Technical Talk: Uptrend is Still Intact
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December 22nd, 2009 by Prieur du Plessis, Investment Postcards from Cape Town
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The comments below come courtesy of John Murphy, technical analyst and author of a number of best-selling books on the topic.
A Friday stock bounce kept major stock indexes stuck in a two-month trading range. Prices also remain above their 50-day averages which keeps the intermediate uptrend intact. Prices, however, remain below long-term resistance barriers near 10,500 in the Dow, 1120 in the S&P 500, and 2200 in the Nasdaq Composite. Although not shown here, today’s unusually heavy trading is due to quarterly futures and options expiration as well as some index rebalancing. It has little forecasting value.
A modest pullback in the US dollar also provided some short-term relief to stocks and commodities. Gold and oil ETFS (GLD and USO) bounced off their 50- and 200-day moving averages respectively.
Stocks may also be benefiting from a favorable seasonal pattern. Not only is December a strong month seasonally, but a late-month bounce (known as the Santa Claus rally) may still lie ahead. That may not be enough to push stocks out of their trading range, but should be enough to prevent them from dropping much. Stock traders appear to be satisfied with protecting their 60% gains in 2009, and don’t appear in the mood for taking on new risks. That also argues for a trendless market through yearend.
Treasuries bonds and notes lost ground on fears that long-term rates are headed higher in the new year.
Source: StockCharts Blogs - ChartWatchers, December 18, 2009.
Dr. Prieur du Plessis is an investment professional with 26 years' experience in investment research and portfolio management. More than 1,200 of his articles on investment-related topics have been published in various regular newspaper, journal and Internet columns, including his blog, Investment Postcards from Cape Town. He has also published a book, Financial Basics: Investment. Prieur is Chairman and principal shareholder of South African-based Plexus Asset Management, which he founded in 1995. The group conducts investment management, investment consulting, private equity and real estate activities in South Africa and a number of foreign countries. He also serves as Honorary Consul of Slovenia for South Africa, actively developing economic, cultural and scientific relations between Slovenia and South Africa. Prieur is 54 years old and live with his wife, television producer and presenter Isabel Verwey, and two children in Cape Town, South Africa. His leisure activities include long-distance running, traveling, reading, motor-cycling and scripophily. Read more from the author/contributor here.
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