The
Weekly Report For August 10th - August 14th, 2009
Commentary:
Financials were in the spotlight this week as several banks
including Bank of America Corporation (NYSE:BAC),
Wells Fargo & Company (NYSE:WFC),
and Citigroup, Inc. (NYSE:C)
rallied sharply. Regional banks were also broadly higher, with the
SPDR KBW Regional Banking ETF (NYSE:KRE)
rising over 10% on the week. The general indexes also got a boost
with a better than expected labor report on Friday, and also closed
the week higher. Despite the outsized gains in the banks, American
International Group, Inc. (NYSE:AIG)
was the star of the week rallying sharply into their Friday earnings
report. AIG followed up by reporting a positive report, and shares
continued to rally, ending the week up over 100%.
IN PICTURES: 7
Tools Of The Trade
The Diamonds Trust, Series 1 (NYSE:DIA)
ETF which tracks the Dow
Jones Industrial Average continued its sprint higher, reaching
as high as $94.50 before late day profit taking set in. The markets
are overbought
by just about any technical measure, but there is no rule that states
they can’t keep rising. DIA has now clearly extended itself
from the prior base, and is in an intermediate uptrend until proven
otherwise. The next resistance
level looms at $96.50 from the November 4th election
high.
The chart for
the S&P 500 SPDRS (NYSE:SPY)
ETF also shows continued strength, with a push above the psychologically
important $100 level. The bulls have shown little mercy for the
bears lately, and even the only profit taking during this entire
run has been in the form of narrow range candles. While SPY was
able to trade above the November 4th high, it hasn’t
decisively moved above this range and it could be an area of important
resistance.
The
iShares Russell 2000 Index (NYSE:IWM)
ETF has outperformed both of it’s large cap peers, by clearing
the November 4th high and holding above it for several
sessions. IWM shook off two days of weakness this week with a move
to new rally highs on Friday. IWM is currently acting the strongest
of the major market index ETF’s, which would be a healthy
development as it may show investors are willing to take more risk.
While
the Powershares QQQ ETF (Nasdaq:QQQQ)
has been leading for the entire rally, it appears to be tiring out,
lagging the other markets this week. While QQQQ was the first to
decisively clear its base and the November 4 highs, it failed to
confirm a new rally high on Friday with the rest of the market ETF’s.
With many of its underlying components overbought and stretched
out, it’s possible that QQQQ is hinting at profit taking setting
in for the markets.
Bottom
Line
The markets continue to punish short
sellers every step of the way, so it’s important to recognize
that each of the market ETF’s is in a clear intermediate uptrend.
They are making higher highs, and higher lows, while trading above
rising moving
averages. While it’s likely that profit taking will set
in soon, the underlying technicals would favor a pullback as a buying
opportunity. A drop below the prior bases would be the type of negative
development that could signal a reversal.
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