Here Yesterday, Gone Today
After very strong days Tuesday, we saw a
day of give-backs in both markets Wednesday. This was more evident in
the Dow Jones Industrials with Hewlett-Packard
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PowerRating)) and
J.P. Morgan Chase
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PowerRating) issuing earnings warnings. JPM stated that
losses from it’s venture capital division far outweighed the gains
from their private equity division. (Side note: As Goran has pointed
out to us in the past, JPM has one of the biggest derivative books on
the street. Goran was mentioning today that he thinks this
warning may be setting the stage for a bigger debacle down the line.)Â
HP’s Fiorina said the United States and European sales were still slow
and that “malaise” had spread to China in Asia and from
Mexico to the rest of Latin America. She fell short of actually
confessing they will miss consensus estimates, but I think we can
safely read between the lines and call this a warning. We also
got comments like “circle of doom” out of multi-national
conglomerate Gillette today, as management stated they were going to
give guidance more realistic with current business conditions. We
saw weakness in nearly all indexes including oil, oil services,
utililities, gold, networking, drugs, with all of them being led by a
decline in the biotechs.
longer term resistance held this index in check while the Dow was
making a new high for the year. Our recent rally was stopped by the
support line that has held since the March lows. The sell off over the
past two days has been particularly bearish, and may not stop
until the bottom of the April 9th candlestick.
Transportation index, we again see a non-confirmation of the Dow strength.
This, coupled with the non-confirmation of the Utilities Index, raises
red flags for the sustainability of a further advance in the Dow
Jones Industrials Average.
lower, telling us the level of complacency in the marketplace is
reaching extreme levels. As this chart shows, we can push to
even lower levels, like like we observed in August of last
year, but this index again raises a red flag for traders to watch
carefully for a potential break-down in the Dow.
can see from the following chart that old support has now become
short-term resistance.
shoulders formation here, with the right shoulder at approximately
1940-1949.Â
giving the SOX problems now. This resistance also coincides with a
very bearish candlestick from May 29 called a “shaven-top” (an
immediate sell-off from the open). After four days of positive
trading, today’s candlestick is showing us a few days of rest are
needed.Â
of weakness. After a huge surge above the 900-915 resistance 12
sessions ago, the index failed at the highs formed in January and has
now fallen back below the 900 level. I would look to take a short
position in this index on any rally back into the 900-915 area (with a
stop above 915). The index looks like it may want to move back to the
880 area, and any break of 880 could send it plummeting back to the
820-840 area. We haven’t been getting many glowing same store sales
reports so an impetus for further upside is currently lacking.
late last night, so I didn’t have a good “gut feeling” about
market conditions walking in today. (A blissful trip, I may add, since
this is the first trip I have taken in 8 years without a laptop and
without any market exposure, other than a quick check of Bloomberg
every few hours). A quick review of charts last night helped me
identify areas of resistance on the NDX, so I was prepared to short
given weakness. Today’s action in both the Dow and the Nasdaq are
showing that we could have weakness or sideways trading in the days
ahead. Given the fact that both indexes have been able to hold key
support levels in recent trading show underlying bid strength so any
sell off should be relatively contained. Again, the support levels are
very clear so be prepared to stop out of any longs and/or push the
short side if we violate those support levels in the next few trading
days.Â