Weekly Outlook: January 5, 2009
January 4, 2009
A Santa Clause Rally says goodbye to 2008 while offering out a very “good buy” of sorts to start off 2009. For the four-day period the S&P500 ($SPX) cash is up a seasonally jolly 6.72% on constructive and nice price behavior for market bulls.
THE WEEKLY NUTSHELL
- A tempered but nice index hammer Monday. Continued spike in commodities (USO, GLD) and energy complex (OIH, XLE) brings muted response as action is linked to Middle East escalations and threatening investor sentiment. Dow’s (DOW) “K-Dow Petro” $17.4B joint venture with Kuwait is axed due to current economic environment.
- A more seasonal jolly Tuesday. GM’s (GM) GMAC receives word of $5.0B in TARP monies. Naughty stories are discounted including weak but mostly in-line Chicago PMI and Case/Shiller Housing Index and WSJ article warning of banking industry’s first quarterly loss since 1990. Semis (SMH) provide early technical leadership on no news but worthy of taking up slack for easing commodity prices.
- Bulls say “Good buy” to 2008 in style Wednesday as majors all close decisively above the 50-DMA. Traders (around) cheer update by Fed of $500B mortgage-backed securities program intentions. More “Out with the old” and in with the “Obamaism” sees investors shaking off weak continuing claims data, pressuring negative yields in bonds (TLT) and the CBOE Volatility Index ($VIX) to its first sub 40% reading in nearly three months.
- More seasonal “Obamaism” despite worrisome but light reports to kick off 2009’s first trading day. All around poor ISM Index is worse than estimates and weakest in 28 years. SIA announces global semi sales off 9.80 year-over-year, while traders work on that optimistic discounting thingamajiggy in the SMH. Negative yields in treasuries continue to look less attractive in 2009 and Black Gold surge on no fresh catalysts of notice but prompts influential technical leadership for energy complex (OIH, XLE). Billionaire investor Goldmember, umm Sam Zell, remains “HOT” for Starwood Hotels (HOT).
ON TAP THIS WEEK
Can last week’s seasonally inspired bout of “Obamaism” continue as traders come back to work? After such heady gains, being able to shake off outright bad news isn’t as likely, as was the case last week. Further, the help of a well-spent seasonal bias has been mostly exhausted at this juncture. That being said, a slightly more robust calendar of economic catalysts could be incentive to induce a bit of easier to qualify profit-taking to start off the week.
Spearheading will be a foursome of reports on Monday and Tuesday which include truck and auto sales, factory orders and national service conditions. For most market watchers though, the monthly jobs release on Friday will be the week’s highlight. That being said, with its late arrival, anticipating how traders might react to the report is likely tied to the preceding four days price action, rather than too much emphasis on the data itself—which isn’t likely to sound all that pleasant.
Weekly Calendar of Key Reports
Monday:
Economic Construction Spending (-1.2%), Truck & Auto Sales
Earnings Mosaic (MOS)
Tuesday:
Economic Factory Orders (-2.6%), ISM Services (37.0)
Earnings Acuity Brands (AYI), Global Payments (GPN), Resources Connect (RECN), SMSC (SMSC)
Wednesday:
Economic Weekly Crude
Earnings Constellation Brands (STZ), Immucor (BLUD), Ruby Tuesday (RT), Sonic (SONC)
Thursday:
Economic Weekly Claims (550K), Consumer Credit ($0.5B)
Earnings MSC Ind (MSM), RPM Inc (RPM), Schnitzer (SCHN), Texas Ind (TXI), Apollo (APOL)
Friday:
Economic Monthly Jobs Report (-475K, 7.0%, 0.2%), Wholesale Inventories (-0.9%)
Earnings AZZ Inc (AZZ), Greenbrier Comp (GBX), KB Home (KBH)
TECHNICAL PICTURE
Figure 1: Dow Industrials (DIA) Daily Bullish Range
Last week’s observation of seeing the shaving down of premiums and a multiday pullback as a constructive one-two punch for bulls couldn’t have gone any better for traders present and / or positioned. Entering the week and that combined edge is gone. However, the reality is over the past two and one-half months, the indices haven’t gone anywhere, despite last week’s monster gains.
The immediate technical expectation is for a slight pause of two or more days to occur due to short-term indicators tipping in favor of the neutral-to-bearish trader. It’s anticipated though, that any action along those lines should have bulls looking to “Buy the dip” above the 50% retracement and 50-DMA—both of which act as a solid support. As such, this market observer is “Obamaistic” of constructive, short and shallow pullbacks dictating bullish decisions.
MARKET LAB
Bullish Technicals
- Corrective testing 2002 lows S&P500.
- FTD 12/2.
- Accumulation edge within loose bottoming process.
- Increasing list of healthy bases from growth stocks.
- Uptrend within trading range. 12/22-12/29 Hammer double bottom low.
- Sub 40% price break in VIX suggests further risk acceptance by bulls.
Bearish Technicals
- Short-term overbought (P/C, ISE Index, NAZ TRIN, S&P/Naz Price Oscillator).
Index or Sector Proxy | Ticker Symbol | Support | Resistance |
S&P500 | ($SPX) | 885–900, 850, 800 - 815 | 900 – 925, 1000 |
NASDAQ100 | (QQQQ) | 29.75 – 30.25, 28.50, 27 | 31, 32, 34 |
Chris Tyler
Senior Staff Writer & Options Strategist
Optionetics.com ~ Your Options Education Site
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The information offered here is based upon Christopher Tyler’s observations and strictly intended for educational purposes only, the use of which is the responsibility of the individual.
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