Wednesday, December 31, 2008

State of the Market - 12/31/08

I was home for most of the day today with my first born, so I was able to watch the market a little bit and wanted to share some thoughts on this final trading day of 2008.

Following up on yesterday's low volume melt-up, we saw more of the same today. Stocks rose steadily throughout the session but with volume coming in light and even lower than yesterday's light totals in some cases, I can't give much credence to this action. Yes, the indices did get back above their 50 day moving averages today, but they did the same thing back on August 28 (check out the S&P chart) and all it led to at that time was a historic sell-off in September and October. I have used the comparison between August and right now and I still think it is applicable.

The McClellan Oscillator is a good overbought/oversold indicator in my opinion, and I have shown it before this year several times. Anything over +200 signals overbought. Right now, it is at 263. The last two times it got over 250 were 11/4/08 (+259) and 12/8/08 (+279). The two days that followed 11/4/08, the market fell about 10%. Following 12/8/08, the market fell from a high of 920 to the bottom of this current range around 850.

McClellan Oscillator
T2108 Getting Close As Well

The RSI(2) overbought/oversold indicator used by Woodshedder at is also at historically high levels on both the Nasdaq and S&P. On both these indices, the RSI(2) is close to or in some cases above the levels reached on 11/4/08 and 11/28/08. Check out what happened after each of these dates. Not really good.

S&P 500 with RSI
All Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

The fact that all of these overbought conditions were setup on very weak holiday volume, not to mention that we are at or quickly approaching the top of this trading range, leads to me believe the market is setting up for a nice pullback soon. Perhaps this time is different and the low volume doesn't matter this time. I will put my faith more in the market's recent historical behavior rather than hope that things have suddenly changed, but that's just me. I still don't see a ton of great setups on the long side and most of the ones I have been watching did virtually nothing today. I see the past few days as hedge and mutual funds attempting to paint the tape for the year as best they can so perhaps their performance stats won't look quite as bad to their investors as it may have before this week. In my opinion, we are either setting up for the mother of all rallies that starts a new bull market in my opinion (very unlikely) or an end of this bear market rally that leads to at least a testing of the recent lows and possibly new lows overall (much more likely).

I didn't make any trades because I could see us melting up a bit more Friday when volume could still be rather light, but if I have the opportunity I may look to get short very soon. The only thing that worries me is that most traders seem to be expecting a sell off as well. But if it looks like a rat and smells like a rat, then it is probably a rat. Be very careful chasing longs here unless volume comes in quickly and tighten up those short lists. That's what I plan on doing.

I hope you all have a great and healthy 2009. It has been about a year now for this blog, and I hope it has been beneficial in some way to everyone reading this. As time permits, I hope to continue posting the nightly commentaries and videos as I have done this year and perhaps expand into some new areas, but we'll have to see how that goes. I have lots of ideas but it really depends on how much time I have because family always comes first. I think I have improved as a trader and a writer as the year has progressed (at least I hope so), and I hope most of you have been able to improve as well. 2008 will go down as a historically tough year but if you could survive this type of market, you can probably survive anything. Here's to a 2009 filled with more improvement, more hard work, and more successful trading regardless of what Mr. Market throws at us. Take care and have a great new year!!

Tuesday, December 30, 2008

State of the Market - 12/30/08

Well, after a two very busy days, I have a few minutes to sit down and gather my thoughts a bit. First of all, my wife and I were blessed with a very healthy, very big (8 lbs, 9 oz; 22 inches) baby boy on Monday morning named Luke. Both mother and son are doing very well and will be coming home from the hospital on Thursday. I'm sure it will be quite an adjustment for mom, dad, and son #1 when everyone is home, but we'll manage.

Mommy is at the hospital tonight, and son #1 is at the grandparents, so I can put a few market thoughts down quickly. In terms of the market, I have obviously not been able to follow things very closely this week, but after looking at my scans really quickly tonight, I don't think I've missed much. Today's gains came on weak volume overall and the indices are still in a holding pattern - they couldn't really get over their 50 day moving averages today. I only had a few short candidates that look poor after today, so most are still valid, and most of my long candidates are also still looking good, although I see some of the solars that I have been pointing out in my videos had big pops today. If you didn't check out the video from this weekend, you can still do so to get some good ideas.

I say this with all sincerity - I have absolutely no bias or feel right now for which direction this consolidation will eventually go in. I am completely open-minded. It doesn't make much sense for us to move higher based on fundamentals, but I also don't hear many people predicting a rally to start the year - most expect a selloff. I still don't plan on trading until next week (if I have time) and hopefully we will get some guidance by then. Keep your options and your mind open right now and be ready for whatever this market wants to do.

Good luck the rest of this week and I hope everyone has a very happy new year! I don't know if I will be back until the weekend, so take care.

Sunday, December 28, 2008

Video - Weekend Market Summary - 12/28/08 - Some Setups for the New Year

Here's the video for this weekend. I am not planning on trading for a number of reasons this week, but I would expect volume to pick up starting January 5 and I am getting my watchlists ready for that week. Main points for the video include:
  • Still in a trading range and I expect it to continue this week with the holiday trading.
  • Still seeing more short setups compared to the number of long setups I see. That has me still leaning more bearish on the overall market come 2009.
  • As always, though, I am open to whatever the market wants to do. I will look for volume as confirmation for a move above 920 (breakout) or below 850 (breakdown).
  • This will be the last video for this year as my wife is giving birth Tuesday and my focus will move from trading stocks to changing diapers for at least a few weeks until we get in a routine with two kids instead of one. If the blog posts slow down, you know why.
Have a great week and I wish all my readers the happiest of New Years. Now off to watch some football - too many great games this week to miss any of them. Take care.

**** Here's a link that should work better for IE users if the first link doesn't work

Friday, December 26, 2008

State of the Market - 12/26/08

Today, as expected, was a very slow day on Wall Street as low holiday volume continued and stocks did basically a whole lot of nothing. They started higher at the open and rose for the first hour or so of trading, but fell from there all the way until 1:00 or so. They hit a bottom there and rose back up into the close, finishing with modest gains. If you traded today, more power to you.

Not much to say that I haven't said previously this week. The market is in a range here that makes it very difficult to trade, and until we breakdown (851-857 area on the S&P) or breakout (920 area on the S&P), there isn't a whole lot to do. This week was slow and next week will likely be similar with New Year's day coming on Thursday. I am still expecting a move lower once the new year starts, but will try to be prepared for either outcome and completely open-minded here.

I hope everyone out there had a blessed and enjoyable Christmas holiday. Christmas with a two year old is great and took me back to my childhood a bit. My wife and I spent most of today cleaning and organizing around the house to make room for all my son's new toys and playing with those toys a bit too with him, which was fun. I'll try to be back this weekend with one final video showing you which stocks are setting up as possible longs or shorts before the new addition comes to the family December 30. Until then, take care and enjoy the weekend.

Wednesday, December 24, 2008

State of the Market - 12/24/08

As expected, we had another low-volume, boring session today with the market up a small amount on very thin trade. Friday will likely be another slow session given tomorrow the market is off for Christmas.

Technically, the numbers to watch are still 850 to the downside and 920 to the upside on the S&P. A break of either of those levels on heavier volume could be the sign we need to know what the next play should be.

I covered my two shorts this morning - NDAQ at $22.57 for a 6% gain and CCI at $16.39 for a 2.7% gain. Both were near what will likely be short-term support and I really didn't want to be bothered with any positions going into Friday.

I guess it is better we have fallen this week on lower volume than rallied on lower volume like we did during Thanksgiving. We'll have to see if anything happens next week - I hope we just continue to move sideways. Perhaps when the new year starts we can get a move for real. Based on my individual charts, I am still expecting a move lower rather than a rally - I just don't have many nice charts except for some precious metal stocks.

That's it for today. I want to wish everyone of my readers a very merry Christmas and I hope the holidays treat you all very well. God bless and I'll see you probably sometime this weekend.

Tuesday, December 23, 2008

State of the Market - 12/23/08

As expected, we had another low-volume, boring day today on Wall Street, as the holiday trading season appears to be upon us in full force. Stocks were choppy but higher early on in the session, but started falling around 11:00 and continued to do so until lunchtime. From there, stocks basically went sideways with a slight downward bias. There was no late day bounce today and even though we closed lower, not much of substance happened in my opinion.

Technically, I am still looking at 850 on the S&P as a key number as that will mean a lower low has taken place. I would also watch around 1500 on the Nasdaq, although it has to get down near 1478 to make a lower low. Right now, it kind of looks like we are setting up a situation like August (I mentioned this possibility in the video this weekend) where we just move sideways for a while around the 50 day moving average before breaking down in earnest. Tomorrow is going to be extremely slow and Friday will likely be the same. I could see that happening (more sideways movement) through next week. If for some reason volume comes into play on a breakdown, that will be important.

I did nothing today except set my stops at the open and turn off my quote screen. I was stopped out of my BDC short at $19.22, which I kind of expected. It still sucked however because it reversed lower right after that and I would have a gain right now. It ended up giving me a 4.85% loss, which is much higher than I like to take.

On a different note, sometimes you get a blessing when trading and you don't even realize it. I was very close to going into SDS and QID yesterday afternoon but decided not to. I would have likely been stopped out anyway on the late bounce, but if I wasn't, I would have had a heart attack this morning. I can't believe these inverse ETFs. Look at SMN. Perhaps people holding these were aware of what was going to happen, but I am sure a bunch were not (I wouldn't have been). I don't know how they play out with these redemptions - I don't know what to think about them. I wonder aloud if these things are here to stay or if eventually they are going to self-destruct. Just a thought. I know I would probably have been better off if I stayed completely away from them.

Tomorrow will be a very short and likely boring session, so I don't know if I will be back with a commentary or not. If not, I hope all the readers of this blog have a great Christmas holiday and can enjoy the next few days with friends and family away from this market. After the holiday, I'll try to be back with a few posts or videos before the baby comes on December 30. Take care and God bless. Merry Christmas!

Monday, December 22, 2008

State of the Market - 12/22/08

Well, for most of the day, it looked like Wall Street was finally ready to give us some guidance in terms of where it wants to go, but of course that would be too easy. The market started lower at the open and fell pretty steadily throughout the session, not counting a few periods of consolidation during the 10:00 hour and lunchtime. The selling picked up during the afternoon and it took the indices clearly below the trendlines I mentioned this weekend in the video. Things looked bad for the bulls at that point, but then out of nowhere, stocks bounced sharply in the final hour and closed off their lows, which completely muddles the picture even more for this market.

Technically, the indices still did close below their trendlines, and just under their short-term moving averages, so maybe the late bounce will prove to be nothing. I really would have liked to have seen a close near the lows however. Support for the S&P is around 851, which is close to where it bounced from today. Next levels of support for the Nasdaq is around 1477. The VIX was never up that much today even during the selling and actually closed lower. I have no way of knowing what this means anymore.

As for my trading, I was able to be near my computer this morning and I did put some shorts on in individual stocks as I saw them breaking trendlines. I shorted CCI at an average cost of $16.87, NDAQ at $24.10, and BWLD at $24.60. The BWLD short was the only one that didn't work right away, as it spiked almost a point in about thirty minutes and quickly hit my stop at $25.31, giving me a 3% loss. When I got back to my computer in the afternoon, I added BDC as a short at $18.36. All of these looked very good when I left work around 3:30. When I got home, I had a different viewpoint. That late bounce took away most of the profits I had in these shorts - always gotta love that.

I also took a position in SKF at $120.17 in the afternoon, but the late bounce took me out of this at $117.95, giving me a 2% loss. That was a lot of fun as well.

Overall, I really thought we could get a trend going after watching the market action most of the day. I knew volume was lower, but I didn't think that would matter much being it is expected. The late bounce certainly throws a wrench in things, however, and we'll have to wait until tomorrow to see if it means anything. Perhaps I should have shut it down for real when I said I was considering it last week. Random pops like we had in the last half hour really frustrate me and continues to make trading anything for more than a half hour a very difficult proposition. Yuck. Hopefully I'll get some guidance from my scans. Take care.

Saturday, December 20, 2008

Video - Weekend Market Summary - 12/20/08 - Bulls Running Out of Steam Soon?

Lots of good football games tomorrow so I am getting the video out early this weekend. Main points include:
  • We've gone basically nowhere the past two weeks. However, based on the many short setups I see and the very few nice long setups I see, I am starting to expect another significant move lower sometime in the next few weeks. Exact timing will be difficult.
  • The number of stocks up 50% or more in the past month is over 400 now, which is ridiculous. Tells me there are a ton of overheated stocks out there.
  • Current market is looking similar to mid-August 2008 to me. We moved sideways there for a while right around 50 day moving average before heading lower.
  • It's possible seasonality may push us a bit higher in the short-term, but I am expecting a turn sometime soon and will play it on the short side. Watch 920 and 880 on the S&P as key numbers and watch volume on a break of those levels as confirmation.

**** Here's a link that should work better for IE users if the first link doesn't work

Friday, December 19, 2008

State of the Market - 12/19/08

It's Friday and since we had another day of movement that takes us nowhere as I mentioned last night, I am cutting the typical state of the market short for today. Today was a boring day and nothing of significance happened from what I could see. I had my quote screen off for most of the day. I will be back this weekend with a detailed video and a look at both sides of this market, hoping to gain a clue as to where we head from here.

I was stopped out of my NTES short early around $21.35 for a 2.5% loss. I was away from my computer this morning and just set my stop, figuring it would get hit anyway. That puts me back to 100% cash for the weekend as my account continues to grind nowhere but sideways in this chop. Being away early cost me a breakout in one of the only two stocks I was watching on the long side - CSKI. There is no guarantee I would have taken it, but it looks good now - I just can't chase it. Kind of sucks but so does this market.

Until the bottom trendlines are broken, there is no reason to short this market from my perspective. Until the 920 and 1600 levels on the S&P and Nasdaq are broken to the upside on heavier volume, there is no reason to get long any stocks in my opinion. Hopefully one of those two things happen soon so we can get some trades on that will move, but with Christmas coming up and the lower volume that is certain to accompany it, it is not like it has to happen. We could just continue to chop sideways into the year end. I hope that doesn't happen, but it could.

Enjoy the weekend and I'll be back tomorrow. Take care.

Thursday, December 18, 2008

Things Don't Look Great - Bulls Need To Step Up Tomorrow

Just got back from dinner and it is late, so I am just going to share some thoughts from my scans instead of doing a whole video.

After going through my scans, I guess I have to lean bearish right now for several reasons. The indices are all sitting right at important trendlines and don’t have a lot more room to the downside here before this rally could get into trouble. I am also seeing many, many more attractive short setups compared to the number of attractive long setups I see. There are really only two longs that interest me (AIPC and CSKI). That is disconcerting to me. I think if we were going to continue higher here I would see more nice charts.

Selling pressure wasn’t very intense today and I didn’t see many real technical breakdowns in individual stocks tonight in my scans so that’s good for the bulls. One thing, however, that did stand out in the scans is we have 171 stocks that are up over 50% or more in the last twenty trading sessions. That is the highest number I have ever seen and is what I would call dangerous. The closest number we’ve had to that was on August 11, when there were 125 stocks up 50%+. Check out August 11 on a chart to see what happened after that. That number tells me that there are many individual stocks that are overheated (even with the recent pullback) and that is usually a bad thing.

As always, I am trying to keep an open mind here, but if we break those trendlines, then I have to think things could get ugly quickly. We'll just have to see. I feel like a politician this week because my daily outlook has flip-flopped so much, seemingly each day. That’s how this week has been – just like last week, we’ve moved around a bunch but haven’t really gone anywhere. We opened last Monday at 882 on the S&P and today we closed at 885. That makes trading (at least swing trading) tough. I know a breakout is possible (watch 920 and 1600 on the S&P and Nasdaq respectively) and will still play it if it happens, but the way things look it, frankly it would surprise me. Watch those levels and if they are broken, then I would look to get short, even though I'll probably just get whipsawed out again.

Here are some of the ones I am watching on the short side. Sorry for no charts tonight. Quite a few retail and restaurant stocks on this list. The setups are definitely there for the taking - will they work is the real question.


Good luck tomorrow. I am going to miss the first few hours of trading - maybe that is a good thing. Watch out for those options days.

State of the Market - 12/18/08

Another very choppy day on Wall Street today, as traders still can't seem to decide whether they want this market to go up or down. Futures were pretty much flat pre-market, and stocks opened that way. They put in a bounce early and things looked promising, but this quickly reversed and stocks broke through the late afternoon lows from yesterday. They didn't move much lower, however, and rallied from there into the 11:00 hour. They pulled back slowly from there until a little before 2:00, when stocks broke support and fell to new lows for the day. They formed a bear flag at 2:20, fell through that around 2:50 to new lows, then formed another bear flag moving into the close. Volume appears to be even or a little heavier than yesterday but not by much.

Technically, the levels I mentioned yesterday that I was watching to the downside were 895 and 883 on the S&P and 1560 and 1533 on the Nasdaq. Both of the first levels were broken today and both indices are now back below their 50 day moving averages. That is not good. The indices obviously closed off their lows but the S&P just barely closed above their short-term moving averages and the Nasdaq did test those levels today. The uptrend lines are still holding on both of these indices as well. The VIX bounced off some support today around 44 and could move higher from here. So what does this all tell me? Well, if we had a smoother ride down today, I would be clearly more bearish. With this market, however, you just never know. I will watch those trendlines and if we get more selling early tomorrow(perhaps breaking today's lows), then I would expect us to move lower in a more significant fashion. This could all be part of a pullback/consolidation move, but the bulls better step up tomorrow to defend the current levels or more selling could come in quickly.

I debated whether to sell my NVDA and DRYS after-hours last night but I decided to keep them. That looked like a good decision early on as DRYS gapped up once again. NVDA however acted very poorly, falling through some intraday support even with the market being slightly higher and I sold out at $9.05, giving me a 2.1% loss. I let this go a little longer than I should have but was trying to be optimistic. I set my stop on DRYS at $12.57, which was under yesterday's highs and the 50 day moving average. I thought about taking my 9% gain right off the open, but passed and then ended up with a measly 1.3% gain. In hindsight, three straight gap opens was probably a good sign that this was about to reverse. I really am not doing well recently in terms of taking profits when I should versus letting stocks move a little. Every time I let them move, I end up losing a nice gain, and every time I get out early, the stock runs without me. It is very frustrating but then again, the whole market is frustrating right now.

As the market broke down in the afternoon, I started looking for shorts. I entered two individual shorts that looked like they were reversing at key resistance - EDU at $52.71 and NTES at $20.88. I actually added more NTES at $20.81. As EDU broke down, I moved my stop up, honestly not expecting it to be hit. Well, of course it was ($52.79) and I took a very small loss on that. I entered SKF at $109.51 as it formed a nice looking bull flag after breaking out but I was also stopped out of that at $107.85 as it broke below this bull flag, giving me a 1.6% loss. It's always fun to get whipsawed out of a position only to watch it move the other way when you get stopped out. If that wasn't enough frustration for me, I went into SDS at $83.85 and this looked like it was going to work as well - it moved up nicely after I entered. I moved my stop up as it broke to new highs and felt pretty confident about the position. Of course, a spike down took my stop out at $84.32 for a very small gain. The low on the spike was $84.30. A whole lot of trading today that got me a whole of nothing (well, nothing besides frustration).

I don't know for sure what to expect for tomorrow as we have quadruple witching for options, and that typically causes some wild trading. Perhaps that was part of the reason for the craziness of the final two hours. I will watch those trendlines but I would also fear a bear trap for a breakdown here, just because that would be the most frustrating outcome for all and because of the options expiration. I will be away from my computer during the morning, and perhaps that is good - can't trade if I am not there. I am not having much luck right now - not losing much but just kind of spinning my wheels - and when that happens or when you are frustrated, it is usually a good idea to step away until your emotions are back in check. The fam is going out to eat tonight but if I find some interesting setups in my scans, I'll try to be back later with a video. Take care and good luck Friday.

Wednesday, December 17, 2008

Just Some Random Thoughts Tonight

My watchlists are quite small tonight on both sides of the market, so instead of doing a video, I figured I would just share some observations.
  • Your guess is still probably as good as mine in terms of the overall market for tomorrow. I didn't gain any clues from the index charts. Pay attention to the levels I wrote earlier.
  • One interesting fact - we had twice as many 4% or higher moves today to the upside than downside(457 to 218). That is bullish for a down day.
  • XLF is right at a downtrend line and has its 50 day moving average right above that. It will probably be tough for it to bust through both immediately, but if it happens, it could definitely run.
  • Solars were big movers today and the gains came on heavier volume. These things can move IF the market decides to break out, so keep them on your radar (CSUN, SPWRB, SOL, SOLF, JASO are my favorite charts)
  • Some of the longs from last night's video are still valid but the ones I am focusing on as of now are AIPC (almost there in terms of pullback), CSKI, and XCO. That's all I am really interested in right now for more than a day or so.
  • Some stocks I am watching as they run up into some resistance include NDAQ, MET, EDU, CPKI, CYBS, NTES, QLGC, NTCT, and SBUX. Market has to obviously break down for these to work as shorts.
Good luck Thursday. No meetings tomorrow so maybe I'll be able to follow things a little better and get a clue as to where we are headed. Take care.

State of the Market - 12/17/08

After putting in a great session on news of another Fed rate cut yesterday, stocks opened lower to start the session today. Stocks gapped down, put in a quick bounce for about a half hour, and then fell to new lows. Those lows were quick, however, and stocks rose steadily throughout the rest of the morning and into the early afternoon with only a few light pullback. It was quite an impressive showing and around 1:45, the market actually broke above yesterday's highs for a short period of time. They met the resistance I pointed out yesterday, however, around 918 on the S&P and 1598 on the Nasdaq and quickly reversed lower from there. This pullback lasted until around 2:30 when stocks bounced back a bit into the final hour. That bounce looked like a bear flag though and it did try to break down from that, but really couldn't do so. The last forty minutes was pretty choppy, but the last five minutes was quite bad and left the market with moderate losses on what appears to be volume similar to yesterday.

Technically, the fact that we reversed almost exactly at the recent highs on the S&P and Nasdaq is certainly not bullish, but perhaps we just need a few days of rest before busting through those levels. Those are still the numbers(918 and 1602) I am watching carefully on the upside. Until the last five minutes, I really wasn't too concerned with the pullback we got midday. We'll have to see if the selling late carries over to tomorrow. I would watch 895 and 1560 as a first level of possible support and below that, we need around 883 and 1533 to hold respectively. If they don't, then things could get worse. For some reason, I just didn't like that late action.

I was able to check in with the market at lunch and was impressed with the bounceback, so I entered into NVDA at $9.22 as it broke above the resistance I pointed out in the video last night. Later on, my meeting got done early so I was able to check back in and decided to enter a few other positions based on their intraday charts - DRYS at $12.02, ACM at $30.87, and HIG at $18.48. Initially, these positions acted very well and as they did, I moved my stops up. However, when the reversal occured around 2:30, I was stopped out of the last three, all with small losses. DRYS was hit at $11.93 for a 1% loss. ACM was hit at $30.54 for a 1.3% loss. HIG was hit at $18.31 for a 1.1% loss. I was optimsitic that these would work but not optimistic enough to give them much room. My stop was not hit in NVDA and I still have that position. I actually did go back into DRYS later though at $12.37 as it broke out intraday near the end of the session. I didn't like the way either closed however so we'll also have to see what happens with these. I may get out after-hours.

Today was kind of a confusing day for me - I expected a nice breakout after stocks rallied the entire morning off the opening gap down, but then when we reversed around the recent highs, I expected a pretty big selloff. We got neither and right now, the best way I can describe things is still up in the air. Today was basically chop and doesn't help give us any clues as to what play to make next. Quadruple witching is coming up on Friday as well so it is certainly possible we chop around a little bit longer going into next week. My outlook remains bascially the same as last night - slightly bullish and looking for a breakout for the indices from which I can get long, but aware that definitely doesn't have to happen. I am willing to short as always if we fail here. If I see anything interesting tonight, I'll be back with a video or some notes. Take care.

Tuesday, December 16, 2008

Video - Tuesday Market Summary - 12/16/08 - Will The Rally Continue?

New video for the weekend - main points include:
  • Great day on all accounts for the bulls. Huge number of 4% moves higher in my scans.
  • Still a bit of resistance for bulls to overcome before I can say "all clear".
  • You have to remember that Fed days are often reversed soon after the initial reaction, so don't think we are guaranteed a rally tomorrow. Hopefully we get one though.

**** Here's a link that should work better for IE users if the first link doesn't work

State of the Market - 12/16/08

Figures I pick today to have two straight days of meetings at work. I was away from the computer for most of the day except the final hour, so my summary may be shorter than usual today. The big news today was the Fed rate decision, and the market did rally higher in anticipation of the decision. Stocks soared on news of the newest rate cut, pulled back quickly, but then blasted off again to put in big-time gains into the final hour. They consolidated those gains quite nicely for most of the last hour (not counting one quick spike down that was bought) before closing near their highs for the day. Volume does not appear to be overwhelming but was definitely heavier than yesterday.

Technically, the Dow is the only index that closed clearly above its 50 day moving average, but the Nasdaq and S&P closed right around that level if not slightly above. I wish they would have been able to clearly bust through these, but that may be asking too much for one trading session. There is some resistance just above the closing levels of today around 918 for the S&P and 1602 for the Nasdaq, and if we get through those levels (hopefully on heavier volume) then I would get much more bullish than I am now. It would signify another higher low and higher high being put in on the indices and that is bullish. It looks like the VIX has broken down through its most recent support so that should also be good news for bulls.

When I got home around 3:00, it took me a while to get caught up with the action and with what was happening. My first instinct was to not trust the move - any rational person cannot see the lowest rates in our country's history as "good" news (I see it as a sign of panic myself), but the stock market is certainly not rational. I saw a lot of individual stocks that looked decent, but they also had not broken above some key resistance points I was watching, so I passed on taking any longs today. Perhaps I will tomorrow if these stocks breakout (I'll try to show these stocks tonight in a video) but I didn't feel like anticipating a breakout here, especially with the Fed decision causing this spike. Everyone knows that things are usually volatile immediately following the rate decision, and we could easily be down 300 points tomorrow as the market tries to make up its mind about whether it likes or dislikes the decision. As I said yesterday, I would rather be safe than sorry right now, and since I will be at another meeting tomorrow, passing for the moment seemed like the best play. I am willing to go long again, but I just don't want to be early and get whipsawed once again. Hopefully I can find a way to be near a computer tomorrow because it will probably be an interesting day.

As I said, I will be back later with a video that shows some of the stocks I am watching closely. Today's action was certainly good for the bulls and we certainly could rally further here. Hopefully we will. We have seasonality with us and if we make another higher high tomorrow, then we could take off to close out the year. You just always have to be careful around Fed days however - you never know what the market is going to do until after a few days have passed. That's why I am going to wait a bit here. Good luck Wednesday.

Monday, December 15, 2008

State of the Market - 12/15/08

With a lack of clear closure over the weekend to the news issues affecting the market, Wall Street opened pretty much flat today as no one seemed to be eager to take any positions and trading seemed very light. There was a downward bias for most of the day with some slight bounces mixed in, but the action was so slow that I don't know if it is worth analyzing that deeply. There was a late bounce that came out of nowhere that took the indices off their lows for the day, but the market still finished with slight losses. That bounce shows perfectly why trading in a low-volume environment is so difficult, and we definitely saw lower volume today.

Technically, the indices broke down out of what now look like bear flags on their intraday charts after rallying right up to former support areas. I showed these charts Friday. It wasn't the most powerful breakdown though and came on lower volume, so I think things are basically still up in the air. I think that late bounce proves that fact. The possible bear flags that are being formed on the daily charts have yet to be broken to the downside, so we'll have to wait for some confirmation of the next move. The numbers I will be watching to the downside are 850 and 815 on the S&P and 1478 and 1398 on the Nasdaq. To the upside, I will be watching 885 and 905 on the S&P and 1535 and 1590 on the Nasdaq. I hope I am wrong, but I think we may be facing a trading range here, which is going to make things difficult. We need some volume to come in in order for a break of any of these levels to be meaningful.

No trades for me today. I went into the day today really not expecting to do much, because none of the news items I mentioned in the video were taken care of over the weekend. Until they are, things might stay this way. I was watching the inverse ETFs throughout the day and almost got drawn in a few times, but I am glad I showed enough discipline to stay out. There just aren't a ton of great opportunities out there right now.

If it stays like this(trading in a range on lower volume), it might actually be a blessing for me. I've been thinking about just shutting it down for the year for several reasons. For this week, I have meetings the next two days at work and won't be near a computer, so that makes following things much harder in the short-term. That is another reason I sat out today - wouldn't have much of a chance to follow them tomorrow. In addition, with this being the last full trading week of the year, I think the action next week is going to be thin and quite choppy. I am up around 94% in my main account right now for the year, and unless some really good opportunities come up soon, I don't know how smart it is to risk those gains in a questionable environment.

More importantly, my wife is scheduled for a c-section delivery for our second son on December 30, and I know that my focus will not be on trading for a few weeks at that point and rightfully so. Everyone I talk to says going from one kid to two is a huge adjustment, and I guess we'll find out soon. So I know that I won't have much time at least early on to dedicate to following this market(not as much as I usually do), and until I can adjust to the responsibilities of being a parent to two kids instead of one, sitting out may be smart from my perspective. If the blog posts thin out considerably for a few weeks, you'll know why.

This weekend, I said things are up in the air right now and I don't think that outlook changed for me today. I would basically recommend just watching those levels mentioned above and if we break above or below those levels on some heavier volume, then perhaps move on some trades. I would not try to anticipate here - the thin volume is going to make things tricky. If I find anything interesting in my scans, I'll be back later, but as of now, I don't expect to find much. Good luck Tuesday.

Saturday, December 13, 2008

Weekend Market Summary - 12/13/08 - Keep Your Options Open

New video for the weekend - main points include:
  • If you look at the indices, you can see bullish signs and bearish signs. Kind of up in the air right now for me.
  • News-driven environments are always hard to trade and that's what we have right now.
  • Best advice is to keep your mind open here as neither a breakout or breakdown would be surprising. Getting locked into one opinion right now will get you in trouble.
  • Video focuses on both long and short setups as I try to remain prepared for anything.

**** Here's a link that should work better for IE users if the first link doesn't work

I have received some feedback on the videos so far and hope to receive more. I think they are turning out well but if you have any suggestions feel free to let me know. Thanks.

Friday, December 12, 2008

State of the Market - 12/12/08

A failed bailout/handout attempt for the automakers/UAW caused some panic early today on Wall Street. Futures were down big pre-market and it looked like we would get more selling on the back of yesterday's break of support. That did not happen, however, as the gap down proved to be the lows of the day, as stocks rallied from there and closed near their highs for the day. It certainly wasn't a smooth ride though, and there still seems to be a lot of uncertainty in the air right now. Volume was mixed - higher on the S&P which lagged today but lower on the Nasdaq which outperformed today.

Technically, I think I will just put up some 15 minutes charts that pretty much tell the story. It is good to see we didn't have an awful day, but we have climbed right back up former support levels that could prove to act now as heavy resistance. It looks like both the Nasdaq and S&P have regained their short-term moving averages. There is a good possibility we still fail around this area next week, but there is just as good a chance that we were just consolidating this week and will break above the declining 50 day moving averages next week. To be honest, your guess is as good as mine right now.

It took just about everything I had this morning to not sell my SDS and QID positions at the open of the pre-market session. QID was at $75 and SDS was at $95, and selling both then would have given 9% and 8% overnight gains respectively and also would have put my account at all-time highs. For some reason, I held and just decided to put stops below yesterday's highs, as I realized we could bounce off the opening gap. I didn't expect those stops to be hit, but they were. QID was hit at $71.45, which gave me only a 3.4% gain. Kind of sucks. My SDS stop was not hit right away.

After the market did bounce off the opening gap, I decided to enter a few more inverse ETFs - went into DUG at $31.55 with a stop below $31 and SKF at $133.95 with a stop below $129.30. I didn't have a good feeling one way or the other about them as I knew this market could be crazy today, but felt they were worth the risk at the time. When the market broke to new highs for the day, my stops were hit on both. DUG gave me a 1.98% loss. SKF gave me a 3.7% loss. My SDS was also stopped out at $89.34, giving me a 2.8% gain. Basically, I am back to where I started at yesterday afternoon.

Later on, as the market rose without really breaking back down, I started looking at longs and played the intraday chart of DRYS. I went in at 9.05. It did take off nicely and at that point, I moved my stop up to breakeven. It was hit around $9.07 which gave me a very slight gain but nothing really. After that, I gave up and pretty much called it a day, admitting to myself that I had no clue what was going to happen next on this day. I probably should have done that much earlier.

Needless to say, it was quite the frustrating day for me. It would have been nice if I just would have followed my instincts to sell out pre-market and just sat back the rest of the day in cash. Can't do anything about but learn though. Anytime news events are taking center stage(like now), trading becomes even more difficult in my opinion. I think today was an example of that. Not only is there no way to know what the news is going to be, but you also don't know how the market will react to it. Right now, although I am not losing money, which is always the first goal, I am not making any progress either. I am trying to force things a bit and probably overtrading. That is never a good thing. I keep expecting a big move and don't want to miss it, but this week we really wen't nowhere when you look at where we started and where we ended.

I wish I could tell you where we head Monday morning, but I honestly don't have a clue. I don't even have a good feel one way or the other. It all probably depends on this bailout. If it gets done (which I assume will happen because that's how Washington works - no ability to stand up for any principles) then I could see us gapping up Monday. If it doesn't get done, who knows? Basically, if you like gambling, the current market is perfect for you. As for me, I will have to wait to see what happens and then react accordingly. Perhaps I won't do much of anything. We will just have to see how it goes. I'll try to be prepared for whatever happens - that's probably the best game plan. Keep an open mind here and be ready for either outcome. Enjoy the weekend - I'll be back with a video at some point. Until then, take care.

Thursday, December 11, 2008

Video - Thursday Market Summary - 12/11/08 - Looking for Short Setups

New video for tonight - main points include:
  • Today certainly was a bearish day as three-day support was broken and futures are already down for tomorrow. A further breakdown would likely signal an end to this rally.
  • Retail and financial ETFs look particularly bearish which is not good for the overall market.
  • Video focuses mainly on short setups for tomorrow - lots of stocks that look like they may be failing at their 50 day moving averages.

**** Here's a link that should work better for IE users if the first link doesn't work

State of the Market - 12/11/08

Consolidation was the name of the game for most of the day today on Wall Street, as a bad open once again held support, and stocks meandered sideways for most of the day. However, a late move lower that broke support bodes poorly for the next few days. Pre-market, things did look bad and the market did gap down to start the day, but that gap held right at the 885 and 1535 areas on the S&P and Nasdaq that have been so important this week. Stocks climbed slowly from that open up to a breakeven point, where they basically flatlined from about 10:30 to lunchtime. They tried to bounce at 12:00 and then a little later toward 1:00, but those bounces weren't strong and as the afternoon progressed, stocks fell back down toward their lows. Although support has held for the past few days very nicely, it gave out today and around 2:40, stocks broke support and fell to new lows for the day. Stocks did bounce a bit into the close and that allowed them to finish slightly off their lows, but it looks like the damage was already done. Volume appears to be close to yesterday but I don't have the final totals.

Technically, I said that I would be slightly bullish as long as the key support levels of 880 on the S&P and 1535 on the Nasdaq held. Most of today looked like another day of healthy consolidation until the late breakdown. The selling took the indices below their short-term moving averages as well. The XLF had a particularly bad day, breaking both a trendline and its short-term moving averages, and looks to be setting up for much lower prices. In addition to the breakdown on the indices, I also see several formerly decent-looking charts that broke down big today (AAON, OSIR, CRM, THOR, RGLD, IXYS, TXI) and that is not a good sign. It tells me that there is a very good chance we are no longer in the consolidation mode. A break below the 855 area on the S&P would confirm the possible bearish wedge setting up and would be bearish. The Nasdaq may get some support near its recent lows around 1395, but that's a far ways away. We can always bounce but I would guess that the former support levels listed above will now act as resistance. I guess I am back to looking at bounces as opportunities to short.

I mentioned last night that I was watching the precious metals and the solars very carefully as both looked like they were setting up possible moves. I passed on the gold stocks this morning for some reason (watched AUY take off and kept waiting for a pullback) but did keep an eye on the solars. I entered YGE at $5.34 as it climbed slightly over its 50 day moving average. It was not a large position because I don't feel comfortable taking large ones in low-priced stocks, but I still felt it was worth a shot. It broke down mid-afternoon from a flag pattern so my stop was hit at $5.48, giving me a slight 2.3% gain. I hate day-trading but right now that seems to be what I am doing due to not wanting to hold onto losers or give up profits in an uncertain market environment.

When the market broke down, I entered QID at $68.93 and SDS at $86.74 and put stops below the breakout points. If this was a bear trap, then I wanted to make sure I wouldn't lose a whole lot so I wasn't going to give these positions much room to move against me, but they worked out so far. I have a little cushion now and I will look at add more if we break the lows of today, as these two are setting up flag patterns on their intraday charts. I wish I would have added SKF and may wait for a little pullback. I'll have to look at my individual shorts tonight.

I said last night that I was slightly bullish due to the healthy looking consolidation patterns that were forming. I also pointed out however that things remain up in the air overall and if those support levels were broken, things could get bad in a hurry. In this market (actually in most markets) I think it pays to keep your mind open. If you get too locked into one viewpoint, it seems that is the typical time Mr. Market comes in to teach you a lesson. I was willing to go long if we broke out, but I was just as willing to go short if we broke down. After today, it looks like Mr. Market has showed us his hand a bit and now we can start trading accordingly. As always, anything can happen, but I would focus on the short side only for the time being. Seems to be the play to make right now after today's action. Good luck Friday.

Wednesday, December 10, 2008

Video - Wednesday Market Summary - 12/10/08

New video for tonight - main points include:
  • Still a little up in the air here - hoping for continued consolidation that could set up a more powerful breakout.
  • Inverse ETFs are at some possible support levels - will they break through?
  • Solars and gold/silver stocks stood out to me in the scans. Solars are more of a hunch - looking for a possible pop soon.

**** Here's a link that should work better for IE users if the first link doesn't work

State of the Market - 12/10/08

On news of another bailout/handout for the automakers, stocks looked poised to bounce back today from a disappointing session yesterday. Stocks opened higher and continued higher throughout the morning, but it was a very choppy and difficult ride upward. They hit a peak during the lunch hour and fell for the next few hours, testing their lows from yesterday afternoon before bouncing a bit for the last hour and a half into the close. This bounce allowed them to finish in the middle of their range. Volume appears to be mixed - higher on the S&P and lower on the Nasdaq.

Technically, after looking at the 10 minute charts, the past few days look like nothing more than consolidation, and that is good. When I saw these yesterday, I was concerned they were forming head and shoulder patterns (and that is still a possibility, especially on the Nasdaq) but it doesn't look as bad to me today. It is good to see that the market pulled back once again to test support levels (880 on the S&P and 1535 on the Nasdaq) and held those levels. As long as that happens, I have to think the action so far is very constructive. I think originally I was hoping for a few days of flat action, but I think I now realize with the volatility, a flat session is almost impossible anymore. So even though the point losses were large yesterday, support held for the most part so perhaps I overreacted a bit to the action. Now that I look at even the daily charts, I think the action looks good. It looks like we are resting and that will allow the market to perhaps bust above their 50 day moving averages in the next few days. Let's just hope those levels mentioned above continue to hold. If they don't, then the story completely changes.

S&P 500 Intraday
Nasdaq Intraday

There were a lot of things I didn't like with the midday action - financials were lagging, intraday charts were wedging higher and losing momentum, and just too many stocks moved a little too fast for my taste(mainly the commodities). I also saw the VIX have a sudden spike down for seemingly no good reason. Because of these things, I decided to enter a few inverse ETFs around lunchtime. I entered DUG at $29.66 as it bounced off some support around $29.30, and later entered SKF at $115.11 as the financials broke through their gap of a few days ago. They weren't huge positions but I figured I could add to them later if I chose. When they moved a little higher, I moved my stops up so I was basically going to breakeven on the combined positions if I was stopped out. I was stopped out of DUG at $30.15, which gave me a puny 1.5% gain. I was also stopped out of SKF at $112.87, which gave me a 2.2% loss. Since the DUG position was bigger, I basically broke even with a slight gain. Oh well. The fact that we didn't break down with all of those factors I mentioned is bullish I guess.

Taking an early look at the charts, I am seeing some bullish pullbacks on stocks like ACM and INSU which is great. After doing my scans, I will see if there are more that are consolidating their recent gains properly. Last night, I was kind of unsure of where we would go but was slightly bearish. After today, I am still not totally sure where we go from here but would say I am slightly bullish now. Let's see what happens - I wouldn't mind a few more days of consolidation - but based on the charts I see, there are several positives right now. As always, however, remember the motto of this market - "anything can happen". The fam may be going out to eat tonight and wrap up some Christmas shopping, but I'll try to do a video later. Take care until then.

Tuesday, December 9, 2008

Many More Short Setups in Scans Than Long Setups

I have a pretty bad headache tonight so I am not going to do a video. I will put the stocks I am watching and as the title states, I had many more short setups than long setups right now. I don't know if that means anything or not - I guess we'll find out. If we don't hold the numbers I mentioned earlier today, then I could see us falling a good amount once again and this rally going up in smoke. I hope that doesn't happen but based on my individual charts I now think it is certainly a possibility. As always, with this market, anything can happen.

Longs Watching For Rest: CSKI, ACM, INSU, AAON, PENN (wish there were more)
Longs Set Up Right Now: GMCR, NVDA (just broke above 50 day today)

Inverse ETFs to Watch: SDS, SMN, QID (all at some lateral support), SKF, SRS, FAZ


I think most of these shorts are self-explanatory (right up again 50 day moving average, ready to break down from bear flag patterns) but if you have any questions feel free to ask. Good luck Wednesday.

State of the Market - 12/9/08

After having another great day yesterday, the stock market looked like it wanted to pull back early today, as futures were down and the market did open down a good amount to start off trading. Support from yesterday, however, came into play, and stocks quickly put in a bottom there and rose throughout the next hour and a half in impressive fashion. The Nasdaq led the way, breaking past yesterday's highs, but the S&P lagged and looked like it was forming a possible head and shoulder pattern on the intraday charts. Around 11:00, stocks did start pulling back. They consolidated through the lunch hour, but around 1:00 started drifting back down to those important support levels. They broke through the neckline of that intraday head and shoulders pattern at 2:00, and fell further from there. They tried to retake the neckline as the final hour approached, but really couldn't do so and closed near their lows for the day. Volume was heavier on the Nasdaq, giving that index a distribution day, but lighter on the S&P.

Technically, I said last night that I was expecting a pullback and we got that today. Now we have to determine if this is "more" than just a pullback, because this type of strong selling is not what I was hoping for. I wanted a slight, quiet pullback where the market just kind of rested for a few days. I don't think today can be described in that way. It seems like the indices got rejected today at their 50 day moving averages. The S&P 500 closed below its former high around 896 and that is not encouraging. Next line in the sand for me for the S&P is right around 880. If that holds, I will give the market the benefit of the doubt. The Nasdaq did come close to testing that 1535 area and closed above it - that's the level I will watch carefully. The XLF closed above key support around $12.95 and I will watch that level as well. Interestingly, the VIX was barely higher today even with the large pullback. Not quite sure what to make of that.

I didn't do much of anything early on today because I didn't have a good feel for things. I thought about buying at the beginning of the session as stocks were right near support, but just passed instead. I later had SKF on the screen around $103 but again passed as I felt I would just be guessing. Since the new highs were just broken yesterday, I think it was tough to know for sure how the market would react near them and if they would hold. Therefore, I sat most of the session out. I did try and short KBH around 2:00, but Scottrade had no shares to borrow. Oh well. I did take a position in SDS right around 3:30, but accidentally hit sell when trying to put my stop order in and was out immediately ($85.56 buy, $85.66 sell). At that point, because I wasn't too sure with the decision anyway, I just decided that was some sort of sign and shut it down for the day.

I am not ready to throw this rally under the bus yet after one bad day, but I do think this pullback was a little harsher than I had hoped for, especially when I look at the intraday charts. They don't look bullish at all. I said last night I was watching those short plays as a "tell" for the overall market, and a lot of those setups look like they now may play out as good plays. That is also bearish. With the lack of great leading charts (not just beaten down ones), I think it pays to be cautious after today. Hopefully you caught the video last night when I pointed out we were due for this pullback and not to chase any longs. We'll have to see how this plays out - I think we are kind of up in the air right at this moment. Watch those levels I mentioned earlier and go from there. If we rest a few more days but don't move much lower than where we are now, then perhaps we can make another run at the 50 day moving averages and continue with more upside. But if we get more selling tomorrow and break downside support, then this rally could be over just as quickly as it started. Because of that, I don't know that I am anxious to make a big move here - want to see some confirmation first on both sides. I'll be back later if my scans give me any revelations. Good luck Wednesday.

Monday, December 8, 2008

Video - Monday Market Summary - 12/8/09

New video for tonight - main points include:
  • Great move today and certainly lots of bullish signs, but a little overbought here so be careful.
  • Most stocks moving today are beaten-down types - will wait for a pullback rather than chase here and get caught in a reversal.
  • Had some short setups show up - not looking to get short, but will watch these as a tell for the market. I don't want to see those setups work - I want to see them bust through resistance.

**** Here's a link that should work better for IE users if the first link doesn't work

State of the Market - 12/8/08

After a positive reversal Friday, the stock market followed through on those gains early this morning in a big way. Futures were up pre-market and although they pulled back as the open approached, stocks still gapped up to start the day and continued higher for the first ten minutes or so of trading. This open took them above the previous highs from November and above the important technical levels of 896 on the S&P and 1535 on the Nasdaq. Stocks consolidated that open until around 10:20, when they started moving higher again and eventually broke to new highs for the session. A slow pullback started around 10:45 and lasted all the way into the lunch hour. Around 1:30, the S&P dipped briefly below their gap open, but was able to hold on and from their, stocks moved higher into the final hour, breaking to new highs around 2:45. The run-up continued until around 3:35, when stocks fell sharply and went back down into their intraday range. They bounced a little, but fell back down into the close, forming possible bear flags on the 5 minute charts. However, that's about all anyone can complain about today. Volume was higher as well which is good to see.

Technically, the levels I mentioned this weekend were clearly broken to the upside today and it certainly looks like we have now put in a higher low and now a higher high. That is great news. In some cases (the Dow and S&P) the indices will now have to deal with their 50 day moving averages. That could prove to be difficult right off the bat, especially considering the move that has already been put in. With the McClellan Oscillator at its highest levels ever, I would not be surprised at all by a pullback soon. That's not a bad thing - a pullback would be healthy and is actually necessary for a longer, more sustained rally. I will watch the former recent highs of 1535 on the Nasdaq and 896 on the S&P as support levels. Ideally, we would pullback to test those areas over the next few days on lighter volume and then move higher from there. If they hold, I think we can say with more certainty that the market's character has changed. If we don't hold those levels, I would look at 1510 and 880 respectively as the next levels that should hold. If we move below those, then maybe we are back to the same chop as before, but I don't expect that to happen.

I did not take any trades early on because I already had my large SSO and QLD positions from Friday and didn't feel comfortable chasing anything yet (still have some trust issues with this market.) All I did was move my stops up on those positions to somewhat underneath the gap open and went from there. I did start thinking about some plays during lunchtime when the market was pulling back calmly to levels I hoped would act as support. I decided to enter ERX (the 3x energy) at $37.03 and put a stop beneath the lows of the day around $36.15. That stop proved to be set too tight and it was hit at $36.10, giving me a 2.7% loss. It did move higher later in the session.

I was also stopped out of both my ETF positions in the afternoon as I moved my stops up as I described in the last paragraph. SSO was hit at $26.18, which gave me an 8.6% gain, and QLD was hit at $27.17, giving me a 9.4% gain. Not bad for a day and a half trade. There is no doubt I felt a little seller's remorse when I was stopped out, and I did reenter QLD at $27.92 later on with a tight stop. I was stopped out later on the late pullback at $27.81 for a 0.4% loss.

I was really torn going into the day as to how I would handle my positions. I wanted to get the most out of them that I could, but I still had major trust issues with the market and didn't want to give them back. Turns out I set them too tight. I can't say for sure, but I think I may have taken profits anyway near the end of the day, and I can't complain too much because I did get some nice gains. It would have just been nice to get out near the highs. Hopefully I can learn from this.

Interestingly, I have noticed my trading is much like a stock chart (and if anyone else sees this with their trading, please let me know.) By that I mean there seems to be levels for my account that I get to and then just level off. Last year, I kept building my account to a certain level, only to trade poorly and drift backward. I would build back up to that level and then pullback. Finally (much like a stock chart) I was able to get through the level and from there, the account took off. For this year, I think this is the third or fourth time I have approached my all-time highs. I am right at my all-time highs now once again, but I am wondering if this will be the time I bust through those highs. Or, on the other hand, does my trading subconsciously change when I get to those levels and I make bad decisions that keep me under those levels? This is something I am thinking about right now. If I didn't get stopped out today, I would be at all-time closing highs right now. The past two trading days consisted of me getting barely stopped out of positions and missing out on potential profit, in some cases (UYG), large profits.

I may be back later with a video - we'll have to see what the charts look like. I am back in cash and although I am bullish now, I am hesitant to buy here. Today was a great day even with us not finishing at the highs. I just think we have gone too far in the short-term and perhaps it has been too fast. Can we go higher tomorrow? Certainly. Can overbought become more overbought? Certainly. I just think it pays to be cautious and not chase anything that is now overextended. The time to buy was last Friday. If you were more patient with your longs than I was, I don't think there is anything wrong with holding onto them here and weathering a potential pullback. If that pullback occurs, that is when I will be looking to get long again. If we pullback in the manner I described earlier(calmly on lower volume), then I may look to get long even more agressively than I was heading into today. Many of the charts I posted in the video this weekend broke out nicely today, and if we get a few days of rest and their short-term moving averages catch up to their prices, I will be ready to jump on some of these. Good luck Tuesday.

Saturday, December 6, 2008

Video - Weekend Market Summary - 12/6/08

Here is the video for this week. Main points include:
  • Cautious optimism about a rally here but we still have some levels to get through.
  • Market continues to shrug off bad economic news - that is bullish.
  • Automaker bailout and OPEC meeting will be in the news next.
  • Charts I see are beaten down - tells me this will only be a temporary rally.
  • I expect a choppy rally if we get one - will look to take profits when I get them.
Hope you enjoy it and it helps out. Good luck next week - hopefully we get some follow-through and can get a rally going into the end of the year.

**** Here's a link that should work better for IE users if the first link doesn't work

Friday, December 5, 2008

State of the Market - 12/5/08

I said last night that today was setting up to be a very important day for the markets full of news and maybe a turning point one way or the other. Sometimes Wall Street disappoints us with blah performances at those junctures, but today we saw the opposite. Futures were down pre-market and the jobs number did turn out to be even worse than expected, which pushed futures even lower. The market did open lower and continued steadily lower for a little over an hour. It did put in a morning bottom right above the recent lows from Monday on the S&P and Nasdaq around 815 and 1400 and bounced right up to the lows of yesterday afternoon as lunchtime approached. Things looked pretty good at that point, but there was a sharp pullback around 12:30 that looked bad at the time. The markets righted themselves, however, and moved to new highs shortly after that. They consolidated for most of the 1:00 hour, but broke out nicely at the end of it which also took them out of the rising channel the indices traded in for most of the day. They consolidated those gains as well for about a half hour, forming nice looking bull flags from which they broke out of again around 2:30, rising to new highs for the day. There was a pretty sharp pullback to start the final hour, but stocks held their previous breakout levels and continued higher all the way into the close, ending close to their highs and with good sized gains across the board. Volume looks like it will be a little stronger.

Technically, there were some bullish developments to come out of today. Stocks held their recent lows from Monday almost to the penny and then rallied from there. That is bullish because so far we have maintained a higher low. The Nasdaq did break above some lateral resistance from this week around 1500, but still has to deal with the 1535 area. If it can clear that level on a closing basis, a higher high will have been put in and that would definitely be bullish. However, the Nasdaq did close right at its 20 day moving average which has been a point of trouble for a while, so we will have to see if we get follow-through here. The S&P closed right at its lateral resistance around 875 and needs to clear 896 on a closing basis to put in a higher high. It closed a bit above its 20 day moving average but it could still hit resistance here. Finally, the XLF closed above its most recent high and the financials showed relative strength all day. That is a good sign because the market can't move higher for more than a week or two if the financials don't join the party. So overall, there is definitely reason to be optimistic after today but I would say it should be cautious optimism, because there are still some technical hurdles that need to be overcome. Let's see if the market can do that next week.

As for my trading, the early action played out pretty much as I expected. I thought we would see a gap (although I didn't know which direction) and from there some choppy trading. I was looking to play some inverse ETF's based on the open, but what I saw was king of weird and led me to stay away from them, at least early. The indices were moving lower, but they seemed to be doing so in a very weak way. I also noticed that while the rest of the market fell slowly, the financials (I was watching SKF) really didn't move one way or the other. I didn't like that for some reason and I think that was the main reason I sat and just watched instead of jumping into those inverses. I thought it was a perfect setup from which to get whipsawed, and I didn't want any of that.

I did get drawn in later though when the market bounced. I actually was impressed with the way financials were showing relative strength versus the overall market, so I entered UYG at $5.49. I also entered SSO at $22.82. I kept my stop losses around 2-3% for both, using intraday charts for those levels. Unfortunately for me, the sharp pullback that came at 12:30 knocked me out of both of these with small losses - UYG at $5.37 (2.4% loss) and SSO at $22.46 (1.78% loss). I guess I set my stops too tight because they were barely hit, but I was really looking for quick follow-through and I didn't want to mess around if we didn't get it. It just seems it came later - sucks for me, especially with the UYG move that I ended up missing.

My real problem there was not noticing the rising channel on the 5 minutes intraday charts early enough. If I did, I may have waited to buy a bit and also would have set my stops a little lower. That channel played out well and if you traded it, you would have been successful, at least for a little while. I wish I would have noticed it earlier. I may have been able to stay in my original positions.

Although I was frustrated, I did go back into SSO later @ $23.80 and entered QLD at $24.62(which was showing nice relative strength) later in the afternoon. I felt I had to because I know this market is poised to move big and I didn't want to miss it. It is tough going back into positions at a higher price when you get stopped out and have already taken a loss on them, but sometimes you have to do it. I actually added to these later (SSO at $24.80 and QLD at $25.31), giving me fairly large positions in both. My average price is now $24.08 in SSO and $24.82 in QLD. I have a small cushion in both now so as of right now, I plan on holding them over the weekend with my fingers crossed.

All in all, a pretty good day for the bulls, as very bad news was once again shaken off, the recent lows were tested but held, and the market was able to put in a nice up day in the face of very bad conditions. This market has teased us before, however, so I would again be cautiously optimistic here, not overly optimistic. It would be very nice to see a move here that can last for more than a few days. Let's hope we get one. Enjoy the weekend - I'll be back at some point with a video. Take care.

Thursday, December 4, 2008

Market Looks Poised to Make A Big Move - Wish I Knew Which Way It Was Going to Be

First, I did sell my SKF after-hours at $139.99 for a 2.5% gain (posted this on Twitter). After looking at the indices, I just think there is too much uncertainty in the charts to make any big bets before the employment number tomorrow. I am looking for more selling, but I know that it is definitely not a given, especially if for some reason the number isn't as bad as people expect. And it may not even be the number that matters - it's the reaction to the number that matters, and I have no clue how this market will respond. It has taken most bad news fairly well recently.

Here are the indices. You can see them setting up in triangular patterns right now and that's why I think we could be poised for a big move one way or the other. I just don't have a good feeling as to which way that move will be. I plan on watching the levels I posted on these charts below and then going from there. I may not do anything. I know a false breakout or breakdown is certainly a possibility as well, which would frustrate the heck out of me. To be honest, Monday allowed me to get back closer to my highs for the year (up around 85% right now in my main account) and after losing some of the gains throughout November(which was definitely not fun), I really don't know if I want to risk losing those gains again. We'll see how tomorrow plays out - maybe I will take some trades but I may just take a break and watch the action as an impartial observer.

S&P 500
All Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

If you're trading or have positions on, best of luck tomorrow. I'm pretty sure it should be an intense and exciting day.

State of the Market - 12/4/08

The stock market continued its range-bound trading for most of today, moving lower, then higher, then lower, and finally higher, but still not going much of anywhere of significance until the final hour. Futures were lower pre-market, and stocks did fall sharply at the open. A bottom was put in quickly however, and they bounced back and actually rose to new highs briefly before 11:00. Those highs couldn't hold though and stocks fell back down to their morning lows, barely breaking through them around 1:30. They rallied back again from there, but fell back down as the final hour approached. That final hour caused a breakdown and things got ugly quickly. A bounce in the last twenty minutes took stocks off their lows, but the bulls still have to be disappointed about how today turned out. Volume appears to be slightly higher.

Technically, that last hour really made things bad. It was nice to see the market recover from the opening lows in the morning, but I never had the sense it was ready for a powerful breakout. It never got much above the 871 level of the 20 day moving average I pointed out last night and now that it is below the 9 day moving average again, things don't look good. The late bounce takes a little bit of the sting away, but it certainly looks like we could head lower soon. I know we don't have to - remember, "anything's possible" - but it looks likely as of now. The VIX held its 50 day moving average today and never went below it. That is bearish.

I made a few trades today. The first one was one that I originally thought was stupid - taking SKF at $132.13. I say "stupid" because this market was slow all day and wasn't going much of any place. Those type of markets are usually the ones that will kill you. SKF moved lower throughout the day and when I saw it bounce off its lows and through a trendline on the 5 minute chart, I went into it. The market was falling at this time too and I was unimpressed with the effort the bulls put in up to that point, even though they turned positive. It didn't seem to be a powerful move at all to me, so I tried a short. I was stopped out later at $126.96 for a 4.1% loss.

This turned out to be a good thought but I mistimed it. I went back into SKF later in the final hour at $136.44 as it broke above some lateral resistance. It also clearly bounced off its 200 day moving average at that point which I mentioned last night in the video. I was very hesitant to do this but I thought it was worth the risk. I did not however enter any other inverses at the time because I fully expected the market to reverse again and move higher (my cynical nature I guess), and I didn't want to be caught for more losses. I don't like the way this closed and since I don't have much of a cushion in my position right now, I have to decide whether to hold this overnight or sell out after-hours. For some reason, the inverse ETFs are all bidding lower right now than they closed by 1-2% - I don't know why.

My stop was hit in AXYS during the final hour as well at $69.43 which gave me a 1.6% loss. No reason to mess around with stocks that aren't going to work right away in my opinion, at least in this market. I will say though that the fact a good looking stock like this one couldn't hold its breakout is not a good sign at all for the overall market. I am considerably more bearish after this failed breakout. I will have to see if there were others - I would imagine most of the watchlist I showed last night look considerably worse today.

I don't know if today's slow pace was due to the economic news due out tomorrow or not, but it was quite a boring day until that last hour. I don't know that tomorrow will be the same type of day - I would assume there will be a little bit more fireworks when the jobs number comes out. Last night, I said I really thought things were up in the air, and maybe they still are - I will keep my mind open as always. The action today however was certainly bearish and since we are overbought and right below heavy resistance, a more severe pullback is certainly a possibility. Unless we get some surprisingly bullish news tomorrow morning, I unfortunately think that's what we'll get. Be careful out there and good luck Friday.

Wednesday, December 3, 2008

Video - Wednesday Market Summary - 12/3/08

Here's the video for tonight. I am torn and don't know where we head from here. I see bullish things and I see bearish things. Basically, as I explain in the video, I am preparing for both options and keeping an open mind. We are at a point where a big move should be upon us - it is just up in the air from my perspective which direction that move will be. Good luck Thursday.

**** Here's a link that should work better for IE users if the first link doesn't work.

State of the Market - 12/3/08

More of the same today on Wall Street as the market yo-yoed up and down all day, but really didn't go anywhere productive until very late in the session. The market opened sharply lower, bounced for a few minutes, then looked like they were going to fall to new lows again. Stocks held there however and put in a nice hour-long rally from 10:00 to 11:00. They moved sideways into lunch and looked like they were consolidating, but that changed when stocks tried to breakout but couldn't and then reversed lower. After some chop, the market broke down around 1:20, losing all their gains for the day and approaching their morning lows. Out of nowhere, when things looked pretty bad once again, stocks rallied around 2:00, moving all the way up toward the morning highs. They consolidated their gains nicely for the first part of the closing hour, and then took off (just as I left work for home of course) and broke to new highs for the day, closing right near their intraday highs. Volume was also higher which is good to see.

Technically, I don't know how I missed it, but IBD did count yesterday as a follow-through day for the indices. After the selling of Monday, I had no thoughts of the action yesterday being good enough for a FTD day - volume was not nearly powerful enough in my mind - but I guess it does count if you follow the exact rules. I probably have become so oblivious to the FTD because so few have worked this year. Anyway, today was a good follow-up to the move yesterday and it is nice to see we closed at the highs for the day. That being said, we still have some work to do before we can say this market is going to put in a significant rally. The S&P is sitting right at its 20 day moving average (around 870) and the Nasdaq is still a bit below its 20 day moving average(around 1515). They are also still below the trendline that I have shown several times. We are also overbought once again via the McClellan oscillator. I still don't have a good feeling one way or the other. I am certainly not as bearish as I was Monday night,and I am not discounting a move higher here - it is certainly a possibility.

I don't know why, because I said last night I was looking to get short if anything, but I did take two long positions today. I guess I was hoping for a gap up that could be faded, but when we gapped lower and then moved off those lows in a strong manner, I figured it was time to change course for a bit.

I posted AXYS last night as a chart I was watching, and when the market reversed higher and AXYS got above its pivot point around $70, I decided to enter there. I got in at $70.45. When it moved higher, I moved my stop up to around $69.50, figuring if it couldn't hold this breakout, there was no reason to keep it. I really don't like "breakouts" that finish in the middle of their daily range - tells me they aren't real strong and in my experience usually go on to fail. Right now, though, it looks like a nice breakout.

Later on, I also took a position in QLD ($24.93) as the Nasdaq and the other indices consolidated in what at the time looked like a very bullish flag pattern on the intraday charts. I was anticipating here a bit but figured my stop was close by (around $24.50) and was looking at a 2% loss at worst. My stop was hit ($24.44) after the market fell through that flag pattern and I did take the 2% loss. It did end up moving back up in the final hour, but I am not too upset with this trade because I followed my plan. It just didn't work out.

All in all, we had another choppy, up and down session today and because of that, I still lack a great feel as to where we head from here. I am getting the feeling that the market really doesn't know where it wants to go right now either. Maybe it is just waiting for the economic numbers due Friday, which will likely be big in determining the next move. It was good to see the indices move higher late, and I was noticing some really nice intraday charts today. I saw a nice setup on the financials - bounced off support today, forming cup with handle pattern on the 5 minute chart from which it broke out of around 3:30 or so. Same sort of setup on SSO and QLD. However, the breakout that did occur wasn't the strongest I've ever seen, so is that a sign? I really just don't know.

For me, I am happy with my AXYS position and am willing to go long more stocks if they show up, but I wouldn't say I am in a rush. I am also willing to get heavily short if this market if the opportunity presents itself. We still haven't recovered the losses from Monday yet. Basically, I am open for anything because I see a lot of cross-currents out there and I'm not trying to get locked into one outlook right now, I think doing so could get you into trouble. The mantra remains "anything can happen" and being prepared for that should help you out. I will be back later if I see any nice new charts popping up in my scans. Take care.

Tuesday, December 2, 2008

Things Kind of Up In The Air From My Perspective

Not a lot to say tonight because I just don't have a good feel either way after going through my scans. As I looked at the indices, I think they are kind of in no-man's land here and I am not sure which way we go. Today's action does look stronger than the recovery on November 6 (going back to the comparison I've talked about recently) so I am not as sure as I was that we fall apart starting tomorrow. I think if the bulls come out and somehow push this market through the resistance it is at now and through its 20 day moving average (which will come up next) then maybe we rally. That's probably a big task though. At the same time, if the lows of yesterday and today don't hold, then things will likely get ugly quickly. I guess I still lean bearish here and will probably still look at shorts tomorrow depending upon how we open and how strong any bounce we get is. The morning rally seemed weak to me and that is the reason I went short midday.

S&P 500, Nasdaq

I still am not seeing many charts come up in my scans and that is not good. As I've said a million times, we have to have leadership emerge if a meaningful rally is going to happen. I will put this one chart up that caught my interest - I haven't posted it before so just putting it out there as one to watch. I like the setup here, but I would guess the market needs to cooperate.

All Charts from Telechart 2007, Courtesy of Worden Brothers, Inc.

Not having an edge in this market is dangerous, and since today was a bit stronger than I expected, I am doubting a little if I have an edge here going into tomorrow. I will watch how things go, but as of now I don't see myself making any major moves unless I get a clear signal, which right now I don't have. Things just seem up in the air to me and we all know that anything is possible with this market. If anything, I will likely look for shorts like I did today, focusing on the inverse ETFs. Good luck Wednesday.

State of the Market - 12/2/08

Another up and down day on Wall Street today, as stocks attempted to bounce back from the massive selling we saw yesterday. Futures were up a good amount pre-market, and stocks did start modestly higher at the open. However, they quickly pulled back and things looked quite bleak. They firmed up a little before 10:00, moving higher for about an hour. They consolidated a bit, tried to break out again right before lunch, but couldn't get much going and started pulling back around 12:30. The breakdown started slowly, but picked up steam around 1:30 and the market lost nearly all of its morning gains. They bounced briefly at 2:30, but that bounce had the looks of a bear flag, and the selling continued as the closing hour approached. The bulls did step up though soon after that and pushed the market higher in the last 45 minutes, even battling back from a sharp pullback at 3:30 to close with nice-sized gains and at their highs for the day. Volume appears to be higher which is good for the bulls to see.

Technically, the indices closed right at what seems to be some heavy resistance, both on the daily charts and the intraday charts. I am watching 1450 on the Nasdaq and 850 on the S&P 500 as key levels, which is right above the closing numbers on both of these. Perhaps if we get over these levels convincingly, this bounce I talked about last night could last longer, but as of now, I am not convinced that today was anything more than a relief move after yesterday's carnage. The move today only regained about a third of the percentage losses from Monday. We need to keep that in mind - there was a lot of damage done yesterday and it's not going to be fixed in one day.

On the video last night, I compared the current setup to November 4 and 5 , and so far, it looks like it is playing out the same way. Today was a weaker bounce compared to the selling of the previous day or days, and stopped right around the 9 day moving average. Even the VIX dropped back below its short-term moving averages today, just like it did on 11/4 and 11/5. If the setup holds true and continues to play out like it did then, we could move higher tomorrow and get above the 9 day moving average before reversing and heading a good bit lower. I have no way of knowing for sure if that will happen, but I am looking for that possibility and therefore will continue to look to short any bounces.

I was back at work today (that's why there were no Twitter posts) so I didn't get to watch that much of the action but I was able to check in at lunchtime when the market was rallying right up to the resistance areas I mentioned last night. The advance really seemed weak as well, especially when the market broke to new highs, so I looked to get short as was my plan last night. The only position I entered was SKF at $154.49. It was a larger position than the one I had yesterday but kept a tight stop right underneath that area. It took off nicely right after I entered. That didn't last, however, and my stop (which I moved up) was hit at $158.72, giving me only a 2.6% gain. I wish this would have kept moving obviously, and the chart really did look good until around 3:15, but with this market, it is never easy. I am glad I at least was able to get something out of today. I didn't make any other trades.

As a reader stated well last night in the comments section, we always have to "expect the unexpected" with this market, so I know we could rally further from here. However, I still have to think today just provides a better opportunity to go short again, which is what I will be looking to do. Timing it will likely be difficult but I will do the best I can to do so. As always, I will keep my stops pretty tight as well - don't feel like taking any big losses right now after having such a good day yesterday if I mistime things or this market feels like proving me wrong once again. If my scans show me anything different than what I am thinking right now in terms of getting short, I will be back later and let you know. Until then, take care.