Damage on Monthly Charts – XOM and JNJ

Oct 16, 2008: 10:57 AM CST

The recent stock market downturn has taken down many otherwise strong stocks, destroying yearly uptrends and shattering large-scale support levels.  Let’s take a quick look at the current S&P 500 Index as well as large “Blue Chip” companies Exxon-Mobil (XOM) and Johnson & Johnson (JNJ):

S&P 500:

I cannot underscore how much damage has been done to investors in this recent downturn.  Also, that large red bar on the right side of the chart is NOT yet complete – it represents only the half of October which has currently transpired – It’s absolutely devastating in its relentlessness.

Ultimately, I’m convinced we’ll retest the 750 S&P index level before everything is said and done, and could potentially exceed it – while that was perhaps considered unfathomable last year – just last week, we were only 100 points away from that level.  We’re currently beneath the lows of the 1998 ‘crash’ which was particularly painful at the time – that’s long behind us but we’re actually beneath the index level 10 years ago.

Enough of that – let’s look at oil giant Exxon-Mobil (XOM):

XOM reported record profits recently, but with the sharp decline in crude oil prices and the expectation for a potentially deep US/Global recession (combined with “Demand Destruction”), the stock  has plunged precipitously in October after peaking in mid-2008.  In six months, price has fallen from a peak at $95 to a current low just above $55 – slicing all pertinent monthly EMA support and the 50% Fibonacci retracement just above $60 (roughly where the candle’s real body is supporting currently).

Until then, the rising 20 month EMA provided clean and clear buy signals – it was violated on a closing basis not long ago before price officially turned down to new price lows on the year.  Volume is also surging to record levels (trend has been up) and – again – the month is half-over and the volume almost matches that of all of September – massive turnover.

Finally, let’s look at a ‘defensive’ Consumer Staples (safe) stock Johnson & Johnson (JNJ):

Generally, we look to invest in ‘safe havens’ during economic uncertainty, and if you still want exposure to the Stock Market, ‘consumer staples’ is the ideal way to go during bear markets/recessions.  We’ll always need toothpaste, shampoo, cosmetics, etc.

However, JNJ is even suffering, as investors are likely ‘throwing the baby out with the bath water’ and selling everything that has the name “stock” or “equity” attached to it.  It can create value for long-term investors, but in the short-term, can be particularly painful for swing and position traders (sudden downturns, that is).

Nevertheless, price is finding current support at the rising 50 month EMA during a strong and pervasive up-trend.  Aggressive investors/traders may find this to be an appropriate buy signal for accumulation – others may just want to stay away from all stocks until the uncertainty and volatility subsides.

Either way, even ‘strong’ stocks are taking brutal hits that are providing (unexpected) risk and possible opportunity.

Stay safe – these are turning out to be very difficult times for both longs and shorts.

1 Comment

One Response to “Damage on Monthly Charts – XOM and JNJ”

  1. Emini Addict Says:

    XOM and the whole market for that matter.. might be pricing in an Obama presidency. I wonder what the reaction will be when it is official. Not that I want that, but it’s not looking good for friendly taxes for investors these days.