Stock Preacher

This is what happened last week…

Last Tuesday began what the world community views as a major event in US history, the inauguration of Barack H. Obama as its 44th President and its 1st Black American President.
Some of President Obama’s executive orders on his 1st day in office:

1. A freeze on salaries for White House staff earning $100,000 or more, about 100 people in all.

2. New Freedom of Information Act rules, making it harder to keep the workings of government secret.

3. Tighter ethics rules governing when administration officials can work on issues on which they previously lobbied governmental agencies, and banning them from lobbying the Obama administration after leaving government service.

The week in the markets, however, continued to be bathed in the glow of uncertainty within the financial sector and coupled with Qs about the timing of the economic recovery.
Couple that with headlines announcing that China’s Y 2008 Q 4 GDP contracted from 9% to 6.8%, the UK reporting a GDP decline of 1.5%, the largest since 1980, US housing starts fell to their lowest level on record, and initial jobless claims returned to Christmas levels, matching the 26 yr. high of 589,000 set in December 2008.
Though Microsoft disappointed, IBM and AAPL rang the bell with GOOG beating too, and coming in better than expected.
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After getting crushed since September the US indices were up with good and respectable gains last week, bringing up the question if the recent upturn marks the early signs of a market recovery or on the other hand, represents a consolidation before the next leg lower. Time will tell us. You must remember that when measuring the upturn’s credibility, the following is a checklist (the technical wish list) for the signals.

Several, if not all, of the following events must occur:

1. A strong-volume rally that is not driven by government intervention.

2. The emergence of sector leadership.

3. Breadth: One, preferably two, 20-to-1 up days to neutralize last October’s breakdown.

4. A slowing in the volatility to digest the market extreme activities of 2008.

5. From the Sentiment POV we need for analysts, pundits, and talking heads to stop telling the audience how great this buying opportunity is.

6. A strong volume break above intermediate overhead resistance.

Until all of the above are in place another sharp move South is a risk, and therefore capital preservation is your principal objective when it comes to the DJIA, S&P 500, and the NAS. Now the Small Caps, Mini’s and Micros are a different picture, as they are traditionally the leaders.

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Let’s have a look at Mickey’s World; The Walt Disney Company Burbank, CA, United States (NYSE: DIS) from a Technical POV (point of view).

The overall analysis after Thursdays (11/06/08) market action is Bearish, in the near term Bearish, mid-term Very Bearish, and long term Very Bearish. The trend on DIS is Bearish.

Today Disney closed minus 1.79 pts at 24.23 on volume of 15MM/shrs on the day (Nov. 05, 2008). There is one Open Gaps Down on the chart on October 6, 2008, (29.46—29.40), the 1st support level is 22.59, the 2nd is 21.37, the near term resistance 24.86, and the 50 day moving average at 27.50,
This is The Walt Disney Company: The King of the Magic Kingdom is a mouse, we all know him as Mickey.

The Walt Disney Company is the world’s #2 media conglomerate, # 1 is Time Warner (TWX) with assets encompassing movies, music, publishing, television, and theme parks. Disney’s TV holdings include the ABC TV network + 10 broadcast stations, and a portfolio of cable networks including ABC Family, A&E Television Networks (37%-owned), and ESPN (80%). Walt Disney Studios produces films through imprints; Walt Disney Pictures, Touchstone, Pixar, and Miramax. In addition, Walt Disney Parks and Resorts is one of the top theme park operators in the world, we all know them as Walt Disney World and Disneyland Resorts. Disney competitors are primarily in the Film & Video industry, DIS also competes in the Internet Content Providers, Music, and Publishing sectors, the competition is; CBS Corp, News Corp, and Time Warner.

Note: In the motion picture production and distribution sector consumer spending drives demand. The profitability of individual companies depends on creativity, marketing, and distribution.

Large companies have the advantages of long term contracts with key actors and directors, a permanent staff of technical employees, and wide distribution networks. Small companies compete by creating marketable movies, often for niche audiences, on low budgets. Although production work is labor-intensive, the value of the product results in high average annual industry revenue of $300,000 per employee.

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After getting crushed for a month, the U.S. markets came to live last week.

On the the week, the Dow industrials put on 114.32pts, 1.57%, to 9,325.01, the S&P 500 rose 14.66 pts,1.54%, 968.75, and the NAS rallied 22.43pts,1.32%, to 1,720.9 .

The Big Q: has the up turn marked a early sign of a market recovery or does it represents a consolidation before the next leg lower.

The Big A: Time will tell.

When we measure the upturn’s power, the following is a checklist in determining a MML (major market low).

Most of the following below have to happen:

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An off-the-charts strong-volume rally that is not driven by government intervention.
*
The emergence of sector leadership. Along with the financials, the airlines are well, but these groups cannot do it alone, the techs have to really join the party.
*
At least one, and preferably two, 20-to-1 up days to neutralize the October breakdown. Over the past many sessions, the U.S. markets have suffered three 20-to-1 down days from the breadth POV.
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A volatility drop to digest the market crash. For instance, a series of 100-point Dow moves, in either direction, uninterrupted by these 800-point intraday whipsaws.
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From a sentiment standpoint, analysts need to stop declaring how great this buying opportunity is. This is a must
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A decisive break through overhead resistance.

That is it from the Technical POV.

Now, when considering the final point, a break through over overhead resistance, see the following areas:

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Dow resistance at 9,387, matching the two week prior closing high.
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NAS resistance initially at 1,844, matching two week prior closing high, followed by the 1,900.
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S&P 500 resistance spanning from 1,000 to 1,010, two week prior closing high held at 1,003.

From a technical standpoint, anything transpiring under these levels is little more than “noise.”, and as these areas are approached, the risk of another sharp downturn increases.

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