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TECHNICAL ANALYSIS


PENDY'S PICKS: September 13, 2012

09/13/12 08:57:34 AM
by Donald W. Pendergast, Jr.

The .OEX inched higher again on Wednesday, appearing ready possibly preparing to make another attempt at a new high.

Security:   .OEX, SLV, MON, MCD, DD
Position:   N/A

The .OEX (Standard & Poor's 100) finished Wednesday's trading session at 659.33, closing up by 0.20%. This key large-cap index now appears to be on the verge of yet another bullish breakout, one that should peak no later than September 23, 2012. The 40-week cycle in the .OEX may have already peaked, so the next week or two in the US broad markets could be very exciting indeed.

Figure 1 shows us the strongest four-week relative strength (RS) performers in the .OEX; JPMorgan Chase (JPM) has been grinding higher in a steady channel since early June 2012, but its short-term money flow histogram is hinting that this rally may not see the north side of 40.00 to 41.00 before a significant correction occurs.

National Oilwell Varco (NOV) appears to have hit strong resistance just shy of 85.00 and could be ripe for a modest correction after such a strong 11-week rally. Morgan Stanley (MS) is in fine technical shape, and all money flows are strong but the stock is getting way overextended above its 21-day exponential moving average (EMA). Expect some profit taking soon and for support near 15.75 to possibly provide a bounce.


FIGURE 1: STRONGEST COMPONENTS. The 10 strongest S&P 100 (.OEX) components over the past month, as of Wednesday, September 12, 2012.
Graphic provided by: MetaStock.
Graphic provided by: MetaStock Explorer.
 
Figure 2 is a look at the weakest four-week relative strength performers in the .OEX. Dell (DELL) may be in the initial stages of bottoming; its long-term money flow histogram is manifesting a bullish divergence with price as the stock continues to toy with the 10.50 to 10.55 area.

Altria Group (MO) gapped lower on Wednesday; this stock's daily chart looks very grim from a technical perspective, and the selling is probably only getting started, given how horrific its money flows are. Pepsico (PEP) also broke sharply lower on Wednesday; 68.46 may offer the first hope for meaningful support in this consumer staples giant's share price.

FIGURE 2: WEAKEST COMPONENTS. The 10 weakest S&P 100 (.OEX) components over the past month, as of Wednesday, September 12, 2012.
Graphic provided by: MetaStock.
Graphic provided by: MetaStock Explorer.
 
Figure 3 are the S&P 100 components giving overbought and/or exit signals. Four stocks gave overbought/exit signals; items of note among these signals include the double-top formation in Monsanto (MON), Johnson and Johnson (JNJ) could see a further pullback to its 21-day EMA near 67.65, and McDonald's (MCD), with its weak money flows, also looks very likely to test support near 88.00 to 89.00 soon.

FIGURE 3: OVERBOUGHT AND/OR EXIT SIGNALS. The S&P 100 (.OEX) components issuing overbought and/or exit signals at the close of trading on Wednesday, September 12, 2012; no new buy signals were issued.
Graphic provided by: MetaStock.
Graphic provided by: MetaStock Explorer.
 
Among the exchange traded funds (ETFs) that Pendy's Picks follows there was one overbought/exit signal, this being in the iShares Silver Trust (SLV) (Figure 4). The wild, wide range daily price bar that SLV produced on Wednesday is either the wash-and-rinse precursor to another surge higher (perhaps a 25-30% chance of this) or the initial warning that a significant correction is about to get under way. Pendy's Picks suspects that the latter scenario is what's about to occur.

FIGURE 4: ETFS AND OVERBOUGHT/EXIT SIGNALS. The exchange traded funds issuing overbought/exit signals on Wednesday.
Graphic provided by: MetaStock.
Graphic provided by: MetaStock Explorer.
 
The .OEX crept a bit higher on Wednesday, with its daily chart looking as if another bullish breakout is on the agenda soon. The 20-day and 40-day cycles in this index are due to make peaks sometime between now and September 23, 2012, so if you are still long this market you need to be monitoring your positions very closely indeed. Trade wisely until we meet here again.



Donald W. Pendergast, Jr.

Donald W. Pendergast is a financial markets consultant who offers specialized services to stock brokers and high net worth individuals who seek a better bottom line for their portfolios.

Title: Writer, market consultant
Company: Linear Trading Systems LLC
Jacksonville, FL 32217
Phone # for sales: 904-239-9564
E-mail address: lineartradingsys@gmail.com

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