sábado, 13 de julio de 2013

sábado, julio 13, 2013

Getting Technical

 WEDNESDAY, JULY 10, 2013

Charts Say the Stock Rally Is for Real

By MICHAEL KAHN

Technical indicators have not looked this good in a while, but Ben Bernanke and the Fed still control the market.

 

Ever since the market started to move higher last November, technical indicators such as volume, momentum and market leadership seemed to be at odds with the rally. The stock market went up, and that was all that mattered.

Or was it? The Federal Reserve had a lot to do with it as the Fed continued to pump liquidity in to the system via its open-ended bond-buying program (called quantitative easing or QE). As long as the printing presses rolled, stocks went up.

So with the technicals going positive over the past few days as the May-June correction ended, we have a perverse reason to worry. Why now, after eight months of rallying? Could it be that the market has finally given in to the siren call of endless Fed stimulus? Does it believe that the last Fed campaign dubbed "QE to infinity" was named literally?

But let's get to the charts and the positive developments that have occurred since last Wednesday's column (see Getting Technical, "Up or Down? Decision Time for the Market," July 3).

The Standard & Poor's 500 index moved smartly above all of the resistance features outlined last week (see Chart). These include the falling trendline from the May peak, the 50-day moving average and the gap on the chart from the June 20 market slide. The index is also back above its former rising trendline drawn from the November low, so the June breakdown is now fully negated.

Chart

Standard & Poor's 500
[image]


Market breadth, as measured by the New York Stock Exchange advance-decline line, a running tally of how many stocks go up and down each day, is also moving higher. So is the net number of 52-week highs. Indeed, both the full NYSE 52-week highs minus lows data and the common-stock only data, with bond equivalents and exchange-traded funds removed, are climbing once again.

Key sectors such as the banks, represented by the SPDR S&P Bank ETF (ticker: KBE) are at multiyear highs. Retail, as represented by the SPDR S&P Retail ETF (XRT), recently broke through resistance to all-time highs. Even the iShares PHLX Semiconductor ETF (SOXX) continues to outperform the market after surviving Monday's Intel (INTC)-induced selloff.

Other than these three, the only sector of the critical group I call the "four horsemen" to show technical trouble is home building. But the iShares U.S. Home Construction ETF (ITB) is still holding above a very important technical price floor.

After the close Wednesday, Fed Chief Ben Bernanke will speak and take questions. Guessing what he will say is a fool's game, but if he does back down from his suggestion that he will pull back on bond buying (taper), investors will cheer. And if he leans more toward tapering, investors will jeer.

For now, traditional bull market sectors such as financials, semiconductors and consumer discretionary are in the lead, as this column reported in earlier stories on chip stocks and the consumer discretionary ETF. Small company stocks are outperforming big stocks, and the Russell 2000 cleared resistance with its first-ever close above 1,000 last Friday. It does appear that the market has finally gotten its act together in a more textbook way.

It seems strange to worry about a more positive structure in the market, but maybe that is just a different wall of worry than we are used to having. Has the market changed for the better, or is this change really the capitulation of the bears?

For now, we have to take the charts at face value and expect July to live up to its better-than-average reputation. But after the market digests what Ben Bernanke has to say, seat belts may be required.

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