Stocks|July 27, 2009 6:16 PM

Weekly Market Outlook

July 27, 2009

Two monster weeks of gains for the major indices were followed by a flat/mixed performance on Monday. A wide variety of companies report quarterly earnings this week — better-than-expected (or perhaps “not-as-bad-as-expected”) earnings reports over the past couple of weeks have been credited for fueling the recent market gains. Upcoming this week on the economic reporting calendar include Consumer Confidence, Durable Goods Orders, GDP, Personal Consumption, and Chicago PMI.

The Nasdaq 100 (NDX) has continued to be a market leader, as technology stocks have outperformed. As you can see in the following chart, although the NDX is up for calendar year 2009, it is still down over a 52 week time frame (not to mention the fact that it neared 5,000 in the year 2000. Although we have taken out 1,500 and stayed above that level since mid-July, there is a bit of concern that we are in the area of a 50% retracement from the 2007/2008 highs to the recent lows.

NDX Daily Chart

The S&P 500 Index (SPX) took out recent overhead resistance in the 950 area, and is now closing in on the 1,000 level — which is one of those nice “round” numbers of which the market and many traders are fond. There is very heavy call open interest on both the SPX August 1,000 Call and the S&P 500 ETF (SPY) 100 Call, indicating that there has been a great deal of Call buying at that key strike price.

SPX Daily Chart

The Dow Jones Industrial Average (DJIA) is another major index that has recently taken out and/or is approaching key levels. The DJIA took out the round 9,000 level last week, and some are speculating that a test of 10,000 is in the cards for 2009.

DJIA Daily Chart

Bottom Line: The short-term momentum remains UP for the markets — don’t fight this strong underlyling trend. However, be aware that things could reverse quickly — and there is a certain amount of bullish sentiment complacency that seems that have entered recently in terms of earnings, the economy, put/call ratios, etc — as contrarians, these tend to ring caution bells when you consider that we are still basically retracing losses from last year. So continue to ride the upside, but don’t be surprised to see a sharp pullback soon, especially as we approach the traditionally weak months of September and October.

Price Headley,
BigTrends.com
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Stocks|July 20, 2009 3:28 PM

Weekly Market Outlook

July 20, 2009

Big gains for the major indices last week as July options expired. Earnings continue heavily this week, with big names reporting earnings every day. Last week, it seemed the general theme was that Technology and Financial names are weathering the economic storm fairly well, while traditional Industrial names are showly little if any recovery thus far. It is a fairly quiet week for economic announcements this week with Crude Inventories, Jobless Claims, and Existing Home Sales among the highlights.

The S&P 500 Index (SPX) has rallied strongly on the Daily Chart as you can see below, but we potentially face overhead resistance in the 950 area. Percent R rocketed higher from bearish readings to bullish over the past week. The 900/910 area now looks like it will hold support on pullbacks.

SPX Daily Chart

The Nasdaq 100 (NDX) continued its recent strength last week, with a big rally that took it over the 1,500 level for the first time since September 2008. You can see that 1500/1600 is still roughly only a 50% upside retracement from the 2007/2008 highs to the 2008/2009 lows. Remember that 50% retracements in a bear market are often the point near where the rally can stall out. However, Weekly Percent R is showing very strong readings, and as long as this remains in strong territory the underlying trend must be considered bullish biased.

NDX Weekly Chart

On the multi-year monthly chart of the Dow Jones Industrial Average (INDU) (DIA), one can piece together a wide trading range possibility in the 7,000 to 10,000 area. A rally up to 10k is certainly possible, but be ready to look for reversals lower should we reach those heights. Similarly, a test of the 7,000 lows (and possibly lower) is also a definite possibility over the long-term. You can see that monthly Percent R has just emerged from overly bearish territory.

DJIA Monthly Chart

The CBOE Volatility Index (VIX) broke below the 25 level last week, continuing its recent downtrend. Note that tests of the Top Bollinger Band recently have preceded quick moves lower in line with market rallies. Tests of the Bottom Band, however, have not reversed higher in as quick a fashion, tending to cling along the Bottom Band for multiple days at times. A move back to the 30 area certainly over the medium-term certainly would not be a surprise.

VIX Daily Chart

Bottom Line: Last week’s rally indicates the short-term underlying trend is bullish and should not be faded without a clear reversal … however, very low equity put/call ratios are a concern given the anemic earnings results from traditional Industrial companies. Can Technology and Financials (and perhaps Metals/Commodities) propel this market higher alone?

Price Headley,
BigTrends.com
1-800-244-8736

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Author: BigTrends BigTrends was founded in 1999 by Price Headley to give active investors and traders actionable information and education to help them be more successful in their own trading.

Stocks|July 14, 2009 1:01 PM

Weekly Market Outlook

July 14, 2009

July Options Expiration Week started off with a bang, with the markets gaining yesterday and the S&P 500 Index (SPX) closing just above the key 900 level. The CBOE Volatility Index (VIX) dropped down to 26.31 yesterday, and may soon test its recent lows around 25 should the market strength continue.

Earnings reporting season is in high gear currently, with names such as Goldman Sachs (GS), Johnson & Johnson (JNJ), Intel (INTC), Yum Brands (YUM), Abbott Labs (ABT), Google (GOOG), IBM (IBM), Bank of America (BAC), Citigroup (C), and General Electric (GE) reporting Tuesday through Friday of this week.

Among the economic reports due this week are PPI, Retail Sales, CPI, Capacity Utilization, FOMC Minutes, and Housing Starts.

The S&P 500 Index (SPY) bounced higher from its Bottom Bollinger Band yesterday, but as you can see on the following chart, it has basically been in a downtrending range since mid-June. The Index may face resistance as it approaches the 920 area. In addition, the Daily SPX Chart is facing a bearish Percent R re-test — keep an eye if Percent R approaches the mid-level of 50, as that may mark a possible reversal area.

SPX Daily Chart

The Nasdaq 100 (NDX) (QQQQ) has been an outperformer in 2009 versus the other major indices, led by its heavy Technology weighting. The longer-term Weekly NDX Chart below shows the recovery from last Fall’s lows, but we face potential overhead technical resistance near the round 1,500 level. Remember that many market watchers and traders focus on key psychological round numbers such as 1,500 (and 1000, 2000, etc) and they sometimes become a “self-fulfilling” prophecy when an index tests a key round level.

NDX Weekly Chart

Stepping back to look at the multi-year monthly chart of the Dow Jones Industrial Average (INDU) (DIA), you can see that the recent market recovery is fairly insignificant in the scheme of things. We basically are in a consolidating trading range, similar to what occurred in 2002/2003. 7,000 looks like a key bottom area that may need to be re-tested before this consolidation is finished.

DJIA Monthly Chart

Volatility has been generally moving lower this year from the extreme levels it reached during the various credit and economic crises. You can see on the following chart that the VIX has generally been in a 27 to 33 range recently, but broke below that on Monday, and may soon test its recent lows in the 25 range.

VIX Daily Chart

Bottom Line: The markets are showing very short-term strength, but overhead resistance is a major concern as the technicals begin to weigh down on rallies. Avoid over-exuberance about upside potential, and be ready to profit on the downside should the short-term uptrend reverse.

Price Headley,
BigTrends.com
1-800-244-8736

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Author: BigTrends BigTrends was founded in 1999 by Price Headley to give active investors and traders actionable information and education to help them be more successful in their own trading.

Stocks|July 6, 2009 3:24 PM

Weekly Market Outlook

July has started off rather weak as the markets haven’t been able to reach any higher highs over the past few weeks. With last week’s poor jobs number an earnings season now upon us, volatility could be the key going forward. Although the market might not break into a new trend in the coming days, volatility is likely to increase as uncertainty about the future starts to cause concern. Sentiment here is telling us to be cautious with any long plays as the market has a bearish bias right now.

As we mentioned last week, the NDX (black line) is rather bullish and remains much stronger than the SPX. As you can see from the chart below, the Nasdaq tends to lead the S&P on both strong bullish and bearish trends. Last fall as the market really started to unravel in September through November, the NDX was weaker (below) the SPX. The two really came into sync on the last down leg through February and March, but once the March lows were reached and the rally started, the NDX has outperformed again for the most part.

NDX/SPX Performance Chart

So what does this tell us? Well as things stand today, the NDX is still significantly above the SPX, but both are starting to fall some. We expect to see the two lines converge over the coming weeks, and if another bearish leg of the market is to come, the NDX should break below the SPX and confirm by continuing lower. If not, then we are likely to see some chop for the market throughout the rest of the summer.

The SPX is at a critical junction right now, having failed to close above the 10-Bar EMA (yellow line) on the monthly chart. The monthly charts for the SPX still have a bearish bias, and the lower Acceleration band currently sits around 800. If the market starts to break down, we could easily see a test of that round level of support in late July or August.

SPX Monthly Chart

Bottom Line: The CBOE Volatility Index (VIX) is now back above the 30 level for the first time in a little over a week. We have been oscillating around this level for almost two months now, and the support appeared to break there two weeks ago as the VIX fell down to 25 intra-day last week.

CBOE Volatility Index (VIX)

We have since rallied back up into the 30-level resistance (black dotted line) again with Percent R also breaking the 50 level. We are really in crunch time here for the VIX, as it needs to hold 30 and the 50 level to begin the makings of a bullish trend (bearish for the market). If not, then the market should rally back higher this week. Keep your eye on the VIX to see what transpires.

Trade Well,
Price Headley
BigTrends.com
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Author: BigTrends BigTrends was founded in 1999 by Price Headley to give active investors and traders actionable information and education to help them be more successful in their own trading.

Stocks|June 30, 2009 12:45 PM

Weekly Market Outlook

June 30, 2009

The 2nd quarter of 2009 ends today, with the markets showing gains for the quarter. Not many earnings reports are due in this shortened week (the market is closed Friday, July 3rd for Independence Day): APOL and HRB reported Monday after the close and GIS is due Wednesday morning before the open. The major upcoming economic event this week is the monthly Employment Report due Thursday morning, July 2nd. Also due this week is Consumer Confidence, PMI, and Auto Sales.

The April to June quarter of 2009 is ending today, you can see on the following price performance chart that it has been a positive recovery quarter for the major indices. The Nasdaq 100 (NDX) continues to be the outperformer of the major indices, with S&P 500 (SPX) next in line, and the Dow Jones Industrial Average (INDU) a relative laggard.

NDX/SPX/INDU Performance Chart

The NDX has been uptrending since the March 2009 bottom. You can see on the Daily Chart below that Percent R has moved back above the 80 level after a recent test of the 50 mid-level, which is sign of strength. One caveat to the bullish view of this chart is potential overhead resistance from the key 1500 level. Big “round” numberts such as 1000, 1500, 2000, etc, are often important psychological and technical levels for major indices, and you can see that we have been unable thus far to take out 1500 on the NDX.

NDX Daily Chart

Stepping back to a longer-term Weekly SPX Chart, you can see below that Percent R and Efficiency Ratio are showing strength. However, the recent rally somewhat looks like a bear market rally when the bigger down moves are seen in context. The SPX faces potential resistance overhead from the key 1000 level, as well as the 40 week Exponential Moving Average (green line), which is just abvoe current levels at around 937 currently.

SPX Weekly Chart

Bottom Line: With the CBOE Volatility Index (VIX) breaking below the 27 level, the underlying short-term trend appears bullish. But the major indices face potential overhead resistance, and we must keep in mind the bigger picture of this being a rally within a bear market/trading range.

Trade Well,
Price Headley
BigTrends.com
1-800-244-8736

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Author: BigTrends BigTrends was founded in 1999 by Price Headley to give active investors and traders actionable information and education to help them be more successful in their own trading.

Stocks|June 22, 2009 2:31 PM

Weekly Market Outlook

June 22, 2009

June Expiration ended last Friday with the major indices down sharply for the week. We are also down thus far on Monday, with the S&P 500 Index (SPX) right around the round 900 level currently. Earnings Reporting includes some big names in a variety of sectors this week such as WAG, ORCL, KR, BBBY, DRI, MON, NKE, PAYX, RHT, ACN, CAG, PALM, & KBH. The major economic event this week is the FOMC Rate Decision due Wednesday afternoon, June 24th. Also due this week on the economic report calendar are Durable Goods Orders, New Home Sales, Crude Inventories, Initial Jobless Claims, Final 1st Quarter GDP, Personal Income and Consumption.

As you can see on the following chart, the S&P 500 has moved into the bottom half of its Acceleration Bands (light blue lines) for several days now. Our BigTrends Market Timing turned short-term Bearish on the S&P 500 last week on June 18th — our Market Timing is a nightly commentary on the markets based on trend and sentiment indicators, call 1-800-244-8736 for more information. The Daily Percent R reading on the SPX has moved to the lowest levels since the March 2009 market bottom. Should the 900 strike be violated, potential downside support for the SPX kicks in around the 880 level, which is the site of the recent trading range bottom and also just below the location of the Bottom Bollinger and Acceleration Bands.

SPX Daily Chart

The growth-oriented Nasdaq 100 (NDX) has been an outperformer versus the SPX and Dow Jones Industrial Average (DIA) in 2009. However, looking at the longer-term Weekly NDX chart below, you can see the underlying downtrend in place since 2007. In addition, we face potential overhead resistance, both from the Top Acceleration and Bollinger Bands, as well as the round 1,500 level.

NDX Weekly Chart

The CBOE Volatility Index (VIX) is spiking up this morning to back above 31. The VIX has largely been oscillating around the key 30 level recently, with 27 to 33 being the basic range. However, volatility on the VIX itself looks to be picking up, as you can see from the Percent R spikes in the chart below. In addition, the implied volatility on VIX options has increased recently, indicating that some traders are likely buying VIX options banking on increased movement.

VIX Daily Chart

Bottom Line: We remain in a bigger picture trading range, but we see a short-term bearish bias as we head into the heart of the summer months. The market had a very strong 3 month move from the bottom in early/mid March to early/mid June, so some sort of consolidation/pullback is a logical possibility to follow.

Trade Well,
Price Headley
BigTrends.com
1-800-244-8736

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Author: BigTrends BigTrends was founded in 1999 by Price Headley to give active investors and traders actionable information and education to help them be more successful in their own trading.

Stocks|June 8, 2009 1:10 PM

Weekly Market Outlook

June 8, 2009

Another up week for the major indices closed out on Friday … the S&P 500 Index (SPX) has now closed higher 11 of the last 13 weeks and the Nasdaq 100 (NDX) has been up for 10 of the last 13 weeks. Very few earnings reports due this week, the likes of PBY, MW, DLM, & NSM among the highlights. Due up this week on the economic report calendar are Crude Inventories, Fed Beige Book, Initial Jobless Claims, with May Retail Sales on Thursday morning probably the most important release of the week.

Markets are down thus far on Monday, and the CBOE Volatility Index (VIX) is back above the 30 level intra-day. You can see on the following Daily chart that the VIX has been in a down-trending channel since March, but recently has been waffling around the key 30 area. For the time being, the VIX looks constrained in the 27.5 to 32.5 area.

VIX Daily Chart

The SPX has remained in the uptrend in place since the March 9th bottom. All pullbacks have been contained by (and mostly clear above) the 40 day exponential moving average (yellow line). More recently, a 930 to 950ish range has been established. While many think the recent rally may be over-extended & “overbought”, don’t fight the trend, especially as long as Percent R remains strong and keeps moving back above the 80 level after pullbacks.

SPX Daily Chart

We have discussed recently how there is a long-term commodity/inflation play developing. The chart below examines the long-term relative performance of the PHLX Gold & Silver Index (XAU) versus the SPX & NDX. The weekly % performance chart shows that since the October 2007 stock market top, the XAU is down around 15%, while the NDX is down around 30% and the SPX around 40%. In addition, since the October 2008 market selloff, the XAU has also outperformed the two major broad market indices. The top holdings of the XAU include Barrick Gold (ABX), Goldcorp (GG), Newmont Mining (NEM), and Freeport McMoran Copper & Gold (FCX). The rally is not constrained to Gold alone, as Silver has also been very strong recently.

XAU vs NDX vs SPX Weekly Chart

Bottom Line: The market continues to show resilience on pullbacks. Despite some negative sentiment among
market “experts” and the possibility of an emerging trading range, until this market strength is confirmed to break down, the bias should be to the long side.

Trade Well,
Price Headley
BigTrends.com
1-800-244-8736

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Author: BigTrends BigTrends was founded in 1999 by Price Headley to give active investors and traders actionable information and education to help them be more successful in their own trading.

Stocks|June 1, 2009 1:26 PM

Weekly Market Outlook

June 1, 2009

May trading ended with a sharp upmove in the last few minutes of the trading day on Friday, putting the major indices up for the week. Fairly light on the earnings reports this week, some of the more interesting names include ALTR, JOYG, SNDA, TOL, WSM, & CIEN due in the coming days. Consumer Spending and Manufacturing reports are due out today, while also upcoming this week are data on Home Sales, Auto Sales, Crude Inventories and Non-Farm Payrolls.

The strong close on Friday took the CBOE Volatility Index (VIX) below the key 30 level … we are seeing follow through rallying in the market thus far on Monday. Inflation-related sectors (such as Oil & Gold) appear likely to continue to lead the way. You can see on the following S&P 500 Index (SPX) Daily chart below that today’s continued rally has pushed the SPX above its recent 880 to 930ish range. This is an intra-day chart, however, and we haven’t yet gotten a confirmed close (or two) above the 930 level.

SPX Daily Chart

The Nasdaq 100 (NDX) had a very strong week last week, and continues as a relative 2009 outperformer versus both the SPX and Dow Jones Industrial Average (INDU). On the NDX Weekly Chart below, you can see that Weekly Percent R readings are shooting through the roof, reaching the highest levels since 2007. Reminder that when Percent R reaches extreme levels a short-term pullback or consolidation may be in order; but the underlying uptrend is in overall bullish mode over this time frame chart.

NDX Weekly Chart

The close on Friday to the May month-end was significant to the long-term SPX Monthly chart. It appeared that the SPX was setting up for a possible “bend-but-don’t-break” bearish re-test; but the strength of the close violated that re-test. This sets up a likely trading range scenario (that appears to have a bullish bias). Keep an eye peeled if Monthly Percent R approaches the key 50 mid-level, as that may be a resistance area to further rally or reversal location.

SPX Monthly Chart

Bottom Line: The May month-end bullish move may prove to be significant, especially if it is confirmed by strength today (Monday) and this week. The VIX remaining below 30 is important. Inflation remains a long-term concern, but inflation and commodity related stocks are rallying currently (Gold, Oil, etc) and look to have further upside, so don’t fight the trend.

Trade Well,
Price Headley
BigTrends.com
1-800-244-8736

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Author: BigTrends BigTrends was founded in 1999 by Price Headley to give active investors and traders actionable information and education to help them be more successful in their own trading.

About BigTrends

Price Headley was inducted into the Traders' Hall of Fame in 2007 and is the founder of BigTrends.com, which provides investors with specific real-time stock and options strategies and investment education to profit from significant market trends.

Price appears regularly on CNBC, Fox News and Bloomberg Television, and in a variety of print and online financial news outlets, including The Wall Street Journal, Barron's, Forbes, Investor's Business Daily and USA Today. Price also speaks regularly to investment audiences nationwide.

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