US Financial Sector Update

Dow Jones closed at 12479, down 145 points. Not a good sign for the Bulls. For the week, Dow dropped by 507 points. It looks to have formed a double top and is now below its 50 day moving average of 12642.

The weakening of the index is mainly due to high oil prices which is causing inflation worries all over the world. It is also likely that the FED will stop its rate cut measures giving investors less excuse to buy into the market.

The phase chart of the iShares Dow Jones US Financial Sector fund (Symbol: IYF) is back into “Bearish” phase. It stayed in “Recover” mode for 18 trading days but could not gather enough momentum to move to “Accumulation” phase.



Let’s hope the March lows can hold water. If not it will be bad times ahead for the Bulls again.

Oil Update

Oil price has been rising steadily and there is no sign that the price is going to come down anytime soon.

Lets look at United States Oil (USO) a investment fund that seeks to reflect the performance, less expenses, of the spot price of West Texas Intermediate (WTI) light, sweet crude oil.

The closing price on 21 May 08 was 108.31. For 2008 alone, the price has gone up from 75.76 to 108.31, an increase of 43%.

The phase chart is in “Bullish” phase. In fact the price level has not touched the 200 day moving average since Aug 07.

The price is now about 45% above its 200 day moving average of 74.51. There is a high chance of a pullback from current high levels. But the trend is clearly up.

Nikkei225 Update

The land of the rising sun looks brighter for the past few weeks. The Nikkei 225 index moved into “Recovery” phase since the beginning of Apr 08.

The index has stayed in “Recovery” phase for 28 trading days. It is now above its 50 day moving average. The 200 day moving average is now at 14,963. The immediate support for the index is at 14,000 points.

S&P500 Phase Analysis

US market performed well this week. The S&P500 index was up 37 points (2.6%) for the week to close at 1425.

We have mixed economic data on Friday. Housing starts for April exceeded economist’s expectation whereas the University of Michigan consumer sentiment survey reading for May was below estimates.





The market looked to be heading towards triple digit losses for the Dow but buying in the afternoon pushed the index back near the unchanged mark.

The S&P500 is still in “Recovery” mode and the index is now testing the 200 day moving average of 1427.

If you look at the daily chart for the S&P500, the index looks bullish based on MACD and slope of the Bollinger band.

My personal opinion is the index will break the 200 day moving average soon and the index will be moving to “Accumulation” phase.

Gold ETF Update

The streetTRACKS Gold ETF slipped into “Warning” phase on 20 Mar 08 and it is now below its 50 day moving average.




Similar price pattern occurred last year from 16 May 07 to 9 July 07 where it stayed in “Warning” phase for 35 trading days.

We are now in “Warning” mode for 25 trading days. A lot will depend on whether the index can hold above its 200 day moving average of 80.87. If you are thinking of buying into Gold, I suggest that you hold on to your cash and wait for the index to move back to “Accumulation” or “Bullish” mode.

Dow Update

The Dow had a better showing in April compared to March. The index was up 558 points for the month of April, an increase of 4.5%. On Friday, Dow managed to close above 13000 points since early Jan 2008. The job numbers released on Friday showed 20,000 job losses in April compared to 81,000 in March. The unemployment rate dropped to 5 percent compared from 5.1 percent. The job losses were not as bad as market expected and the market managed to clear its 200 day moving average.

The market certainly looks brighter from the phase chart. It has managed to move to “Accumulation” phase for the first time in 2008.


It will be interesting to see whether this show of strength will continue in the month of May.