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Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!

Sunday, January 03, 2010

Stock Market -- Technical

As fate would have it, market behavoir over the latter part of Q 4
'09 exquisitely concealed its likely direction as we start 2010.
Naturally, a nice long weekend has probably served only to make
traders more fidgety.

Short Term
The SP 500 entered a mild uptrend in late Oct. It closed out the
year right on the trend line, spent most of the time over Nov. -
Dec. in extreme price compression and did it all on light volume.
Mid and smaller cap. measures did far better, as players used
Dec. to anticipate the positive "January effect."

The market is "neutral" in the short term -- neither overbought
or oversold.

My price oscillator off the 25 day m/a has become increasingly
compressed since the spring of '09, with players buying on ever
more shallow dips and taking profits on ever more humble blips.
This exceptional nine month long pennant formation closes out
the week of Jan. 11 - 15 and could herald more price volatility.

Over the past three odd years, the market has exhibited a
pattern of lows set every 15 - 17 weeks. The next low point is
due in early Feb. '10.

Intermediate Term (6 - 26 weeks)
The market remains in a sharp uptrend on the weekly charts
dating back to the Mar. '09 lows. As with the shorter term
daily chart, the uptrend will be tested right at the outset of
the new year.

The market is significantly overbought on all intermediate
measures and is showing discomfitting flatness of momentum
on my weekly price oscillator which is run off the 40 wk m/a.
I generally skip the long side of the market when this smoothed
measure levels out as it has often signified a topping process.

Long Term
The monthly charts show a powerful advance in progress, but
one which is now rapidly becoming overbought. The internal
momentum measure is strongly positive and leaves room for a
moderate price correction that would not turn the charts bearish.

Looking ahead, we continue to have the same issue to contend
with that beset thinking over the final quarter of '09. The
trajectory of this advance has been so strong off the 3/09 low
that we could witness a churning, consolidating market for a
good 4-5 months before you would have historical warrant to
to begin to question its pedigree as a cyclical advance.
Something to keep in mind.

$SPX weekly chart.

1 comment:

stock news said...

Key benchmark is likely to open higher on the back of positive Asian cues and encouraging news flow on the domestic front. Data showing a surge in exports in November 2009 may also support market. From today, 4 January 2010, trading starts at 9:00 IST and will end at 15:30 IST, as the stock exchanges have decided to extend trading hours by 55 minutes.

According to data released by the NSE, in the last session, FIIs were sellers of index futures to the tune of Rs 59.79 crore and sold index options worth Rs 195.33 crore. They were net sellers of stock futures to the tune of Rs 342.74 crore and sold stock options worth Rs 17.2 crore.

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