Monday, May 31, 2010

S&P500 Technical Analysis (05/31/2010)

S&P500 Technical Analysis chart:
You should ignore the last week moves, the real game will start tomorrow. Big players are back from 3 days vacation. Bulls must over come 1100, 1130 then 1150 in coming days.
If S&P500 gets above 1130 you can dip your toe in water and go long. Pay attention to possible break the 1040 support level. Violation of 1040 will be the deal breaker.
At this point I give 20% chance that S&P500 rallies to 1120 then rolls over. if S&P could get above 1120 there is 15% chance it shoots for 1150. On the other hand there is a 55% chance S&P500 violates the 1040 support level and heads lower. If S&P tanks to 1040, I give only 10% chance that we get a bounce back.

I just find it on YouTube, check it out, LOL

Friday, May 28, 2010

LIBOR & Ted Spread Chart (05/28/2010)

I post the LIBOR every Fridays. Just type Libor in search box (it is located on top left corner). You can see Libor charts.

LIBOR-OIS (USD SWAP) 3M Chart:Value: 0.24


Ted Spread Chart:

Tuesday, May 25, 2010

S&P500 Resistance & Support Levels To Watch (05/25/2010)

S&P500 fell to 1040.78 . As I mentioned in my previous post 1044 was the support, we moved below it then bears start to cover and we got the classic short squeeze again!
I don't like the action today to me it was not any where close to "reversal day". I was looking for indicators to see if big institutions are buying, but there was not any big buyers. I will remain bearish on the long term U.S. stock market out look, but I'm going to change my short term out look on market from bearish to neutral. Please pay attention to 1100 and 1130 as major resistances. Note there is nothing has changed in Europe, so it's too soon to cheer. It's not wise to buy unless S&P500 shows some strength.
If S&P makes a new low and falls below 1040 and stays there over 3-4 days, bulls are in big trouble.

Sunday, May 23, 2010

S&P500 Technical Analysis (05/23/2010)

S&P500 Technical Analysis chart:(chart above is from May 17th post.)

S&P500 tanked to 1055 on May 21st and we got the short squeeze as we expected. At this point is hard to say, where are we going? I was looking for break down the “down trend channel” and S&P500 just did that. On Friday May 21st big institutions managed to save the market. S&P500 was going to close in red, but in last 18 minutes they shoot the market up 1.50% . It was the classic short squeeze. They were many weak hand bears who did not want to hold their short positions over the weekend, plus Friday was Option expiration therefore Friday action does not count. Consequently I need a couple days to digest the data before I jump in any conclusion. Many analysts talked about the 1065 level that makes it too obvious, I rather stay in the contrarian camp, and look for the next leg down, we shall find out by Tuesday what could play out?

Meanwhile pay attention to any violation of 1065 & 1050 levels. If S&P500 violates them it will tank to 1044 or lower. S&P500 has formed the secondary down trend channel I pointed it in purple in the chart . In last couple days S&P500 moved in this tight channel, and Friday short squeeze stopped right beneath it. If S&P breaks the channel we could shoot for 1100 resistance level.
In the case that big institutions decide to squeeze bears and send the market higher. Keep an eye on 1100 as the major resistance level then bulls must over come 1143 and 1152 (Good luck with that!! LOL) . In my eyes as long as S&P stays below the 1152 bears have the upper hand.

Friday, May 21, 2010

LIBOR & Ted Spread Chart (05/21/2010)

I post the LIBOR every Fridays. Just type Libor in search box (it is located on top left corner). You can see Libor charts.


Ted Spread Chart:

LIBOR and Ted Spread are rising. As a financial analyst they make me worry. If Europe crisis was improving we should witness decline in Libor. To me Libor is the canary in a coal mine. The Euro zone crisis just started and it is not going to get fix anytime soon. They lack fiscal policy and as long as they could not come out with a regime that controls fiscal policy and monetary policy they are not going to come out of the ditch.

Tuesday, May 18, 2010

S&P500 Long Term Forecast (05/18/2010)

S&P500 Technical Analysis chart: "Click on picture to zoom in"

S&P500 violated the major uptrend channel that is going to change the market outcome in coming months. Please pay attention to 1110-1100 as the first support level. If 1100 would not hold S&P will head for 1052-1044 the February low. I expect to get a short squeeze which should last a couple days. If S&P500 could get above 1150 it would have chance to shoot for 1180.

In the case that 1052-1044 fails to hold S&P500 should tank to 880 the July 2009 low. I think we should hit 880 level by September 2010.

David Hefty, CEO of Cornerstone Wealth Management, on Economy

I'm not as bearish as David Hefty, but he has some points. It's interesting to see bears like David Hefty or David Tice, Federated’s chief portfolio strategist Prudent Bear Funds came out of their caves after a long hibernation.

Monday, May 17, 2010

S&P500 Technical Analysis (05/17/2010)

S&P500 Technical Analysis chart: The flash crash caused major damage to the rally. Please note that market sentiment has been changed. Retail investors got burned 3 times in past decade once in 2000 then in 2008 and they got the final shot in the head in May 6th, when market drop near 9% in matter of minutes. The flash crash is going to push them away from stock market for a while.
Here is my forecast for coming days. I give only 5% chance for S&P500 rallies to 1150. If S&P could get above 1150 and stays above it for 3 days bulls could argue that this rally is not dead. We shall find out soon.
If S&P500 drops to 1110-1105 there is 10% chance of rally. I think S&P is going to tank to 1065 in coming days, there is 55% chance that it would break the May 6th low and heads for 1052-1042 level. If S&P reaches the 1065 there is 30% chance that we get a bounce back. Note any rally would be an opportunity to sell, and please don't try to be a superhero, DO NOT BUY THE DIPS. You are going to get crushed.

Monday, May 10, 2010

Major resistance levels to watch in May 2010

European finance ministers and central bankers agreed late Sunday on a new loan program that could top 750 billion euros ($970.6 billion), designed to keep the Greek debt crisis from spreading to other vulnerable European countries.
Euro/USD shows an excellent short squeeze. I think it is going to test the 1.32 resistance level as long as it would stay above 1.27, please note if Euro/USD drop below 1.27 it would wipe out the 1.32 scenario.
For the U.S. stock market we should pay attention to 1152 resistance in S&P500. If market get above 1161 it has chance to shoot for 1200-1220.
Pay attention to 1152 and 1161, as major resistance in coming days.

Thursday, May 6, 2010

What happened to the stock market on May 6th 2010?

S&P500 Technical Analysis Chart(Big Picture): "Click on the chart to zoom in."

Everybody wants to know, why did the U.S. stock market drop near 9% today?

What a day! Stock market dropped near 9% intraday in matter of minutes. Dow Jones fell 998.50 points in just a couple minutes. Bloomberg and CNBC tried to calm investors they said it was a computer error! Yeah right!!!
There was no computer error. If you had access to a good dealer/broker you could buy/sell. Please note that market was down over 3% before everything start to fall apart. Plus before the U.S. market free fall the Forex market started to fall which ignites the stock market sell off. I noticed the the unwinding of the carry trade*1 of Japanese Yen. To me that was the main catalyst for sell off in the U.S. stock market. Therefore I'm not going to buy the nonsense that NASDAQ came up with about computer error. Please note they are going to cancel any transaction between 2:40 P.M. and 3 P.M. that +60% away from the market value.
What we have witnessed today was computerized selling. It is not wise to single out one event for the market free fall today, as a financial analyst I think there was series of events that caused the market crash. I think there are three possibilities:

1) A trading desk in a big financial institution made a mistake and entered a wrong number, which flooded the market with sell orders and caused institutional stop loss got hit one after the others that ignites more Stop-Market orders hit the exchanges and cause the market fell in just a couple minutes, but if anyone worked in an institutional trading desk knows that you cannot trade in such a huge number before you get approval from your supervisor, therefore this scenario does not have a good chance.

2) A couple quant funds who use algorithmic models to trade; Started to liquidate on very high volume they probably wanted to dump their stocks and currency holdings to buy future market. Because right before the big dip I noticed near 3 standard deviations move from the mean, between future market (E-mini) and stock market it means future market became extremely cheap compare to stock market. They wanted to take advantage of this opportunity, therefore they start to dumping some of their holdings; market was flooded with sell order which caused the institutional Stop-Loss triggered one after the others and caused a cascading effect then High-Frequency trading firms canceled their bid orders, which helped to dry out liquidity. I think when High Frequency trading firms stopped trading caused the free fall at 2:40 P.M. At the same time NYSE decide to delay the transactions to slow down the selling which cause transaction transferred to NASDAQ and other exchanges in the absent of NYSE market suddenly face the lack of liquidity therefore the was not enough money to catch up with flood of stop-market orders, there were not enough bid orders (buy orders), therefore computers dropped the sell price to match the bid orders that explained why some companies trade as low as a couple penny.
Accenture plc (CAN):
Day's Range:$0.04 to 42.30
3) There is an other possibility; a big financial institution dupped a big number of E-Mini S&P or went short the E-Mini S&P on heavy volume or they bought huge number of Put Option on stocks. When other institutions see such activities they start to panic and dumped their holding at the same time market makers who helped the financial institutions to issue their bearish bet start to sell some of their holdings to hedge which flood the market with sell orders, and the rest would be the same as I explained in #2). I think this is what most likely caused the free fall.

We had the biggest volume trading since Dec 2009 there was 2.6 Billion shares were traded. Today roller coaster moves will scare many retail investors and caused them to become more cautious in their trades or stay away from stock market for a while. Many investors are going to get the margin call, they have two options, they could take a tremendous risk and pray to god that market some how shoots up; or they have to inject money into their accounts if they fail to do so their brokers is going to sell their securities after 3 days to cover the margin. If market tanks Friday and Monday investors will scare away and start to dump their holding and S&P500 is going to take out 1065.79 . If it would not hold next possible support level will be February low 1044.40 . It would be interesting to see what is going to play out with in next 3 trading days.

*1)Cary Trade:Investor sells a certain currency with a lower interest rate and uses the funds to purchase a different currency that yielding a higher interest rate. Traders using this strategy attempts to capture the difference between the rates, which can often be substantial, depending on the amount of leverage used. This is a very risky strategy because you get hurt if the interest rate or currency value changes.

Wednesday, May 5, 2010

Greece 10-Year Bond Chart (05/05/2010)

Greece 10-Year Government Bond Technical Analysis Chart: Please note if Greece 10-Year bond would not get back below 7.00% with in next couple weeks it would ignite serious problems in Euro region. France and Germany and Spain would feel the damage the most.

Spain 10-Year Government Bond Technical Analysis Chart:
As I mentined before, Greece crisis is not as important as many believe it's a regional problem. You should become nervous if Spain or Portugal become next Greece. In my April 12th article, I wrote about the possibility of credit downgrade of Spain. S&P just did what I been talking about. On April 28th, Standar & Poor's downgraded Spain’s credit rating from +AA to AA. Please note if Spain losses it rating to +BB; you should run for hills.
Spain economy is much bigger than Greece and will cause a systematic risk to the global economy.

Spain Economy Fact sheet:
GDP (purchasing power parity):
$1.368 trillion (2009 est.)
country comparison to the world: 13
$1.419 trillion (2008 est.)
$1.406 trillion (2007 est.)
note: data are in 2009 US dollars

GDP (official exchange rate):
$1.466 trillion (2009 est.)

GDP - real growth rate:
-3.6% (2009 est.)
country comparison to the world: 173
0.9% (2008 est.)
3.6% (2007 est.)
GDP - per capita (PPP):
$33,700 (2009 est.)
country comparison to the world: 38
$35,000 (2008 est.)
$34,800 (2007 est.)
note: data are in 2009 US dollars

GDP - composition by sector:
agriculture: 3.4%
industry: 26.9%
services: 69.6% (2009 est.)

Labor force:
22.97 million (2009 est.)
country comparison to the world: 27

Labor force - by occupation:
agriculture: 4.2%
industry: 24%
services: 71.7% (2009 est.)

Tuesday, May 4, 2010

S&P500 Technical Analysis (05/04/2010)

S&P500 Technical Analysis Chart:

S&P500 Technical Analysis Chart(from April 29th Article) :
Thanks for your feedbacks, I'm glad I could help my readers to close their long positions before market tanks. As I mentioned in my previous articles, 1152 is the major support, we should wait to see if big institutions are going to step in and push the S&P500 higher or not. Please note I would not recommend anyone to go long at these levels, you should wait for conformation, before press buy button.