Capitalogix Commentary 12/13/09

It was a slow news week, as long as you weren't Tiger Woods.  Numbers and charts can tell only so much of a story.

Market Commentary.

Why has the market stayed so strong?  The first thing that comes to mind is massive government intervention.  The next thing that comes to mind is that there have been more buyers than sellers.  That is not a pun.  Perhaps it is more telling to say there hasn't been a lot of committed short sellers.  Recently, however, there hasn't been a lot of committed buyers either.  The result has been a month-long, narrow trading range.

Here is an intra-day chart of Dow Jones Industrial Average. It is easy to see the trading range that has constrained prices for the past month.  Notice how many times price has turned-down off the highs, and bounced off the lows.  The question is, will it happen again?

Technical traders will see this as a likely time to turn back down.  The Dow is at the top of its recent trading range and has several negative divergences (like the MACD shown at the bottom of the chart).  However, markets aren't known for rewarding the "easy" trade.

In addition, big moves often happen after tight ranges.  So, the next move might be a big one.

For a clue as to the direction of the next move, it may help to look to the Financial Sector.

Financials are Often Early Indicators of the Broader Market.

Here is a chart of Goldman Sachs. It is going through a downside correction, beneath its 50-day moving average, and is testing support.  A sustained move above this level could be a very bullish early indicator for the U.S. Equity markets.  A further break-down, from here, would also be telling.

Business Posts Moving the Markets that I Found Interesting This Week:

• The Post-Recessionary Global Economy: In Search of the New Normal. (Wharton)
• Think The Worst Is Over? Think Again, VCs Say At Tech Showcase. (WSJ)
• BusinessWeek's List of the World's Most Intriguing Companies. (BusinessWeek)
• Where Does the Money Go From Each iPod Bought? (Telegraph.UK)
• Is Time to Be Brave and Buy the Dollar? (TimesOnline)
• More Posts Moving the Markets.

Lighter Ideas and Fun Links that I Found Interesting This Week

• Time Magazine's The 50 Best Inventions of 2009. (Time)
• Loneliness is Contagious: Even If That Sounds like an Oxymoron. (Slate)
• Six Social Media Trends for 2010. (Leader)
• Learning From Porn: Lessons from the Cutting-Edge Of Technology. (MediaPost)
• Dissecting the Dollar's Re-Design Project. Is This Re-Branding? (Mint)
• More Posts with Lighter Ideas and Fun Links.