TECHNICAL OUTLOOK >>> Dow Financial Index / S&P 500 aka GS Frontier

Technical Sandiwara Fallout ala Wall St

The fundamental outlook of Wall St looks more bloodier than the technical charts. This don't mean there will be no further detioriations technically. Some upleasant upcoming downside is inevitable but chances are (hopefully) a technical rebound can come sooner than expected/ Not many will agree with ZL and his unorthodox market views but I do have SOME technical back-ups you know. With the 5 charts ZL hope not too many will accuse ZL of blowing hot or cold air. Is TA as useless as some critized >>> we'll know before the week is out.

But ZL do have concerns when I look at the SPX weekly chart (not included). Prices are at the top of an ascending wedge formation, and a correction back to the rising trend line seems the most likely next move. Could be that today's decline was the beginning of that correction.

Please click on images to ENLARGE

Financial stocks are considered to be leading indicators for the rest of the market. Over the last year, the group has led the market higher. Last Friday, they led it lower by U KNOW WHO.

With the group (and the market) having rallied two months without a pullback, one certaintly seems overdue. And it may have started with Fridat's closing numbers. If this just a short-term pullback, the S&P 500 should find support along its January high or SPX 1150 to be more precise.

By the way, SPX 1150 is very close to the 38% Fibonacci Retracement. Bet you don't know that until ZL mention this.

Now scramble for S&P 500 Fibo chart man .............. LOL!!!

These 2 (Daily & Weekly) sector charts indicated that financials would need to lead on a relative basis in order for us to see strength in overall equity prices this year. Until late last week, financials have performed very well on a relative basis. Take a look visually at the top & below charts to view what ZL is referring to :

It's quite evident that the market is going only as far as the financial sector can take it. That leads to one very important question. Will the technical problems that surfaced this past week be resolved quickly in the upcoming week, or is the market finally ready to pause and collect its breath? While nothing is ever a guarantee in the stock market, my bet is that financials will underperform for at least a short period of time and that will stymie the market's advance. So what damage was caused?

First, take a look at the weekly chart of the Dow Jones US Financial Index:

The long-term negative divergence that's present here raises intermediate-term concerns because such divergences on weekly charts tend to keep the bulls at bay for weeks, if not months. The heavy volume reversal in financials late this past week printed a dubious candlestick for the week.

CiTi Group : Set up for a Short?

C immediately fell to the short-term price support that we mentioned near the $4.40 level. Now C rests in a trading range of $4.40-$5.00. Let's see which level falls first. Another short-term negative was the market's reaction on Friday to two solid reports. Bank of America (BAC) tripled profit expectations, yet that large financial finished the day -5.49%. General Electric (GE) also posted excellent results, but fell 2.7% on heavy volume and with a long-term negative divergence present on the daily chart.

ZL's overall views of this GS cum Wall St Scandal

Friday was the announcement that the SEC is alleging that Goldman Sachs (GS) defrauded investors out of $1 billion relating to mortgage investments. I'm not going into the details of the allegations, but help me with the math here. GS lost $23 per share on Friday, or $12 billion in market cap, because of $1 billion defrauding allegation? Is there more to it than what was provided in the initial news release?

This $1 billion fraud charges is a farking joke but looks more like cotton wool over the eyes of layman investors such as you and yours truly included. Financial reforms is the main agenda of this Yankee propaganda. And can you come up with a bigger whipping boy than Goldie?

Can you align this to CIMB being charged for frauds by our SC and the implications that follows Bursa Malaysia? You really expect to see Nasir Razak get lynched for a comical RM1bn loanstock "Sandiwara?"

Hello my friend, ZL hears your mommy calling you for lunch .... LOL!!!

Have a nice day & goodluck2all