Sunday, March 01, 2009

Technical Picture - Multiyear Lows on Higher Volume

The government is taking a major stake in Citigroup, GE is slashing its dividend, and fourth quarter GDP readings show the economy contracted at its sharpest rate since 1982. Those headlines led to some very choppy trading and pushed the S&P 500 and the Dow to their lowest intraday and closing levels since 1997. For the week the S&P lost 4.5% on higher volume. As long as we keep making new lows on higher volume, the bears own it.

The NASDAQ has been the lone major US index to hold above the November lows. On a positive note the Canadian TSX had a technical bounce on the retest of its November lows, lead by oversold oil and banks.

As we noted Thursday, open interest was too bullish and Friday it neutralized.

Financials are still very weak, but positive divergence of the MACD to lower prices, implies that a bottom and potential reversal is near.
A correction in the $USD would help commodity related names.

Oil had a nice 3 day bounce last week. Still Canadian oil stocks outperforming - ECA, SU, CNQ. Currently approaching overbought levels, we are keeping a close eye on this sector for a consolidation breakout.

Although oversold, gold appears to be topping out. We note slight negative divergence creeping in. We do expect prices to retest recent highs, but will be watching closely for sell signal.

Solid performance for some Agchem names on Friday - MOS, TRA, CF. Sector is in a box play and oversold, so we are watching closely.

Although oversold, we expect further correction to health care/biotech sectors, following Obama's health care budget. We do, however expect a technical bounce when prices test support. AMGN $45.00 could produce a worth while retracement 38- 62%.


Trader M.D. said...


The $RUT too is above its November (intraday & closing) lows.

TJ said...

Thanks MD. Didn't have time to check the small caps.

Eric Winchell said...

Thanks... great charts. Oil interesting as it flattens out...

TJ said...


Oil keeps setting me up and letting me down. Oh well, one day it will reverse.