There is nothing like reordering things such as DOD’s (dear old Dad’s) anti-hallucinogen medication, to provide a recollection base for there call for the LSD kick from which the market is now on and sustaining. It was just when I was reordering my Dad’s anti-hallucinogen pills, that I realized the LSD effect that the market must now be on.
LSD was, in the days of our day-boomer generation, a drug that was, all-too-often, taken. All-too-frequently, the results of said ingestion were described as pleasant; however, there were times recorded, when nightmare-like episodic consequences were recorded. And, to be recalled by embarrassed observers, for the dubious benefits of the partakers. But, the long-term effects frequently persisted, remaining, lurking in the unhappy brain of the participant. And, so it seems to be with today’s stock market, which appears to have taken a dose of LSD and, in consequence, to be having a very pleasant trip. The road markers are the Dow Jones Industrials, a genuine bogus marker for the astute time-traveler. Why is it bogus, do you ask? Simply put, it is an index of 30 stocks. As if that weren’t bad enough, the weights of those stocks can and do, frequently skew the index. For example, of those 30 stocks, only about 1/3rd are making new highs, yet, this index is flirting with new highs. How come? And, what about the Utilities average and the Transportation average? They are certainly not making new highs.
Zero interest rates are always a consumer turn on
Let us remind you that the consumer has found cash; even when there were 3 new cars in the garage; the consumer couldn’t turn down a zero interest rate on a new car. So, as interest rates decline and new homes and old homes are stockpiled, in good supply, there are two factors that will move these unsold homes, namely: severe reduction in the prices of these homes and, special, low- interest rate mortgages. Today, with interest rates falling, there obtains these really good inspirations for our first-time home buyers, or our move-up home buyers. If, somehow, these real-estate mavens can price their homes so that real rental comparisons are significantly higher, Bam! They made a sale. That modality should be enough to reignite the housing market, albeit for a short time. As to the investment side of the housing market, that is: that side of the market which doesn’t use the house to live in, but rather, to flip and so, make transactional moneys, well, we think that area might just be in a little bit of trouble. To flip a house, one must assume that you, the flipper, will get more for that house than you paid for it. With the prices of housing on the heavy decline, there isn’t all that much hope for that side of the market. So, where is the “smart” money going to go? Well, some will surely head for the stock market, but we’re willing to bet that much more will head for money markets and for the security that bonds imply. How about foreign investments? True, we here in the USA, are further along on that road, actually, nearing the end of this huge expansion period, but from where then, with the emerging markets, will the Europeans get their growth? Notice, we did not include the Asian markets which, will surely go gangbusters, with, or without, our participation. India, China, Russia, et al, all on a lunar trajectory, sans the good ole US of A, True, if we are in the mix, the mix is better, but they don’t need us to continue their growth.
Diminishing memory as we age
How much effect will the blow-up of several big commodity hedge funds have on the market? Our experience tells us that in about 2 weeks the public will have a slight recollection, but will not recall the name; by Week 3, they’ll not remember in what it was that the fund was invested and, by Week 4, they’ll say: “What, a hedge fund blew up?” The next fund that blows up will surely have less of an impact than did the first two; and so on and so forth. We do get used to bad news, i.e., Iraq, which is beginning to look rather more like Vietnam, sans the ground-fighting. Then, there are those congressional elections and the other elections, now approaching with great speed. Exactly how many seats are the Republicans slated to lose and, what effect will such loss have on anything? Bet ya, nada! These overpaid people, enjoying benefits way up the wazoo, did, precious little in the past; what makes you think that anything is going to change? It does give us something to speak about, in addition to the NEW HIGHS IN THE DOW JONES Industrials, which we all know is a stupid measurement, anyway. We mean: 30 stocks do not make up a market!
How about a contest to solve a way out of US debt?
Is anybody ever going to talk about the USA’s massive debt and how to get it under control? Obviously, we are not doing a very good job in that department. What happens if some of the petro-dollars decide not to invest or, to hone back their investment in our country? Will we have to raise interest rates to get the smart fellows interested in our bonds? And what will that do to our economy? If we cut rates, who will buy our debt? UGH!!! So many questions, so few answers. Instead of running a stock-picking contest, run a contest on how to control our ever-growing spending appetite and how to reduce the national debt!
Monday: August construction spending and September ISM index are released at 10:00. Tuesday: Auto sales for September are released and Kansas City Fed President Hoenig speaks. Wednesday: The Reserve Bank of Australia issues its interest rate decision, August factory orders are released at 10:00, Fed Chairman Bernanke speaks, and New York Fed President Geithner speaks. Thursday: The Bank of England announces its interest rate decision, the European Central Bank announces its interest rate decision, Chicago Fed President Moskow speaks, September chain store sales are released and Philadelphia Fed President Plosser speaks. Friday: September nonfarm payrolls and unemployment rate and at 03:00, August consumer credit report is released.
The put/call ratio finally broke back to the neutral level from its bullish levels. Friday’s close of the put/call ratio was a neutral 112/100 down from the bullish 130/100. The VIX is stuck in a time-warp tunnel at.11.98, down from last week’s 12.59 but up slightly from last month’s 11.96 and up slightly from last year’s 11.92.
The US Dollar index rallied again in the Friday session. We are now officially overbought. The stochastic indicator is issuing a continued buy-signal, at overbought levels. All the indicators we follow, are issuing a buy-signal. The 5-period exponential moving average is at 85.41. The top of the Bollinger Band is at 85.96 and the lower edge is seen at 84.52. The weekly chart looks as bullish as does the daily chart. The uptrend line on both the weekly and the daily chart is at 84.72. The indicators on the weekly chart show that 3 of the 4 indicators are bullish. The Thomas DeMark Expert indicator is issuing a sell-signal. We notice that the weekly chart shows some progress to the upside. The next level of resistance is at 85.97 and then, 86.35 and 86.39 then, of course, at 86.64. We do expect to see the US Dollar index retreat, to burn off some of the overbought condition. We will see support at 85.25, 84.96, 84.68, and, of course, at 84.56.
The Euro remains in oversold territory and really looks awful on the chart. If the low of 1.26920 doesn’t hold, we may feel a stinging retreat to 1.26820, under that: 1.26058. All the indicators are oversold, but are uniformly holding fast to their sell-signals. Not a curl, nary a bend in any of them. The weekly chart confirms the negative view of the daily chart. Only the Thomas DeMark Expert indicator is deviating, but not issuing a signal.
The S&P 500 chart is definitely very upbeat. The market seems to be exhausted, at this time. Monday, fresh money will be dropped in the market for the benefit of 401K investors. The recent rally has been so steep that we are far away from the uptrend line. It seems likely that we will return to the line, either by going sideways or by way of a retreat. For the market to meet the uptrend line, it needs to go sideways for 10 more business days. That should do it. The stochastic indicator is issuing a sell-signal, as is our own indicator and the RSI. The Thomas DeMark Expert indicator continues to point upward, with a buy-signal. The 5-period exponential moving average is at 1343.59. The top of the Bollinger Band is at 1353.60 and the lower edge is seen at 1303.44. The uptrend line is at 1331.70. The weekly chart has a little different picture. In this chart, the S&P 500 is on the uptrend line. The indicators are giving us mixed readings, with all but the Thomas DeMark Expert indicator, continuing to issue a buy-signal, but all the indicators are extremely overbought. The monthly charts are also telling us that we are in extremely overbought territory.
The NASDAQ 100 looks as overbought as does the S&P 500. The stochastic indicator is issuing a sell-signal. Both the RSI and our own indicator are issuing a sell-signal. Only the Thomas DeMark Expert indicator is issuing a continued buy-signal, but is at extremely overbought levels. The 5-period exponential moving average is at 1669.35. The top of the Bollinger Band is at 1701.13 and the lower edge is seen at 1573.14. The weekly chart is also overbought and scraping along the top of the Bollinger Band. Only the Thomas DeMark Expert indicator is issuing a sell-signal. The monthly chart doesn’t look as dramatic as do the weekly and daily charts. This chart looks like it has been range-bound since 2004. That is very interesting when you think about all the press we have had, regarding the movement of the NASDAQ 100.
The Russell 2000 did not go along for the upside ride, seen by the other equity indices. The stochastic indicator is issuing a sell-signal, as is our own indicator and the RSI. The Thomas DeMark Expert indicator is issuing a continued buy-signal, with more room on the upside. The 5-period exponential moving average is at 734.65. The top of the Bollinger Band is at 746.75 and the lower edge is seen at 712.99. The very short-term uptrend line is at 727.19. There is a longer uptrend line, at 722.49. The downtrend lines for Monday are: 738.69 and 742.35. The weekly chart shows a very overbought market. The weekly stochastic indicator is issuing a continued buy-signal, at overbought levels. The RSI is not overbought and is pointing higher, the Thomas DeMark Expert indicator is issuing a sell-signal and our own indicator is overbought, and thinking about bending over to the downside.
The Continuous Commodity Index is in rally mode, and is nowhere overbought. The stochastic indicator is issuing a continued buy-signal, as is our own indicator. The RSI is going sideways and the Thomas DeMark Expert indicator is issuing a continued buy-signal, but at overbought levels. The 5-period exponential moving average is at 367.42. The top of the Bollinger Band is at 392.39 and the lower edge is seen at 353.56. The weekly chart looks okay. The stochastic indicator is issuing a fresh buy-signal. All the indicators are issuing a buy-signal. We have a 10 count on the bottom and it looks as though this index is turning the corner and appears to be getting ready for a rally. The monthly chart is a bit more dramatic, showing that this past month’s retreat has been very deep, removing 4 months of rally from the chart.
December Cocoa has left a doji candle on the chart. This tells us that the market is in transition and could change direction. The downtrend line is at 15.15, a level that this market needs to remove to return this chart to a positive viewpoint. The stochastic indicator is curling to the upside and could issue a buy-signal, as early as Monday’s trading session. The RSI is bending to the upside and our own indicator is about to issue a buy-signal. The Thomas DeMark Expert indicator is issuing a continued sell-signal, at oversold levels. The 5-period exponential moving average is at 14.80. The top of the Bollinger Band is at 15.30 and the lower edge is seen at 14.34. We expected to see support in December cocoa at 14.45, but it never got there, bouncing from the 14.49 level. There is a small gap on the chart, from 14.40 to 14.45. Under that level, there is support at 14.15. The weekly chart tells of a different story. Here we see the stochastic indicator, at oversold levels, but still issuing a sell-signal. The Thomas DeMark Expert indicator is issuing a buy-signal, the RSI: a sell, and our own indicator is issuing a sell-signal.
December coffee probed the upside in the Friday session, but apparently didn’t like the thin air at that altitude. The stochastic indicator continues to issue a buy-signal, but is curling over to the downside and will issue a signal, perhaps in the Monday session. Our own indicator has already issued a sell-signal. The Thomas DeMark Expert indicator is issuing a sell-signal, but the RSI is pointing to higher numbers. The 5-period exponential moving average is at 106.81. The top of the Bollinger Band is at 110.57 and the lower edge is seen at 100.41. The weekly chart looks very good. It looks as though we are forming a “W” bottom, on the chart. So long as the former low of 98.00 is not removed, we could be on track to go to 114.20. Once we close above that level, would you believe, 122.50 and possibly, 132.50? The indicators on the weekly chart are all positive.
November Frozen Concentrated Orange Juice is in an upward bias, a holding pattern, waiting for the October crop report. The stochastic indicator, our own indicator, the RSI and the Thomas DeMark Expert indicator, all are uniformly issuing a buy-signal. The nicest thing we can say about juice is that when it could have retreated, it didn’t. The 5-period exponential moving average is at 169.67. The top of the Bollinger Band is at 183.09 and the lower edge is seen at 164.67. We have closed above the downtrend line on the daily chart. The stochastic indicator and the RSI are issuing a buy-signal on the weekly chart. Both the Thomas DeMark Expert indicator and our own indicator, are issuing a sell-signal, so we have no agreement on the weekly chart.
December gold is beginning to look tired. We have exhaustion dots over the highs of both Thursday and Friday. The stochastic indicator is curling over to the downside, but has not issued a sell-signal. The RSI, our own indicator and the Thomas DeMark Expert indicator, have all issued a strong sell-signal. The chart pattern seen is that of a rounded bottom. It could be trying to for a “Tea-cup” pattern but it is too early to make that call, at this time. The 5-period exponential moving average is at 602.30. The top of the Bollinger Band is at 642.00 and the lower edge is seen at 566.00. The uptrend line is at 603.50. The downtrend line is at 610.30. We have a point of inflection on Tuesday, into Wednesday! Be careful! The weekly charts are painting a very positive picture. All the indicators are issuing a buy-signal.
November crude oil has finally issued a buy-signal, on the weekly chart. The daily chart, although somewhat oversold, could retreat from this level. The stochastic indicator is about to issue a sell-signal and it isn’t even yet at neutral levels… This tells us that if there is a retreat, it is a retreat that isn’t going to get very far. The 5-period exponential moving average is at 62.45. The top of the Bollinger Band is at 70.26 and the lower edge is seen at 58.60. All the indicators on the weekly chart are issuing a firm, buy-signal. This chart indicates that November crude oil could easily return to 68.00.
November Natural Gas has been oversold since August. You think it can rally? Well, the chart says it can rally. The stochastic indicator, as well as all but the Thomas DeMark Expert indicator, is issuing a buy-signal. The 5-period exponential moving average is at 5.667. The top of the Bollinger Band is at 8.349 and the lower edge is seen at 4.870. Even the awful looking weekly charts provide a glimmer of hope. All the indicators on the weekly chart are issuing a buy-signal. Maybe winter is coming, hummm?
NYA CASH (8469.65)
Resistance 8363.45 8478.49 8494.40 8498.27 8512 8526.76 8580 8598
Support 8468.97 8449 8424.56 8400 8386 8363.45 8344.67 8311 8294.64
8275.84 8268.97 8236 8209.66 8190 8163.26 8140.11 8108 8071 8022 8009
7953.14 7924.62 7901.40 7897.69 7883 7872 7855 7824.41 7805 7798.30
7780.33 7753.95 7739.47 7716 7708.11 7693 7677 7667.64 7642.81 7634.58
7621.26 7599.78 7566.02 7546.67 7529.15 7516.48 7498.75 7470.90 7455.70
7422.77 7407 7380.75 7369 7339 7316 7293 7280 7263.32 7251.87 7233 7214
7200 7174.95 7160 7138 7116.60 7107 7091 7084 7060 7047 7028 6993.30
6971.22 6958 6936 6924.00 6913 6906.23 6887 6843 6800 6786 6749.41
6701.47 6699.84 6680
RUI CASH (723.48)
Support 722.35 718.67 715.95 712.54 709 707.55 704.41 701.86 697.41
694.50 690 688 686.50 684 681 678.33 675.65 672.40 670.69 667.14 665.05
663.18 661.28 658.23 656.20 653.80 650.61 647 644.67 641.46 638.70
635.58 633.87 631 628.46 624.98 621 619.20 617 614.25 611.70 609 607
604.665 602.50 599.39 595.70 593.40 590.58 588 585.27 582 579.24
Russell 1000 Value (762.18)
Support 762 759 756 754 751.62 748.55 745.14 744.82 742.95 739.24 735.58
733.51 730.19 727.53 725.26 722.96 720 718 715.11 713.53 710 708.98
705.80 703.39 701.38 700.34 697.65 695.98 693.38 690.61 687.26 684.85
683.16 679.76(just go short) 677 674 671.25 669.40 667.70 666 663.44 661
659 656 653 650 648.11 644.62 641.05 640 638.05 635 632.90 630 627.20
624.61 620 615 613.48 610.29 608.48 607.76 606.92 604.91 599.92 596
Russell 1000 Growth (524.28)
Resistance 527 530 532 534.43(H) 536 539
Support 522 520 517 515.62 514.04 511.07 508.41 505.90 503.53 501.78 498
496 493 496 493.36 490.56 488.57 485 481.43 477 475 471 468 464 462
460.87 457.82 455 450.31 445.34 443.88 442 440 438 436 434 432 429 427
425 423 421 418.68 416 414 412 410
TO A0 (Russell 2000 cash) (725.59)
Resistance 727 729.35 732.24 735 737.45 739.75 742.40 746.09 749.70 753
755 758.12 761 764 767 772.12 774.71 776 779 781 784.62(H)
Support 721 718.63 714 711 708.54 706.61 704.40 699.24 696.41 693 690
686 682 679.04 676.39 673.22 671.94 669.05(just go short) 666.36 663.65
659.35 655.95 653 650 647.35 644.33 642 638 635.33 632.73 630.40 628.54
626.91 624.41 621 618 615.31 612.71 609.41 607 601 596 593 590.53 587
584 579.38 577.93 573 570 567 565.21 559.70 558.58 554.13 551.87 548.45
545 541.96 538 536 533 529 526
SPX CASH (1335.85)
Support 1335.64 1329.35 1324.65 1314.78 1311 1306 1298.92 1295.09
1293.57 1289.49 1285.25 1278.90 1268.20 1265.48 1262.08 1257.98 1248.29
1240.29 1235.18 1231.57 1228.45 1222.52 1219.29 1211.27 1202.35 1199.71
1195.90 1192.34 1187.13 1179.59 1175.44 1171.35 1168.20 1164.50 1161.43
1152 1147 1140 1132.84 1130.54 1128 1124.62 1120.19 1118.60 1110 1094
1090.19 1087 1079 1068
NDX CASH (1654.13)
Resistance 1666.03 1676.63 1685.66 1697 1706.33 1713.84 1720.15 1724
1735.50 1741.35 1749 1761.46(H)
Support 1650 1645.20 1622.37 1617 1611 1601 1589 1581 1589 1574.71
1570.34 1557.70 1548.07 1539.59 gap to 1534.78 1508.94 1494 1486.74
1479.69 1451.88 1448 1438 1428 1420.79 1412.63 1408.59 1399.05 1397.50
1388.20 1380 1374 1366.73 1356 1348.27 1334 1320.95 1309
DX Z6 (85.68)
Resistance 85.78 85.82 85.97 86.16 86.45 86.64 86.70 86.99 87.09 87.24
87.62 87.67 87.77 87.80 87.96 88.08 88.13 88.19 88.27 88.33 88.45 88.33
88.51 88.60 gap to 89.17 89.27 89.37 89.39 89.52 89.69 89.84 89.90 89.99
90.05 90.17 90.26 90.34 90.79 90.99 91.06 91.16 91.18 91.22 91.33 91.49
91.55 91.60 91.68 91.74 91.98 92.05 92.27 92.45 92.54 92.61 92.80 93.00
Support 85.62 85.54 85.42 85.32 85.19 84.96 84.87 84.74 84.70 84.68
84.56 84.42 84.28(I) 84.16 83.95(I) 83.85(I) 83.79 83.67 83.60 83.57
83.47 83.41(I) 83.30 83.15 83.05 82.99 82.86 82.72 82.65 82.59 82.37
82.18 82.02 81.98 81.81 81.75 81.66 81.48 81.39 81.31 81.25 81.12 81.00
80.98 80.69 80.22(4/28/95)
Jeanette Schwarz Young, CFP, CMT
Box 1952 c/o New York Board of Trade
One North End Avenue
New York, New York 10282