Sunday, July 8, 2007

Weekend Review

$DJUSRE weekly (chart 3rd from top)- shows resistance in the 325 to 330 area which is on top of the 40 week MA. The downtrend line from peak back in Feb also congests here so this area is significant resistance. RSI and MacD confirming the weakness.

$DJUSRE daily (chart 2nd form top) - the rally is showing signs of fatigue. The 50 day is south of the 200(flat and turning down) which puts this in bear mode. 320 -325 are clear resistance. On top of all this the neckline of the head and shoulders intersects here as well.

SRS daily (top)- digesting recent gains it has fallen to support area here at $85. RSI and MacD confirm this. Whether you follow $DJUSRE or IYR do not panic. The housing bubble has popped and like the tech bubble before, it will fall further than you believe possible. If you believe the chart on the 10 year note yield (which of course I do), it spells MAJOR problems for real estate. Remember this has been the driver of the U.S. economy functioning as an ATM machine for the consumer. The $TNX chart (4th from top) had an outside reversal or bullish engulfing candle on the weekly which is very positive the bond bears (yield bulls).

Crude - USO broke the neckline I have been mentioning and had a strong close on the weekly. The daily still shows the 50 south of the 200 which is okay but needs to be watched. Again, in addition to the technicals, politics and economics support this trade. We could be entering a period like we have seen with gold where the underlying physical outperforms the related stocks.

$DJUSFN weekly (last chart)- a potential double top on this index may be in place. We are right on top of the 40 week MA which has served as strong support. RSI and MacD show negative divergences (lower highs) on the 2nd rush up thru 600. Support areas to watch are 580 and 565.

$DJUSFN daily (2nd last chart)- the 200day is offering support here. Resistance just shy of 600 which is where the 50 day resides. The 50 is still north of the 200 so not in complete bear mode yet. A break thru 580 more importantly 575 would signify significant deterioration. The Bear Stearns drama is the opening act of this drama. My preferred play is the SKF.

SKF daily (chart 5th from top)- consolidating recent gains back to the 71-72 area. I am not the biggest cup n handle fella but the action from mid April to end of June could be construed as a cup with the handle being the action of the last week or so. The cup is worth 10pts (76-66) so this would imply a target of $86. (76 break out plus 10pts) The falling wedge scenario is playing out nicely. Using the spike high of 81 back in early March as the start of top descending line and low of 69.50 in mid March as start of lower descending line. Widest part is 11.50 pts and with break out in early June thru 68(plus 11.50)leaves an implied target of $79.50. Couple of bullish patterns here to watch. Good luck and good trading to you.
Disclaimer: Just like the plastic bags most goods come packaged in that need the disclaimer , do not put on head as suffocation may occur. The same applies here. I am not telling you to go out and do any of this. I am just sharing stuff I am watching. Above all, don't risk capital you can't afford to lose.

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