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Purely Technicals' Blog

Stock Market Commentary: Warning Signs, Courtesy the Financials

 

For more Stock Market Commentary, Stock Trading Picks & Options Trading Picks and a Model Trading Portfolio, visit www.TheMarketMessenger.com

 

Thursday, Oct 18, '07: 

Good evening,

Over the past few days, the charts have been showing signs that have been making us a little uneasy. We can't quite put a finger on it but they seem to be providing subtle signs of something lingering under the surface. 

Is it just a psychological thing, associated with the 20-year anniversary (Oct 19) of the '87 crash? No, don't think so. Here at TMM, we're not big believers in the self-fulfilling prophecy.

Is it the fact that the S&P-500 continues to have trouble with secular resistance in the area around 1550? Could be... Remember, during the bear market of the 60s/70s, each cyclical rally stopped within a few percentage points of secular resistance - at around 1000 on the Dow (the most significant index of the time). So that's one possible reason for this uneasiness...

Is it the fact that it is getting harder and harder to find individual stock charts that are showing clear-cut setups (unless one's willing to go long stocks that have, in some instances, gained 60% in two months)? That is definitely a factor.

Is it the fact that everywhere one turns it seems like there is an analyst calling for higher highs and looking to raise his/her target on a stock? Yes, that's another factor that is contributing to the current mindset of the contrarion in yours truly.

Is it possible that this is much ado about nothing? Sure, that's possible. But just in case, we'd like to leave you with a few charts from the financial sector...

The first one is that of the DJ US Financials Index, which has broken a bear wedge today and is showing a negative centerline crossover on RSI and a negative MA crossover on MACD. As can be seen from the chart, the index is once again under the crucial level of 560.

The rest of the charts are those of individual stocks within this all-important sector.

So there you have it. There’s been some really ugly price action in this sector, which as we all know, often leads a market turnaround. Will that hold true in this instance as well? We shall soon find out.

At TheMarketMessenger.com, we're going to let things settle down a little bit before we get too aggressive on the bullish side. We continue to maintain the view that having an appropriate amount of portfolio protection in the form of index puts is probably going to do more good than harm at this juncture. One never knows, and its always better to be safe than sorry... 

Goodnight and good luck with your trading!

Asher Pinto

 

For more Stock Market Commentary, Stock Trading Picks & Options Trading Picks and a Model Trading Portfolio, visit www.TheMarketMessenger.com

 

 

Published Friday, October 19, 2007 3:43 PM by Purely Technical
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Purely Technicals' Blog
"Show me the charts, and I'll tell you the news" ... so goes the timeless trading adage. At TheMarketMessenger.com, we let the charts do the talking and after listening to them closely...

We bring you ... purely technical analysis based, unbiased market analysis, and Stock and Options Trading Picks.

Come visit us at www.themarketmessenger.com

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