Archive for August, 2009

Is The Stock Market Rally Over?

Posted in The S&P 500 Index (SPX) on August 16th, 2009 by admin – Be the first to comment

By Jim Donnelly, Olson Global Markets

Although overbought conditions now prevail on both the daily and weekly time frames, long term technical studies are nevertheless rising nicely following a year-long plunge into deeply oversold readings. With this situation at hand, it is interesting to point out that the S&P 500 Index is now approaching a test of key trend line resistance (in red) at the 1,025 level.

Since a chorus of well known fundamental investors (and analysts) suggested last week that the equity markets were well ahead of the economy at this point, it appears that investors have become cautious. The concern, of course, is that a correction or worse may be just around the corner.

Although these worries may prove to be accurate, a solid break above 1,025 on the S&P 500 Index would likely catch a number of investors off guard once again. With earnings season just about over and a myriad late August vacations likely to thin investor attendance, one would expect a pause in market activity to occur unless an exogenous event unexpectedly presents itself.

That said, its worth pointing out that long-term technical studies favor an eventual break above resistance now at the 1,025 level. If it occurs relatively soon, a move up the next key resistance level at 1,165 (in blue) may unfold over the intermediate-term.

Over the short-run, however, that battle should take place near the 1,025 area.


More Upside Still Likely For the Financial Sector

Posted in Financial Select Sector SPDR Fund (XLF) on August 9th, 2009 by admin – Be the first to comment

By Jim Donnelly, Olson Global Markets

The financial sector, including money center banks, investment bankers, insurance companies and brokers, has experienced a solid and well received turn-around to the upside since the depths of this past year’s devastating selloff.

And while Friday’s last hour pullback (particularly in bank stocks) may portend near-term weakness in the days just ahead, more upside price activity is likely to be achieved over the intermediate term.

From a technical perspective, the Financial Select Sector SPDR Fund, whose ticker symbol is XLF, has already formed of a bullish reverse Head & Shoulders pattern that targets an eventual move up to the $20 area. Friday’s $14.35 close, which sits solidly above former “neckline” resistance at $13, nevertheless caused daily technical studies to move into an overbought condition.

Although these technical conditions raise the possibility for a pullback over the near-term, to “retest” neckline support at $13, such an event would likely present another attractive buying opportunity for financial stocks. Bullish technical divergences continue to support expectations for further gains over the intermediate-term with momentum buying clearly present.

Unless the fundamental picture of the financial sector begins to sour once again, a pullback toward the $13 area on the XLF would look like a “buying” opportunity from this vantage point.