About Me

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 !!!

Monday, September 05, 2011

Stock Market Technical -- Weekly Chart

This post takes an intermediate term view of the market. Market internals turned down in early
Apr. of this year when price momentum relative to the 40 wk (200 day) m/a turned convincingly
downward following a large run up in relative standing that left the market overbought. Chart
Notice the downtrend in the price oscillator has remained intact. I will not be getting a positive
read on this indicator until there is a stronger northward move in the oscillator. I will take short
term long positions in the market during a downtrend of this sort, but reserve much larger $ longs
for those periods when intermediate term momentum is on the rise.

There are other indications of internal weakness that show up on the following SPX chart. $SPX
Note here the downtrends underway in RSI, MACD, and ADX +DI. Risk remains in the market
until these trends bottom and show some positive action.

Now the hard truth is that if the cyclical bull market remains intact, These intermediate term
signals can remain suppressed for up to another 2-3 months. That would hardly be an unusual
development.

Let me also venture beyond traditional technical analysis to discuss the trajectory of the market.
The cyclical bull in place since 3/'09 has been the most powerful one since the 1995 -2000 and
1948 - 52 runs. But, unlike those periods, this market has been more volatile, having experienced
strong price corrections in 2010 as well as this year. So, I would not be very surprised or upset
if the SPX traded down to 1050 over the next month or two given the outsized trajectory it
maintained from 3/'09 through 7/'11. I think if the current correction can be contained at 1050,
we still can talk about a cyclical bull market. I have dredged all of this up because there should by
all rights be another decent upleg to this market, and I am not prepared just yet to abandon that
idea.

As a closing note, be advised that I am not projecting a further decline in the SPX to the 1050
level in the months ahead. I have just marked 1050 as a "fail safe" point below which much
darker doings could await.

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