Increasing Risk Aversion Indicated Deeper Correction for Stocks

Editor’s note: this column was originally published on Capital Essence’s CEM News. It’s being republished as a bonus for the loyal readers. For more information about subscribing to CEM News, please click here.

Good Morning. This is Capital Essence’s Market Outlook (the technical analysis of financial markets) for Friday November 20, 2009.

Stocks closed significantly lower on Thursday with the major indices down more than 1 percent as investors appear to be turning cautious after new data showed mortgage delinquency rates and foreclosure rates not only jumped in the third quarter, but reached record highs. The same report also said the trend that will likely continue into next year.

Also contributed to the overall weakness were the stronger U.S. dollar and report that Bank of America’s Merrill Lynch cut its 2010 growth outlook for the semiconductor sector and downgraded 10 stocks in the group, including Intel (INTC), Texas Instruments (TXN) and Marvell Technology (MRVL). The Semiconductor HOLDRs (SMH) lost more than 3 percents as a result.

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The graphics below are from our “U.S. Market ETF Trading Map”, which shows the Money Flow measure and trading ranges for SMH and S&P 500 index. As shown, the light-blue shading represents the short-term trading range. A move above or below that range is considered overbought (as represents by the red shading) or oversold (as represents by the dark-green shading).

semiconductorholdrs_20091119

Chart 1.1 – Semiconductor HOLDRs (daily).

After a strong run of outperformance since early March, SMH rolled over and lagged the broad market by a wide margin. As you can see, not only it did not follow the S&P to new highs, Money Flow measure has been trending lower from the below the zero line over the past couple of months, signals heavy distribution. This is bearish and a retest of the bottom of its short-term trading range will most likely ensue. Although let’s notice that Thursday’s selloff seems to be overextended, so we should expect at least an attempt to rebound to the area of Thursday’s downside gap, about 25.94.

Thursday’s selloff was broad-based with all ten major sectors in the S&P closed in the negative territory. As a result, the S&P 500 index undercut the important psychological 1100 level and closed near the intraday low. In fact, as the below chart suggests, the broad market index is in for a retest of key broken resistance turns into support.

sp500_20091119

Chart 1.2 – S&P 500 index (daily).

As shown, the index broke resistance at 1080, or the September high, with a big surge to new high on November 9th. Last week, this level was retested and held. It was then became a key support level. Although after breaking decisively below the important sentiment 1100 level on Thursday, the S&P is once again setting for another retest of 1080. A failure to hold above that level will break the November uptrend and raise the odds for a test of the bottom of its short-term trading range. Immediate resistance is about 1114. A close above that level, though it’s unlikely tomorrow, will resume the uptrend.

In a longer term however, the bulls shouldn’t get into any serious trouble as long as Money Flow measure stays positive and prices hold above the November low of 1029.

In summary, recent trading action suggested strongly that risk aversion is coming back to the market. So it seems to us that Thursday’s decline could be a beginning of the long overdue downside correction. What this means is that there is a higher than average odds that the selloff will momentum but a much deeper slide is needed to break the long-term uptrend.

Thanks and Good Trading!
(By: Michelle Mai for Capital Essence)
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Note: Michelle Mai writes technical analysis for Capital Essence. To receive the daily edition, please subscribe. It’s now available at a monthly rate.

避險情緒突襲股市

Editor’s note: the English version of this column was originally published on Capital Essence’s CEM News. It’s being republished as a bonus for the loyal readers. For more information about subscribing to CEM News, please click here.

這是Capital Essence對2009年11月20日(週五)的市場技術分析。

由於最新數據顯示第三季度抵押貸款違約率和住房止贖率不但繼續攀升而且創出歷史新高,投資者似乎開始轉為謹慎,週四股市大幅下挫,各大股指跌幅超過1%。上述報告還稱這一趨勢有可能會持續到明年。

另兩個導致股市下跌的不利因素一是美元走強,二是美國銀行下屬的美林公司調降了對半導體板塊2010年增長的預期,同時將板塊中10只股票評級下調,包括英特爾(INTC)、德州儀器(TXN)和Marvell Technology(MRVL)等。結果Semiconductor HOLDRs(SMH)暴跌3%以上。

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下面的圖形來自於我們的“美國市場ETF交易地圖”,顯示了SMH和標普500指數的交易區間和資金流向指標。如圖所示,淡藍色帶代表短期交易區間,向上突破這一區間意味著超買(紅色色帶所示),向下跌破這一區間意味著超賣(墨綠色帶所示)。

semiconductorholdrs_20091119

圖1.1 Semiconductor HOLDRs(日線圖)

SMH從3月初以來一直領先大盤,但10月份開始轉跌,隨後走勢大幅落後於大盤。從上圖我們可以看到,SMH不但沒有跟隨標普創出新高,而且過去兩個月資金流向指標一直在零線下方不斷走低,說明機構在強力派發。這是不利的,意味著很可能重新測試短期交易區間的底部。不過我們需要注意,週四的暴跌似乎有些過頭,因此我們預計至少會出現一次反彈至週四向下跳空缺口的嘗試,大約在25.94美元。

週四的行情屬於全線大跌,標普所有十大經濟板塊全部低收。結果,標普500指數底切了1100點的重要心理關口,收於盤中低點附近。事實上,從下圖我們可以看到,指數即將測試關鍵阻力位被突破之後形成的支撐位。

sp500_20091119

圖1.2 標普500指數(日線圖)

如圖所示,11月9日,標普突破了1080點(9月高點)的重要阻力位,隨後大幅飆升、創出年內新高。上周,這一位置遭到測試並成功守住,因此這一位置已經變成了一個重要支撐位。昨天標普果斷擊穿了1100點的重要心理關口,將再次面臨對1080點的測試。如果這一支撐失守,將突破11月份的上升趨勢,從而增加重新測試短期交易區間底部的概率。緊鄰阻力位大約在1114點。收盤站上這一位置將恢復上升趨勢,不過這不可能在今天的行情中發生。

然而從更長期來看,只要資金流向指標繼續維持正值、價格堅守在11月低點1029點上方,多頭應該不會陷入嚴重困境。

總結:大盤近期走勢強烈意味著風險規避情緒重新返回市場。因此在我們看來,週四的大跌可能是一輪遲到已久的回調行情的開始。這意味著下跌走勢很有可能會加速,但只有突破長期上升趨勢才有可能出現深度回調。

(本文作者:Michelle Mai)

© All rights reserved and actively enforced.

﹕Michelle Mai為Capital Essence(錢途集團)撰寫技術分析﹐並為包括市場趨勢在內的數份金融市場投資通訊的首席市場策略師。如欲每日盤前收到更多最新分析, 敬請訂閱