy are at the front of the agenda.
There are some rumblings about health care reform which may ease some of the pressure on that sector. According to The Hill, Senator Ron Wyden (D-Oregon) is putting together, and heavily lobbying for some kind of workable compromise which may delay or reshape the universal, government sponsored, portion of the plan. This is the area of "reform" that has spooked the market, as some fear that a government program will eventually put private insurers out of business.
Energy policy is a whole different ballgame. The White House continues to push for cap and trade, a hard to understand and nebulous plan which seems to behave as a hidden tax on anyone who uses fossil fuels.
Chart Courtesy of StockCharts.com
Looking at the Pharmaceuticals Index (DRG, above) and the Oil Service Index (OSX,below) you can see that both sectors are trying to force their way higher. Oil service is up against key moving average resistance, while the drug stocks have been moving slowly higher. As we noted here yesterday, Warren Buffett has been adding to his Johnson & Johnson (NYSE: JNJ) holdings, according to SEC filings. JNJ is one of our health care holdings here as well.
Chart Courtesy of StockCharts.com
The next important area of the market is technology. The Nasdaq 100 Index (NDX) is an excellent barometer of large cap technology stocks, as it houses Microsoft, Cisco Systems, Apple and Research in Motion among others. Here we see another good piece of news. NDX has crossed above its 200-day moving average, the line that traditionally divides bull and bear markets. As with the S & P 500, there is resistance to be overcome. With NDX the key chart range is 1400 to 1435.
Chart Courtesy of StockCharts.com
Conclusion
A purely technical look at the stock market shows that the bulls have not given up. There was clearly some profit taking last week. But the market held at key support levels and is trying to rebuild its head of steam in order to attempt a move toward new highs from the March bottom.
There are some positives and some negatives at work. The biggest positive seems to be that money wants to come into stocks. The negatives include political uncertainty and the fact that the summer, a period of low volume and trader apathy lies ahead.
For now, we retain a trading posture. We have some open positions in all of our sections and continue to rely on ETF timing for much of our activity for now. But it's clear that the short term, barring an unexpected event has improved.
Get Dr. Duarte's All NEW Books "Market Timing For Dummies." and "Trading Futures For Dummies." The Trading Manuals for All Seasons. Also Available As Kindle Books.
|
|
|
|
|
|
Market Moves - Stock Of The Day
|
|
|
|
Powershares Nasdaq 100 ETF (Nasdaq: QQQQ) Holds Together
|
|
|
|
| |
The Powershares Nasdaq 100 ETF (Nasdaq: QQQQ) has found support along with the
market behind Research in Motion (Nasdaq: RIMM) and Microsoft (Nasdaq: MSFT).
Chart Courtesy of StockCharts.com
The 4 Qs are acting well, driven by decent action in large cap tech stocks. This is a good sign, as just a week ago the Nasdaq 100 and the rest of the market were struggling.
What makes this activity most interesting is that we are well into the month of May and the market is not looking ready to roll over just yet. That means that money is steadily moving in.
Part of that is the fact that lots of institutional traders missed the rally, and as the quarter rolls closer to an end, they would like to make up some ground.
That means that at least the rest of this month, and perhaps into the early to mid-June, we could see higher prices. For now, we just have to play this market one day at a time.
We are currently long QQQQ. Visit our technology section for more details.
|
|
|
|
