Será que este rally é sustentável?
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Será que este rally é sustentável?
The markets started the new year with a wild run higher. Is it sustainable?
By L. A. Little - Publisher and Editor, TA Today
http://www.tatoday.com . Jan 6, 2003 7:21:22 AM
It's time to get serious again. One thing you cannot do in trading is to believe that you can rest on your laurels. Last year was a good year for my trading portfolio, but it's a new year and a new set of opportunities and risks. The markets started the new year with a wild run higher. Is it sustainable. Can a higher high in this uptrend be obtained? I don't think so. Let's see why.
Technical Indicators
DJIA - 8800. That looks to be the magic number here. DJIA closed at 8601 and we are now within striking distance of that right shoulder of the small head and shoulders pattern that we first pointed out two weeks ago. Here's the graph again as a refresher. When we drew this two weeks past, I was looking for support around the 8255 level. We reached 8244 before the rally took place Thursday to take us back up to where we are now. So now, I would be on the lookout for the right shoulder to form in here soon and to give us the failed higher high. Such a failure would provide the opportunity to trade back down to left shoulder of the larger inverse head and shoulders pattern. Of course, this is if all goes according to plan.
The result of all of this is that we have a reasonably good chance of a failed rally in our midst right now. I am not buying this rally. In fact, I'm getting ready to short into it. That will be my focus in the coming days. What will the coming week bring? Well, with the likelihood of a failure is staring us in the face, I'm thinking the risk is actually to the downside here, technically. Slightly bearish risk is what I would surmise.
COMPQ - On the NASDAQ, you have to peg resistance in the 1420 area. The NASDAQ close Friday at 1387 or 30 points away from that area. This leads me to believe that the upside has more limit to it than the downside at this juncture. Without volume, I'm very suspicious of the move we have seen up so far. Just like the move down, the reduced volume over the past two to three weeks has made market forecasting quite difficult and has forced me to play smaller. Right now, unfortunately, the risk here looks to be greater than the reward. Risk is slightly bearish.
SPX - Resistance on the S&P is both at the current level and again at 925. A close of 925 would give hope of a higher high but the odds appear stretched for that. There's more downside risk than upside so I would have to peg risk as slightly bearish even with the nice move and decent consolidation of gains that we witnessed on Friday.
XAX - The AMEX is doing that little January effect rally right here. Technically, this market is set up pretty good compared to the others. It is right at breakout resistance here short term and looks to probably have enough steam to actually achieve a higher high. Quite different from the other markets. If I were wanting to stretch longs, stocks on this index with good charts would be where you should look most likely. Risk is bullish for the coming week.
SOX - I often think of the SOX as the little engine that could. It could break the back of the market or put it on it's back and take it higher. It has that kind of influence. Right now the SOX has a decent move starting to take place off the recent lows and is without serious short term resistance for another 10 to 20 points. Unfortunately, that's not that far. I would have to consider the outlook near term to be neutral at best; slightly bearish is more likely though.
BKX - The BKX is the to the listed issues, what the SOX is to the NASDAQ. With a solid set of financial stocks, the listed issues can rise. Right now, the BKX continues to be stuck in the 725 to 800 range. With the index at 775, unless it breaks higher, the majority of the gains are already in this latest move. As a result, I don't see this as being the engine to drive the listed issue higher. In fact, it will soon act as a drag most likely. Risk is slightly bearish.
XAU - The precious metals have continued to be the most bullish event on the street of late (along with oil). Friday they burst higher once again and now look poised to make a decent run at the June highs for the complex. The 3-week consolidation without giving up the gains make this a bullish wedge that looks be breaking further to the upside. This is bearish for the general market.
BBH - I've started concentrating on the BBH as a measure of speculative money of late. The move down at the end of December bounced off the short to intermediate term up trend line stretching back to the July. There is a long term down trend line coming in just shy of 100 so it appears that there is the potential for the Biotech's to roam higher if they try. With the absence of volume, they have pretty much gone sideways for 3 months now. The formation is short term slightly bullish unless the horizontal resistance at just over 90.
Risk Factors
Oil - Oil closed at it's highest levels in the past two years. Whether they can continue to soar is anyone's guess because at some point there will be a significant pullback. I wouldn't bet against it, but it's getting to the point where you are stretching your lucking betting for it as the rise has taken place without any digestion. At this point, I would believe it to be neutral with wild swings quite possible.
Earnings and Warnings - The earnings warnings are still possible but should soon begin to wind down. YHOO reports on the 15th so the warning season is almost to an end. If anything the tide is about to turn here with one more week of possible surprises prior to the earnings announcements starting to pick up. Slightly bearish is the outlook for the week.
Seasonality - The seasonality has been the biggest thing going for the markets since middle of October. The next couple of weeks are marginal at best with a big bullish bump to end the month. Thus, short term, the risk is neutral.
Economic Data - I don't see any market moving data until the jobs report on Friday. For that number, the forecast is basically flat from last month. That actually seems to be spot on as I don't expect a significant variance. What is the market needing to fuel a further rally? Seems like better than expected numbers are needed. The risk is slightly bearish as a result.
Sentiment - The bullish advisors numbers have definitely stalled here with roughly twice as many bulls as bears and the other fourth of the folks sitting on the fence. This continues to be a bearish technical factor against the market right now.
Federal Reserve - The major problem facing the Federal reserve now is a weaken foreign currency, slow growth, and ballooning budget deficits. This makes it difficult to stimulate much more and besides, there's not a lot left in the bag of tricks to stimulate the markets and the economy. Seems like one this we might see is a more lax set of margin rules on stocks. Whether the Fed wants to admit to it or not, they definitely do watch the markets. Risk is neutral as they few bullets left and I don't expect them to spend them any time soon.
Exchange Rates - The Euro has not only broken the long term down trend against the dollar now, it has also broken out of a nice six month base that it had built and is spurting higher. I don't see this pulling back for a bit now and that is bearish. Something to watch now is the Yen which has spun a nice head and shoulders formation here over the past year. That formation, if it completes, portends a Yen priced at roughly 82 to 85 over the coming year. I'll be quite honest that I'm not sure how the Yen, of all currencies, makes that kind of move against the dollar, but that's the way the charts are starting to read. Short term, this chart is bearish also.
Overall Risk
Although I have cautioned of a potentially rally in the markets, I was not sure it would occur. Last week I had said that if we do get a rally, consider it a gift and look to lighten up into it and potentially short depending on your conviction because it might be the last rally of any significance for a while to come. I've not changed that tune and the rally is upon us. I will look to use it to build a few short positions that I'm comfortable with as the majority of the indicators suggest lower equity prices to come.
Current Portfolio Mix
Last week I covered both my health care shorts at the beginning of trading on Thursday and the INTC short the day before. This leaves me with just some token short positions. Most of my longs continue to be the precious metals and I'm wanting to nurse the other longs a bit longer before cashing in. My next order of business is to start building shorts where the charts lend confidence in that move.
Position Current Previous Week
Long Percentage 25.4 % 22.8 %
Short Percentage 6.7 % 17.5 %
Cash Percentage 67.9 % 59.7 %
http://www.trading-ideas.com/MarketCommentary/mc010603-3.asp
Abraço.
By L. A. Little - Publisher and Editor, TA Today
http://www.tatoday.com . Jan 6, 2003 7:21:22 AM
It's time to get serious again. One thing you cannot do in trading is to believe that you can rest on your laurels. Last year was a good year for my trading portfolio, but it's a new year and a new set of opportunities and risks. The markets started the new year with a wild run higher. Is it sustainable. Can a higher high in this uptrend be obtained? I don't think so. Let's see why.
Technical Indicators
DJIA - 8800. That looks to be the magic number here. DJIA closed at 8601 and we are now within striking distance of that right shoulder of the small head and shoulders pattern that we first pointed out two weeks ago. Here's the graph again as a refresher. When we drew this two weeks past, I was looking for support around the 8255 level. We reached 8244 before the rally took place Thursday to take us back up to where we are now. So now, I would be on the lookout for the right shoulder to form in here soon and to give us the failed higher high. Such a failure would provide the opportunity to trade back down to left shoulder of the larger inverse head and shoulders pattern. Of course, this is if all goes according to plan.
The result of all of this is that we have a reasonably good chance of a failed rally in our midst right now. I am not buying this rally. In fact, I'm getting ready to short into it. That will be my focus in the coming days. What will the coming week bring? Well, with the likelihood of a failure is staring us in the face, I'm thinking the risk is actually to the downside here, technically. Slightly bearish risk is what I would surmise.
COMPQ - On the NASDAQ, you have to peg resistance in the 1420 area. The NASDAQ close Friday at 1387 or 30 points away from that area. This leads me to believe that the upside has more limit to it than the downside at this juncture. Without volume, I'm very suspicious of the move we have seen up so far. Just like the move down, the reduced volume over the past two to three weeks has made market forecasting quite difficult and has forced me to play smaller. Right now, unfortunately, the risk here looks to be greater than the reward. Risk is slightly bearish.
SPX - Resistance on the S&P is both at the current level and again at 925. A close of 925 would give hope of a higher high but the odds appear stretched for that. There's more downside risk than upside so I would have to peg risk as slightly bearish even with the nice move and decent consolidation of gains that we witnessed on Friday.
XAX - The AMEX is doing that little January effect rally right here. Technically, this market is set up pretty good compared to the others. It is right at breakout resistance here short term and looks to probably have enough steam to actually achieve a higher high. Quite different from the other markets. If I were wanting to stretch longs, stocks on this index with good charts would be where you should look most likely. Risk is bullish for the coming week.
SOX - I often think of the SOX as the little engine that could. It could break the back of the market or put it on it's back and take it higher. It has that kind of influence. Right now the SOX has a decent move starting to take place off the recent lows and is without serious short term resistance for another 10 to 20 points. Unfortunately, that's not that far. I would have to consider the outlook near term to be neutral at best; slightly bearish is more likely though.
BKX - The BKX is the to the listed issues, what the SOX is to the NASDAQ. With a solid set of financial stocks, the listed issues can rise. Right now, the BKX continues to be stuck in the 725 to 800 range. With the index at 775, unless it breaks higher, the majority of the gains are already in this latest move. As a result, I don't see this as being the engine to drive the listed issue higher. In fact, it will soon act as a drag most likely. Risk is slightly bearish.
XAU - The precious metals have continued to be the most bullish event on the street of late (along with oil). Friday they burst higher once again and now look poised to make a decent run at the June highs for the complex. The 3-week consolidation without giving up the gains make this a bullish wedge that looks be breaking further to the upside. This is bearish for the general market.
BBH - I've started concentrating on the BBH as a measure of speculative money of late. The move down at the end of December bounced off the short to intermediate term up trend line stretching back to the July. There is a long term down trend line coming in just shy of 100 so it appears that there is the potential for the Biotech's to roam higher if they try. With the absence of volume, they have pretty much gone sideways for 3 months now. The formation is short term slightly bullish unless the horizontal resistance at just over 90.
Risk Factors
Oil - Oil closed at it's highest levels in the past two years. Whether they can continue to soar is anyone's guess because at some point there will be a significant pullback. I wouldn't bet against it, but it's getting to the point where you are stretching your lucking betting for it as the rise has taken place without any digestion. At this point, I would believe it to be neutral with wild swings quite possible.
Earnings and Warnings - The earnings warnings are still possible but should soon begin to wind down. YHOO reports on the 15th so the warning season is almost to an end. If anything the tide is about to turn here with one more week of possible surprises prior to the earnings announcements starting to pick up. Slightly bearish is the outlook for the week.
Seasonality - The seasonality has been the biggest thing going for the markets since middle of October. The next couple of weeks are marginal at best with a big bullish bump to end the month. Thus, short term, the risk is neutral.
Economic Data - I don't see any market moving data until the jobs report on Friday. For that number, the forecast is basically flat from last month. That actually seems to be spot on as I don't expect a significant variance. What is the market needing to fuel a further rally? Seems like better than expected numbers are needed. The risk is slightly bearish as a result.
Sentiment - The bullish advisors numbers have definitely stalled here with roughly twice as many bulls as bears and the other fourth of the folks sitting on the fence. This continues to be a bearish technical factor against the market right now.
Federal Reserve - The major problem facing the Federal reserve now is a weaken foreign currency, slow growth, and ballooning budget deficits. This makes it difficult to stimulate much more and besides, there's not a lot left in the bag of tricks to stimulate the markets and the economy. Seems like one this we might see is a more lax set of margin rules on stocks. Whether the Fed wants to admit to it or not, they definitely do watch the markets. Risk is neutral as they few bullets left and I don't expect them to spend them any time soon.
Exchange Rates - The Euro has not only broken the long term down trend against the dollar now, it has also broken out of a nice six month base that it had built and is spurting higher. I don't see this pulling back for a bit now and that is bearish. Something to watch now is the Yen which has spun a nice head and shoulders formation here over the past year. That formation, if it completes, portends a Yen priced at roughly 82 to 85 over the coming year. I'll be quite honest that I'm not sure how the Yen, of all currencies, makes that kind of move against the dollar, but that's the way the charts are starting to read. Short term, this chart is bearish also.
Overall Risk
Although I have cautioned of a potentially rally in the markets, I was not sure it would occur. Last week I had said that if we do get a rally, consider it a gift and look to lighten up into it and potentially short depending on your conviction because it might be the last rally of any significance for a while to come. I've not changed that tune and the rally is upon us. I will look to use it to build a few short positions that I'm comfortable with as the majority of the indicators suggest lower equity prices to come.
Current Portfolio Mix
Last week I covered both my health care shorts at the beginning of trading on Thursday and the INTC short the day before. This leaves me with just some token short positions. Most of my longs continue to be the precious metals and I'm wanting to nurse the other longs a bit longer before cashing in. My next order of business is to start building shorts where the charts lend confidence in that move.
Position Current Previous Week
Long Percentage 25.4 % 22.8 %
Short Percentage 6.7 % 17.5 %
Cash Percentage 67.9 % 59.7 %
http://www.trading-ideas.com/MarketCommentary/mc010603-3.asp
Abraço.
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- Registado: 5/11/2002 12:54
- Localização: Lisboa
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