S&P 500 & Big 10 Analysis - Week of February 27
Another week spent struggling to close above 13,000 and no cigar. Wake me up when we get there.
Although the market was able to breach that level on two occasions, the highest close it could muster was 12,984. Based on the current market, that will be just a stopping point on the way to test the May 2008 high's of 13,136 in the DJIA, and 1387.00 in the S&P futures. And at this pace, it could easily take a month.
S&P futures double top from Tuesday's (1369.50) and Friday's (1368.50) provides the only formidable resistance in this market next week. Heck we could easily open above that level on Monday and just sit there all day (which seems to be the new trend) and get that magical close above 13,000. Think they will mention that on CNBC? After that expect the slow roll up to 1387.00. Minor support moves up to the weekly low of 1350.25, and if the market really falls out of bed, major support comes in at 1330.25.
Apple (NASDAQ: AAPL) continues to punish short sellers and technical analysts who were banking on the key reversal from February 15th. These analysts are now scrambling to raise their price targets. I thought when something went to your target you were supposed to get out, guess it is not that way with AAPL.
The February 15 high of 526.29 is a sitting duck to me and stops alone at that level could catapult AAPL to 530 on its way to 550. Long term investors should move their sell stops to 510, if they cannot stomach a visit to 500 or lower.
Hello Exxon-Mobil (NYSE: XOM), when are you going to wake up and take out your 52 week high of 88.13?, let alone approach the May 2008 and all time high of 96.12. Look for a string of closes above 88.00 to signal the next leg up to the June 2008 high of 90.50. If for any reason, XOM begins to retreat expect minor support at 86.50 and major support at 84.00.
Chevron Corporation (NYSE: CVX) has been creeping up as well. However, this issue is much closer to its all time high of 110.99 for some reason. Clearing 108.50 was a major hurdle on Friday and sets the stage for another leg up to the old high.
On the other hand, if CVX falls back under 108.50, it could easily be right back at 107.00 or 105.00 in a heartbeat. Many times this issue will give back a few weeks of gains in 2-3 trading sessions.
Finally, International Business Machines (NYSE: IBM) broke out of its month long slumber (191-195) with a bang. Once the institutional seller was taken out at 195 (sizeable order that High Frequency and day traders had been leaning on for months), it was a classic short covering rally. Either someone was called in or decided to puke a large short position and the only noteworthy size had been at that 195 level.
The ensuing rally stopped just shy of 200.00 and expect a continued push towards that level. Do not expect a major pullback in IBM until this issue has a string of highs in the same area (within a point or so), similar to the formation it made in mid-December.
Of course, the old 52 week high of 194.90 will be a target for those traders brave enough to enter new short positions on a stock that has issued positive guidance for years to come.
Microsoft (NASDAQ: MSFT) has taken a slight breather from it's monster run. Just eclipsing last week's high by .13 and reaching 31.68 and then retreating to 31.00 before snapping right back to close on the highest close (31.48) since April of 2008. MSFT is one issue that will make several highs or several lows in one tight area, and once it breaks out never looks back. Most likely, last week's high will be once such area this week.
After that, minor resistance at the April 2008 high (32.10) will be a minor stopping point before the march to the 35 area (which coincidentally would recoup half of the move from it's all time high of 53.97 (December 1999) to 14.87 (March 2009 low). Do not expect a significant pullback in this under issue until 31.00 is taken out a few times on a closing basis.
Procter and Gamble (NYSE: PG) made a whole slew of analysts, who earlier in the month had ganged up on PG and issued downgrades, look really bad. This issue, which has been range bound the entire year (67.00-62.36), and stuck between 65.50 and 62.36 since late January, finally made it's move. After the company announced 10 billion dollars in savings over the next four years, PG exploded and attempted to take out some institutional sellers who have been patiently perched at 67.00. Perhaps a few more attempts will do the trick.
Above 67.00 will be some minor resistance at the May 2011 high of 67.72 up to 68.00. No major resistance after that until the October 2008 high of 71.94. If 67.00 can hold this rally in check (which seems unlikely at this juncture) expect PG to drift back down to the middle of the yearly range in the 64.50 area.
Quite the opposite has been happening with Johnson and Johnson (NYSE: JNJ). After meandering between 66.32 and 64.00 since mid-December, JNJ is pressing down on the bottom end of it's range. The ouster of the CEO gave JNJ a slight boost mid-week but was unable to clear the major resistance forming at the 65.30 area. After going ex-dividend on Friday (.57) JNJ once again revisited the lower end of it's recent range. If 64.00 can hold, look for slow migration back to the upper end of the range at 66.32. However, if 64.00 is taken out, look for minor support at 63.00, but more importantly the November 25th low of 61.05 may come into play.
Another stock going ex-dividend, but not really giving in, is General Electric (NYSE: GE). After flirting with the July high of 19.53 by reaching 19.50, a brief retreat to 19.00 entailed. This issue has been range bound the entire year between 18.23 and 19.50. It is hard to identify the catalyst that would nudge GE above 19.50, but I'm not really sure it needs one.
Unfortunately, GE is struggling to reach it's November 2008 high of 21.04, let alone its September 2008 high of 25.75. As long as 19.00 holds on a weekly basis, you are safe holding this issue, but perhaps investors should seriously consider cashing out of GE and putting the funds somewhere else, like AAPL. Unless of course, you are content with the healthy dividend yield of 3.53%.
AT&T (NYSE: T) managed to trade in a .42 range for the entire week. Thursday's (30.48) and Friday's (30.49) double top, seems to be preventing this issue from making a new yearly high above 30.68, let alone even coming close to the May pre-failed takeover bid of T-Mobile high of 31.94. Similar to GE, JNJ and PFE, it appears no new money is flowing into these issues, only out of it.
Shorter-term return hungry investors seem to be more active just ahead of, and just after the ex-dividend date. Building core positions ahead of the ex-dividend date (providing slight upward pressure) and disposing of the issue once it goes ex-dividend (providing slight downward pressure) has been the play. As the chart indicates, this pattern is coming to fruition since going ex-dividend in early January. From a technical perspective, major support has moved up to 30.00 and a string of closes above 30.50 would signal a move 31.00.
Meanwhile Pfizer (NYSE: PFE) is trying to recover from going ex-dividend earlier in the month. The January 31st close of 21.40 (just ahead of the February 1st ex-dividend date) is certainly the level the dividend players want out at. Although PFE was able to breach that level on two different occasions last week, it failed to sustain that level on a closing basis. Until 21.50 is taken out, expect a boring trading range of 20.80-21.50 to persist.
Of course, FDA news can always move this issue, but an announcement of the results of its new Alzheimer's drug trials is not expected until later this year.
In closing, any investor that has ridden the market rollercoaster since 2008, should take a good hard look at their portfolio. If there is an issue that has rallied, but nowhere near where it was in 2008 (GE, PFE and T and others outside of the Big 10), chances are they are not going there any time soon. Furthermore, these laggards will be the first issues on the chopping block when an inevitable pullback takes place.
Along these lines, investors should investigate ways to lock-in their hard fought gains over the last four years. At this time, there certainly seems to be no urgency in taking such precautions, but how well prepared was your portfolio for a meltdown in 2008? Let the futures predict the future. and until 1350.00 is taken out in the March futures you can look forward to your next round of quarterly statements.
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