Weekly Market Summary for Week Ending Oct 1, 2004
BY AL MARTIN
(Insiderintelligence.com) Last week saw the SPX trade in 30 point (1101.50-1131.50) range, settling out the week at 1131.50 up 21.39 points, week over week, in a week marked by further deterioration on market internals, wherein volume shrank to a fresh low on our 30 day volume progression charts and the A/D line as well as the new highs /lows also reaching a 30 day low.
Furthermore common stock mutual fund weekly inflows reached a fresh 30 day low as did the weekly summation of the CBOE VIX volatility Index, with weekly total insider selling, on a dollar volume basis reached a 6 week high.
Also, the number of publicly listed companies, traded in domestic exchanges, issuing profit warnings, reached a fresh 30 day high. Weekly Big Board AMEX and OTC short interest reached a fresh 30 day low, while total margin debt reached its sixth consecutive weekly new all time high, wit foreign buying of US stocks, which comprises fully 26% of all US stock ownership, fell for the 29th consecutive week, establishing a fresh 8 year low.
For these reasons, Tradex Tradenet consensus, which had posted the previous 4 weeks as to market internals, as “ poor” posted last week’s market internals as “ very poor.” With special comment noting that total margin debt is now higher , with short interest lower than were both, during the week of March 17 2001.
As to market fundamentals; last week’s economic calendar releases, with equity market impact constriction, were as follows: Aug. new hm sales at 1.163 mu vs. 1.153 mu (e) neutral –mildly bullish, sep consumer conf. Index @ 96.8 vs. 100 (4e) moderately bearish, GDP annuals (final revision) neutral-mildly bullish, wkly jobless claims @ 369K vs. 343K (e) – 4 wk ma @ 343.5K + 2250-cont. claims @ 2.87M (-) 16K moderately bearish, Aug Personal Spending flat vs.+.1 (e) with income +.4 vs. +.4 (e) neutral (due to prior month’s revisions), Sep NY Empire Index @19.3 vs. 17.8 (e) mildly bullish Aug personal savings rate at +.9 vs+.8 (e) neutral – mildly bullish, Aug Construction Spending @+.8 vs.+.4 (e) moderately bullish, Sep U of M Consumer Conf. Index @ 94.2 vs. 96.0 (e) mildly bearish, Sep ISM (Manuf.) at 58.5 vs. 58.3 (e) neutral – mildly bullish, Sep Chicago PMI @ 61.3 vs. 58.0 (e) mildly bullish and Aug. Help Wanted Index at 37 vs. 38 (e) mildly bearish
For the week overall equity market construction of net economic calendar releases, on a weighted and revised basis, was +2 (-2 bond market construction) on Tradex’s 52 wk. Economic Calendar release stock/bond Mrkt. Constriction charts, with the cumulative 52 wk total at 29 (moderately bullish) yet with Q3 construction at –8 (mildly bearish) indicating that economic fundamentals are in the process of rolling over from bullish to bearish.
As to trading, Monday's session saw the SPX 100 day ma, as well as the 1104 floor support level broken on both an intra day and closing basis, this continued the short side bias from the previous Friday's close.
Thursday's session saw the SPX trade down into the 1100/02 support zone establishing an intra-day low of 1101.50, which when the floor saw that selling was drying out in the 1100 level would hold, traders began to bid the market which in turn prompted a late session round of scattered light volume short covering up to 1111, settling back to close at 1110.06 right at the 100 day ma, thus changing the bias from short to long, although not sufficient to generate a fresh buy signal in that the market was unable to close above the bottom of the 1114/18 now resistance zone.
Wednesday's session saw the SPX establish an 1108 intra-day low, well above the 1104 support level which in turn promoted scattered light volume waves of floor buying which further in turn promoted late session short covering, when it became evident that the 100 day ma would be breached on the upside, a flurry of last minute moc buy orders came into the pits from technical traders who saw that the market would close above the 1114 bottom of the 1114/18 resistance zone for the first time in 11 sessions, thus generating a fresh technical buy signal, based on the market settlement at 1114.80, further reinforcing the existing long bias and indeed generating a fresh short term technical buy signal.
Thursday's session saw the SPX establish a higher intra-day low at 1109.50 and a higher intra-day high at 1116 over that of the previous session, while establishing a close above the 1114 bottom of the 1114/18 resistance zone, thus generating a second consecutive daily technical buy signal and continuing, albeit not strengthening the long side bias in that the market did close lower although by only the smallest of fractions that chart (1/4 point) than the previous close.
Friday’s session saw the selling pressure that was apparent in Monday – Thursdays session due to end of month and quarter portfolio window dressing activity come to an end.
With a typical first day of the month light volume session likely in store in net neutral economic fundamental news flows, floor traders began bidding the market in late morning trade, enticed by the pool of buy stops from shorts and technical traders coalesced just above the top of the 1114/18 resistance zone, and again just above the top of the 1120/22 resistance zone and further again just above the top of the 1129/31 resistance zone up to the 1132 weekly floor resistance level.
Indeed, as day traders would have noticed, volume spiked at each one of these technical levels as buy stops were run, in what was otherwise a light volume session with the poorest daily market internals of the trading week.
Of course and as always, readers who had put on fresh long positions at 1114/15 earlier in the week, sold on the close Friday, in that we don not hold positions over the weekend as to do so would increase risk beyond the tolerance of the risk/reward trading model that we employ.
Furthemore wiith three technical resistance levels breached on the upside, on both a daily the ling side bias was continued. However and as was noted in Tradex’s end of week sheet comments that there will likely be some reversals of Fridays rally in Monday’s intra-day trade, in that the rally was a light volume affair with poor market internals promoted largely by floor traders buying and short covering with very little institutional and even less retail interest seen.
The rally occurred on both a day and week which saw very negative collateral market action, i.e. a fresh closing high in crude, a dollar sell off, a rally in gold and a sharp sell off in the bonds.
The new support/ resistance level SPX zones, based on last weeks market action are\ as follows: first support at 1129/31 new support zone, second support now becomes the 1120/22 support zone followed by third support at 1114/18 now support zone down to floor support at 1104 followed by the 1100/02 support zone , the latter being a combination of both technical and psychological support. Next upside resistance remains at 1135 (moderate) , followed by 1140 (heavy) then on to 1147/49 (light), 1150 (heavy- psychological) .
Readers who acted upon our previous weeks note of the "short term very overbought” condition on the USZ contract made money in last weeks trade with the USZ contract closing at 111.17 down 2 whole points (2-1/2 points intra-day high to intra-day low) wk over wk.
Indeed last week’s end of week Friday (10/1) posting changed four levels from “short term very overbought to now “short term slightly oversold which will likely prompt a ½ to ¾ point technical bounce , to relieve the slightly short term oversold condition.
Furthermore the DXZ contract which came under pressure last week up until the close of Thursday's session, due to typical end of Japanese fiscal year currency repatriation trades began an expected technical bounce in Friday's session a bounce which is expected to continue for another 5 basis points starting Monday.
Also the GCZ contract signaled a fresh technical buy , in last Wednesday's trade, establishing a fresh MOC buy signal when the 414.40 top of the 411.30/414.40 resistance level was breached on a losing basis at 415.
This signaled the all clear for a likely rally up to the 418.60/ 422.40 next upside resistance level the top of which was tested in Friday's trade. However , to continue the long hold the GCZ contract would need to establish a close above 422.40 by Tuesdays (10/5) session close.
Also the HGZ contract, having established a weekly close above 140.00 is now posted as “ short term overbought” and would establish a “ short term very overbought” reading upon the establishment of a close above 143.50 (Note : LME/ZME warehouse copper inventories are at near record levels at a time when Chinese and Indian demand has begun to fall).
On our watch list for this week is the PAZ contract which, on an intra-day basis, broke out above its 218.30/222.40 congestion/ support zone on several occasions in last week's trade , a definitive close above 222.40 would generate a fresh short term buy signal.
Palladium is, by the way, being pushed higher on the news that Hughes Research Institute has temporarily abandoned its 3 year intensive research effort to substitute silver for palladium in the nickel-rhodium compounds used in catalytic converters.
* AL MARTIN is an independent economic-political analyst with 25 years of experience as a trader on NYMEX, CME, CBOT and CFTC. As a former contributor to the Presidential Council of Economic Advisors, Al Martin is considered to be a source of independent analysis for financially sophisticated and market savvy investors.
After working as a broker on Wall Street, Al Martin was involved in the so-called "Iran Contra" Affair as a fundraiser for the Bush Cabal from the covert side of government aka the US Shadow Government.
His memoir, "The Conspirators: Secrets of an Iran Contra Insider," (http://www.almartinraw.com) provides an unprecedented look at the frauds of the Bush Cabal during the Iran Contra era. His weekly column, "Behind the Scenes in the Beltway," is published weekly on Al Martin Raw.com, which also publishes a bimonthly newsletter called "Whistleblower Gazette."
Al Martin's new website "Insider Intelligence" (http://www.insiderintelligence.com) will provide a long term macro-view of world markets and how they are affected by backroom realpolitik.