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Time to Confirm Key Reversals

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This is the week for semiconductors, emerging markets, the NASDAQ 100 Shares, and crude oil.

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Editor's Note: This article was written by Richard Suttmeier, chief market strategist at ValuEngine.com, which is a fundamentally-based quant research firm in Princeton, New Jersey, that covers more than 5,000 stocks every day.


Weekly Key Reversals

Last week we saw weekly key reversals for the Dow and S&P 500, which continue with lower weekly closes this week and next with the Dow below 10,173 and the S&P 500 below 1115.1.

The prior week we had weekly key reversals for the SOX, EEM, QQQQ, and crude oil and had lower weekly closes last week continuing the overall key reversals. These key reversals are confirmed by closes today below 329.49 SOX, 39.61 EEM, $44.16 QQQQ, and $74.26 on Nymex crude oil.

The weekly chart for the Dow Industrial Average is now negative with the Ascending Wedge that goes back to March 5, broken to the downside and below the down trend that goes back to October 2007.


Source: Thomson / Reuters

Even if the key reversals aren't confirmed, today's support is 10,004 with my annual pivot, now a resistance at 10,379. We had the breakout followed by the fake-out as I predicted as 2010 began.

The Philadelphia Semiconductor Index (SOX) has a negative weekly chart profile with semiannual and annual supports at 271.95 and 259.45 with the 200-week simple moving average at 378.51.


Source: Thomson / Reuters

The Emerging Markets Index Fund (EEM) has a negative weekly chart profile and is below my annual pivot at $39.81 with my annual resistance at $44.99.


Source: Thomson / Reuters

The NASDAQ 100 Shares (QQQQ) has a negative weekly chart with the ETF between my annual pivots at $40.37 and $44.82.

Nymex Crude Oil has a negative weekly chart profile with Texas Tea below its 200-week simple moving average at $76.20. Quarterly support is $67.22 with my annual pivot, now a resistance at $77.05.

Retail HOLDRS Trust (RTH) shifted to negative on its weekly chart on Friday, January 15. The subsequent decline last week has this ETF on the cusp of its 200-week simple moving average at $91.26 and a close this week below this key level indicates risk to my quarterly value level at $78.37. This week's resistance was $92.63.


Source: Thomson / Reuters

According to a US Treasury Report, The Home Affordable Modification Program aims to help responsible American homeowners maintain a sustainable monthly mortgage payment through a pay-for-success framework that aligns incentives of borrowers, lenders, and servicers.

Over 900,000 Americans have begun trial modifications since the program's inception and more than 110,000 have been approved for permanent modifications as of December 31, 2009.

The median monthly savings for individual homeowners is more than $500 per month. Over 100 servicers have signed up to participate in HAMP, covering more than 89% of mortgage debt outstanding in the country. The program was designed to help about 7 million homeowners, so the program hasn't met expectations. This will lead to at least 3 million to 3.5 million defaults and foreclosures or short sales in 2010. As this supply of existing homes comes to market, prices will decline again, putting pressures on homebuilders and community and regional banks.

Send me your comments and questions to Rsuttmeier@Gmail.com.
No positions in stocks mentioned.

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