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Saturday, June 09, 2007 6:43:01 PM
Amateur Investors Weekend Stock Market Analysis (6/9/07)
http://www.amateur-investor.net/Weekend_Market_Analysis_June_9_07.htm
For the first time in several weeks the market came under some decent selling pressure. One reason for the increase in selling pressure this week may have been tied to the Yields on the 10 Year Treasury Note. Notice over the past few years each time the Yields on the 10 Year Note have spiked higher and risen 0.5% or more over a period of several weeks (points A to B) this has been followed by a pullback or consolidation period in the Dow for 3 weeks or more (points C to D). Currently the Yield on the 10 Year Note has undergone another substantial move higher and gained over 0.6% March (points D to E) and has risen back above the 5% level (denoted by solid black line). Keep in mind the last time the Yield on the 10 Year Note rose above 5% was in the Spring of 2006 which was followed by a 1000 point drop in the Dow (points F to G). Thus it will be interesting to see if we will now see another multi week pullback develop in the coming weeks.
As far as the major averages the Dow has now below its 20 Day EMA (blue line) for the first time in several weeks but so far has held support above its 50 Day EMA (green line) near 13200. Over the next few weeks the 13200 level will be a key support level for the Dow. If the Dow were to drop below its 50 Day EMA then that could lead to a more substantial correction with a drop back to the 12800 to 12500 range.
The Nasdaq dropped back below its 20 Day EMA (blue line) this week but was able to hold support near its 50 Day EMA (green line) on Friday. Thus it will be important for the Nasdaq to hold support near its 50 Day EMA the next few weeks. If the Nasdaq were to drop below its 50 Day EMA then that could lead to a more substantial correction with a possible drop back to its 200 Day EMA (purple line) near 2430.
As far as the S&P 500 it has dropped below its 20 Day EMA (blue line) for the first time in several weeks but did hold support near its 50 Day EMA (green line) on Friday. Over the next few weeks it will be important for the S&P 500 to hold support near Friday's low which was at 1487. If the S&P 500 were to take out the 1487 level then that would likely lead to a more substantial correction with a potential drop back to the 1460 to 1420 range.
Finally if for those that like to trade the major ETF's such as the SPY's for example one of the Strong Buy Signals we look for when the market has become overbought in the short term is for both the Relative Strength Index (RSI) and 8 Day Stochastic to close below a reading of 10. The most recent Signal (point S) occurred on Thursday which gave us a Buy Signal Friday. Meanwhile a couple of other Buy Signals (points S) were generated back in late February and early March with the entry days denoted by points E.
Meanwhile going back even further here were some more Buy Signals (points S) when both the RSI and 8 Day Stochastic closed below 10 with the entry days denoted by points E. In all of these cases the SPY's gained at least $1 from their entry prices and in some cases rose $2 or $3 over a very short period of time.
http://www.amateur-investor.net/Weekend_Market_Analysis_June_9_07.htm
For the first time in several weeks the market came under some decent selling pressure. One reason for the increase in selling pressure this week may have been tied to the Yields on the 10 Year Treasury Note. Notice over the past few years each time the Yields on the 10 Year Note have spiked higher and risen 0.5% or more over a period of several weeks (points A to B) this has been followed by a pullback or consolidation period in the Dow for 3 weeks or more (points C to D). Currently the Yield on the 10 Year Note has undergone another substantial move higher and gained over 0.6% March (points D to E) and has risen back above the 5% level (denoted by solid black line). Keep in mind the last time the Yield on the 10 Year Note rose above 5% was in the Spring of 2006 which was followed by a 1000 point drop in the Dow (points F to G). Thus it will be interesting to see if we will now see another multi week pullback develop in the coming weeks.
As far as the major averages the Dow has now below its 20 Day EMA (blue line) for the first time in several weeks but so far has held support above its 50 Day EMA (green line) near 13200. Over the next few weeks the 13200 level will be a key support level for the Dow. If the Dow were to drop below its 50 Day EMA then that could lead to a more substantial correction with a drop back to the 12800 to 12500 range.
The Nasdaq dropped back below its 20 Day EMA (blue line) this week but was able to hold support near its 50 Day EMA (green line) on Friday. Thus it will be important for the Nasdaq to hold support near its 50 Day EMA the next few weeks. If the Nasdaq were to drop below its 50 Day EMA then that could lead to a more substantial correction with a possible drop back to its 200 Day EMA (purple line) near 2430.
As far as the S&P 500 it has dropped below its 20 Day EMA (blue line) for the first time in several weeks but did hold support near its 50 Day EMA (green line) on Friday. Over the next few weeks it will be important for the S&P 500 to hold support near Friday's low which was at 1487. If the S&P 500 were to take out the 1487 level then that would likely lead to a more substantial correction with a potential drop back to the 1460 to 1420 range.
Finally if for those that like to trade the major ETF's such as the SPY's for example one of the Strong Buy Signals we look for when the market has become overbought in the short term is for both the Relative Strength Index (RSI) and 8 Day Stochastic to close below a reading of 10. The most recent Signal (point S) occurred on Thursday which gave us a Buy Signal Friday. Meanwhile a couple of other Buy Signals (points S) were generated back in late February and early March with the entry days denoted by points E.
Meanwhile going back even further here were some more Buy Signals (points S) when both the RSI and 8 Day Stochastic closed below 10 with the entry days denoted by points E. In all of these cases the SPY's gained at least $1 from their entry prices and in some cases rose $2 or $3 over a very short period of time.
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