The Rally Starting In August Was A Counter-Trend Move. So What Does This Mean For The Market?
The
breakout from the downtrend channel in the S&P 500 (SPX) was confirmed
last week, but there was no positive follow-through src=”https://tradingmarkets.com/media/2004/Katie/image002.gif” hspace=12 v:shapes=”_x0000_s1052″>
     Source:
CQG
points, and has a good record of accuracy. This may partially be a function
of the popularity of the model. TD Sequential “sell†signals were also
confirmed in several sector indices.
Breadth
readings have been moderately positive on up-days, and moderately negative
on down-days
in trend. If the market undergoes a long-term bullish reversal, we expect
breadth to reach positive extremes on 2%+ up-days in the major indices.
|
Technology |
| font-family:Arial’>. The uptrend in crude oil futures is parabolic. It is nearly impossible to call the exact top, which we expect to be more of an inverse “V†rather than a drawn-out process. Short-term momentum is positive, and is the indicator that is “working†given the strong nature of the trend. |
     Source: |
We
believe that the rally initiated in August was a counter-trend move, and that
the next leg will be down for the market1146-1150
1163
1101
1080
10264
10500
10000
9784
1500
1523
1377
1300
Downside
risk is moderate based on the proximity of secondary support
3-4%, while the NDX has about 9% downside. Updated support and resistance
levels can be found in the accompanying table.
COMMODITIES
The
Reuters/CRB Futures Index (CRB) broke out to new highs late last week
such as crude oil and gold. Momentum is positive in energy-related commodities,
as mentioned above.
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TRANSPORTATION
Transportation |
     Source: |
INTEREST
RATES AND RELATED SECTORS
src=”https://tradingmarkets.com/media/2004/Katie/image012.gif” hspace=12 v:shapes=”_x0000_s1051″>
     Source:
CQG
has been short-term deterioration in interest-rate sensitive sectors relative
to the market, but the long-term outlook is still stable
the broader market for a month. The Philadelphia Utility Index (UTY) has also
seen its relative strength (versus the SPX) neutralize in recent weeks. Finally,
relative strength of the Morgan Stanley REIT Index (RMS) failed to confirm
new highs in price.
Positive
sector developments:
reached a new all-time high.
broke its long-term downtrend line.
reached a new all-time high.
(XAU) broke above the top of its weekly cloud.
(DRG) fell below support at the August low.
Support
and resistance levels in the following table should be looked at as cushions,
rather than precise price points.
Levels in boldface are less than 1% away from Friday’s close.
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Airlines |
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Banks |
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Biotechs |
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Brokers |
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Defense |
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Drugs |
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Gold/Silver |
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Housing |
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Insurance |
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Internet |
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Nat. |
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Networking |
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Oil |
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Oil |
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REITs |
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Retail |
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Semis |
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Transports |
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Utilities |
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* The RMS would confirm
a breakout above resistance on a close today above 682.04.
Some things to watch
(or watch for) this week…
the broader market?
average (again)?
gains?
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font-family:Arial’>Volume Ratio |
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This
report has been prepared by MKM Partners LLC. Its employees, officers,
directors, individual shareholders, consultants, affiliates and/or their families
(together “the Firmâ€) does not have positions and deal as principal in transactions
in securities referred to herein (or other instruments related thereto) including
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The Firm has not engaged in transactions with issuers identified in the report.
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cannot be guaranteed. Any opinions, estimates or projections expressed herein
may assume some economic industry and political considerations and constitute
current opinions, at the time of issuance, which are subject to change.
This
information is being furnished to you for informational purposes only and
on the condition that it will not form a primary basis for any investment
decision. Investors must make their own determination of the appropriateness
of an investment in any securities referred to herein based on the legal,
tax and accounting considerations applicable to such investors and their own
investment strategy. By virtue of this publication, neither the Firm nor
any of its employees shall be responsible for any investment decision.
Firm revised its ratings, which now comprise:
expected to outperform related market index by at least 5% over the next 12
months.
expected to perform approximately in-line with related market index over the
next 12 months.
is expected to underperform related market index by at least 5% over the next
12 months.
expected to outperform related market index by at least 1-5% over the next
three months.
expected to underperform related market index by at least 1-5% over the next
three months.
of October 8, 2004
Trading Buy 0%, Trading Sell 0%
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