Dr. John Faessel's  Instablog

Tuesday 11-22-2011

Dr. John L. Faessel

ON THE MARKET

Commentary and Insights

Quote of the day

“One simply cannot build a growth strategy on accumulating more debt, when the capacity to service the current debt is questioned by the markets.”

~ Olli Rehn ~

European Economic and Monetary Affairs Commissioner

~

Pattern Breakdown

The McClellan Oscillator is OVERSOLD at minus 222

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Yesterday the stock market got slugged early on news that the bipartisan super-committee failed to come up with a solution to reduce the nation's budget deficit. The Dow was off over 300 points by about 11 o'clock but have a late rally finishing down 248 points closing just above its 50-day moving average.

Today, I expect that we test yesterday's lows and likely exceed them and that would bring the McClellan Oscillator well into the high 200s (or even 300s) in OVERSOLDNESS along the lines that I mentioned yesterday setting up a rally (that would most likely stick); see below. ** Worst-case, we might add another day in the bottoming process, but we're about there.

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Of note, I see in the last reporting period that institutional ownership of (CIGX) is now at new highs of 19% of total shares outstanding. And don't forget to add Tradewinds (an over 17% owner of 16.6 million shares) to the mix.

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One of my very savvy stockbroker subscribers sent me an interesting Dow chart referencing the "bubble" formed by the 20-day moving average moving above the 50-day moving average setting up a hot rally as "price" moves farther to the right side of the graph. I'm including the jpg chart and his commentary /prediction.

August 2010 chart. The 20-day moving avg line crossed 50-day MAV line as market bounces off bottom

the market retests the lows creating a bubble in the MAV lines 20 mav crosses back and below 50-day mav however the 50-day line continues sideways to up and next move in the market blows the chart away..  same at the top.. get the bottom bubble where for a short time the 20 day mav goes through the 50-day then reverses next time it penetrates 50-day mav.. It is for real..

Current chart... this is where the prediction comes in... out on the limb once again!!

market is looking like it will create the bubble .. few more days and the 20-day mav will in all likely hood move through the 50-day mav that sets up a bottom test and the 20-day mav loses steam and drops back through the 50-day mav.. we then finally have bottomed and next up move is the real one..  I have been telling clients that we are at the bottom or so close we can't see it...

** From yesterday’s report:

“It looks to me like we could break well lower today and conceivably get into the (McClellan Oscillator) minus 200s, quite oversold. Then a Tuesday morning market hit again would set up sending oversoldness into the deep realm of a bounce back set-up. Looks to me like there's multiple support points or zones that could come into play to buoy up the overall pattern. Sentiment remains rotten and that's a plus. Two other important considerations are operable here; the Santa Claus (end of tax selling) rally and a cycle low. Fingers crossed... but I think the whole thing holds up.”

Fridays McClellan Oscillator posting was in NEUTRAL at a minus 123

China economic update:

China’s leaders are shifting their outlook toward a decidedly more negative economic view than they had just six months ago, now expecting a long global downturn that could act as a drag on growth in the world's second largest global economy for years.

And from Bloomberg: The World Bank said China is heading for a soft landing of growth in excess of 8 percent next year, and with most Asian nations has fiscal scope to cushion its economy from an escalation in Europe’s debt crisis. http://www.bloomberg.com/news/2011-11-22/world-bank-says-sees-china-soft-landing-as-asia-withstands-europe-economy.html#

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The (SPX) closed yesterday at 1192.98

S&P 500 (SPX) Channel support is at 1193

Price support in the S&P 500 (SPX) is at 1183 /1185.

The August 8^th lows were 1101.

Short term price resistance is at (SPX) 1198

Channel resistance is at 1201

The 50- moving average "now" resistance is at (SPX) 1207.

Short term resistance in the S&P 500 (SPX) is at 1222, then at 1232.

Formidable price resistance at the top- tick of the near four month old consolidation is at 1292 then at 1277.

The 200-day moving average resistance is at 1269.

Monday’s key indicators and metrics:

·                 McClellan Oscillator is OVERSOLD @ MINUS 222               

·                 VIX – 32.91

·                 Gold (COMEX) $1678.6

·                 Swiss Franc – 1.0912

·                 The Treasury 10-year yield 1.96%

·                 Crude oil (NYMEX) $96.92

·                 CBOE Put / Call Volume Ratio – 1.08

·                 Aussie Dollar – 0.9800

·                 US Dollar Index – 78.46

·                 3-month $ LIBOR at 0.50

·                 Copper – 3.3030

·                 Silver (COMEX) 31.116

·                 Brent Crude $108.50

·                 Euro – 1.3496

·                 Canadian Dollar – 0.9625

For my Best Ideas for 2011 please send an e-mail request to: Dr.Faessel@onthemar.com