Monthly Intraday Charts for SPY and SSEC: 2011-08

This is a monthly series of intra-day charts for S&P 500 (SPY) and Shanghai Index (SSEC) for July 2011.  


SPY

SSEC

How to parse jobless claims message

WSJ ran a educational piece on 8/11/2011 on how to interpret jobless claims messages:

Perhaps the most important data release this week is Thursday's report on jobless claims. These Labor Department figures have a remarkable track record for pegging economic turning points.
They also can signal where stocks are headed.
Lately, claims have sent a mixed message. The outright level of jobless claims remains uncomfortably high; the four-week average stood at 407,750 as of July 30.
By contrast, two years into the last economic recovery, claims had fallen to about 360,000.
Still, the pace of newly filed claims has slowed a bit lately. The four-week average actually peaked in mid-May at about 440,000, and its improvement since did foreshadow the better tone of July's employment report.
There are a host of reasons now to suspect that the improvement may not last. First is the jump in layoff announcements of late. These hit a 16-month high in July, according to Challenger, Gray & Christmas, thanks to major cuts from large companies like Cisco Systems and Merck & Co.
Second is the sharp selloff in stocks, which has undermined confidence and deepened concerns about economic growth.
Third, Japan-related disruptions to typical auto-plant shutdowns this summer may keep claims artificially low.
All this may put upward pressure in the weeks ahead on jobless claims. The key, though, is whether they surpass year-earlier levels.
As John Lonski of Moody's Analytics notes, the last three recessions occurred after jobless claims posted significant year-on-year gains. For now, their level stands about 10% below where it was at this time last year.
"It is imperative for financial markets and for the economy that we avoid another upward trend," Mr. Lonski says.
There are glimmers of hope: The number of U.S. job openings edged higher in June, as separate Labor Department figures showed Wednesday. The ratio of unemployed to openings has now fallen from a high of over 6 to 1 to about 4.6 to 1.
Even so, it will be a long wait before openings, currently about 3.1 million, return to the 5 million level seen before the recession started in December 2007.
The labor market's rebound has so far been halting. It will need to take more than baby steps for the U.S. to get up and running again.

True Capitulation? 80%, Bottom to be revisited? 50%

From April 29's high 1370 to yesterday's low of 1119.28, S&P 500 index retraced more than 18%, a severe correction, on the verge of 20% definition of bear market.  This magnitude is greater than 17% correction in summer of 2010.

According to Investopedia.com, Capitulation happens:

When investors give up any previous gains in stock price by selling equities in an effort to get out of the market and into less risky investments. True capitulation involves extremely high volume and sharp declines. It usually is indicated by panic selling.  

The term is a derived from a military term which refers to surrender. 

After capitulation selling, it is thought that there are great bargains to be had. The belief is that everyone who wants to get out of a stock, for any reason (including forced selling due to margin calls), has sold. The price should then, theoretically, reverse or bounce off the lows. In other words, some investors believe that true capitulation is the sign of a bottom.

Some other investor professionals also require more than 10% drop in major company's stock price or better, major indexes, yesterday Bank of America's price dropped more than 20%, Financial ETF (XLF) dropped more than 9%, S&P 500 itself dropped 6.66%, Nasdaq dropped 6.9%.  All these factors plus the fact that S&P is on the verge of 20% edge that distinguishes bull market correction from bear market.  It's very likely yesterday was the true capitulation i.e. the bottom, the likelihood is 80%.

Now the next question is will that bottom be revisited in the near future?  I give it a 50% chance right now.

Monthly Intraday Charts for SPY and SSEC: 2011-07

This is a monthly series of intra-day charts for S&P 500 (SPY) and Shanghai Index (SSEC) for July 2011.  

SPY

SSEC

US Stock Index Update

Even though last week was dubbed the best week in 2 years, the following charts show that the major indexes were just on track to get back to the upward trending channel dated back to September last year, and in fact, Dow is already in the channel, NASDAQ has touched the lower end and reversed, and S&P has not yet touched the lower end of channel yet.

DOW

NASDAQ

S&P 500

Monthly Intraday Charts for SPY and SSEC: 2011-06

This is a monthly series of intra-day charts for S&P 500 (SPY) and Shanghai Index (SSEC) for June 2011.  

SPY

SSEC

S&P 500 and Amazon Inc. (AMZN) Chart Analysis

Early last July, S&P 500 and AMZN both ended their correction and started their 1st leg up, after 5 leg run up, S&P 500 were up 33%, AMZN was up almost 90%.  Interestingly, AMZN ended the run-up in mid-Jan, one month earlier than S&P 500.

S&P 500

AMZN