Weekly Technical Outlook – S&P and Top Components
Is the sell-off in the market over and will 38 be the low for Facebook (NASDAQ: FB)? No and no. Based on the extremely weak closes in both FB and the overall market, there is still some work to be done on the downside.
The momentum from the JP Morgan (NYSE: JPM) debacle last week was too much for the market to overcome. As a result, the selling that began on Monday did not stop until the closing bell on Friday. And if this continues, the June S&P 500 futures may be heading to the 1250 level, or where we started at the beginning of the year, ouch. For the time being, do not expect the index to turn around and do an about face until 1310.75, becomes major support instead of major resistance.
In all of my years of trading, I have never witnessed the trading activity that occurred at 38 in FB on Friday. If you Google “making a stand” this weekend, the underwriters of the FB IPO should be at the top of the search. Those traders must have felt like General Custer at Little Bighorn as they were deluged with sellers several times on Friday.
Unfortunately, for owners of this issue, with 38 being such an obvious number to all, I highly doubt it is going to be the low. The low will come when no one suspects it, similar to when the top was made in the June S&P 500 futures at 1419.75 when the whole world was bullish. But gauging the level of bearish sentiment on FB, the bottom may be in sooner than you think.
What has happened to Apple? Where are the Wall Street analysts who were slapping $750-1000 price targets on this issue less than a month ago? Do they not have the common courtesy to admit to their foolishness, or at least come out now and reiterate those targets and tell us to buy more? Give me a few downgrades this week and I may actually start getting bullish AAPL.
Technically speaking, AAPL held up well on Friday during the carnage. Two lows and two closes around 530 provides both long and short-term traders with an excellent level to focus on this week. There is no need to rush out and buy it on Monday’s open, but if AAPL continues south but then comes back above 530, watch out for the dip and rip back up to 550.
Along with AAPL, Exxon-Mobil held its ground on Friday. Although it did breach the major support at 81.50, it managed to close at 81.47. Perhaps another test of 81 is on the horizon and if it does not hold, there is minor support at 80.61 (December 20th low) and major support at 79.38-79.53 (December 19th low and close). On the upside, look for the institutional sellers that are still chasing XOM down, to lower their offers to 83.
International Business Machines (NYSE:IBM)
The chart of IBM is looking grim. After making several attempts to hold the 200 level intraday, IBM could not manage to close above it even one time the entire week. And now with that level over four points away, expect the big boys to be selling there and the High Frequency Traders to be right there in front of them. On the downside, IBM made several lows in the 192’s in mid-February, so that will act as the next major support level.
How about the price action in Microsoft? It labored for almost five months to climb from 26-33 and in less than a month it has given more than half of it back. That is what most investors fail to comprehend, what a bull eats in a month, a bear scarfs down in a day. In other words, if you do not have an exit point on the way up, surely pick one on the way down and do not miss it. With that being said, MSFT will now have another battle with large sellers at the 30 level, and at each and every penny in the 30 handle. If the slaughter does not stop at Friday’s low of 29.17 or the whole number 29, perhaps the January 30th low of 28.83 will provide support for MSFT.
General Electric (NYSE: GE)
GE, the company itself, has determined that 18.32 is critical support for its own stock price. When GE hit an intraday low at that level in March, the company came out the following morning with positive announcements. Then last week, when the stock hit that level again, GE announced that it’s subsidiary, GE Capital, would be paying a special dividend to it’s parent corp., causing the stock to spike. On both occasions, GE gapped up and went higher. Back in March, GE reached 20.26, however, the rally off the good news this time has peaked at 19.26 and the stock closed under 19 on Friday at 18.95. It will be interesting to see what the company has in store for the Street the following morning when it reaches 18.32 for a third time.
Chevron Corporation (NYSE: CVX)
CVX is now a double-digit stock for the first time since mid-December with Friday’s close (98.46). For you old school technicians, CVX will be filling a gap that has held since November 28th at 98.05. That level should provide initial support for CVX with major support at 95.77. Expect minor resistance around the whole numbers 100 and 101, but expect larger institutional sellers at 102.
AT&T (NYSE: T)
AT&T possessed excellent relative strength during this week’s sell-off. In fact, T made it’s high for the week on Friday at 33.81 (11 cents off the 52 week and multi-year high). Multiple large orders at 34 continue to provide much needed cover for the HFT crowd who will continue to sell in front of that level ahead of the size, until it is no longer profitable to do so (another tractor beam play). If you are attempting to protect longer-term profits in this issue, a break under 33 would be a reason for some concern.
Procter&Gamble (NYSE: PG)
PG is developing a similar technical formation in the mid 63’s (support) as to the 68 level (resistance) back in mid-March. The question remains, can PG mount a rally from this level, or is the support finally going to give way? In my opinion, the longer it stays down here (close 63.52) the less likely the rally scenario will be. The next support level for PG will be the March 3rd low of 62.56. When PG has posted consecutive lower highs, lows and closes in the past, that trend has lasted for up to four-six days.
Johnson&Johnson (NYSE: JNJ)
JNJ is hovering just above major support. From Monday through Thursday the JNJ bulls were able to defend the 63.40 area. However, on Friday it gave way (low-63.09) and recovered to close at 63.35. Once again, here is an issue that needs to get away from support off the hop or it will succumb to the selling pressure. Minor support can be found at the April 19th low of 62.76 and major support is located at the November 29th low of 61.79. With all five highs last week between 63.93-64.14 it is obvious there is a large seller at 64, but the seller is being more discrete about showing its true size in order to combat against HFT leaning strategies.
Wells Fall Low, I mean Wells-Fargo is taking a drubbing along with of the rest of the financials. Hey CNBC, perhaps it is time to put the “decoupling from the European banking crisis” on the shelf for a few weeks. After 32.50 held like the Rock of Gibraltar since mid-April, WFC breached it and settled below that level at 32.24 on Tuesday. After that, WFC blew through the 31 handle that was devoid of any support and made a low on Friday of 30.65. For now 30.65 will be minor support, but it sure feels like this issue has 30.00 or 29.89 (March 6th low) written all over it. Expect minor resistance at 31.58 and large offers to begin accumulating from 31.90-32.00.
The June S&P futures dropped over 50 points last week pretty quickly. Furthermore, several of the key components have taken out major support levels. Whether this is a correction in an already long in the tooth bull market run since the March 2009 lows, or the beginning of a bear market, I will leave that to the experts. In my opinion, the January lows are on the horizon, and if the 1250 level does not halt this decline, you do not want me to write where I think this market may be heading. For now, investors should take advantage of any dead-cat bounce (if it ever happens) up to 1330, and get on the horn with their broker to discuss their overall market exposure, and to explore possible exit or hedging strategies.
Comments are closed.