Morning Value Investing Observations – Monday June 20, 2011

This Monday morning looks like the market is going to get a haircut thanks to the lack of resolution on the Greek credit crisis. Smart investors will simply let this play out and save their dry powder for when shares of their favorite plays are on sale – kind of like shopping on the final days before Christmas when deep cuts in pricing are done by merchants who want to move their goods while the consumer is in spending mode.

What’s helpful during times like these is to gain footing on solid ground by gaining a historical perspective on what kind of support one can expect. The 70 week moving average (350dma) has been support for major lows over the last 10 years (except for the 2009 melt down) as you can see below.  A break of the 200dma (on daily chart, currently 1257) is a sell trigger and buying at the 350 dma (currently 1197) is the perfect buy point:

[Image: 2011-06-18_1026.png]

Here’s a 10 year time frame and you can see the 200dma (40 weeks) and 350dma (70 weeks) and how 350dma was a GREAT buy point the last 8 times it happened. Key thing to realize is that these support averages will be rising as the 2009 melt down ages and falls off the screen outside the moving averages.

[Image: 2011-06-18_1033.png]

Overnight, Asia Ends Mostly Lower; Property Drags in HK and Greek Loan Delay Drags Down European Shares. We have a Fed two-day meeting starting tomorrow I believe.

This week, we’ve also got the following economic data points:
[Image: 2011-06-20_0719.png]

In terms of support and resistance, Long term trend is up and the Medium/Short term trends are both down, only as long as it stays below 1326-1333 (on a closing basis). It takes a move above 1262 to perhaps indicate a short-term uptrend. As long as index stays below 1345, it’s either consolidating or declining. I see the 1280, 1291, 1303, 1313, 1320, and 1335 as the areas of resistance above. The bulls need to regain 1280 on a closing basis in order to regain a foothold in the game again. In terms of support below, I’m watching 1261 and 1241 as areas of strong support and the 350dma is 1197 if things were to get really ugly in the next month.

Today’s spotlight video comes from Robert Doll who is someone any investor should listen to:

BlackRock: Market Outlook This Week

Mon 20 Jun 11 | 07:23 AM ET

Strategy on what to buy now, with Robert Doll, BlackRock, who says the markets are just in a soft patch.

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