Thursday, July 31, 2008

Market Still Stuck in Range, Tough to Make Big Moves

Good evening, traders. Here are the major indices, which appear to be stuck in sideways trading ranges. Hopefully they will break out of these ranges soon, but even if they do, there are others issues to deal with. For instance, if the Nasdaq does break the 2350 area, you can see the 50 day MA is right above it and will probably act as resistance. It is entirely possible the market heads higher, but I don't think it will be a very smooth ride north.

S&P 500, Nasdaq

Today was a really weird day, and my scan numbers affirmed that. First, you have oil down $2, but the market didn't respond at all. Yesterday, oil was up big, and the market rallied. In terms of numbers, there was almost an equal number of upside(199) to downside(231) breakouts today, which is quite weird with the Dow and S&P down a significant amount. There were stocks that moved higher today, and I didn't see that many really heavy breakdowns outside the earnings realm. So maybe, today wasn't as bad as the market averages suggest. Volume was slightly lower on the S&P and Dow, and slightly higher on the Nasdaq.

So what's in store for us tomorrow? I really don't know - my hunch is that we are due for a further pullback, perhaps to the bottom of these ranges. The market is slightly overbought and my momentum scans show that we are at an area where typically stocks pull back. Of course, the jobs number comes out tomorrow, and I would guess that will dictate things more than anything else. Now that the market doesn't seem to care either way about oil prices, we have to look for other influences that will drive trading. Bottom line is I wouldn't be surprised of anything the market does right now.

Here are the stocks I entered today. VISN is the star of this market right now and looks better than any other chart I see out there. I pointed out this chart as one to watch here. I still am steamed that I was run out of this after earnings. What happens with this stock will tell me a lot about this market overall. So far, we haven't seen good earnings rewarded too much.

VISN, VRUS

Before I get into the charts, I will preface it by saying what I've been saying for a while now - this still isn't the time to push things on either side of the market. I have been making a few trades, but most of my money has been in cash recently and my positions have been smaller than normal. It is too tough and too choppy to be going heavily into any stock right now.

Here are some long candidates I am watching if we somehow continue higher. I see a lot of flag patterns setting up, and this first group contains some my favorites.

QLGC, PNSN, IMAX, SQNM
ARST, OME, ANST, BVX

Others I am watching include UAUA, STEI, ODFL, CEC, IDRA, ABAT, ARBA, WAB. The main problem I have is that I am seeing very few charts with high levels of BOP - a Telechart indicator that measures the underlying accumulation in stocks. By looking at VISN and VRUS, you can see what high levels of BOP look like. Most of the charts I see are yellow, indicating neither accumulation or selling in the charts.

We could pullback here, so I would consider a few shorts, again in small positions and with modest profit targets. Here are some of the best setups I see.

RATE, WFR, CBI, ERES
FSTR, CFSG, FCSX, JST
All Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

Some others I am watching for possible breaks of their 50 day MA (as they have rallied weakly right up to them) include RCL, FBP, OZRK, NMX, ERJ, WBS, and DMLP.

Best of luck tomorrow. The way things have been and look like they are going to continue to be, I think we all need it. At least tomorrow is Friday, and we can take a few days off after that. Off to look for a new TV - good trading Friday.

4 comments:

Gio said...

hey Mac... I haven't read my IBD issue yet, but I wonder what they are going say about today's action. I think the Vix is too low for us to bottom. I'm in the Vix 40 camp. I agree with you that the oil-to-equity correlation is messed up. I caught on to that yesterday. BUT, I would like that relationship to get back. Right now I can't find anything with an acceptable standard deviation that correlates to this market. Know what I mean? Have an idea where to look? Right now, I'm looking at gold-dollar.

I did however spot one trend... medical stocks are breaking out (except BIIB and ELN after hours... ouch!), which is as Josh himself would say, is not what you want rallying to start a new bull market... totally agree with him there.

Surf with you later... when the "waters are less choppy"!

-gio

Mac said...

I wish I knew Gio. IBD wasn't too concerned with the action because it came on lower volume. The only correlation or pattern I can see in this market is "expect anything".

I will likely continue to keep my focus short-term on most trades and not trade as much.

I read a good description of things by Rev Shark - he said something to the effect of, "if you want to make money right now, buy whatever was the most beaten down for the past day or two, or short whatever was the strongest the past day or two, because that's how the market is playing out right now."

Cheers said...

I've had VISN on my radar, thanks to your posts. After this ~13% loss so far, do you still have faith in new highs any time soon? Are you taking this as a buying or a missed opportunity?

Please keep it up, I enjoy reading your blog.

Cheers

Mac said...

I was stopped out early today from my VISN - I thought it should definitely hold the $24 area and I put my stop right below that.

I base my buys on charts, and when I see the chart as it is now, I see one ugly chart. From my perspective, today messes up the whole pattern. Up to this point, it was acting almost perfectly. Now, I am looking to stay away. It may rally from here, but I won't be in it. Just my opinion though.

I also tend to think this is being messed with - how does it drop $2.50 this afternoon in the matter of two minutes??? Something smells fishy there to me.