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Wiser Trader Stocks and Options Newsletter ______________________________________________________________________________
Issue No. 81 June 19, 2006 Prescott, Arizona Systems@WiserTrader.com ______________________________________________________________________________
1.0 Trading
The major indices have tested their 2-year lower trend lines in an attempt to establish a bottom.
1.1 Bottoming
The first test of 2-year lower trend lines in over six months was seen recently for all the major averages. The bounce, seen in Figure 1A for the S&P 500 was a welcome sight. In the past, the averages have retested their lows two or three times before they rallied. More volatility can be expected in the near term. The 200-day SMA has become resistance for the S&P 500.
FIGURE 1A
The NASDAQ in Figure 1B is a bit more worrisome. It fell below its 2-year lower trend line, which along with its 200-day SMA, has now become resistance.
FIGURE 1B
Figure 1C shows that the average momentum indicator for 5 indices is approaching the neutral level of -43 after being briefly oversold. The pause in its upward movement on Friday was not met with the same erratic reversal of three weeks ago. Component indicator values are diverging a bit, which may help dampen some of the choppiness.
FIGURE 1C
New long positions should be entered with tight sell stops. They can be loosened when the S&P 30-day moving average begins to slope upward.
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1 month |
1 wk ago |
2 wks ago |
3 wks ago |
4 wks ago |
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Dow Jones Industrial Index |
-1.2% |
1.1% |
-3.2% |
-0.3% |
1.2% |
|
NASDAQ Composite Index |
-2.9% |
-0.2% |
-3.8% |
0.4% |
0.8% |
|
S & P 500 Index |
-1.2% |
-0.1% |
-2.8% |
0.6% |
1.0% |
|
NYSE Composite Index |
-3.0% |
-0.4% |
-4.1% |
0.8% |
0.8% |
|
Russell 2000 Index |
-4.1% |
-1.2% |
-4.9% |
1.1% |
1.0% |
|
HGX, Phil. Housing Index |
-9.3% |
-0.9% |
-6.8% |
-1.9% |
0.1% |
|
IYR, Real Estate |
2.9% |
-0.9% |
0.0% |
2.2% |
1.7% |
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GLD, GOLD |
-12.0% |
-4.6% |
-4.8% |
-2.5% |
-0.7% |
|
RKH, Banking |
-1.5% |
-2.5% |
-1.1% |
1.4% |
0.7% |
|
IYT, Transportation |
0.4% |
2.1% |
-4.4% |
1.8% |
1.1% |
|
SMH, Semiconductors |
-6.1% |
1.3% |
-5.9% |
1.2% |
-2.8% |
|
BBH, Biotechnology |
0.4% |
0.6% |
-3.3% |
0.9% |
2.3% |
|
OIH, Oil Infrastructure |
-2.6% |
-0.2% |
-8.4% |
3.5% |
2.9% |
|
XLE, Energy |
-1.7% |
0.6% |
-6.6% |
2.6% |
2.0% |
|
XLU, Utilities |
3.3% |
-1.1% |
-0.2% |
2.9% |
1.7% |
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XLB, Materials |
-5.1% |
0.0% |
-6.8% |
0.8% |
1.0% |
|
XLI, Industrial |
-2.3% |
1.3% |
-4.4% |
0.6% |
0.3% |
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XLK, Technology |
-2.0% |
1.3% |
-3.7% |
-0.2% |
0.8% |
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XLV, Healthcare |
0.1% |
-0.4% |
-1.5% |
1.1% |
0.9% |
|
XLF, Financials |
-2.4% |
-2.7% |
-1.7% |
0.9% |
1.0% |
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XLP, Consumer Staples |
0.6% |
-0.1% |
-0.8% |
-0.5% |
2.0% |
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XLY, Consumer Discretionary |
-1.6% |
0.0% |
-2.4% |
0.9% |
0.0% |
The VIX and VXN volatility indexes are listed in Table 2B.
Table 2B
Volatility
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Indicator |
Current |
Last Week |
2 Weeks Ago |
Complacent |
Cautious |
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VIX ** |
17.3 |
18.1 |
14.3 |
< 20 |
> 50 |
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VXN *** |
21.7 |
23.2 |
18.4 |
< 30 |
> 70 |
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** Below 20 day SMA = Short-term buy signal. *** Below 20 day SMA = Short-term buy signal. |
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Figure 2A compares the major averages with key ETF’s and Sector SPDRs.
FIGURE 2A
Table 2C Market Summary Industries are listed according to the Yahoo Industry Classification
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