After six straight trading days of losses, stocks and the major indexes closed mostly in the green today. Final numbers – The Dow +75.42 (chart), Nasdaq +9.49 (chart), S&P 500 +9.44 (chart) and the Russell 2000 +4.60 (chart).

The pundits are claiming that today’s upbeat market sentiment is due to a report that U.S. exports hit a record in April. However, I suspect it was a relief rally caused by more than a week of selling pressure. I also suspect that the downside to the 200-day moving averages (blog) of the key indexes are still a potential. Let’s see if there is a meaningful follow-through to the upside tomorrow, which could be a positive set up ahead of next week’s quadruple witching. Quadruple witching is a market event that occurs four times per year in which options and futures expire. This quarterly event can also create an increase in volatility in the overall markets.

Have a good evening.

~George

Although the major averages were up for most of the day, a sell-off within the last 20 minutes of the trading session helped notch a fifth straight day of declines. This despite bullish comments from Chairman Bernanke and how he sees stronger growth for the second half of the year. The Dow (chart), Nasdaq (chart) and the S&P 500 (chart) all finished modestly lower on the day, with the small-cap Russell 2000 (chart) actually eking out a slight gain.

One of the concerns I have is not only from a technical standpoint (blog), but now seemingly the psychology of the markets is such that any kind of rally is to be sold until we are at a true oversold condition, or we hit the 200-day moving averages on the indexes. If this is the case, there is still plenty of room to the downside to go. I am not predicting such a move but if the market sentiment remains as is, it could become a self fulfilling prophecy. That said, there does not appear to be much market moving economic news scheduled to come out the rest of the week so it’s possible equities begin to trade sideways a bit, which may not be such a bad thing.

Have a good evening.

~George

After five straight weeks of key indexes losing ground, have the markets technically broken down or are they way oversold? Let’s take a look at the Dow (chart) and the S&P 500 (chart). First the Dow, without a doubt the 50-day moving average support line has been broken, however the RSI has not yet reached oversold conditions (chart). The moving averages in particular the 50-day and 200-day, and the Relative Strength Index (RSI)are closely watched technical indicators by many hedge funds and institutional investors as a premise to the short and mid-term direction of a given stock or index. The S&P 500 (chart) has a very similar chart pattern as the Dow Jones Industrial Average (chart) with a breakdown of the 50-day moving average and is not quite in an oversold condition with the RSI.

As with any chart patterns, there are support zones within the bigger picture and right now it appears that the S&P 500 is at a critical support area in the 1295 to 1300 level. If this current level fails, then most technicians believe that the 200-day moving average will be the next significant support zone and that is yet another 4% or so down from here. Should that be the case, then we could be looking at an overall 10% correction in the markets in which certain market technicans would view this event as a healthy correction in a bull market. We will see if this scenario plays out.

Good luck to all 🙂

~George

Okay so we have gotten more clarity as to the state of our economy. After falling more than 2% yesterday, the Dow (chart) and the markets for that matter continued to mover lower today, albeit a bit more modestly. The Nasdaq (chart) actually managed to eke out a slight gain on the day. So what happened? Fears of a global recovery that’s losing steam is at the forefront of the volatility in the markets and data points are now confirming such a slowdown. Yesterday the payroll processor ADP came out with a report which indicated that private sector job growth was anemic in May with employers adding only 38,000 jobs. That was far less than the 175,000 jobs that economists were projecting and no where near what it is going to take to get the unemployment rate down. Couple that with the manufacturing sector slowing down dramatically as indicated by the ISM reporting that the Purchasing Managers Index posted its biggest drop in over 25 years. No wonder the markets got spooked.

The focus of attention is now on tomorrow’s May jobs report which the markets are bracing for “worse than expected” data on the health of employment sector. So what about stocks in the near term? In this type of environment sometimes it’s best to do nothing and let the markets digest all of the data points that are being released. We will take a look at the technicals over the weekend and see if there is anything glaring from a technical standpoint.

Have a good evening.

~George

Despite a sharp rally on the last day of May, the major averages fell 1-2% for the month. Let’s take a look at the Dow (chart), S&P 500 (chart), Nasdaq (chart) and the Russell 2000 (chart). Not too shabby considering that our domestic economy is showing signs of weakness, especially with the continuing saga in the housing sector. Furthermore, the Euro zone is also struggling, particularly in Greece, which is in need of finanicial aid again. Then there is the ongoing middle east crisis, not to mention the aftermath of the tragedy in Japan. The list seems endless, however, the markets were only down a couple of percentage points or so in May. It could of been a heck of a lot worse, folks!

What’s in store for June? Typically both May and June are softer months for equities, however, there will be no shortage of economic news coming out. This week alone we will get a clear reading of the state of our economy from the likes of chain store sales, jobless claims, and factory orders just to name a few. The single most import report that all eyes will be on is the May jobs report, which is due out on Friday before the market opens. Let’s hope we begin to see some meaningful job growth for that’s where our real recovery will truly begin.

Good luck to all 🙂

~George

Stocks eked out modest gains on Friday but for the fourth week in a row the major indexes lost some ground. For the week the Dow (chart) S&P 500 (chart) Nasdaq (chart) and the Russell 2000 (chart) retreated less than 1%. One meaningful technical indicator market technicians would highlight is that all of these indexes are hovering right around their 50-day moving averages. This is on the heels of the G.D.P. report issued on Thursday which indicated that economic growth is still very tepid and another report out indicating a jump in unemployment claims continued to add to the skittishness of the markets.

So far the “Sell in May” and go away adage is holding true to form but at least the retracement so far has been orderly and some market analysts would even say healthy. Now that Q1 earnings reporting season for the most part is over, what will be the next catalyst to move the markets? For now seemingly all eyes will indeed be on the upcoming economic reports in June via the consumer, the manufacturing indexes, the real estate market and the most critical component the job market.

Have a safe Memorial Day holiday 🙂

~George

After a recent sell-off in commodities including gold and especially silver, these precious metals appear to have found some support. The metal of most interest lately has been silver. After an historic run only to be followed by drop of more than 30%, traders have been eyeing the $32.oo support level of the iShares Silver Trust symbol (SLV) chart. These shares track and reflect the price of silver and has been one of the hottest ETF’s this year. Technically, the SLV still has more work to do to resume its uptrend, however it is clear that some support has been found at these levels. I will be watching the $38.00 zone which is also the 50 day moving average to see how this ETF will behave should it lift back there in the near future. Even the more broader commodity tracking index (NYSEArca: DBC) chart seemingly has stabilized in the $29.00 zone.

This could be good news for the overall markets which have been under pressure over the past few weeks.

Have a great day.

~George

Equities ended lower for a third straight week despite the blockbuster debut of Linkedin (NYSE: LNKD). The social networking company soared over 100% on its first day of trading but that wasn’t enough to lift the overall markets. The Dow (chart) finished the week off 93 points, the S&P 500 (chart) – 10 points, the Nasdaq (chart) gave up 20 points and the Russell 2000 (chart) retraced 6 points. With Linkedin’s opening act, some fear that the street once again is not in line with reality and that we are now in a bubble, especially with the social networking companies. This is carrying over into the overall market landscape which is fueling the negative market sentiment trend we have been in for a few weeks now. Couple that with the traditional summer market, and we could be setting up for an additional leg down.

I certainly do not anticipate the kind of May we had last year in where the market fell almost 8%, however I do think the technicals (blog) are being challenged now and I also think it is very important to demonstrate patience and prudence when considering opening new positions in stocks or commodities in the near term.

Have a great weekend 🙂

~George

From a technical perspective, the key indexes are seemingly breaking down. The Dow, S&P 500, Nasdaq and the Russell 2000 all have something to say. Let’s start with the Dow (chart). Although this index remains above its 50-day moving average, the RSI has broken through its 50 value level. The S&P 500 (chart) is hovering right around its 50-day and has also broken through the 50 value level on the RSI. The Nasdaq (chart) did break through its 50-day but managed to close above it today with a current value of around 44 on the RSI. Finally the Russell 2000 (chart), this index has actually broken down through its 50-day with an RSI value of around 42.

Why is the 50 day moving average technically important? Institutional investors and certain market technicians use moving averages as a metric for support or resistance. The same is true for the 50 value level or the mid-point of the RSI. Certain market technicians use this technical indicator as an overbought or oversold condition. Most agree that the 70 value level of the RSI is an overbought zone and that the 30 value level is an oversold zone. The reason the 50 value level or the mid-point stands out in the RSI is that certain market technicians use that value mark as a trigger point to go long or short an underlying index or equity. Technicals are not everything to everyone, however, they can be of assistance when navigating the market waters.

All the best.

~George

Last week the major U.S. indexes were primarily down albeit modestly. The Dow (chart) finished the week off 0.34%, the S & P 500 (chart) -0.18% the Russell 2000 (chart) -0.28% and the lone winner of the group last week was the Nasdaq (chart) finishing up 0.03%. Of course the commodity space remains front and center with the enormous volatility that has recently come into that sector (NYSEArca: DBC) chart.

This upcoming week earnings will continue to come out of the retail space from the likes of Wal-Mart (NYSE: WMT) and Home Depot (NYSE: HD) and in the technology sector Dell (NasdaqGS: DELL) and  Hewlett-Packard (NYSE: HPQ) are also scheduled to report. On the economic front traders will be looking at oil inventories out on Wednesday along with FOMC minutes to see if there are any trading opportunities there. Let’s hope that this weeks data points can change the negative market sentiment that has seeped into equities lately.

Have a great week 🙂

~George