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GLOBAL EQUITY REPORT November 28, 2009
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DJIA: 10,309.92 10-YR TSY: 3.21% CRUDE OIL: $77.56
COMP: 2,138.44 GOLD: $1,176.70 $USD INDEX: 74.86
S & P 500: 1,091.49 SILVER: $ 18.25 VIX: 24.85
"If a speculator is correct half of the time, he is hitting a good average. Even being right 3 or 4 times out of 10 should yield a person a fortune if he has the sense to cut his losses quickly on the ventures where he is wrong."- Bernard Baruch
US MARKETS:
Greetings stock fans. It was a shortened week of trade for US markets in observance of the Thanksgiving holiday on Thursday, which just so happened to be the day where global markets/bourses were succumbing to lower depths on the revelations of Dubai World’s ‘potential’ default on $60 BN in outstanding loans. Regardless, while volume levels were expectedly light, there was no loss for volatility as US markets swung within a broad range on both the positive side of the ledger, as well as the negative side.
Last week we noted to readers/members, “this week is a shortened week of trade with US Markets closed on Thursday in observance of the Thanksgiving holiday and as a result, trading will be tapered and thin, which could produce some volatility, particularly Wednesday and Friday where it won’t take much to run the tape in either direction. Thus, should one choose to enter the fray, be prepared for ‘potentially’ whippy action due to light volume”, which was certainly the case.
In any event, the tape remains in decent shape from a technical perspective despite all of the ‘noise/rumblings’ that market participants had to contend with in last week’s trade as the ‘staircase’ pattern (higher lows and higher highs) remains intact, whereby it ‘appears’, for now, that the noise from abroad has had relatively little impact on US equities markets, as well as the overall mood of both investors and traders alike.
As a result, the major averages finished out the week of trade unscathed and pretty much where they started the week with the DJIA; COMP and S&P 500 closing out with fractional losses with the latter finding itself residing right at its 20-Day moving average and positioned above both its inclining 50 and 200-Day MA’s respectively as evidenced by the chart below:
As one can observe from above, nothing much has changed/altered with the technical landscape of the Spoo’s as the index remains in a healthy posture trading above its moving averages in the ‘staircase’ pattern of higher lows and higher highs. Until or unless this pattern is interrupted (a lower low is put in on a ‘close’) the tape continues to warrant the bullish benefit of doubt and should continue to be acknowledged and respected.
While relative strength finds itself in a neutral posture with its RSI 50 reading, as well as the MACD hovering at the 0 line, such may ‘appear’ to be suggesting short-term indecisiveness, which may entail the delivery of a few more cards from the deck from Mr. Market in order to garner further clarity.
Nevertheless, with the Thanksgiving holiday, as well as Q3 earnings season now in the ‘rearview’ mirror and market participants returning in full this week, perhaps we’ll receive a clearer picture of things to come.
Therefore, while the tape remains in a healthy posture, displaying favorable characteristics, we also witness some short-term indecisiveness amongst participants via both the relative strength and MACD readings, which perhaps will clarify themselves in the days ahead.
GLOBAL MARKETS:
Rumblings from the Mid-East sent shockwave tremors throughout global markets/bourses last week when it was revealed that Dubai World may default on $60 BN in loans. News of such ‘potential’ default was the catalyst for lower prices throughout, whereby Asian markets were stung as indices bled a stream of red and finished out the week of trade with losses across the board. With that said, the action in both the Seoul Composite and Nikkei leaves little to be desired with both continuing to act horrid, while the KLSE Composite; Singapore Straits and Taiwan Weighted continue to display positive characteristics from a technical perspective and remain our desired regions, as of present. With respect to the Jakarta Composite; BSE 30 and Hang Seng, while all three (3) have ‘slipped’ this past week of trade from their upper end of the ranges, we remain neutral on all, as well as the Shanghai Composite, who finishe d lower for the week, yet remains in a somewhat healthy technical posture with more work to be done. As for ‘Down Under’, both the All Ordinaries and NZ 50 were unable to escape the rapture of lower prices in last week’s trade. However, while the latter remains in its multi-month channel and ‘appears’ in decent shape, the former continues to display signs of a ‘potential’ H&S (Head-and-Shoulders) top pattern that IF, indeed materializes in the days/weeks ahead, may usher in lower prices. Keep a close eye on the 4,500 level with regards to the All Ordinaries. Should the level (4,500) ‘give way’ or be violated/breached on a ‘closing’ basis in the near future, such would more than likely signal trouble ahead. Moving on to Europe, despite taking its lumps in Thursday’s trade after the Dubai World exposures, the CAC; DAX and FTSE recovered quite nicely in Friday’s trade, yet such was not enough as all three finished the week of trade with mild losses. Nonetheless, nothing much has changed/altered from a technical perspective as all three continue to mimic the action in the US with respect to direction.
BONDS:
As money flowed out of equities in the latter part of the week, ‘Treasury Land’ was the recipient of such funds with bond prices ticking higher and yields sliding lower. For the week, the 10-Yr finished lower by 14bps, closing out at our long-time (multiple months) noted ‘potential’ support of 3.2% at 3.21%. Thus, we now find the ‘Note’ resting at the lower end of the range and should the 3.2% level ‘give way’ on a ‘closing’ basis in the days/weeks ahead, such development would have adverse implications for equities markets. However, on the flip-side of the ledger, should the 3.2% yield level on the 10-Yr ‘hold’ on the goal-line and be capable of moving into higher ground, well then, equities markets would then become a beneficiary of such scenario. Nonetheless, members/readers should continue to utilize the 3.2% figure/level as ‘potential’ support, while the 4% level offers headwinds and remains ‘potential’ resistance.
METALS:
We stated last week that, “the secular bull in both Gold and Silver remains alive and well despite short-term ‘frothy’ conditions which can persist longer than one may anticipate”, which remains the case today as well. While both Gold and Silver continue their uninterrupted run into northern territory and remain overbought from a short-term perspective, such conditions can and often do persist longer than one may anticipate. Nevertheless, despite both Gold and Silver’s swoon lower in pre-market action on Friday, both the ‘yellow metal’, as well as ‘Hi-Ho Silver’ recovered smartly and picked themselves up off of the floor to close with minimal damage (extremely bullish action), yet perhaps more importantly, displayed the strength of both metals. For the week, it was a ‘mixed picture’ as Gold finished with gains of 2.2% to finish out at $1,176. 70, while Silver was not as fortunate and slid by 1.4% to close out the week right on our referenced $18.25 level that we have been directing readers attention. Moving forward, ‘yellow metal’ now has the ‘potential’ to ring in at $1,300 +- (weeks/months) a few ticks, while we would not be the least bit surprised should Silver embark on a run to the $20-$21 zone in the weeks/months ahead. As members/readers are well aware, the metals, both physical and Jr. shares, have and continue to be our preferred investment/trading vehicle of choice.
CRUDE OIL:
After violating our referenced ‘potential’ support at the $75 level on an intra-day basis on Friday, crude recovered smartly and was able to finish the session above our often noted $75 figure and remains in decent shape from a technical perspective. As we’ve alluded on several occasions in the past, we felt that the $75 level would more than likely be ‘tested’ before crude could make a serious attempt at higher levels and perhaps go ‘topside’ of noted ‘potential’ resistance at the $82 level. Now that such scenario (test of 75 level) has materialized and crude ‘appears’ to have withstood (held on the goal line) the attempt at support, let’s see if higher prices are forthcoming in the offing. Nonetheless, readers should continue to use the $75 figure as ‘potential’ support, while the $82 level provides ‘potential’ headwinds/resistance . In the meantime, ‘black gold’ appears content in trading within the range with its healthy technical posture intact.
CURRENCIES:
After breaching our noted 74.40 level from last week on news that Dubai World may be nearing default on $60 BN in loans, the $USD recovered somewhat on Friday (11-27) and attempted to find its footing only to find further selling pressure and paring the majority of its intra-day gains. For the week, the ‘Buck’ finished lower just shy of 1% (74.86; -0.72) and continues to struggle. Moving forward, the declining 50-Day moving average (76ish) provides potential headwinds/resistance, while a breach/violation of 74.20 on a ‘close’ may usher in further downside pressure. Nevertheless, the ‘greenback’ remains on its back in the I.C.U ward on life support apparatus.
US Markets:
Short-Term: Neutral- Mixed Signals-Consolidating/Improving
Intermediate-Term: Neutral- Ditto- Mixed Signals-Consolidating
Long-Term: Bullish- SPX 1,000 Has Been ‘Re-Captured’
(Yet, within the confines of a secular-Multi
Year Bear based on Weekly charts)
POTENTIAL INDICES SUPPORT/RESISTANCE:
SUPPORT RESISTANCE
DJIA: 10,192; 10,020; 9,989 10,495; 10,632; 10,834
COMP: 2,140; 2,110; 2,080 2,205; 2,240; 2,267
S & P: 1,085; 1,065; 1,045 1,115; 1,140; 1,168
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