S&P 市场未来几周短期分析

cougar

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Monday October 25, 2010

We are looking for a pullback in the equity markets in the near term, but see the major indices making new recovery highs later this year. We think the dollar will rally in the short-term, and also believe treasury yields will move higher.

We continue to believe that the current rally is extended on both a price and time basis and that a pullback will be seen within the next couple of weeks. The major indices are bumping up against some pretty formidable chart resistance, marked by their proximity to the April highs, while at the same time, price momentum is overbought on a daily basis. The pickup in price volatility over the past couple of days may also indicate indecision among investors and eventually cap this rally for at least the near term.

The S&P 500 has bounced back to an area of key overhead supply that ranges between 1,180 and 1,220. Prices undercut trendline support off the lows Tuesday, and have been testing the underside of this resistance the past couple of days. A price failure at this trendline and subsequent decline below the lows Tuesday at 1,160 would open the door for a drop back to strong chart support in the 1,130 region. This level marks the breakout from the large inverse head-and-shoulders pattern, and, therefore, is very strong and important support for the "500."

A decline to the 1,130 area would represent a normal 38.2% retracement of the rally since late August, and would also take prices back to the vicinity of their 65-day exponential moving average. Many times during an intermediate to longer-term uptrend, prices will pause and come back to test the 50-day or 65-day exponential average. In addition, a decline to the 1,130 area would take prices down to the lower Bollinger Band, which also represents potential support.

We still believe the U.S. Dollar Index is in the process of making a short-term bottom, and we think a rally in the greenback would be the catalyst for some minor corrective action in stocks. We see the U.S. Dollar Index advancing up to both chart resistance and trendline resistance in the 80 to 80.5 region over the next couple of weeks, before resuming its major downward trend. Overhead supply in this zone comes from the pivot low in early August while the downsloping or bearish trendline is drawn off the peaks in June and late August.

The greenback recently fell to long-term trendline support off the lows in 2008 and 2009. In addition, there is some chart support for the dollar in the 76 to 77 region from the pivot low in mid-January. At the same time, the dollar is oversold on both a daily and weekly basis and has traced out bullish divergences on the daily momentum charts. Sentiment, a contrarian indicator, toward the greenback has dropped near the most pessimistic levels seen last year while other currencies such as the Swiss franc and Japanese yen are extremely bullish. In our view, this all adds up to a potential countertrend rally in the dollar. However, once this rally ends, we see the U.S. Dollar Index taking out last year's low at 74 and heading for the bear market lows down in the 70 to 71 area.

We are looking for a short-term bottom in Treasury bond yields, as it appears the 10-year yield is tracing out a double bottom. To complete this pattern, yields would have to jump above the 2.83% zone. The latest decline in yields in October, which broke the lows from August, was not confirmed by daily momentum, setting up bullish divergences for both the 14-day RSI and daily MACD. This shows momentum improving after cycling into oversold territory, and we believe this may be a good setup for higher yields. However, we do not see a runaway move to the upside for yields as there is a mountain of chart support in the 3.1% to 3.2% region.

Market sentiment is also becoming a concern to us for the stock market, as there is evidence that the scales have tilted too far to the bullish side for our comfort. There have been some very low readings in the CBOE equity-only put/call (p/c) ratios, which is a concern. Last week, we saw equity-only prints of 0.45 on Wednesday and 0.48 on Friday, the lowest levels since April, which marked a pretty good high for the stock market. The 5-day exponential average recently fell to 0.53, from 0.82 in late May, and looks to be breaking out of a bullish wedge formation. Many times, after p/c ratios fall to low levels and then break their downtrend, the possibility of a pullback or correction rises as option investors switch from bullish positions to neutral or bearish positions.

In addition, commercial hedgers, considered the "smart money," have taken record short positions in the NASDAQ 100. As pointed out by Jason Goepfert over on sentimentrader.com median returns for the "100" when commercial hedgers had a large short position were negative for the short to intermediate term. At the same time, there has been a spike in long positions among large speculators, considered "dumb money," into the NASDAQ 100. In general, the combination above can also be seen in the S&P 500 and the Russell 2000. In addition, flow of funds into the NASDAQ 100 by Rydex mutual fund investors has moved to lofty levels, and many times, this is a precursor to a pullback or correction.

Gold and silver prices have finally begun to correct as they had gotten very extended to the upside on both a price and time basis. Besides profit taking, we think the catalyst for a pullback in the metals complex will be a countertrend move in the dollar. We are looking for gold prices to decline to the $1,300/oz. level, which would represent a 23.6% retracement of the rally since February. We think silver could decline back toward the $21 to $22/oz. area. We believe any weakness in metals prices will offer a very good buying opportunity, as we see much higher prices as we move into the latter part of 2010 and into 2011.

cougar

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happywacom

thanks

xnz

xiaoshan

canucks

it is top form now.

integration

thanks.