WeThePeople

Did the Dow break above the 3 year down trend line?

2009-11-10T05:39:00.000-08:00

I have attached the 3 year chart of the Dow and drawn the 3 year down trend line on it as you can see above. Did we break above it? It is the question of the day as investors determine whether we are going to make a significant move up on the Dow and other indexes. The answer to the question depends on something usually not apparent. It depends on the thickness of the line I drew. If I use a standard 2.0 weight line, which is the weight of the line I have been using since drawing these charts, the unexpected answer is No! If I use a 0.5 weight line, which is almost the thinnest weight line I can draw using Powerpoint, the answer is Yes! So how does one decide whether to Buy into this rally at this late stage or not? You wait for a clearer breakout.

I know everyone is going to be screaming at me about this, but the signal is not yet clear that we are going to rise to 11,000 or higher on the Dow at this time or if we are going to retreat and have a correction. I know that sounds wimpy, but I only want to use data to decide, not my emotions. So there you have it. I will continue to use this thinner downtrend line when I draw this chart in the future. But when I can't say something for sure I look for alternative measures. In this case I give you the 3 year chart of the SP500. On this chart below, you can see that we have not broken the 3 year down trend line. That adds to my caution in telling people we are going to go up. If the S&P 500 also broke through this down trend line, I would be more optimistic.

I hope this helps understand why I have not declared that we are going up.

The Economy and Unemployment: A discussion of current times.

2009-11-08T03:24:00.000-08:00

I thought a discussion was in order since the release of the 10.2% Unemployment rate data on Friday. It is difficult for most Americans to really see the impact of these numbers but I am going to share some observations with you on how America is slowly changing like a faucet dripping water or the boiling of a pot of water, it takes time to really notice the change.

Let me start with a quote from Haver Analytics which was published on Saturday.

"The official unemployment rate continues to pale in comparison to the rate which includes "marginally attached workers" and those who are working part-time for economic reasons. It rose to a record 17.5%. Another tally of joblessness indicates that with "discouraged workers" the unemployment rate rose last month to 10.7%. Not only are more individuals unemployed or have stopped looking for work, but the median duration of unemployment jumped last month to a record high of 18.7 weeks. The ranks of those unemployed for 27 weeks or more rose to 5.594 million (145.9% y/y), also an historic high."

Here are some historical facts. The unemployment rate for the years 1923-29 was 3.3 percent. In 1931 it jumped to 15.9, in 1933 it was 24.9 percent. It then steadily decreased until 1941 when it stood at 9.9%. In 1942, after U.S. entry into World War II, the rate dropped to 4.7%.
(Source: US LABOR STATISTICS.) Looking at the data announced on Friday, October's unemployment rate jumped a whopping 0.4%, one of the highest jumps in over 5 months according to the chart above. You see we may be starting a higher monthly rate increase than the previous 5 monthly increases.

Let me put a face on the above quote by using an example. Last time I walked around the famous Newbury Street area in Boston, a prized Chic upscale shopping area, I noticed how many small shops and sizable buildings had "For Lease" signs plastered over windows of empty store fronts. Some advertised whole Floors in the multistoried buildings For Lease. The streets were full of people and bustling from one place to another, but not many carried bags of purchased goods. I grew up in Boston and in all my years I have never seen so many empty store fronts in this neighborhood. You see it isn't just the lower class areas being affected by this economy, it is the upscale enterprises as well. This is a change in American's behavior of seismic proportions. With more Small businesses going out of business, it will mean more layoffs, more foreclosures, more vacant apartments and more suffering for far too many people. I am afraid this is going to be commonplace in the next year. I saw the same thing in an Francisco neighborhoods as well.

The importance of this isn't just in the Retail Sector, it is affecting all Small Businesses because credit has dreid up for most or their savings and cash reserves for a rainy day are spent trying to hang on until the economy turns around. But wait, you say the experts have said the economy has begun to turn around and the stock market is up, The Fed has proclaimed the recession is over and we will be coming out of this eventually. Call me a skeptic, but I do not see things getting better any time soon. The next big shoe to drop is Commercial Real Estate. And with all the small shops closing you can see the ripple about to happen to the buildings too. There will not be buyers of these properties until the prices drop more. And so it goes on and on.

Think about the airlines now for a moment. With much business being curtailed for small business and the number of layoffs in large companies still continuing, the airlines will be standing next in line for a bailout. I purchased 2 tickets to go from the East Coast to San Francisco one way and non stop. Can you guess what the price was for the combined tickets? It was less than $270 total! That's less than what it costs to pay for gas to drive across the country. This can't be good for the airlines. They are selling tickets across the country for about $135 a piece. This is amazing and can;t be profitable when you consider the costs of airplanes, the salaries and benefits for pilots, flight attendants, mechanics, ticket handlers, baggage handlers and all the corporate office functions needed to run a company like IT, accounting etc.

The American Consumer is going through a fundamental seismic change in sending habits that will be permanent for this generation. We are not at the end of this economic downturn. If it were a baseball game I would say we are in the 5th inning with still more baseball to come. Cash is KING and will be for some time to come as well. It has been the American Consumer who has spurred our economy the past 30 plus years. They have been responsible for 70% of our economic growth and for now and for years to come, they are going to be restrained. A good test of this hypothesis is to ask yourself about your planned spending for the holidays. My guess is that it will be about as restrained as it was for last year.

You can try and fight this tend or you can go with the flow and accept it for what it is. Some are calling this period, The Great Recession. Does it remind you of another similar phrase? It does me and for good reason! No wonder Consumer Confidence is way down. And the differences between Wall St. and Main St. need to be reconciled.

For another commentary on the unemployment data read this article from Seeking Alpha titled, "And Bernanke Didn't Think Unemployment Would Reach 10%."

Nov. 6th, 2009. Are we headed up now that yesterday had such a big day for the markets? UPDATE

2009-11-06T04:19:00.000-08:00

What now? That is the question. My close friend said he thought we broke the 3 year downtrend line yesterday. As you can see from the Dow 3 year chart above, we didn't. we are still in that tight wedge area on the right and could go along in this area for another 3 weeks at least without a breakout. But as each day passes with no clear breakout, to me it signifies the strength of this red line above. If it weren't that meaningful, then why haven't we easily broken above it? The reason is because IT IS MEANINGFUL to at least the 40% of analysts which are technical chart readers lime myself. Those analysts advise their company's who place all bets. And if you look at the S&P 500 chart, you can see if anything we may have broken below the support line a few days ago when there was the big selloff.

Look, I heard on CNBC that the Fed, and Chairman Bernanke himself, don't really believe in the recovery they have proclaimed these past 2-3 months. That is why there is no hurry to even signal interest rates are going to go up anytime soon. With the Unemployment rate at 10% and the real unemployment at about 17%, there amount of squeezing by companies to get some profit will continue. That means, unfortunately, even higher unemployment. With the Congress about to extend Unemployment benefits again, the those Unemployment numbers will rise as more are counted again who were dropped from the counting.

If you believe the recovery is real, I have a "bridge to no where" I would like to sell you. And remember this, when there is a breakout to the upside, I will be the first to proclaim it, even if it doesn't fit where the real economy is. That I promise you!

UPDATE: 5:35am PST

Unemployment reached 10.2% for October, up from 9.8% in September. Non Farm Payrolls were down 190,000 jobs.

UPDATE: 6:50am PST
Market opened down about 50 points but then after a half hour of trading, went positive. Confused yet? Why is bad news for Main St. good news for Wall St? They may think we have peaked at 10.2% Unemployment and I expect it to go over 11% anyway so that's a long time yet to play out. I see more Small Businesses closing and laying off more people as their reserve cash becomes depleted. They can't get money from banks as the banks are hoarding still.

Markets will be down for the coming week. Why?

2009-11-01T11:45:00.000-08:00

I have been thinking about the market drop on Friday on accelerated volume. I was trying to come up with some possible reasons which have not ben the usual suspects. This is difficult to do as I have been expecting this pullback for months and I seen signs everywhere that things aren't going to get better any time soon on the economy even though Wall St. seems to defy Main St. So what did I come up with this time and what would be the rationale that this time the market drop is for real and will continue at least for Monday or Tuesday and then possibly on Friday.

So first, Treasury Secretary Geithner was interviewed on Meet the Press by david Gregory. Geithner when pressed seem to say Unemployment will continue to rise even while the economy is recovering as employment is a lagging indicator. But there was more in Geithner's head tilting, a sign of not wanting to answer directly the questions as he knows more than he is saying. I think Geithner knows that next weeks announced Unemployment numbers for October are going to take us over 10% and then the heat will be on. That happens on Friday I believe.

But besides that big piece of news, there are elections being held in several States for Mayor's and for Governors as well as a Congressional opening in Upstate NY, which will reflect a defeat for Democrats which Republicans will play up with the media, as they should. One can rationalize President Obama has had only a short time to fix the problems and one could argue that he may have made some problems worse. But that will be decided by historians and I am not a historian. But I believe that this gives impetus for the markets to correct specifically at this time. It is before Thanksgiving and the start of Christmas Shopping season, so the damage might not be that much of a drag on business than what the economic conditions are already saying about Consumer Spending this year. So what better time for a correction.

This is also in advance of proposed legislation for Regulatory reforms which have already passed Rep. Barney Franks Committee. There is nothing Wall Street would like more to do than to cause alarm to be slow about imposing additional regulations as the market is fragile, they will say. Gee, all this at a time when Executive Compensation is being ratcheted down in 7 of the largest firms bailed out by the Fed. Oh, and late me remind you that this past Friday was the end of the year for many Funds. So, yes, this is the best time politically, financially, economically and emotionally to have this correction. It is all part of the manipulation we have come to expect. To me it is long overdue and I have been saying so for months. But heck, what do I know, I'm only the 200 lb. Gorilla in the room. :) Yes, the market should end down for the week. Hedging with some ETF Shorts might be a smart play for some quick profit.

My Direxion 3x Short of the Russell index, symbol TZA, was finally up for a week. It went up 19.4% since last Friday, Oct.23rd. I see it going up another 20-30% this week as well. It closed Friday at $14.28/share. The ETF of the Financials, symbol FAZ, also moved up this week gaining 18.5% since Oct. 23rd.

UPDATE: 5:30PM PST
The NIKKEI has taken the lead tonight and is down over 250 points. The reason for this can be twofold. First, it could be a reaction from the Dow drop on Friday but it could also be because CIT has announced it is declaring bankruptcy protection.

Market outlook for the week of Nov. 2, 2009

2009-10-31T14:49:00.000-07:00

Well, I was wrong big time on my market call on Friday, as the Dow dropped 250 points. I thought there would be more manipulation that day by market makers. I still do believe strongly we are headed lower. I said a few days ago something big was in the air and maybe it is the coming correction. The volume was much higher on Friday and that suggests more of the same is coming. Expect us to go below the 50 day Moving average and eventually the 100 day as well.

The 3 charts above are all of the Dow looking at it from different time intervals to the close of Friday's trading on Oct. 30th. You will notice that if you looked only at a 4 month chart or even a 6 month chart you would not have the context to determine where we are in the Dow cycle. It is apparent that the 3 year chart which I have been using for quite a while is a very good indicator of where the index is relative to either a breakthrough or a correction. The 3 thin lines are the 50 day, 100 day and 150 day Moving averages. The Dow closed at the 50 day Moving average line.

I also wanted to reiterate this piece of advice. Watch the Nikkei for direction of U.S. markets! back on Oct. 20th post I showed a 5 year chart of the Nikkei and showed it had broken down the uptrend line and I said back then that the Dow will follow suit.

Market outlook for Oct. 30, 2009: Up, but within a tight range. UPDATE

2009-10-29T15:03:00.000-07:00

Today, the Dow surged up almost 200 points to close at 9962. With the Dow rise, the volume today was less than yesterday's volume, not exactly an impressive and convincing move. As you can see in the 3 year Dow chart above, we are actually still in that narrow wedge between the Red line and the Blue line. We could still be there in one month, which is about the time it could take to breakout either to the upside or the downside. Tomorrow is year end for the Hedge Funds and other funds as well and they want to show their customers they have made them a lot of money back this year. So it is possible again that we go back up over 10,000 tomorrow and stay there through the close. It isn't a big deal as the index is only 38 points below it now. But then next week we get the Unemployment numbers for October.

Speaking of unemployment, Shell Oil announced it was laying off 5,000 workers, US Airways announced they were laying of 1,000 more people. And there are a number of States where government workers are being let go from Wisconsin to Massachusetts to California. More and more cities, towns and Counties are having to lay off workers. many are already heralding the end of the recession, and yet, many feel it's a Depression, as they are out of work. The projected Unemployment doesn't peak according to experts until mid 2010 and it is expected we will then be at 10.5% Unemployment rate.

UPDATE: Pre-market Oct. 30th.
European markets are down in pre-market this morning and the DOW, SP500 and Nasdaq are also all down in pre-market. Oil is down to $79.32/barrel. Gold and Silver are also down slightly as well. The dollar has remained flat in pre-market and could go either way after markets open. But much data points to a lower opening this morning. In site of that, I believe the Dow will close over the 10,000 level, the S&P 500 will close over 1090 level and the Nasdaq will close over the 2100 level. I say this because many Funds use today as their year end. They will try and push the market selectively higher to get the numbers up near the close. It's all about manipulation to attract customers for these Funds and also payout bonuses. Bah, humbug!

Market outlook for October 29, 2009: Up

2009-10-29T05:30:00.000-07:00

Ok, here's the big news of the week out fresh this morning. First there's the GDP number. GDP was up 3.5% for 3Q. Then there was the weekly Jobless Claims. Weekly Jobless Claims came in at a loss of 530,000, which was better than expected also. Continuing Claims came in down 147,000 jobs to 5.79 Million jobs. Overall the Dow Futures surged up on the news from being up 23 to 70 in pre-market.

This seems to suggest a bounce back up today in our markets. After the surge in pre-market, the Dow has backed off a bit to now being up 58. However, European markets, which were all down before our GDP numbers were announced, are now all in the positive, which confirms to me today will be up.

When looking at the Dow chart, as you can see above, we have been here before over the past 6 months.. The market rises, then pulls back a little when we expect a correction only to reverse again and go back up. We are at another of those inflection points now. We may go back up again.

While the market may close up for the day, it will be important to watch Volume. Yesterday's Volume was stronger than Monday and so the drop was even more emphatic yesterday. If today the market is up but on lighter volume, then the move up will be less believable and I would use the day to buy some ETF Shorts. If the Volume is stronger today, I would Sell some of my ETF shares in my shorts positions.

On a final not this morning, the well respected Art Cashin this morning on CNBC said that the markets came within a hair to a complete meltdown yesterday because of the U.S. dollar rising yesterday. He believes if the U.S. Dollar can stay calm, we could be OK, but if it starts to rally up like it did yesterday, the entire house of cards can collapse and investors will be selling all asset classes, including equities, in total abandonment.

Market outlook Oct. 28, 2009: Down

2009-10-28T05:33:00.000-07:00

Durable Goods orders for Sept. were up only 1% as reported this morning. This was not encouraging news for those wanting to see a better recovery. Dow Futures as well as the S&P Futures went down on the news. European markets are down this morning and the Nikkei Was also down in overnight trading. It looks like the correction will continue today with the markets in retreat away from the Dow 10,000 level and continue below the S&P 500 level highs of 1,100. I believe when the day is done we will have tested the 9,800 level and gone below it on the Dow. We should also get closer to testing the 1,050 level on the S&P 500.

On another note, Goldman Sachs has reduced its forecast for 3Q GDP growth from 3.0% to 2.7%. This should also help drive the market lower today and for the rest of the week.

Market summary for Oct. 26th: Validation of an earlier prediction

2009-10-26T15:20:00.000-07:00

Well the data is in and Friday's prediction was correct. The Dow did drop to a lower level as predicted by the 2nd "W" pattern, as shown in the charts above. So, today we closed the Dow at 9867, breaking below the 9900 level. While it looks like the Dow may recover some tomorrow, it has started the correction. The only question is how low will this correction go. As I mentioned in the previous post, earnings are being announced as well as several key indicators. I believe Consumer Confidence is important this week but GDP and the Jobless Claims numbers will have the most effect on the market.

Coming week Stock Market: What to look for?

2009-10-25T08:05:00.000-07:00

There is news coming out this week which most likely will move the market. Scheduled to be released are the following new items listed by potentially creating the most market impact:

Third Qtr GDP numbers - Thursday. (Analysts expect 3.1% GDP)
Weekly jobless Claims - Thursday.
Consumer Confidence for October - Tuesday
Durable Goods Orders for October - Tuesday

Many S&P companies will report this week and a partial list is noted below:

Verizon - on Monday
Corning - on Monday
Visa - on Tuesday
U.S. Steel - on Tuesday
Coca-Cola - on Wednesday
GlaxoSmithKline - on Wednesday
Exxon Mobile - on Thursday
Proctor & Gamble - on Thursday
Kellogg - on Thursday
Colgate-Palmolive - on Thursday
Deutsche Bank - on Thursday
Sony - on Friday
Panasonic - on Friday
Duke Energy - on Friday
Cummins Engine - on Friday
Chevron - on Friday

A little mentioned poll by CNN came out last week that I thought should have gotten more press but didn't because there are many advocates for keeping one's head in the sand so you can't see that the recovery isn't recovering as the Fed and Bernanke has said. You look at the data and tell me if you think it is going in the right direction. Here's the poll question:

People were asked if they agreed with this statement: "Economic conditions are very poor."

Here's the response over time they asked the question:

Oct. 42%
Aug. 35%
Jun. 41%
Mar. 48%
Dec. 66%

The poll was conducted by CNN's Opinion Research group and has a plus or minus 3% sampling error.

Looks to me that we have taken a step backwards with 42%.

And here's something on a personal note. If you have a First Aid kit for emergencies, make sure you buy this new product and add it to your kit. It's called "QuikClot and is made by Z-Medica. It is a Gauze which stops the bleeding on very bad wounds. The military uses it and it has helped saved many lives. Here's a link to their web site. I have no financial interest in the company or the product but you know if you have been reading here for a while that I am CERT trained and a first responder so this is placed here as a public service announcement. Thanks

"W" patterns as a way to help decide trading decisions

2009-10-24T08:03:00.000-07:00

I decided to add one more Dow intraday chart from yesterday with analysis to help my readers see what if anything there is to predict for Monday's market action. In the chart above, I have drawn another 2 "W" patterns. The first is the larger "W" pattern which was shown in yesterday's posting. Then in the last 2 hours of trading another minor one was formed. You will notice that this pattern is also a slanted down "W" pattern. This gives a clue that on Monday, the market may complete this pattern by at least going lower sometime near the open. It does not mean that the market will not rise. But it may complete this pattern before it does. Again Volume was higher yesterday than on Thursday and that is not typical. When you look at Volume over multiple years on a daily basis, a usual pattern is that Monday is the lowest volume and then it picks up each day through Thursday and Friday volume drops off. This pattern holds true except when the Friday is Options expiration, which was a week ago Friday on Oct. 16th. As you can see from the chart below, it too had the largest volume day of the week. Yesterday's volume was also the highest of the week, which means to me the drop down had some momentum to it.

Oct. 23, 2009 Mid day market update.

2009-10-23T11:04:00.000-07:00

I was looking at the Dow and the Intraday pattern as the market went up initially but then has pulled back. Looking at the chart above, you can clearly see a "w" pattern. Notice the second leg of the "w" is lower than the first leg. This usually means the movement will be lower yet. Watch to see if the market closes close to the low's of the day at 9949 as it would then close lower than it did the end of last week. And right now with 2 hours left before the market closes there are two things to pay attention to. First is the Volume. It look ahead of yesterday's volume. Secondly, look at the dollar. Right now it is up. If it stays up the market will close lower. If the dollar appreciation moves up more steeply in the final hour, from where it is now, there will be a selloff of equities.

UPDATE 12:45pm PST

With only 15 minutes to go in today's market we were at the lows of the day and the dollar gain has held. The "W" pattern, above did predict this move lower from the chart above and as you can see from the chart below it did drop lower. That is how to read a "w" pattern on any chart. You can see the "W" as I have outlined it with red lines below. The 1st Black line connected to the "W" pattern shows the slant of the pattern so that the second leg is lower than the first. The 2nd Black line I drew was to show that the pattern did show a lower point was actually reached as predicted by the chart. If you are still confused get a book on Technical Analysis Explained by Martin Pring. It's one of the best out there. It can be quite useful to help in trading.

On the earnings front, Honeywell International, symbol HON, reported it beat earnings estimates, but it too had less Revenue than last year at this time.

Markets in limbo. UPDATE

2009-10-23T06:09:00.000-07:00

The stock market still has not made its direction clear going forward. We are still in that narrow range that continues to butt up against the Resistance line of about 10,100. It is obvious that the data from 3Q companies which have reported earnings that it is a mixed bag. This morning MSFT reported and they exceeded earnings expectations. Analysts had expected $0.32/share and MSFT delivered $0.40/share in earnings. Their Revenue numbers were slightly better than last year but nevertheless must be recorded as better. at $12.93 Billion vs last year at $12.8 Billion. While not much of an increase it was still an increase of 1%.

While yesterday we saw a rise in all 3 indexes, the Dow volume was less than Wednesday's volume. In my comments yesterday I had said that the dollar was up in pre-market and that usually meant the market was going to go down. Well the dollar gain evaporated during the day and the dollar fell to a new low. In pre-market this morning the dollar is up again but only slightly and the Indexes are set for a gain at the open. We should see whether MSFT will drive the market higher. It should unless the Revenue gain of 1% wasn't enough of a motivator to buy stocks today. Of course they released their newest update of Windows yesterday and I haven't seen the consumer reviews on it. Hmmm, why would I, we own only Mac's. :)

I will be updating my charts over the weekend so come back and see what they look like in helping point the direction of the market going forward. Have a nice weekend too. Don't forget if you haven't voted in my Mini poll this month to add your opinion. Vote only once please in a month.

UPDATE: 8:30am PST

Burlington Northern Santa Fe railroad reported Quarterly freight revenues were $3.49 billion, which included a decrease in fuel surcharges of $725 million. This Compared to third-quarter 2008 freight revenues of $4.77 billion. You can see here is another company reporting lower Revenue than for the same period in 2008.

According to CNBC this morning, 60% of companies reporting 3Q results have shown higher revenues this period compared to 2008. The problem with that spin is that even if they reported only a $0.1 Million increase or less in revenue, it is counted in the 60% of companies with "higher" revenues. I am not impressed. Clearly the Burlington Northern Sante Fe railroad company, which does ship freight, is hurting and a better measure of the economy than many other companies.

More companies report 3Q results. Jobless claims rise. UPDATED

2009-10-22T05:13:00.000-07:00

This morning the big news in reporting earnings came from McDonalds. They beat estimates for earnings per share by a few pennies, but did not get top line growth in Revenue. As a matter of fact, they said that informal dining out has dropped globally. Two other companies reported this morning, Merck and AT&T. Both of them also did not have top line Revenue growth. Without top line Revenue growth we are very vulnerable for a double dip recession. More companies to report today after the bell. Stay tuned on that front.

The Dow had difficulty again staying over the 10,000 level as it retreated to 9949 and the S&P 500 dropped back to 1081. Weekly Jobless Claims gained 11,000 to 531,000 from 520,000 last week. The four week moving average for jobless claims is at 532,250.

European markets are down again this morning and the dollar is up. The Dow Futures is up in pre-market but with the dollar up, I see the Dow headed down for the day. The S&P and the Nadaq are both down in premarket and should begin that way as well following the dollar's gain.

UPDATE: 7:20am PST

UPS reported lower earnings and lower top line Revenue than last year. 3M reports better earnings AND top line growth in revenue.

UPDATE: 2:00pm PST

Xerox says Sales fell 16 percent to $3.68 billion.

UPDATE: 3:30PM PST

JUNIPER Sales for the third quarter ended last month were $823.9 million compared to $946.9 million revenue booked in the year-ago period. That's another company not growing Sales from last years results.

U.S. Airways total revenues in the third quarter were down 16.6 percent versus the third quarter of 2008. And another company has less revenue than 2008.

Companies reporting earnings but not top line Revenue growth! We are still in a recession.

2009-10-21T06:04:00.000-07:00

I have been watching the earnings reports come in this week and last and specifically looking at the revenue numbers of each company. Even though many companies are beating EPS (Earnings per Share) compared to last year, the real story is that most companies are reporting less Revenue this year than last year, say but a few. Th companies defying that trend are the Pharmaceuticals. Both Pfizer and Elli Lilly saw good gains in Revenue. Lilly reported this morning a 7% gain in top line Revenue as compared to last year.

Still don't think we need major heath care reform?!

Want to know where our stock market is going? Watch the Nikkei!

2009-10-20T05:52:00.000-07:00

I thought I would take a look at where the Nikkei stock market Index was currently and specifically how the long term chart looks compared to the current wedge pattern we are in and waiting for a breakout either to the upside or downside. What I found in the chart was most intriguing. As you look at the similarities from the Dow chart, you will see the similarities are uncanny. But more importantly, there is a clue as to where the Dow may be headed. It may break below the support level line, just as the Nikkei has recently! You may need to click on each chart and enlarge them to see what I am talking about, but it is worth the look.

The Nikkei chart suggests we will not break out to the upside but may well drop shortly and break the Dow's support line.

Dow hits a new level, marking a 52 week high. So what!

2009-10-19T13:42:00.000-07:00

I'm sure many of you didn't notice this today unless you follow the market daily. But I said last week that this was going to happen and today it did. All 3 Indexes, the Dow, the Nasdaq Composite and the S&P 500 all made 52 week highs today. Over the next few months, you may her that these indexes hit new 52 week highs. But don't fall for the hype as we would have a long way to go in each index to reach new highs. For example, the Dow hit an all time high of 14,164 on Oct. 9th, 2007. The S&P 500 hit an all time high of 1565 on the same day. So closing of the Dow of 10,097 and the SP500 at 1097 have a long way to go before we set a new record. And chances are better than 50% that we will go down to 9,000 before we go to 11,000.

Oct. 20 Market outlook: Skeptical!

2009-10-19T06:24:00.000-07:00

A moment ago CNBC interviewed Art Cashin of UBS Warburg. When Mark Haines asked Art where he was in his market outlook, Art replied "skeptical". Well I am too as we have not had the breakout above the downtrend line and the wedge gets narrower and narrower. We can continue in this tight range for at least a week or two but a breakout is inevitable to either the upside or the downside. I am with Art here. I believe if it looks to good to be true to move more to the upside, it probably is.

Oct. 17th Market outlook and recent news

2009-10-17T07:00:00.000-07:00

Well the stock market closed just under the 10,000 level on the Dow Friday, after the Bulls tried to have it close in the positive. But it was Options Expiration for October and that was a mighty tall order. The Unemployment Rate came out yesterday for California and it reached a record 12.2%, which is a full 2.5% higher than the National average. And another Wall St. leader was arrested by the FBI for suspected Insider Trading violations, a very serious claim. They say they had wire taps and certain proof of the charges against billionaire Raj Rajaratnam, founder of hedge fund firm Galleon Group. This should help the Obama Administration and Congress get some backbone finally to pass some tough regulations on Wall Street, although this guy broke laws already on the books and was blatant. I say, if found guilty, with tongue in cheek, "Hang em!" as an example to others. Main Street is in much pain while these thieves are robbing the coffers of investors and their firms, blind! Let's now look at the charts of the stock market .

As I look at the S&P 500 2 month chart (above) and the Nasdaq 2 month chart pattern, I see that the day's close yesterday produced a candlestick Hammer pattern. These markets have done this 2 other times over the past 2 months and each time it had, those markets dropped for about 3-4 days below the close of the Hammer pattern. I expect the same will be true this time. The real question is how far down will the markets go this time. We have gotten the October Options expiration completed, so now maybe the markets will finally have the correction we have been waiting for. Even with a correction, it would correct to only 9,000 on the Dow or 900 on the S&P 500. I must add here that when I looked at the chart of the Dow and observed yesterday's Candlestick pattern it too was a Hammer. But when I looked this morning on Bigcharts.com it wasn't that Hammer pattern. What's going on here? I don't have a clue but it is noteworthy. I am not the only one who saw the same Hammer pattern yesterday, Try AmericanBulls.com and look up under Indexes the Dow pattern for yesterday. I am convinced all 3 indexes showed a Hammer pattern and that most always signifies a reversal in trend. Stay tuned as next weeks action on Monday through to Wednesday should show this reversal with the market going down. Can't say how much as it doesn't reveal that to me. It's just a reversal. I found this chart from an article by Seeking Alpha's Trader Mark and an article you might want to read by clicking here.

Adding another piece of data to this move down the next few days was the high Volume traded yesterday on the Dow, but this was not the same for the Nasdaq. The Nasdaq market has been relatively strong and with Google's terrific earnings and Revenue numbers this week, many are hoping for a resurgence in Technology to help us out of this jobless recovery. Technology companies have gotten us back on our feet before and can do it again, but the Consumer would need to participate as well, and there has been a generational shift in spending patterns of U.S. Consumers as a result of unusually high unemployment and the record foreclosure levels experienced this year and last.

We have not broken up through the Resistance line (see post Thursday, Oct. 15th) and so I am seeing this resistance line as being very strong. This tells me we are not ready yet to go over Dow 10,000 and stay above this resistance line yet nor are we ready to advance over a similar line for the S&P 500 which crosses at 1100. Therefore one must conclude we are still set for a major market pullback.

My own action of the past week was to buy more shares of Exxon, symbol XOM, for $70.21/share to add to an old position I have maintained in the stock, as well as to buy TBT, ProShares UltraShort 20+ year Treasuries. I bought these shares as I do expect the fear of inflation to be just around the corner as government spending continues to worry many. Price paid was $45.40/share. I still own my TZA shares, in case you were wondering. I have taken a beating on these shares and continue to await a correction to be able to gain some losses back.

Consumer Confidence for October

2009-10-16T06:56:00.000-07:00

The latest Michigan Consumer Confidence numbers came out a few minutes ago for the month of October and the number was 69.4 compared to 73.5 in September. This is not in the right direction, is it? With more and more people unemployed and not able to find work, these numbers are not expected to get much better for a long time. But that's not the stock market as it seems to go up no matter what is happening to people. It's all about earnings!

Company earnings were reported yesterday for Google and IBM, as well as GE. Google beat all expectations so the clicking of ads seems to be continuing and thriving. But IBM disappointed analysts because their Service side of the business appears weak even, though the hardware side is good. GE disappointed as well, as many who are making their earnings numbers are not doing it by growing revenue but rather by managing costs. That is disappointing. Speaking of disappointing Bank of America reported and they lost 1 Billion for the quarter. Ken Lewis is now gone and the Gov't pay Czar said he shouldn't take his salary nor bonus as BAC didn't do at all well even with Gov't help. I agree!

Dow closes at 10,000:What's up now?

2009-10-15T07:56:00.000-07:00

The big question of the day is whether a Dow over 10,000 is a sustainable level. As I look at the chart above, I see it will not last. If you click on the chart and make it larger, you will notice the downtrend red line crosses just above 10,000 on the Dow. So technically, we have not broken through this resistance level but we are about as close as it gets.

Earnings are still coming out and we aren't even 1/3 of the way through reporting. Today, Google reports as does IBM and AMD. Thee is definitely a fight for direction here between the Bulls, who appear to have unlimited government funding to firms like Goldman Sachs, and the Bears, who appear to be fighting on a much smaller scale. Unemployment claims dropped a bit this week to 515,000 lost jobs. Everyone hails this as good news as it isn't as bad as it has been. But I'm sorry, we aren't adding new jobs, we're still losing them at a clip of over 500,000 a week. Someone think that is good?

I will not proclaim we are going higher until I see the data. That would be a solid breakthrough of the red resistance line on my chart. If we move only slightly up and then pullback and stay below the line, we will have that healthy correction we need. Stay tuned!

Still think everything is much better because the Dow is over 10,000? Then read this on foreclosures from Yahoo news: WASHINGTON – The number of households caught up in the foreclosure crisis rose more than 5 percent from summer to fall as a federal effort to assist struggling borrowers was overwhelmed by a flood of defaults among people who lost their jobs.
The foreclosure crisis affected nearly 938,000 properties in the July-September quarter, compared with about 890,000 in the prior three months, according to a report released Thursday by RealtyTrac Inc. That puts foreclosure-related filings on a pace to hit about 3.5 million this year, up from more than 2.3 million last year.
Unemployment is the main reason homeowners are falling into trouble. While the economy is likely out of recession, the unemployment rate — now at a 26-year high of 9.8 percent — isn't expected to peak until the middle of next year.

Market update week ending Oct. 9, 2009

2009-10-10T09:03:00.000-07:00

I decided to put some charts up today to give you a perspective on what I have been saying vs. what the charts are showing as we approach the 3rd week of October and Options expiration on Friday, Oct. 16th. The first chart is a 3 year chart of the Dow which was posted on August 8th. At that time I described what I thought the market might do going forward.

I quote, "For the Dow it says that we will not go over 10,000 and on the S&P 500 we will not go over 1090, but there is still the possibility of some good gains in the meantime.... But let me be clear here, there is more pain ahead short term for short positions and those wanting to get out should."

From the second chart, not much has changed since then as shown in the Updated 3 year Dow chart. We are staying below 10,000. Those who were short did experience more pain as the Dow did continue to go up from that first chart date of Aug. 8th but it seems to be hitting up against the resistance line of 10,000. Will we have a correction by this coming Friday, Oct. 16th. Well based upon everything I see reported and people I listen to, we may pull back just enough to complete a "W" pattern, but I do not believe it will be the sharp drop off many, including myself, have expected. We may continue to go sideways staying under 10,000 for another 4-5 weeks until after Thanksgiving when we get indications about this year's Christmas Retail Sales projections.

A bit longer term into January and February I do not see us going and staying over Dow 10,000, as the economy should really bottom at that time, with an increase in Commercial Real estate foreclosures become more apparent and the Unemployment rate goes over 10.3%. This will have even more consequences for the Democratic Party as it faces few months to show any meaningful employment before Congressional mid term elections next year. Much can go wrong between now and then as currency concerns over the dollar provide more pressure on the Obama Administration to do something about it at a time when we are most vulnerable to a double dip recession, which by the way I believe we are going to have. Commodities will rise even more sharply hitting continued highs and then drop again as we go back into the recession.

I must stop now as I feel like I have been channeling some spirit who has guided my fingers on these keys of my computer. I don't know if it is a good spirit looking out for us or a bad one. I guess time will tell! :)

Stock market action for Oct. 8, 2009

2009-10-08T06:05:00.000-07:00

It looks as though no determination has been made yet as to which direction the breakout will make on the Dow. Yesterday the Dow closed at 9725, down only 5 points. This was not enough to make a comment. Today the market is poised to go up because of upbeat earnings report from Alcoa. Retail Sales also came in down but not as bad as analysts said they expected. That surely will aid in the pop up today. And finally weekly jobless claims were down again as was Continuing claims, which was at 6.09 Million jobs. Now pay no attention that these numbers are in fact not true because those not filing claims as they give up looking or don't file as their benefits have run out, but the data shows a decline and that's all that counts. So the "W" pattern has not yet had a breakout either down or up. It may take until the end of next week for the answer as Options expiration for October occurs then.

The chart above shows I have added a second Blue line which depicts the tighter range we need first to break out of and then the second lower Blue line which will signal a correction. This is determined by the Dow closings above the resistance level of 10,000 or lower than the top Blue line and above the lower Blue line, we will have no determination of direction for the market unless we break below the bottom Blue line or above the Red line.

On a related topic about whether the stock market is reflecting where the economy is headed, I was at a town hall CITY COUNCIL Meeting last night where the topic was on housing requirements looking forward to 2014 and the town was projecting a certain number of new homes needed to be built for the expected growth the town calculated they would need. The conversation lasted about an hour before it was open to Public comments and one person got up and asked the question about the elephant in the room. It was this: "Has anyone looked recently at current predictions about economic growth or lack of it over the next 5 years? People are leaving California and businesses are closing. Do you really think in 5 years this is all going to be solved?" There was a hush in the room as many finally got it. The same is true about the economy and the stock market. No one is listening to the comments in those areas about the elephant in those rooms/

Mini Poll Rules

2009-10-07T16:19:00.001-07:00

I like people to vote in the Mini Poll, but you can only vote 1 times in a Month. I get a report of the IP address regarding who votes and if I find more than one vote for the same IP address, I delete it. Sorry but them be the rules. Those who haven't voted this month feel free to anytime. I keep the data summarized by month and post it here on the first day of the month. Thanks for your support.

Market outlook Oct. 7th, 2009

2009-10-07T05:51:00.000-07:00

Yesterday's rise in the Dow to close at 9731 set up the middle high point of the "W" pattern and sets up the next leg down to form the 2nd bottom point of the "W" pattern. If the next leg down does not go below 9,500, we most likely will see another rise above recent highs and quite possibly hit the 10,000 level. If it goes below 9,500, it will have broken the uptrend line which started at the low around March 10th on a 1 year chart. So these next few days are pivotal in determining where we are going in the market. The dollar is set to rise today and so the market is set to drop. Also, my guess is that today's volume will be more than yesterday's and the market will drop on this higher volume. Stay tuned. I will do a complete analysis of the charts this weekend.

You will notice that the Blue support line is converging to the Red resistance line and as it pinches together there will be some breakout here, either to the upside or the downside. My guess is to the downside, as it fits my prediction made back in late August. Today is the start of earnings season, as Alcoa reports after the bell. Be sure to come back to see this story unfold!