Posts Tagged ‘correction’
Is The FTSE 100 Index Headed Down?
The FTSE 100 is close to providing the major bear signal needed to prompt a sustained break below the 5000.00 level, which in turn would attract a fresh wave of bear pressure to 4365.00, but potentially 4160.00. The index of the U.K.’s blue-chip companies has been on the back foot ever since the collapse off the 2010 high at 5833.73 in mid-April. The age-old adage suggesting stock investors should sell in May and go away has been an accurate one this year, and a series of lower highs and lower lows has been evident since then. However, since the beginning of May, the lower lows have met an unusual and very strong negative divergence in the RSI, a possible foretell of a bullish break that is so unexpected by most Market Analysts and Technicians. For details, see the FTSE 100 daily chart for details.
This is the way the Chart looks:
This setback can be broken down into impulsive and subdividing downwards moving waves, where the May 7 reaction low at 5045.30 marks the first impulsive wave low, followed by the corrective rally to 5435.99. The subsequent impulsive move downwards then starts to subdivide after setting a lower low at 4898.49 on May 25, before correcting higher to 5262.50 last week.
Looking closely at that June 3 reaction high at 5262.50 reveals it to be a bull failure/bull trap high, and dominant bears are looking to force a break below this week’s low at 4984.66 to expose the 4898.49 reaction low. A break through this 4898.49 low would provide the strong sell signal, as a subdivided third wave decline is usually a very powerful destructive wave, initially exposing the 4647.00 area where an equality target and the 50% Fibonacci Retracement levels of the 3460.71/5833.73 rally coincide.
However, wave extensions larger than 1:1 are usually associated with this type of decline, exposing congested support between 4365.00 and 4392.82, and possibly the 4160.00 target, being a 1.618 extension target projected off the 5435.99 lower reaction high. Meeting this 4160.00 target would represent a decline of approximately 18% from current levels.
To question the intensity of the prospective bearish outlook, a break above the 5262.50 bull failure high is needed. However, to completely negate the bear threat would require a break above the 5435.99 high. As I mentioned above, the strength of the break possibility is heightened by the RSI divergence and other important technical factors. If one looks at the world picture, he sees bottoming and retesting supports all over. The turnaround of the World Markets may be coming and there is ample reason to believe in this.
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S&P 500 Snaps 2-Day Losing Streak
A wide range of U.S. stocks, including DuPont, Bank of America and Exxon Mobil, climbed Tuesday, indicating increased confidence in the U.S. economy, although continued worries about the European economy kept the gains in check.
The Standard & Poor’s 500 index rose 11.53, or 1.10%, to 1062.00, its first gain in three days. All of the measure’s sectors rose, with materials in the lead while the technology sector lagged.
DuPont led the Dow Jones’ gains with a jump of 1.40, or 4.1%, to 35.49, after the company’s finance chief reiterated DuPont’s earnings forecast for the next few years. Among the Dow’s other top performers, Bank of America climbed 50 cents, or 3.4%, to 15.33. Exxon Mobil advanced 1.94%, or 3.3%, to 61.24, lifted by an increase in crude-oil futures to nearly $72 a barrel.
McDonald’s climbed 1.63, or 2.4%, to 68.38. The fast-food giant’s global same-store sales rose 4.8% in May, exceeding some analysts’ views, although the company said it anticipates foreign-exchange rates, especially a weakening euro, to hurt earnings for the year.
Intel was among the Dow’s few decliners with a drop of 13 cents, or 0.6%, to 20.18, on Nasdaq. Susquehanna Financial Group cut its investment rating on the chip maker’s stock to neutral from positive, citing signs of weakness in the personal-computer market.
The Nasdaq Composite slipped 3.33, or 0.15%, to 2170.57, its lowest close since Feb. 10. Weighing on the measure, Amazon.com slid 3.18, or 2.6%, to 118.83, eBay declined 14 cents, or 0.7%, to 21.69, and Google was off 74 cents, or 0.2%, to 484.78, all on Nasdaq. Bank of America Merrill Lynch cut its 2011 estimates on those stocks and several others in the technology sector, citing the U.S. dollar’s climb, among other factors.
Amazon was also hurt by competitive concerns after Apple Chief Executive Steve Jobs said Monday that iBooks, the e-reading application on its iPad tablet computer and soon coming to the iPhone and iPod Touch, has helped it capture a 22% share of e-book sales–an area previously dominated by Amazon’s Kindle e-reader. Still, Apple (Nasdaq) gave back 1.61, or 0.6%, to 249.33.
The action followed reassuring comments from Federal Reserve Chairman Ben Bernanke that the U.S. economy will continue to recover, although not at a pace strong enough to bring unemployment down quickly. The Fed chief said the U.S. recovery probably began sometime late last summer and that consumer spending and business investments appear to be taking over from the fading government stimulus in lifting the economy.
However, investors remained concerned about Europe’s sovereign-debt issues, especially after Fitch Ratings cautioned that the U.K.’s fiscal challenge is “formidable” and warrants a faster pace of deficit reduction than was outlined in the April 2010 budget issued by the previous Labour government.
Uncertainty over the oil spill in the Gulf of Mexico also continued to weigh on the market.
“Our view has been that we’re going to probably have to suffer the whole summer before the market participants will look at it and say things have settled down over there” in Europe as well as with the oil spill, said Linda Duessel, equity-market strategist at Federated Investors. “All this uncertainty has to be suffered as we make our way though the summer months.”
Goldman Sachs cut its investment ratings on offshore drillers Transocean, Diamond Offshore and Noble with a prediction the six-month deep-water drilling moratorium becomes 12 months. The moratorium affects an estimated 20% of global capacity, the firm wrote, which is likely to keep pricing under pressure. Meanwhile, reports that Diamond was dealing with another oil leak in the Gulf of Mexico only created more uncertainty. Transocean tumbled 2.84, or 5.8%, to 46.33, while Diamond Offshore declined 2.27, or 3.8%, to 56.94, and Noble dropped 39 cents, or 1.4%, to 27.34.
Dollar General rose 60 cents, or 2.1%, to 29.83. The discount retailer’s fiscal first-quarter earnings jumped 64% as shoppers responded positively to new brands of merchandise, such as Hanes underwear, and while the company also improved global sourcing to reduce product costs. Dollar General also boosted its earnings target for the year.
ConAgra Foods rose 44 cents, or 1.8%, to 24.44, after the packaged-foods company said it would sell its operations that make dehydrated and fresh vegetable products to Olam International, a Singapore-based company, for $250 million.
Corning climbed 1.05, or 6.6%, to 17.05. Bernstein upgraded its investment rating on the stock to outperform from market perform, saying Corning’s scratch and shatter-resistant panels for laptops and phones could become Corning’s second-biggest business after LCD panels.
Tellabs (Nasdaq) declined 44 cents, or 6.5%, to 6.37. Morgan Stanley cut its investment rating on the shares of the company, which designs and markets equipment for communications-services providers, to equal weight from overweight. In making the downgrade, the firm said it believes AT&T is planning a “relatively quick transition away” from Tellab’s 8860 multi-service router.
American depositary shares of ABB edged up 46 cents, or 2.8%, to 16.73. Standard & Poor’s Ratings Services upgraded its credit rating on the Swiss engineering giant by one notch, saying the company’s performance is proving to be more resilient to the challenging market conditions than the ratings agency previously expected.
Motorola eked out a gain of 9 cents, or 1.4%, to 6.66. The telecommunications-equipment company raised the maximum debt it will repurchase by $100 million, to $500 million, as it has seen solid response to a pair of tender offers.
Tenet Healthcare fell 31 cents, or 6.1%, to 4.80. CRT Capital Group noted the company’s consideration of a deal with Australian hospital operator Healthscope “has pushed investor trust in management to new lows,” even though Tenet already dropped pursuit of the company. “Our concern at this juncture is that investors now have no clear understanding of management’s future strategy,” and are uncertain about Tenet’s hospitals’ ability to generate meaningful cash flows, the firm added.
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SPX—Correction At Its’ End
As these lines are written, the S & P 500 Index, the one I call The World’s Barometer, as it gives a relatively sure indication of the world markets’ direction, seems to have ended the correction I spoke about in previous articles in this Category. It has, as shown in the Chart below, made a significant Japanese Candlestick pattern called a Hammer and it does indeed look like one. This hammer gives the final blow to the downwards descending pattern and the verification, or Trust, we see tonight is the beginning of a new upwards trend.
The blue lines that surround the price candles are Donchian Channels. When the prices hug these channels at the high end or at the low end for some bars, the prices tend to go up to the signal line (red–in between) and many times past it and correct to the other extreme. Here we see that the Donchian Channels were tested most of the week, and now seems the price’s chance to correct is coming. And it comes just in time.
The Retail Market in the U.S., as represented by their respective equities, is starting to recover from the blows of this harsh Correction. The SPX correction was at the 61.8% Fibonacci Correction Level and those tend to be particularly harsh most of the time. Please check out the Daily Chart below, of a trend-reversal day at 1:33 p.m. EDT of the United States. It speaks for itself.
This is the way the Daily Chart looks:
