The Insightful Trader

Bears Win Again

by on Jan.31, 2009, under Market Commentary

Just when it was looking promising earlier in the week, sellers, hiding behind economic data and an indecisive congress, once again ambushed what few buyers that could be found, and beat them into a hasty retreat. According to Bloomberg this January was the markets’ worse performance in over 25 years. Of course continued economic data and some not so great earnings reports didn’t help matters. Proctor and Gamble, the poster child for defensive stocks fell nearly $4 Friday, which contributed greatly to the pullback in both the DJI and SPX. Since the end of August PG has lost approximately  25% of its market value.

Has anyone else noticed the other  stock advocated by all the talking heads on TV as one of their favorite defensive plays,  WMT has been knocked down to its lowest point in a year, losing nearly 20% of its value in just January as consumers show no willingness to start spending again. It just goes to show that in a bear market, pretty much everyone gets taken to the woodshed. At least let’s hope that’s the case. The other alternative is that when two of our country’s finest corporate icons are subject to such selling pressure in such a short period of time, does this portend much worse to come  economically? Especially when you consider golds’ continued climb, even as other commodities continue to languish. This in spite of a dollar does that not seem inclined to pull back much at this point.

The one bright spot of the week, besides gold stocks, was AMZN which reported better than expected Thursday after hours and rewarded its faithful with an almost 9 point move Friday. I suspect there might have been a short or two that may have been surprised. The company does seem to do an excellent job of marketing and continues to add more and more products to leverage its infrastructure. As mentioned earlier, gold, which broke over its  lower trendline  last week, came back and tested and is now challenging it’s next resistance level as seen on the chart below. However it has both a horizontal line here as well as a longer term downtrend line coming in around the 930-940 area. A break over that will bring the precious metal advocates out in full force. Nearly all the gold stocks are looking similarly impressive and many are just breaking out of an inverse head and shoulders pattern. This gold move, along with the breakdown in some defensive stocks, is something you need to keep an eye on. I’m a little afraid that the market may be trying to tell us something  that we really don’t want to hear. With the S&P getting back down close to critical support in the low 800s it should make for an interesting week. Positions related – AUY and SLW   

 gold-4

Walmart’s turn back down from its 200ma, as well as trendline resistance in early January, turned out to definitely be a cause for concern. A short call off the $56 area has worked out well. May have a little support here.

 wmt-daily

PG daily chart hasn’t been encouraging lately. Notice huge daily candles on both PG and WMT past several months.

pg-daily

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