November 2008 Monthly Recap

I might not get much chance to post over the next couple of weeks. I will be on a business trip till the 19th of December.

The following are the KST graphs with the parameters identified in the December 2008 issue of Technical Analysis of Stocks and Commodities. I found it interesting that the long term charts are all on the way down still. The intermediate is also going down quickly as well. The short term has hit a low and is oscillating some. Not sure if a low has been hit yet but would anticipate it getting close since it is around the lows of the early 2000's. The drop has also been faster than the drop in the early 2000 - 2003. The other thing is that the Small Caps from the Nasdaq, actually have not dropped as fast shown in the Intermediate and Short Term graphs. The DJIA is actually falling faster. The down turn may not be over yet.

Yearly Analysis

This is a very long term analysis of the DJIA. The graph starts before 1930.

The lower line.
In June 1932, the DJIA hit a low of 40.3149. The lower line shows a start there. By looking at the next place it touches and all points are above the chart shows that the next point that it touches was in August 1982 at 769.98. Doing the calculation shows that the market has gone up at roughly a 6% increase if we follow that line. What I find interesting is the 50 year cycle. Based upon that, I am anticipating another pull back to that line in 2032. Assuming the DJIA goes up at a 6% rate since 1932, then the DJIA will pull back to 14, 300 at that point in time.

The second line starts at a high in 1937 and also goes up at a 6% rate. What does this show. We have been very overbought since 1997 until this year when it has dropped.

Where should it be and have we hit the low. Doing the calculations shows that the midpoint between those two lines is 8300. The DJIA closed at just slightly over 8000. We are probably getting over sold at this point as we moved back to underneath the center line. Just as it was overbought in 1930 and had to have a correction. So will it be in 2032. In 1982 there was a long period of consolidation.


I will try to post something like this each year.

November 7, 2008 - Weekly Recap

The DJIA for the week shows that it is still oversold considerable from the stochastics. The other thin is that it has not hit another low for 5 weeks. It is presently in a trading range and do not expect it to break out until it crosses its high of 5 weeks ago.
The same is true for the Nasdaq, although its low was only 3 weeks ago. It has been trading in a tight trading range for the last 3 weeks.

November 4, 2008 Daily Recap

The market today did not respond quite like I thought it would. I believed that since it was Election day that the market would have been very low volatility and in a very narrow trading range until the uncertainty of the election was over. Since many people believe that Barack Obama is the one who can lead us to turn the economy around then we should see the market to really start to go up. Reading an article in "Technical Analysis of Stocks and Commodities" about long term trends, It appears that the markets will not really start up until 2012. This may be a good time for Iron Condors on the Russell 2000, or Calendar spreads.

The S&P 500 graph shows that the market is short term overbought, but the short term trend is up. The intermediate trend is still down. Even though the price is above the 21 day MA it still needs to get above the 55 day MA. I believe this could really keep it from moving up. It will probably bounce off of the 55 day MA.
The same thing holds true for the Nasdaq. The 8 day MA still has not crossed the 21 day MA but may tomorrow. This could start this back into a bull market. Although I really believe the next 4 years it will be flat with no growth.

November 3, 2008 Daily Recap

The markets were relatively flat. The volume was very low as well. This is probably waiting for the results of the election. The overall market has not changed since yesterday. The outlook is the same.

October 31, 2008 Daily Recap

The Daily DJIA graph shows that the markets are becoming overbought. The problem is that it is on light volume. The volume has been below the 50 day average. The good news for the bulls is that the daily candle was above both the 8 day MA and the 21 day MA. So for the short term it is up.
The S&P 500 is very similar, although the daily close was above the 21 day MA, but the 8 day MA is starting to turn upward. When the 8 day MA move above the 21 day MA we may be starting to go into a short term bull market.The Nasdaq is very similar to the other two items.
Ditto for the Russell 2000.

The long term has been down. The short term is up. Below is the chart for the way the markets are presently going.

	Monthly	Weekly	Daily
DJIA	Down	Flat	Up
S&P 500	Down	Flat	Up
Nasdaq	Down	Flat	Up
Russell 2000	Down	Flat	Up

October 31, 2008 Weekly Recap

The weekly DJIA graph shows that the markets may be oversold. The MACD is starting to narrow, as well as the stochastic is turning upward from an oversold condition. The other item is that the 20 week low also occurred at the first of October. The markets may be starting into a trading range.
The S&P 500 is very similar to the DJIA.


The Nasdaq shows oversold in the Stochastics, and the narrowing of the MACD shows we may be starting to change direction of the markets. The only problem is the low was only obtained less than two weeks ago.



The Russell 2000 hit its low this week, but by the end of the week it close above the open from last week.

Here is the weekly assessment of the trends.

	Monthly	Weekly
DJIA	Down	Flat
S&P 500	Down	Flat
Nasdaq	Down	Flat
Russell 2000	Down	Flat

October 2008 Monthly Analysis

On all of the markets, it shows that we are in a bear market. The charts below show that over the last 9 months, the market has been below the 10 month moving average. This month was the worst.

The DJIA is shown here.
Below is the S&P 500. Once again there is only one month in the last 10 that even had a brief time above the 10 month moving average. Not anticipating any time soon for it to be above the 10 month MA again.
The Nasdaq also is showing a bear market. It really hit this month for the Nasdaq. It is going to take a lot to bring it back up.

The final is the Russell 2000. Once again it shows something very similar to the Nasdaq. The Small Caps were not being hit as hard as the Large Caps until now.
All of the markets are in a Bear market now. It is farther ahead to trade from a bear perspective.

October 13, 2008 Daily

All of the markets are still below their moving averages. Even their short term moving average. All of the markets would still be labeled as down as far as their trend lines.. Today had low volume since it was Columbus day. This is also options week so it could be high volatility. All of the charts are shown below. The only positive that shows we can be at an end to the down trend is that the volume was high on Friday and it started out considerably down and changed direction. Several Doji formations.




Direction of the Trends
Long Term - Up if 10 month moving average is up and Close is above 10 month moving average.
Flat if Moving average is up and Close is below Moving average or Moving Average is down and Close is above Movin average.
Down if Moving average is down and Close is below Moving average.

Mid Term. Same as Long term only on a 10 Week Moving average

Short Term - Same as Long term only on a 10 Day Moving average.

	Long	Mid	Short
DJIA	Down	Down	Down
S&P 500	Down	Down	Down
Nasdaq	Down	Down	Down
Russell 2000	Down	Down	Down

January 3, 2008 - Market Recap

Today, I wanted to show the Russell 2000 and where it stands for possible options trading. The first graph shows the Bollinger Band for a 45 day period, and a width of 2.5 standard deviations. As can be seen from this graph the band is narrowing which shows we are in a consolidation phase since the November low. Based on that the move may be more drastic in the near future. The question will be if it will be up or down. Based upon how long it took to go from the October high to the November low was 33 trading days. Notice how narrow the band was leading into that as well. That was approximately a 12.25% loss in those 33 days. That was from a high down to a low.The next chart shows the support and resistance lines. There is a lot of support from the short term right around 740. The next support will be at 668. That is the green line at the bottom that is supported by the July 2006 low. Doing a look at the 68% probability of expiring on February 2008 Russell 2000 options, the point is right at the 670 mark. Based on that, it appears that the setup that I mentioned yesterday would be good. Sell a 670 Put and buy a 660 put. The vertical spread yields about $125 and if it goes a month and I buy it back for 20 would give about a $95 after paying commissions while tying up about $900. I will monitor the position carefully. If it drops too much and I lose $100, I will be out of the trade.

January 2, 2008 - Market Recap

The Dow Jones Industrial Average went to a lower low today since the November low. It shows that the large caps are not doing as well as the small caps are right now. This could be the start of a turning point in the market. Also notice how the two trendlines are going at about the same slope downward. Also the recent Fibonacci numbers show we have retraced to 23% of the swing. Tomorrow will tell if we turn or continue down. The next support will be at 12,700. The Nasdaq shows that we are in a consolidation phase. This downtrend needs to break 2,580 and then we may see it go on down to the November low. Not much support after that. We also see that OBV is down to where it was at the end of November so we are seeing that it is still looking like we have a weak market.

The Russell 2000 stochastics shows how oversold the Russell is right now. If we have another down day tomorrow, it may be a good time to sell a put vertical. I would probably look at selling a 680 put and buying a 670 put. There would have to be another 10% lose in the next 43 calendar days and the probability of closing below 680 would only be 68%. I will be watching the stochastics closely in the evenings for the next few days as well as some of my other indicators to see when to put on this vertical.