Special technical Bulletin (U.S. Equity Market—major indices) - sep 18, 2011
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Special technical Bulletin (U.S. Equity Market—major indices) - sep 18, 2011 Presentation Transcript

  • 1. SPECIAL REPORT JAZIRA SECURITIES BROKERAGE Sunday, September 18, 2011U.S. EQUITY MARKET—MAJOR INDICESIF HISTORY TENDS TO REPEAT ITSELF, THEN “HIT&RUN”The bull market in the Dow jones industrial average ($INDU) run out of steam wellbelow 2007 highs. It wasnt that serious, keeping in mind the major charting tenetwhich states that “the current trend is supposed to be in force until the weight of evi-dences state otherwise”. The evidences, major bearish ones, have materialized; adown-breakout below the rising neckline of a topping H&S, a major rising trend lineand the 50-week EMA was a major bearish manifestation and indicated that a struc-ture is going to change negatively. Momentum was giving also its own bearish signal;the RSI penetrated the 50-line and the structure Bull Support line (see the circles).However, the implications arent usual, the index found support just at the 200-weekEMA (see the yellow rectangle). To answer the tough question you may be askingwhile reading this commentary, we should investigate the 2007 topping pattern. Samepattern, same rising neckline, same violent breakout and even same bounce off the200-week EMA. The result was a quick pull back move to just the neckline and thebear market continued its pace. Should history repeats itself, the index may continuethe current pull back move to the breakout level (nearly 11,700/ 12,000), run intoheavy selling near that range and then continue the bear market trend to still lowerprices. Even if the index attained some points higher that the neck line, that wouldntnegates the expected bearish outcomes unless a new high is registered over 13,000.So keep it simple; a current pull back move may continue taking out some pointshigher but the major bearish move is expected to continue after that.It was really amazing seeing the NASDAQ composite (identical chart to Dow jonestransportation average) (see next page) retracing 100% of the 2007/2008 bear mar-ket. But the failure in DJIA and S&P500 to attain their 2007 highs put a major obsta-cle in front of the Nasdaq progress. Similar bearish pattern and another serious pene-tration in this technological-based index. The panic decline found support at just the200-week EMA and in the meantime, the RSI also found support from the Bull Sup-port Line. A new manifestation has materialized which needs another look to thepast. Continue... 1
  • 2. SPECIAL REPORT JAZIRA SECURITIES BROKERAGE Sunday, September 18, 2011U.S. EQUITY MARKET—MAJOR INDICESContinued …The Nasdaq index succeeded in closing weekly over the broken neckline. Is this ac-tion should trigger a bear trap signal ? Are we going to experience an explosion moveafter such failure penetration. Well, the past action doesnt state this kind of outcome.After a down-breakout below a rising neckline, the index not just pulled back to thebreakout levels, but successfully closing several weeks over this level giving a falsebear trap signal (see yellow circles). It was just an extended pull back move and thebear move continued to March, 2009 bottom. The RSI during the early 2008 pullback also found support just at the mentioned Bull support line only to threaten the50- line and then continue declining to below the bull support line. Even if the currentpull back move attained much higher levels than the 2008 pull back, it should be stat-ed that as long as the index fail to attain new high ground, the probability will con-tinue to be in the favor of bears.The Dow jones Utility Average shows totally different structure. The serious down-breakout seems to be a fake manifestation and the index hovering around a major re-sistance line (443). If the index made its mind to penetrate this level “decisively” athrust may continue to the next resistance level @ nearly 460. What is the messagewe should get from this index ? Why this bullish structure while other indices aretumbling? In the past, a rise in utility stock prices indicates investors anticipate fall-ing interest rates. Thats because utilities are big borrowers and their profits are en-hanced by lower interest costs. As a result, it was a leading interest-sensitive index,but keeping in mind that the U.S. interest rates nearly hovering around the zero(0.25), no-interest based analysis should be employed, and a leading characteristicsshould be questioned. In other words, the breakout in the utility should not be consid-ers a leading signal and doesnt indicate any similar breakout in other indices.BOTTOM LINE: The pull back move may continue for some time, but the bearmarket is expected to continue. Traders can Hit & Run , while investors are advisedto Sell rallies 2
  • 3. SPECIAL REPORT JAZIRA SECURITIES BROKERAGE Sunday, September 18, 2011 Jazira Securities Brokerage Jazira Securities Online Trading 15 Shooting Club Street, Mohandessin You can trade online through Jazira Securities online Tel: (+202) 3760 9983 - 37609941 trading portal ... Fax: (+202) 3760 9883 www.jaziracapital.com Please contact our customer Service representatives for further information..JSB Contacts Title Land Line Mobile EmailHussein El Sawalhy, CFA Managing Director +202 2578 0931/2 +2010 1410 690 helsawalhy@jaziracapital.comAhmed Helmy Head of Sales & Trading +202 2576 0188 +2010 1004 482 ahelmy@jaziracapital.comMohamed Fahmy Head of Research +202 2578 0931/2 +2012 2157 312 mfahmy@jaziracapital.comRamy Rashad, CMT Chief Technical Analyst +202 2578 09 31/2 +2010 8385 501 rrashad@jaziracapital.comBasant Soror Online Trading Technical Support +202 2578 09 31/2 +2012 1615 409 bsoror@jaziracapital.comGeorge Mansour Customer Service +202 2578 09 30 +2012 9214 069 gmansour@jaziracapital.comDoaa Osman Customer Service +202 2578 09 30 +2012 7552 436 dosman@jaziracapital.com Disclaimer  Jazira Securities Brokerage (JSB) is a licensed Egyptian Stock Market Broker, regulated by the Egyptian Financial Service Authority.  Opinions, estimates and projections contained in the research reports or documents are of the author as of the date published and are subject to change without notice  JSB research reports or documents are not, and are not to be construed as, an offer to sell or solicitation of an offer to buy any securities.  Unless otherwise noted, all JSB research reports and documents provide information of a general nature and do not address the circumstances of any particular investor.  Neither JSB nor its mother company (Jazira Capital), or any of its affiliates accept liability whatsoever for any investment loss arising from any use of the research reports or their contents.  The information and opinions contained in JSB research reports or documents have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness.  JSB, Jazira Capital or any of its affiliates and/or their respective officers, directors or employees may from time to time acquire, hold or sell securities mentioned herein as principal or agent.  JSB research reports and all the information opinions and conclusions contained in them are protected by copyright.  The research reports or documents may not be reproduced or distributed in whole or in part without express consent of JSB Research.  JSB research reports or documents, recommendations and information are subject to change without further notice . 3