Weekly Charts Point to Continued Recession, Bear Market

I end the week looking at the weekly charts for the 10-Year yield, Comex gold and copper, Nymex crude oil, the major equity averages, and the housing and financial indices.

Demand for US Treasuries on a flight to quality has trumped the deluge of supply.

The weekly chart for the 10-Year yield shows declining momentum, which favors lower yields given a close today below the five-week modified moving average at 3.46.

It appears that we are headed for a wide trading range in the second half of 2009 given semiannual supports at 4% to 4.175 and my annual pivot at 2.64.

The 30-year fixed rate mortgage has stabilized between 5.25% and 5.50%, not low enough to provide a significant enough wave of successful mortgage refinancings.

Lower commodity prices are signs that the global economy is not headed for recovery.

The weekly chart for Comex gold has declining momentum, and stays negative on a close today below the five-week modified moving average at 932. The downside is towards the 200-week simple moving average at 736. A weekly close below my annual pivot at 891 should accelerate the downside pressures.

The weekly chart for Comex copper also has declining momentum, and shifts to negative on a close today below the five-week modified moving average at 221.13. My quarterly support is 212.36 with my annual pivots at 225.88 and 240.20.

The weekly chart for Nymex crude remains overbought for another week. A close next week below its five-week modified moving average at $63.97 shifts that weekly chart to negative. The 200-week simple moving average provided the ceiling at $74.53, as my annual pivots became magnets at $66.51 and $68.81.

The weekly charts for the Dow, S&P 500, and NASDAQ reflect the return of the multi-year Bear Market.

The weekly chart for the Dow stays negative on a close below the five-week modified moving average at 8,364. Next week the down trend resistance is 8,801. Quarterly support is at 7,681.

The weekly chart for the S&P 500 stays negative on a close below the five-week modified moving average at 901. Next week the down trend resistance is 926. My quarterly support is 786.1 with my annual pivot at 910.8 and annual resistance at 967.1.

The weekly chart for the NASDAQ will remain overbought for another week. A close next week below the five-week modified moving average at 1774 will be a shift to negative. Quarterly support is 1571.

You can’t have a bull market for stocks with a bear market in housing and financials.

The weekly chart for The Housing Sector Index (HGX) shows a multi-year down trend with resistance next week at 87.06. A close below the five-week modified moving average at 81.11 is negative.

The America’s Community Bankers Index (ABAQ) is below its five-week modified moving average at 140.43 keeping this weekly chart negative.

The Regional Banking Index (BKX) is well below its multi-year down trend, and a close today below the five-week modified moving average at 35.91 defines a negative weekly chart profile.

Disclosure: No Positions

Comments

[cyclingscholar:]

Simple moving average, exponential moving average...tell me, what is a MODIFIED MOVING average?

We statisticians despair.

<sigh>

Jul 10 03:19 PM

[Dr. O:]

Robert Shiller agrees:

Jul 10, 2009 01:23pm EDT by Aaron Task in Investing, Newsmakers

Barring a major late-day rally, this week will mark the fourth-straight down week for the stock market following its explosive rally off the March lows.

After all the drama of the past few months, the stock market is now fairly valued on a long-term cyclically adjusted P/E basis, says Robert Shiller, Yale economics professor and author of, most recently, Animal Spirits (with George Akerlof).

That neutral valuation suggests the stock market is likely to resort to its long-term average of 7% annual gains, Shiller says. That sounds great, but the famed professor isn't forecasting that outcome due to one major caveat: The economy is in a "precarious state" and, should it stumble anew, the stock market "could go down a lot," he says.

Shiller is clearly dubious of the "green shoots" mentality and believes it will take a very long time for the economy to return to normal growth after the bursting of the housing and credit bubbles.

"Yes," the professor says without hesitation, when asked if there's a risk the U.S. could suffer the same kind prolonged economic malaise as Japan has endured since the early 1990s.

The silver lining here is Japan's current experience isn't so bad relative to the Great Depression of the 1930s, Shiller notes. Furthermore, he believes smart diversification - vs. "slavishly following" some statistical model - can provide investors a "true way to safety and the ability to capture upside" in various asset classes.

Jul 10 04:29 PM

[Dave Wrixon:]

If you had put the charts away and tried to think the problem through, you would probably have arrived at this conclusion months ago!

Jul 11 05:39 AM

[basehitz:]

The bulls have their work cut out this week. After the predictable oversold bounce in March, the strength and longevity seemed more driven by a coordinated marketing campaign to allow the stock selling telethon for banks and others to replenish their coffers. Now that the sheeple have been fleeced again, it's time to put up or suffer the consequences.

If earnings don't deliver this week something more than crappy results which are "better than expected" due to laying off workers, bulls are toast. This week I'm especially watching:
Mon CSX NVLS
Tues ALTR GS am INTC
Wed XLNX
Thurs HOG IBM JPM NOK
Fri BAC C GE

Thanks Richard. Enjoy your work.

Jul 11 08:46 AM

[Northstar10000:]

Bulls will come back for 2 short weeks, then short the crud out of
the thing.

Jul 11 05:39 PM

[proactivetr...:]

We expected this selloff some weeks back (up on our website.) Likewise the weekly Nasdaq chart is now posted using the qqqq chart. Our "buy on weakness" signals are still in place. MONEY FLOW IS STILL POSITIVE!

Jul 11 08:22 PM

[Tomcat101:]

That means you just make the number whatever you want it to be.


On Jul 10 03:19 PM cyclingscholar wrote:

> Simple moving average, exponential moving average...tell me, what
> is a MODIFIED MOVING average?
>
> We statisticians despair.
>
> <sigh>

Jul 15 10:31 AM