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May 24, 2009

Weekly Update
by Angelo Campione

Current Positioning:

SPY: Short 75%

QQQQ: Short 75%

General Commentary:

This past week was quite interesting, the markets started the week strongly giving the impression that we'd seen another "buy the dip" scenario. However, that all changed by the end of the week and now we have the potential for some more serious downward movement to begin.

If we get a close below 880 on the SPX and 1350 on the NDX, the selling pressure should increase, although at this point the market has been quite resilient and we could simply go sideways for a while here.

On to the analysis..

SPX Chart - Bigger Picture

The bigger picture is starting to confirm that at the very least we'll see a sideways consolidation type pattern between 850 and 950. We do also have the potential for a drop to the 800 level without causing too much damage to the technicals.

The upside seems capped in the near term as the resistance at the 200 DMA and the horizontal resistance overhead seems unlikely to be broken right now.

SPX Chart - Shorter Picture

The shorter term picture now shows the clear break of the up trend channel that happened on Thursday and Friday. This index now only has the horizontal support at 875 to rely on. That doesn't necessarily mean that we're heading south straight away, but it's another blow that the market has taken that weakens the overall outlook.

The MACD is still decisively negative and the RSI is weakening also. This chart seems destined to test the 50 DMA at 850.as a minimum. Personally, I think a dip down to 800 would be healthy for the market in a wider sense.

For this week, support on the SPX is 850 - 875 and resistance 900 - 920.

NDX Chart - Shorter Picture

The Nasdaq is painting an indecisive picture through a symmetrical triangle. This index actually has more potential for an upside break as it's still holding above the 200 DMA, but the jury is still out.

A lift in volume combined with price movement will likely determine the next mid term move.

For the week ahead, support on the NDX is 1300 - 1350 and resistance at 1400 - 1440.

The VIX Picture

The VIX made a new low this past week, showing that the markets' fear is reducing significantly. This didn't last long however, and now it seems that 34 is a key level. If we get a close above 34, this should be the clincher that'll have the markets head south.

Note also how the MACD (both linear and histogram) are setting up for a bullish advance, which confirms our view that more market weakness lies ahead.

The VIX measures the premiums investors are willing to pay for option contracts and is essentially a measure of fear i.e. the higher the VIX, the higher the fear in the market place.

Quote of the Week:

The quote this week is from Indira Gandhi (India's first and only female Prime Minister), "You must learn to be still in the midst of activity and to be vibrantly alive in repose."

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Feel free to email me at angelo@stockbarometer.com if you have any questions or comments.

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Regards,

Angelo Campione

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Copyright © 2007-2009 Angelo Campione

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