Key Reversals and Key Levels Tested
After the first two weeks of 2010, we have four.
As 2010 began, Wall Street told investors on Main Street to buy emerging markets and technology, and that crude oil was headed back above $100 per barrel.
After the first two weeks of 2010 we have weekly key reversals for the Emerging Markets Index Fund (EEM), the Philadelphia Semiconductor Index (SOX), the NASDAQ 100 Shares (QQQQ), and Nymex Crude Oil. A weekly key reversal occurs when a market reaches a new high for the move during the week, but then closes below the low of the prior week. A market reversal is confirmed by two consecutive lower weekly closes after that.
The EEM traded as high as $43.47 a week ago Monday then ended last week at $41.95 below the low of the first week of the year, which was $42.16, but still up 1.1% year to date. A close this week below $41.34 indicates risk to the 200-week simple moving average at $37.70. This would put EEM below my annual support at $39.81.
The SOX traded as high as 370.91 a week ago Monday, which was shy of the 200-week simple moving average at 380.25, then ended last week at 344.67, well below 360.08 the low of the first week of the year. A close this week below 343.66 indicates risk to semiannual and annual supports at 271.90 and 259.45. The SOX is down 4.2% year to date despite a blowout earnings report for SOX leader Intel (INTC). Where's the technology leadership Wall Street called for?
QQQQ traded as high as $46.64 a week ago Monday and ended last week at $45.85, slightly below the low of the first week of the year at $45.92. Without technology leadership I show risk to semiannual support at $44.82, then to annual support at $40.37.
Nymex Crude Oil traded as high as $83.95 a week ago Monday and ended last week at $78.00 below the low of the first week of the year at $79.63. My annual support at $77.05 held as this week begins. This week's support is $76.79 with the 200-week simple moving average at $76.15. A close this week below these supports would be a clear sign of a reluctant economic recovery.
Bank Failure Friday Closes Three Private Community Banks
All three banks were overexposed to C&D and CRE loans bringing the total for 2010 to four. In 2008 there were 25 failures, in 2009 there were 140, so the total for "The Great Credit Crunch" is now 169. We cannot blame Wall Street for theses woes of community banks on Main Street. Blame the regulators, the US Treasury, the Federal Reserve, and the FDIC for ignoring their own regulatory guidelines.
Assuming the FDIC collected $45 billion in Deposit Insurance Fees for 2010 through 2012 this fund is down to $25.5 billion, which will run dry this year as more than 150 additional banks fail.
The yield on the 10-Year US Treasury tested my semiannual resistance at 3.675 as I predicted last week. Wall Street told Main Street investors that yields would rise, but my monthly support at 3.868 held as 2010 began. The 50-day and 200-day simple moving averages are 3.555 and 3.438, which can be tested again if this risk aversion trend continues.
The Bull leads the Bear in the Dow Title Bout, but the Bear could score a knock-out this week. The score stands at 8 to 2 favoring the Bull. My annual support is 10,379 with a weekly pivot at 10,634, and monthly and annual resistances at 10,997 and 11,235. A knockout punch by the Bear requires a weekly close below 10,379. The Bull needs a daily close above 10,634 to win round 11. A close below 10,574 breaks the Ascending Wedge support that goes back to the March 2009 lows.
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