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Weekly Market Summary for Week Ending Sept. 24,

An exclusive weekly feature by Chief Market Technician Al Martin for Insider Intelligence.com subscribers...

Last week saw the SPX trade in an expanded 24-1/4 point (1108.00-1132.25) range, settling out the week at 1110.11 down 18.44 points week over week in a week marked by increased net negative fundamentals, and a late week technical breakdown with increasingly poor market internals. Last week’s market action did provide two distinct technical trading opportunities which fit our 10-1 risk/ reward ratio requirements.

First, a fresh short term buy signal was generated on Monday’s close when the SPX successfully held three separate intra-day tests of the 1120 bottom of the then 1120-22 support zone, which was also an important floor support number, only to rally in the final minutes of the session to close just above the 1120-22 support level at 1122.20 thus signaling an MOC buy order.

Tuesday’s trade saw the intra-day low held above the 1122 level, prompting a late session technical rally to the 1132 level, which fell back into the close at1129.30, constituting the thirds failure of the 1131 top of the 1129-31 resistance zone on the seven day progression charts, thus signaling an MOC sell order of the previous day’s long position, capturing approximately 7 SPX cash points on the trade.

In Wednesday’s near technically perfect trade, the SPX broke below the 1120-22 support zone in the opening trade, further proceeding to take out the 1114-18 support zone in heavy, so-called “natural selling” coming primarily from liquidation of institutional long positions, to establish an intra-day low around the 1112.50 level, which lifted slightly into the close due to a final round of scattered light volume short covering to settle out the session just below the bottom of the 1114-18 support zone at 1113.56, thus signaling an MOC short position order.

Thursday’s market action continued to confirm the short hold with the intra-day high being held below the 1114 bottom of the 1114-18 support, now resistance, zone at 1113, proceeding to establish an intra-day low of 1108, in late session trade, which do not prompt any fresh short covering due to pit sentiment that the market waited to test floor support at 1104, whereupon the markets settled out at 1108.36, establishing a double confirmation hold of the previously acquired position in that the close was below the SPX 100 day moving average , the first such close in 28 sessions.

Friday’s session trade saw the previous days lows held, with an intra-day low of 1109, however all rally attempts were turned back at the 1114 bottom of the 1114-18 support , now resistance zone, with the establishment of 1113.75 intra-day high.

The failure to break below the previous day’s range did prompt a late session round of light volume short covering, lifting the market into the close at 1110.11, right at the 100day moving average, and below 1114, this signaling a continued confirmation of a short side bias.

We did, however, cover our short position on the close, taking 3-1/2 SPX cash points out of the position, mindful that we do not hold positions over the weekend for reasons previously explained.

Bond traders take note: with the USZ contract closing out the week at 1113.15, Tradex CME consensus was changed from “short term overbought” to “short term very overbought.”

Be careful of the bullish hype being heard around the coffees pits based on reports of Colombian crop damage and a drop in West African robusta shipments in that Colombia still has a 112 million bag carry forward from last years crop and port congestion at Dakar which had been causing shipping delays is now largely cleared up.

Weekly Market Summary for Week Ending Sept. 17,

Last week saw the market trend higher despite overall mixed to bearish fundamental economic news flows and continuing neutral to bearish market internals, in a quadruple options / futures expiration week. The markets were forced higher due to the substantial number of naked shorted Sept. SPX\calls, most notably at the 1125 and 1130 strikes, which had to be bought in by Friday’s expiry, in a week which had begun still showing more than 60,000 Sept. SPX contracts outstanding.

The markets did provide, however, yet another entrance point in Thursday’s session trade when the SPX held four separate intra-day tests of the 1120 bottom of the 112-22 resistance, now support zone, closing above the 1122 top, at 1123.50, thus generating an MOC buy signal.

Friday’s market action saw higher trade in a expiry swelled volume with the early session rally stopping at the 1131 top of the 1129-31 next upside resistance zone almost to the very tick.

An MOC sell signal was generated on the close for the fresh long position acquired the previous day not for any technical reasons, but simply due to our risk/ reward model wherein we do not hold positions over the weekend in that to do so would increase\ risk beyond our 10-1 risk/reward ratio, which we trade by.

Indeed, Friday’s 1028.55 SPX close generated a continued long side bias; however we did not issue the bias, mindful of the 20-year historical average which shows that the markets will close lower, on the following Mondays session if the Friday’s expiration session closed higher 74.6% of the time.

Next upside resistance continues to be a light shelf of resistance at 1129-31, moderate resistance at 1135, followed by heavy resistance at 1140 as can be seen on the 89 month charts and the 12 month trend line, now at 1138.63

First downside support is now 1120-22 light, followed by 1114-18 moderate.

Bond traders should also be advised, that in Thursday’s session close the USZ contract went out on the day above 112.08-11 at 112.14, thus generating a short term overbought condition on the contracts MACD line.

Those who trade the “softs & trops” should be advised that long side fund interest in the SBH contract has been building especially after Friday’s session action wherein key resistance at 8-1/2 cents was breached.

The fundamentals in sugar are good with storm damage having severely impacted the Caribbean basin cane crop, and with some damage to Louisiana cane/beet crop being reported which in turn, with a substantially reduce Australian beet harvest and rumors of a fresh 50,000 ton Chinese order in the offing have all combined to exert upward pressure on the SBH contract.

In last week's overlooked fundamental news: Standard & Poor's reported that the number of both NYSE & NASDQ comp. listed companies reporting earnings downgrades has reached a 3 year high, while business inventories to sales ratios have ominously reached a 4 year high. The Aug. book to bill ratio came in at a reading of 1.00 vs. market guesstimates of 1.03, in a special note the Semiconductor Institute noted that despite the bullish touting of chip sales over the past 12 months, the book to bill ratio has been unable to sustain a number above 1.00. Also, in what I would believe is the single most ominous economic statistical release of last week, came from the US Treasury which reported that holdings by US investors of US Treasury securiities had declined to 29% of all of said debt securities outstanding, the lowest domestic ownership of our own national debt ever recorded.

Posted by: Admin on Sep 18, 04 | 3:59 pm | Profile