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Purely Technicals' Blog

Stocks and Metals Markets Round-up

Purely Technical Weekly Newsletter (November 26, 2006) - Featured Article:

The following is a featured article from this week's Purely Technical. You can receive the full newsletter for FREE, by visiting our home page - www.themarketmessenger.com - and filling in the "Join Our Newsletter" form.

Here is the featured article...

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Market Round-up – Stocks and Metals  

Hope you had a Great Thanksgiving!!

As expected, it was a quiet week in the stock markets. None of the major indices changed more than one percent from last week’s close. There was a little bit of profit taking in the shortened session on Friday, but not enough to ring any alarm bells as yet, especially since the move was on very light volume.

The VIX bounced back strongly above 10.0 late this week after having started the week below that level. It remains to be seen whether this is a change in trend or just a knee jerk reaction to encountering decade lows.

It was an interesting week in the precious metals arena. It looks like Silver and Gold have broken out, and continue to look good. However, Platinum had a wild week, finishing lower after a big fake out earlier in the week.

A couple of weeks ago, we’d highlighted this chart of the S&P 500, which shows how price has been supported by the thick black line for the past 4 months. The index continues to trade comfortably above this line. As long as the line is pointing upwards and the index is trading above it, we can expect the bulls to be in the driver’s seat. Accordingly, any move lower in the coming week should find support between 1383 and 1387, or else it can be said that the thick black line – the 20-day moving average (displaced by 5 days) – is predicting a change in trend.

The next chart is that of the Nasdaq Composite. This index has traded at or around the level of the 33.3% retracement of the bear market for just over a week now. The index continues to trade within a bullish channel, and until the lower channel line is broken, the future trend has to be presumed to be a bullish one.

The next chart is that of the Dow Jones Industrials...

The INDU is starting to show a couple of signs of weariness, but is not showing any full-blown sell signals as yet. We see the following warning signs on this chart, but need to wait and make sure that they are not blown out of the water by, say, a couple of large up-days early next week before we start to believe that a reversal of trend is afoot:

a)      Chaikin Money Flow has been declining (and showing a negative divergence with price) for around 3 weeks now, and, as of last week, has broken the uptrend (in CMF).

b)      Price is currently only around 60-80 pts (approx. ½%)  above the rising intermediate uptrend line, a breaking of which might signal that it is time for a correction, perhaps to significant support at 11670.

c)       MACD is still at rather overbought levels and, additionally, is currently showing a potential negative divergence.

If any of these potential sell signals are confirmed over the coming days, expect to see a few more stocks added to our list of short picks. A preponderance of very recent picks happen to be on the short side. Coincidence? Or…?

The previous chart was that of the S&P Mid Caps Index. As you can see, it has been doing pretty well and if the trend is to be trusted the index should be looking to test resistance at 820, very shortly.

The next chart is that of the Russell Small Caps Index. This index has barely budged since reaching the double bottom target of 790, a few days ago. Going forward, we need to see the index hold support at the broken resistance level of 782/783. However, the index has further support from two rising trendlines that are each a couple of multiples of ten points below current prices; so it seems like it will take a concerted effort from the bears if this thing is to turn decisively lower.

Let’s take a look at the charts of a couple of metals and metal-related ETFs, before we dive back into the educational series…

The Silver ETF had a great week, adding on a few percentage points and, in the process, breaking through intermediate resistance at 132. The target from the large symmetrical triangle that we’ve been highlighting for weeks now is still well and truly on. If current strength continues that target should be met within the next few months. 

The Gold ETF also had a great week, gaining a few percentage points, and is now sitting right upon resistance at 63.60. A breakout above this level will push the metal higher up into an area of resistance, which extends up to 66.50, and needs to be taken care of in order for the metal to reach its symmetrical triangle target.

The last precious metal chart that we’re going to look at today is that of Platinum...

As can be seen in this chart, Platinum has had a very volatile week (if not a very volatile month!). After, earlier in the week, having traded (intraday) above the large down-sloping channel, the metal closed the week lower. In the process it has left a couple of very ugly candlesticks on the charts and future price action in doubt.

RSI has corrected from slightly overbought conditions and is currently sitting on its centerline and price has apparently broken below the 20-day Moving Average. Will the move lower find follow through next week? Or will this metal follow the lead of Silver and Gold, and move higher after having shaken out weak positions? We’ll soon find out…

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Snapshot of the latest issue of Purely Technical:

   

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Articles inside in this issue:

§      Answers to Last Week's Quiz

§      Market Round-up – Stocks and Metals

§      Options Theory – Options Pricing: Determinants and Models 

§      Options Trading Pick Update 

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You can join the mailing list to receive the latest issue of Purely Technical each week, by visiting our homepage at www.themarketmessenger.com and filling in the "Join Our Newsletter" form.

We look forward to being your best source for technical market analysis, stock picks, options picks and education in technical analysis and trading.

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Have a Great Trading Week!

Asher Pinto

TheMarketMessenger.com

 

Disclaimer:

This newsletter has been provided for your informational purposes only. It does not constitute an offer to sell or a solicitation of an offer to buy any security or financial product that may be referenced herein. Further, the information contained in this informational newsletter does not constitute investment advice or investment advisory services. All securities trading, whether in stocks, options, or other investment vehicles, is speculative in nature and involves substantial risk of loss. We shall not be held responsible for any losses incurred as a result of the use of any information provided herein. You are strongly encouraged to seek personal advice from your professional investment advisor and to make independent investigations before acting on any information that we publish.
Published Monday, November 27, 2006 6:20 PM by Purely Technical
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