PSEi, 08/05/2011 - Weekly Market Review

This week's downturn signals a reversal of the 2-month uptrend that started Jun-2011. It will most likely start a new short term downtrend that is not inconsistent with the medium term uptrend. The MACD lines and histogram affirms the momentum of this new short term direction. The 6-month medium uptrend that commenced late Feb-2011 continues to be valid for now and the new short term downtrend may be reasonably expected to encounter resistance at the medium term trendline. The primary uptrend that started late 2009 remains in force. A breach of the medium term trendline will warrant a re-evaluation of this outlook.

DJIA - 8/4/2011, Big Dow Selloff Today

Price Action
A failure pattern occurred in Jul 2011 when the Dow failed to breach the May 2011 resistance of 12876. The trend change is confirmed this week when the index broke below two major support levels established in May 2011-11555 and Jun 2011-11882.

Indicators
The RSI has gone into the lower band and the MACD lines and histograms are in negative territory both affirming the downtrend.

Price Targets
Previous major resistance - 11258
Previous major support - 9644
Fibonacci (Jun 2010-May 2011) - 10827

Market Outlook
The index has exhibited a 3 month cycle since Sep 2010 suggesting that the index could continue this downturn until mid-Sep 2011 before finding significant support potentially between 11258 and 9644.

DJIA 7/7/09

An update to the last post. The outlook has not changed.

5mo daily chart-fibo. The mar09-jun09 advance. To increase the likelihood that this is the first move up of a major reversal after hitting the bottom at 6469, then this current retreat that commenced after the 8877 peak in early jun09 needs to find support somewhere between the 8000 and 7400 range. Anything below that strengthens the case for a continuation of the downtrend.

4mo daily chart-HnS. A head and shoulders pattern was completed today that confirms the resumption of the downtrend after the early jun09 peak of 8877. The pattern suggests a price objective of around 7700.

4mo daily chart-ichimoku clouds. the dow is inside the kumo cloud-a range or layer of potential support levels. In this situation, the index is considered to be in an unbiased state and the trader is best to wait and see in which direction it will break away from the cloud.

1yr daily chart-inverse HnS. On a bigger time frame, the index appears to be in the process of developing an inverse head and shoulders pattern. For this to come to a fruition, the dow should find support at or near 7500 then reverse and consequently break above 9000.

Outlook. For now, the technical view is that this new downturn is part and continuation of the prevailing bigger downtrend. However, the (a) MACD divergence and (b) the seemingly developing inverse head and shoulders in the 1yr chart suggest a potential for a major reversal. To increase the likelihood of a bullish reversal, the index needs to find support between 7400 and 8000. The price objectives of the (1) 5mo fibonacci study, (2) the 4mo head and shoulders, (3) the 1yr inverse head and shoulders pattern, and (4) the 3mo ichimoku cloud chart collectively sustain this possibility. If the index does find support along these levels, then the chances of a reversal being underway is upgraded from possible to likely. A fall below the 7400 level rules out the likelihood of the Mar09 to Jun09 as the first move of a reversal and opens the way to a possible retest of the Mar09 low of 6469.

DJIA 5/26/09

TRENDS
* PRIMARY downtrend | Res (Prior) 9000 (MA180) 8600 | Sup 6500
* INTERMEDIATE uptrend | Res 9000 | Sup (Prior) 6500 (MA60) 7800
* SHORT TERM consolidation | Res (Prior/BB upper) 8600 | Sup (Prior) 8200 (BB center) 8300

INDICATORS
* MAs | Price >MA20; >MA60; < but nearing MA180 | Slope MA20(+); MA60(+); MA180(-)
* MACD | trending up but weakening | Positive divergence (Oct08 to Mar09)
* Volume | decreasing volume consistent with sideways movement in May

ANALYSIS
* BEARISH: For now, odds remain in favor of the primary down trend continuing. Selling pressure may be reasonably expected to appear at or near 9000 after which a fresh downleg commences that could take the Dow below 6500.
* BULLISH: The MACD positive divergence and a developing inverse head and shoulders keep the hopes alive for the low probability end of the primary downtrend that could lead to a reversal or a prolonged sideways trend. There are at least 3 scenarios under which this could occur:
1. The inverse head and shoulders pattern comes to fruition and the index breaks upward of the MA180 and the 9000 level with a possible TP of 10500 thereabouts.
2. The index corrects under selling pressure that appears at or near resistance levels and finds new support without retesting 6500 thereby forming a provisional uptrend with one higher low.
3. The index corrects and retests the 6500 support forming a double bottom from which to launch a reversal or sideways trend.

CONCLUSION
1. A reversal from this point breaking above the MA180 and 9000 level is possible but unlikely.
2. A failure to breach resistance levels and a new downleg that will continue the primary downtrend is likely but we need to watch out
(a) if the index finds support above 6500, or
(b) if the index breaches 6500 or forms a double bottom.

DJIA 3/30/09 SHORT TERM REVERSAL

TRENDLINES
*PRIMARY DOWN TRENDLINE
*INTERMEDIATE DOWN TRENDLINE | BROKEN TRENDLINE
*SHORT TERM UP TRENDLINE | BROKEN TRENDLINE

MOVING AVERAGES
*PRIMARY | MA180 DECLINING
*INTERMEDIATE | MA60 DECLINING
*SHORT TERM | MA15 ASCENDING

PRIOR SUPPORT/RESISTANCE
*PRIMARY | LOWER HIGH + LOWER LOW
*INTERMEDIATE | LOWER HIGH + LOWER LOW
*SHORT TERM | HIGHER LOW + HIGHER HIGH

INDICATORS AND VOLUME
*MACD | UPTREND | LOSING STEAM
*STOCHASTIC | UPTREND | OVERBOUGHT
*BOLLINGER BAND | CORRECTING TO CENTERLINE
*VOLUME | DECLINING SINCE MID MARCH

POTENTIAL PRICE TARGETS
*PERCENTAGE RETRACEMENT | 7000-7400
*BB CENTERLINE | 7240
*PRIOR SUPPORT | 6470
*MEASURED MOVE | 5900

ANALYSIS
Last week we had a sense that a correction is bound to appear after a 3week run up. The index has now closed lower for 2 consecutive days and we view this as a start of a near term reversal corroborated by weaking momentum indicators. How far do we think this new downleg will go? A few price targets can be gleaned depending on one's market outlook. If you are one of those excited by the positive MACD divergence (see previous post) that showed itself and is now predisposed to looking at the March low as the potential 'bottom' of this bear market , then you should be expecting a bounce between 7000-7400. If this happens, many will find it encouraging, but for technicians, this remains a long shot. Due to the declining bigger trends, i am constrained to view this near term reversal as a new short term downtrend that is a resumption of a new leg down in the intermediate trend all happening within the context of a primary bear market. Using the measured move method this fresh move down could reach the vicinity of 5900 sometime late April or May. A break below 6469 is a significant confirmation. Use intervening rallies to SELL.

Note: If GM and Chrysler are thrown into bankruptcy/liquidation soon the resulting negative financial and economic repercussions could provide a cathartic shock to the market that might potentially lead the way to an eventual recovery.

DJIA 3/24/09 - A 2 WEEK RALLY

TRENDS
(1) PRIMARY DOWNTREND | Prior Support 6469 | Prior Resistance 9088
(2) INTERMEDIATE DOWNTREND | Prior Support 6469 | Prior Resistance 8405
(3) SHORT TERM UPTREND |Prior Support 6469 | Prior Resistance 8405

MARKET REVIEW
(1) On 2/23/09 [DJIA 2/23/09 LAST LINE OF DEFENSE 2002 LOW] I said that the momentum of the Dow's decline "... could potentially make 6800 achievable." The index continued its decline and hit a new low of 6469 in early March 09.

(2) On 2/27/09 [DJIA 2/27/09] I also said that " It is not unreasonable to expect a correction to happen next week." which was the 1st week of March. On the 2nd week of March, the Dow started a 2 week rally that saw the index climb over 1300 pts. My timing was off by a week.

(3) It is worthwhile to note that a positive divergence presents itself early March 09 when the MACD exhibits a higher low just as the index marks a multiyear low. Consider this as an alert for a possible buliish reversal. Let the index play out and look for potential confirmation in case a reversal does unfold.

MARKET SENTIMENT
The primary and intermediate downtrends continue to rule. Until the chart presents evidence to the contrary, the current 2wk short term uptrend is merely considered an upleg correction of the declining intermediate trend. This rally is approaching potential resistance at around 8000 in the form of (a) a prior support during the minor consolidation from Jan to Feb 09, and (b) a 50% retracement of the 2500 move down from Jan to Mar 09. Keep an eye out for short term reversal signals that clues us in on the resumption of the downtrend. SELL ON RALLIES.

DJIA 3/2/09 - DOW SINKS BELOW 7000

The index closes at 6763 just under our price objective of 6800 (See DJIA 2/23/09 LAST LINE OF DEFENSE 2002 LOW). I thought buying interest would appear at or near 7000 but the market just drove past that level without looking back. Since we are at multi decade lows, I will stop using historical levels for purposes of anticipating potential future support. It is generally accepted that the farther away in time prior support areas are situated, they diminish in technical significance. For now, it is sufficient to say that it is reasonable to expect the market to decline and correct within the confines of the down trending price channel in the chart posted DJIA 2/27/09.

DJIA 2/27/09

TECHNICAL ANALYSIS
Two (2) significant support levels were penetrated this week, the 2007 low of 7449 and the 2002 low of 7177. The breach of the Nov07 prior support assures us of a future lower low in the primary trend and confirms that for now, the Dow is trending down in all time frames. It is not unreasonable to expect some buying interest to appear at 7000 thereabouts. Round numbers usually serve as a form of psychological support to traders. A close look at the Dow's cycle duration raises the possibility of a correction happening around next week. Being at the lower extreme of the price channel supports this contingency of a near term correction. The stochastic indicator is at oversold levels and the MACD continues to deteriorate.

MARKET OUTLOOK
For now, the index is trending down in all time frames and could be expected to continue to oscillate within the declining price channel. It is not unreasonable to expect a correction to happen next week. SELL on rallies.

DJIA 2/23/09 LAST LINE OF DEFENSE 2002 LOW

The Dow pushes past the important Nov 2008 low of 7450 this week with all the big moves happening after each of Pres. Obama's recent televised appearances and that of Treasury Secretary Geitner's. In my 2/17/09 post, I said that if the Dow breaks 7500 it is likely that the average could hit 6800. If that price objective is attained, then the index would have likewise breached the 2002 low of 7000. Looking at the 15 yr chart, the absence of significant support levels prior to 2002 implies that we will have no historical basis to estimate where the next buying interest may appear if the index tanks lower than 6800 and we will then have to resort to other methods of identifying potential levels of support. The MACD suggests that the velocity of the decline could potentially make 6800 achievable.

DJIA 2/18/09 BOUNCE OR BUST?

In my post DJIA 1/26/09 when the Dow was still at 8281, I said "It is reasonable to expect the index to resume its descent to retest the Nov 2008 low of 7450 shortly." We have now reached that reckoning point. The technical significance of how this major support level holds in the face of a serious retest cannot be overemphasized.

DJIA 2/17/09

MARKET SUMMARY
For the past 4 months, the Dow has kept itself within the confines of the Nov-2008 high and low of 9653/7449 establishing a sideways intermediate trend that appears as a correction of the Primary downtrend. The current short term downtrend culminating in today's close brings us to a precarious test of the lower limit.

ANALYSIS
For those expecting a bottom or even hopeful of a recovery anytime soon, then it would be best to watch closely at how price reacts at this important support level. If buying interest at or near 7500 is strong enough to halt the decline and produce a bounce, then it could set up a potential double bottom reversal pattern and fuel the hopes of the optimists. However, if support does give way to selling pressure, then it means that in the intermediate timeframe the direction has shifted from a sideways trend to a new downtrend.

OUTLOOK
Although unlikely because of the prevailing primary downtrend, a bounce off 7500 is POSSIBLE leading to a potential double bottom pattern that could spawn a reversal or an extension of the intermediate sideways trend. However, invoking the Dow Theory that a trend is valid until proven otherwise, the presence of the dominant primary downtrend makes it LIKELY that the average will break below 7500 and usher a new intermediate downleg that could precipitousy fall to around 6800 if we apply the measured move method. SELL on rallies.

DJIA 1/30/09

MARKET BREADTH (NYSE)
Net Advances/Declines: -1736
Net New Highs/Lows: -122

TRENDS
(1) PRIMARY DOWNTREND
(2) INTERMEDIATE CONSOLIDATION
(3) SHORT TERM DOWNTREND |Prior Support 7909 | Prior Resistance 8400

MARKET SUMMARY
The Dow encounters selling pressure at 8400 and resumes a new downleg. It is possible that a retest of the Nov lows will occur - a drop below 7909 will make such event a likelihood. The major MAs are in a downtrending alignment, the STOCH has turned neutral, and the MACD remains in the red.

MARKET OUTLOOK
The minor levels of 8400 and 7909 gain a bit of significance and we need to look at how the average behaves at those levels for future guidance. For now, since there are no compelling signals that question the validity of the short term downtrend, it is not unreasonable to expect that the Dow will drive past 7909 and test the major support level of 7449.

PSEi 1/30/09

PRICE AND TURNOVER
Close: 1,825.09
Change: -35.60 -1.91%
Value: 1,214,711,920

PSE BREADTH
Net Advancing Issues: -45
Net Foreign Buying: -193,559,198

MARKET SUMMARY
The index is in a short term downtrend, that appears as a downleg of the intermediate sideways trend, which in turn shows as a correction of the bigger primary trend. Coming off a downtrend in late October, the PSEi has since confined itself to fluctuating within the Support/Resistance levels of 1700/2100. NFS(WTD) scales down to 50M but NFS(YTD) is 2.9B. Declining stocks continue to weigh down on the NAD line.

TECHNICAL OUTLOOK
For now, the chart shows no clues to any impending trend change. The current short term trend is likely to continue to head towards the Oct 2008 low of 1700 where we can expect buying interest to appear. The intermediate consolidation continues to prevail so it will be reasonable to anticipate the index to respect the major levels of 1700 and 2100 for the meantime.

DJIA 1/23/09

MARKET BREADTH (NYSE)
Net Advances/Declines: 309
Net New Highs/Lows: -164

PRICE TRENDS
(1) PRIMARY DOWNTREND | Correction wave | MA180 Declining | Support 7449 | Resistance 9700
(2) INTERMEDIATE CONSOLIDATION | Downleg | MA60 Neutral | Support 7449 | Resistance 9700
(3) SHORT TERM DOWNTREND |Prior Support 7449 | Prior Resistance 9088

TECHNICAL ANALYSIS
The Dow is trending down in the short term while the intermediate trend continues to move within a range since Oct 2008. The bigger primary trend remains on the decline. The index appears to find buying interest at 7900 and the oversold STOCH raises the possibility of a short term technical bounce. The chart shows no indication that the intermediate consolidation will end soon. SELL.

PSEi 1/23/09

PRICE AND TURNOVER
Close: 1,857.34
Change: -6.18 -0.33%
Value: 1,217,798,565

MARKET BREADTH
Net Advancing Issues: -29
Net Foreign Buying: -235,864,741 (YTD -2,856,147,215)

TRENDS
(1) PRIMARY DOWNTREND | Corrective wave | MA180 Declining | Support 1700 | Resistance 2800
(2) INTERMEDIATE CONSOLIDATION | Downleg | MA60 Neutral | Support 1700 | Resistance 2100
(3) SHORT TERM DOWNTREND | MA15 Declining | Support 1831| Resistance 2003 | STOCH Oversold | MACD Neutral | ATR Declining

TECHNICAL OUTLOOK
The local average is on a short term downtrend struggling to find support at the Dec 2008 lows of 1831. This downtrend appears as a downleg of the intermediate term consolidation which in turn is viewed as a correction of the bigger primary down trend. The STOCH has reached oversold level raising the possibility of a short term bounce. For now, the charts have yet to show any indication that the index is ready to move out of the 3 month range pattern, but when it ultimately does, odds are that it will break downward and align with the prevailing bigger primary downtrend. SELL.

DJIA 1/16/09

MARKET BREADTH (NYSE)
Net Advances/Declines: 1223
Net New Highs/Lows: -74

PRICE TRENDS
(1) PRIMARY DOWNTREND | Correction wave | MA180 Declining | Support 7500 | Resistance 9700
(2) INTERMEDIATE CONSOLIDATION | MA60 Sideways | Support 7500 | Resistance 9700
(3) SHORT TERM CONSOLIDATION | Downleg |Prior Support 7449 | Prior Resistance 9088

TECHNICAL ANALYSIS
The average is on its 3rd day below 8300-a level that served as support for the recent 3 weeks. Although the market has advanced for the last 2 days after appearing to have found support yesterday at 7995, this move up ought to be viewed with suspicion and prudently considered as a normal correction to the successive 6 day decline that started at the beginning of the year. It is reasonable to expect the index to resume its descent to retest the Nov 2008 low of 7450 shortly. SELL.

PSEi 1/16/09

PRICE AND TURNOVER
Close: 1,950.13
Change: -4.84 -0.25%
Value: 1,417,727,600

MARKET BREADTH
Net Advancing Issues: +3
Net Foreign Buying: -404,255,465

TRENDS
(1) PRIMARY DOWNTREND | Corrective wave | MA180 Declining | Support 1700 | Resistance 2800
(2) INTERMEDIATE CONSOLIDATION | Upleg | MA60 Netural | Support 1700 | Resistance 2100
(3) SHORT TERM UPTREND | Corrective wave | MA15 Neutral | Support 1831| Resistance 2003

TECHNICAL OUTLOOK
The local market continues with a 3-month sideways correction of the primary downtrend. NFS prevails. SELL on rallies.

DJIA 1/15/09

MARKET BREADTH (NYSE)
Net Advances/Declines: +219
Net New Highs/Lows: -130

PRICE TRENDS
(1)Primary Downtrend
(2)Intermediate Consolidation
(3)Short term Consolidation | Downleg |Prior Support 7449 | Prior Resistance 9088

TECHNICAL ANALYSIS
(1) The Dow ends flat and is on its 2nd day below the recent 3wk support level, a confirmation of yesterday's range break.
(2) Today's price action is a long legged doji, a typical ODR alert.
(3) The Stochastic indicator remains oversold.
(4) The MACD has recently returned below centerline

OUTLOOK
The recent 2day price action and the negative MACD sets up for a likely new short term downtrend leading to a retest of the important Nov2008 low of 7449. The ODR alert and the oversold Stochastics alerts us to a potential intervening correction bounce. SELL.

DJIA 1/14/09

MARKET BREADTH (NYSE)
Net Advances/Declines: -2844
Net New Highs/Lows: -85

PRICE TRENDS
Primary Downtrend
Intermediate Consolidation
Short term Consolidation | Downleg |Prior Support 7449 | Prior Resistance 9088

TECHNICAL ANALYSIS
The primary trend is declining while the intermediate and short term trends are moving sideways presumably as a correction. Today, the index's 6-day successive slide breaks below the 4-week support level of 8300. This raises the likelihood of a retest of the Nov-2007 low of 7449 but expect possible intervening corrections since the stochastic has entered oversold levels. SELL.

PSEi 1/9/2009

PRICE AND TURNOVER
Close: 1,984.88
Change: +14.16 +0.72%
Value: 1,353,109,762

MARKET BREADTH
Net Advancing Issues: +22
Net Foreign Buying: 102,895,262

TRENDS
(1) PRIMARY DOWNTREND | Corrective wave | MA180 Declining | Support 1700 | Resistance 2800
(2) INTERMEDIATE CONSOLIDATION | Upleg | MA60 Declining | Support 1700 | Resistance 2100
(3) SHORT TERM UPTREND | Corrective wave | MA15 Neutral | Support 1831| Resistance 2003

TECHNICAL OUTLOOK
The primary trend continue to decline while the smaller timeframes are in corrective phases. The charts show no clear indications of a reversal in the primary trend so for now, any intermediate or short term rallies must be viewed with suspicion until important resistance levels are breached. SELL ON RALLLIES.