Market Commentary (May 2009)

Monday, May 04, 2009

Market Analysis:
The market is trekking higher taking out resistance levels as the a rotation into energy and technology provides a strong bid to shares. The six-month trendline was broken at the beginning of April signaling a change in the previous downtrend. A very strong bid has come into the market rallying over 30% off the March 6th lows. The S&P has room to 950 likely intersecting with the 200-day moving average at that area. I would expect a time of consolidation at that level to digest this large move off the lows.
Technology Sector Analysis:
The XLK triggered a long through $16.20 as money rotates into technology. Many technology companies have been weathering this recession well and their future innovation will lead the stock market. The trade is working out well so far moving higher on decent volume. The first target is $18.55 to fill the 10/6/2008 gap. Then, the $20 area will be a good place for some profit-taking.
Energy Sector Analysis:
The OIH triggered the expected long through $88.00 breaking out of its nearly six-month channel base. The lowered volume has made this trade difficult but the pattern has dictated the trade. Stops should be at $80.96 for a maximum 8% loss. The first target is $124.75 to fill the 10/6/2008 gap.
Financial Sector Analysis:
Financial stocks have offered a much larger bounce than I had expected adding fuel to the market's rally. I saw the sector possibly falling out of play and beginning a long-term basing process between $6 and $9. Yet, continued headlines with the government stress tests has kept the sector volatile. The current pattern looks good to go higher in the short-term with $13 likely to be heavy resistance. The news of the stress test will probably create large divergences in the sector and reduce the volality of this basket ETF.


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