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Message: Golbal Equity Report
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GLOBAL EQUITY REPORT October 31, 2009
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DJIA: 9,712.73 10-YR TSY: 3.39% CRUDE OIL: $76.99
COMP: 2,045.11 GOLD: $1,044.70 $USD INDEX: 76.41
S & P 500: 1,036.19 SILVER: $ 16.32 VIX: 30.69
“Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it.”- Warren Buffet
US MARKETS:
Greetings stock fans. What a wild week of trade it was as the decibel levels ratcheted-up a few notches on the Richter scale whereby the VIX (Volatility Index) surged from last week’s close of 22.27 to finish out the week of trade at the 30 handle (30.69) and more than likely, turning the skin tone of many market participants a shade of pale having experienced the tumultuous rollercoaster ride throughout the tape, compliments of Mr. Market.
However, for those members/readers who have been monitoring and heeding our thoughts/observations, such action last week should not have come as a major surprise when we opined, “while nothing has changed from a technical perspective and the tape continues to demonstrate positive characteristics, we are monitoring the MACD action which remains in decline and ‘may well’ drop below the 0 line in the days ahead which would signify a ‘short-term’ warning that both investors and traders may well be wise to acknowledge and take the ‘slow approach’ while treading carefully until Mr. Market delivers a few more cards from the deck in order to garner further clarity,” in which such scenario did indeed materialize as a ‘cannonball’ shot was fired across the ‘bow’.
Additionally, we went on to state that, “the technical posture of the tape remains positive and should continue to receive the benefit of doubt as nothing has disrupted the trend, yet, we ‘may’ be in need of further pause/breath/consolidation and or perhaps some pullback in the days ahead as both the neutral relative strength reading (RSI 55) and the declining MACD are suggesting. Therefore, tread carefully as we await further clarity and as we’re all well aware, markets consolidate through Time; Price and or a combination thereof and as of this writing, we ‘appear’ to be witnessing the former, thus far.” Well, it’s now apparent that the second part of the equation, Price, has now been factored-in which has resulted in, a combination thereof.
As a result, when the final bell tolled, the major indices bled a shade of crimson across the deck in last week’s trade with the COMP getting ‘stomped’ by 5%, while the Spoo’s (S&P 500) were ‘spooked’ to the tune of 4% and the DJIA’s, which held-up far better, took a 2.6% blow to the chin, where we now find the SPX (S&P’s) resting just beneath its 50-Day MA, on a ‘close’, for the first time since July as evidenced via the chart below:
Despite last week’s slippage as observable in the chart above, we’re far from doom and gloom just yet, where the index remains/resides above its all important longer-term 200-Day MA, for now, as well as the pattern of ‘higher highs and higher lows’ remaining intact (for now) and not to mention, nearing short-term oversold readings (RSI 30) with the SPX presently residing at the RSI 41 level.
Thus, while the tape has endured damage from a short and intermediate-term technical perspective, which has prompted us to downgrade both timeframes from a bullish to neutral outlook, we do suspect that with the Spoo’s posting losses in seven out of the past ten sessions, a ‘bounce’ may ensue in the forthcoming days, yet are of the belief/view that any such ‘rally attempt’ will more than likely be met with further selling pressure (distribution).
While we cannot rule-out a ‘possible’ move/retest back to SPX 1100, we do not believe the likelihood of such occurring is ‘highly probable’ due to underlying deteriorating conditions surfacing within our proprietary work/models not yet fully visible within the major indices themselves, as of yet.
Therefore, while we suspect a ‘bounce’ in the major averages in the days/weeks ahead, we’re also witnessing ‘warning signs’ within our work, as well as within the recent tape action that members/readers may wish to heed. While we are certainly not calling for the bottom to ‘fall out’, the warning signs are present and may provide the opportune time to ‘tidy-up’ ones portfolio/holdings.
GLOBAL MARKETS:
Much like the US markets, global markets/bourses felt that the wrath of selling pressure in last week’s trade as prices succumbed to lower levels throughout Asia with the BSE 30 and Jakarta Composite leading the way with hefty losses, while the Shanghai Composite; Hang Seng; KLSE Composite; Singapore Straits; Seoul Composite and Taiwan Weighted all weighed in on the negative side of the ledger as the Nikkei struggled to hold onto the 10K level, finishing in the red. As for ‘Down Under’, the All Ordinaries were unable to stem the bleed and finished with lower prices, while the NZ 50 was able to ‘buck the trend’ and posted a flat finish, continuing to display decent relative strength. Moving on to Europe, the theme remained the same, where investors fled for the exits as the CAC; DAX and FTSE all posted modest losses across the board and as we’ve been alluding to members/readers for months now, the action in Europe continues to mimic that of the US. Thus, when you view one, you witness the behavior of all.
BONDS:
With US equities markets in retreat during last week’s trade, investors/traders sought the (supposed) safe-haven of Treasuries where prices moved higher and the yield on the ‘Note’ slipping 8bps to close out at 3.39%, well within our referenced 3.2%-4% zone of the past months. We’re not sure what it’s going to take, aside from ‘systemic shock’ or, foreign central banks finally deciding ‘enough-is-enough’ in order to witness a breach/violation at either end of the spectrum. Nonetheless, it certainly ‘appears’ that the Fed has all players in their hands/pockets, as of the moment.
METALS:
Both Gold and Silver continue to trade in a ‘constructive’ manner where the action in the ‘yellow metal’ remains favorable despite posting fractional losses ($1,044.70; - 10.10) in last week’s trade, while Silver found the terrain a bit ‘slippery’, finishing in the hole by 7.6% ($16.32; - 1.34) and approaching ‘potential’ support at the 16 level, on the heels of strengthening $USD action. As we mentioned in last week’s scribe, “the ‘greenback’ is and remains oversold from a short-term perspective, thus, we would not be the least bit surprised should the $USD attempt to mount a rally from the 75 depth’s which would have a short-term adverse impact on both metals, albeit, a mere inconvenience.” Such developments ‘appear’ to following our script to the ‘T’, thus far. Nevertheless, continue to mon itor our referenced/noted ‘potential’ support/resistance levels for further clarity as we navigate the landscape ahead.
CRUDE OIL:
After breaking-out of a multi-month long channel and going ‘top-side’ of the $75 figure, crude ‘seems’ content in taking a breath/pause via consolidation as previously noted (last week) when we stated, “crude now finds itself a bit extended from a short-term perspective and in need of pause/breath/consolidation before its resumption of the trend, which is, higher,” where ‘black gold’ remains perched above its 20; 50 and 200-Day MA’s, suggestive of a healthy technical posture, despite experiencing some drawdown this past week of trade, closing 3.3% lower and finishing just beneath the 77 handle at 76.99 (- $2.66bbl). Thus, while we suspect/expect some further ‘backing-and-filling’ in the days ahead, as well as a possible ‘test’ of ‘potential’ support of the 75 figure as the MACD ‘may’ be suggesting, should crude be capable of ‘taking-out’ the 82 level, we may just experience a spurt to our noted 88-90 level in the weeks ahead. Stay tuned.
CURRENCIES:
Last week we directed members/readers attention to the following when we stated, “although the $USD remains on life support apparatus in the I.C.U. ward, the ‘greenback’ is and remains oversold from a short-term perspective and ‘may’ be in the midst of showing some signs of life/pulse after Friday’s awakening?”, which now appears to be the case, as the ‘Buck’ continues to display improving relative strength from a short-term perspective and as a result, we did indeed witness some signs of life/pulse in last week’s trade as the $USD index posted a 1.3% gain, closing out at 76.41 and fast approaching its declining 50-Day MA now residing at 76.80ish. Should the $USD be capable of ‘taking-out’ and ‘clearing the hurdle’ at its declining 50-Day, a move to the 78-79.50 zone remains a viable possibility. If such scen ario were to occur, the developments would certainly have negative implications for the metals, both Gold and Silver, from a short-term perspective, as well as the equities markets themselves. If on the other hand, the ‘greenback’ were to be stifled/rebuffed, reverse the above noted short-term implications.
US Markets:
Short-Term: Neutral- Negative Bias; Short-term Oversold
Intermediate-Term: Neutral- Negative Bias; Deteriorating Conditions
Long-Term: Bullish- SPX 1,000 Has Been ‘Re-Captured’
(Yet, within the confines of a secular-Multi
Year Bear based on Weekly charts)
Have a profitable week of trade!!
The Market Timer
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