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.

Tags: RCL, FBP, OZRK, NMX, ERJ, WBS, DMLP, VISN, VRUS, PNSN, IMAX, SQNM, QLGC, ANST, OME, ARST, BVX, UAUA, STEI, ODFL, CEC, IDRA, ABAT, ARBA, WAB, FSTR, CFSG, FCSX, JST, RATE, WFR, CBI, ERES

State of the Market - 7/31/08

After GDP and jobless claim numbers came in worse than expected this morning, things looked pretty bad for Wall Street. The market did open significantly lower, but as had been the case in the past few days, traders shook off the bad news, and the morning lows were set right at the open(or so I thought). Stock rallied from there for the next hour, but around 10:30, they fell off a cliff and sold off hard into the lunch hour. They hit their lows around 12:20, and then slowly marched higher, with the Nasdaq outperforming the S&P and Dow significantly. Around 2:40, that bounce ended and stocks went lower for the last hour. The selling got rather intense in the last twenty minutes of trading, with stocks breaking their morning lows and the Nasdaq turning negative. It looks like volume will be lower which would eliminate the possibility of a distribution day, which would not be good so soon after a follow-through day.

Technically, the Nasdaq appears to still be range-bound as it got as high as 2353 before reversing in the morning (I've stated that 2350 is an important number to watch). If it does break 2350, the 50 day moving average lies right above, so I think it will be tough for the Nasdaq to get much further without resting a bit. The index is overbought right now, but I will watch for the 2300 area to hold on any possible pullback. The S&P also appears to be range-bound and needs to get over the 1290 area to breakout. I think the 1265 area needs to act as short-term support for the S&P(that's right we are at). The Russell 2000 continues to act the best of all the indices and with a little more rest, could form a very bullish flag pattern.

Even with the market being down this morning, I started two positions in fundamentally sound stocks. My basic strategy is to continue to test the waters here with a few small positions in hopes that they can amount to something special and that this rally can do the same. I entered SOL at $16.40 as it looked to be breaking out of its downtrend channel. I had CSIQ, SOLF, and ENER also on my screen but decided to go with SOL due to its high IBD ratings and its BOP held up best during its recent decline. I was stopped out later at $15.72 for a 4.1% loss. This wasn't a big position but in hindsight I needed to wait for a better pattern.

I also went back into VISN today @ $24.50 as it broke above this little flag pattern it formed. This one stings because I had flashbacks to when I was in this at $20 and got stopped out. I would be up over 25% in a very large position right now. Yuck. I have to move on past that however. I was hoping its 9 day MA would catch up as it rested, but I didn't get that chance. I had to chase it a bit which I don't like doing but of all the stocks I see, I think this one has the best chance to be a big winner.

In the afternoon, I also took a small starter position in VRUS as it broke above strong resistance around the $20.50 area on heavy volume. I got filled at $20.95. Both of these held up reasonably well in the midst of the selling, so I am willing to add to any of these positions if they show strength, or if I am able to get up on them, on pullbacks. At the same time, I have no problem getting out of them if they reverse tomorrow.

Yesterday, oil puts in a huge rally and stocks move higher. Today, oil sells off and stocks move lower. It seems like the oil/market inverse dynamic has now disappeared. Maybe. To be honest, I really have no clue. This is a market where anything that makes sense to a rational person can be thrown out the window. Bad earnings and news from the banks are being greeted with open arms, whereas great earnings reports from companies like FSLR and ISRG are for the most part being greeted with a "ho, hum", usually followed with some selling. There is something unhealthy about that. As I've said about 1,589 times over the past two weeks, this market is crazy and tough to trade well.

I will be back tonight with some charts that I am watching on the long side. There are some that look decent, just not a ton. I am still hesitant to short here since we did follow-through, but I continue to do those scans just in case. As we approach resistance, maybe I should consider it more. I am sure a lot of traders are frustrated right now - I certainly am - but we will get a better trading environment eventually. Sometimes we go through these difficult times, and when they come, it is important to try and protect as much of your capital so that you have it available when a trending market comes along. That's why I am taking fewer trades and making them smaller when I do take them. That probably remains the best game plan. Don't force things and you will be OK, even in this frustrating environment. Best of luck Friday.

Tags: VRUS, VISN, SOL, FSLR, ISRG, CSIQ, SOLF, ENER

Just So You Know....

Maybe he will be right (for once). I won't complain - I am fine with a new bull market starting right here. Overall, however, this doesn't make me more bullish. I usually use Cramer as a contrarian play.

Article Courtesy of CNBC.com - Original link is here

Jul.30

7:10 PM ET

13 hours ago

Yes, the Market Has Bottomed

Posted By:Tom Brennan

If you thought you heard Cramer call a bottom during Tuesday’s Mad Money, you were right.

“It smells to me like something, in fact many things,” he said, “have at last changed for the better.”

“I am indeed sticking my neck out right here, right now,” Cramer continued, “declaring emphatically that I believe the market will not revisit the panicked lows it hit on July 15. and I think anyone out there who’s waiting for that low to be breached is in for a big disappointment and [they’re] missing a great deal of upside.”

“Stop waiting,” he said, and “buy the next dip because I think it might be the last big one.”

Cramer pointed to five specific clues that proved to him that the market was about to turn up.

One is that the negativity is so bad we might be at the point of total capitulation. The investors Intelligence Survey reported a 30% bull-50% bear ratio. Fifty percent bearish! Who’s left to sell? That kind of despair and disbelief has historically been a sign, Cramer said, that the darkest part of night was ending and dawn was near.

Then there were the power moves yesterday by Merrill Lynch

MERRILL LYNCH & CO INC MER 26.91 UNCH 0 NYSE

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, whose newly issued stock is up more than 10% from its offering price. Merrill showed the rest of the banks that they, too, can unload all that bad paper, the CDOs, and cut a deal with the bond issuers to repair a much-damaged, and very important, business relationship. Now Lehman Brothers

LEHMAN BROTHERS HLDGS INC LEH 18.23 UNCH 0 NYSE

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, Citigroup and Wachovia

WACHOVIA CORP NEW WB 17.08 UNCH 0 NYSE

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can follow suit.

Also, plenty of couples have proved through recent earnings reports that they’ve been able to handle the commodity inflation that plagued the market for so long. Just look at the rails, Colgate-Palmolive

COLGATE PALMOLIVE CO CL 74.97 UNCH 0 NYSE

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, Cummins

CUMMINS INC CMI 70.50 UNCH 0 NYSE

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, Avon

AVON PRODUCTS INC AVP 44.11 UNCH 0 NYSE

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and U.S. Steel

UNITED STATES STEEL CORP X 166.85 UNCH 0 NYSE

. How’d they do it? Price increases. And now that raw costs have come down, Cramer’s expecting a load of upside surprises because those price increases will stay put. (Cramer said the decline in gold just serves to verify the commodities crash.)

The Securities and Exchange Commission announced it will continue to protect 19 banks in danger of having massive hedge funds short sell them into the ground. This is key because, as Cramer said, it’s this protection that allowed for the Merrill deals to happen. Now other banks are safe to proceed with their own deals, and the market rally can continue.

The last piece of the puzzle is the housing bailout President Bush signed into law this morning. Bank of America

BANK OF AMERICA CORP NEW BAC 33.61 UNCH 0 NYSE

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, Wells Fargo

WELLS FARGO & CO NEW WFC 31.20 UNCH 0 NYSE

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and all the other major banks can now sell their bad mortgages to the Federal Housing Authority for 80 cents on the dollar. And despite what you think, that’s actually a mark up, not a mark down, compared to what they’d be worth if the FHA didn’t step in.

Cramer’s predicting the rally continues Thursday thanks to great after-the-bell earnings from The Walt Disney Co. and First Solar

FIRST SOLAR INC FSLR 285.00 UNCH 0 NASDAQ

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. And who knows what could happen after Mastercard

MASTERCARD INC MA 270.73 UNCH 0 NYSE

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reports in the morning.

“My bottom call isn’t gutsy,” Cramer said. “I think it’s just a smart call that all the evidence points toward.”

“Bye, bye bear market,” he said. “Say hello to the bull and don’t let the door hit you on the way out.”

Tags: Jim Cramer, Market Bottom

Some Late-Night Thoughts

Well, I just got back and am going through my scans rather late tonight. I missed most of the final hour of trading but obviously stocks finished strong. I don't know how much of the strength in the Dow and S&P were related to strength in the commodities or just overall strong buying. I have to give the market props because I fully expected it to tank when oil bounced (which it did strongly today) and it did the exact opposite. It attempted to tank, but fought back and closed strong. We have two big news items this week with GDP and the jobs report so I'm sure the trading is going to continue to be volatile and difficult.

Technically, I have to lean more bullish after today. The Market Monitor's main ratio turned back to bullish today, but it keeps bouncing back and forth so I am waiting for it to get further into positive territory. The only problem I have right now is that there still aren't a ton of charts that I am excited with, and we are probably a little overbought here. This market is still choppy and volatile, and that makes things difficult to hold positions. I am still taking the attitude that I will be fine taking a long that is a really great setup, but I am not jumping on questionable plays here. I doubt I will be fully invested anytime soon.

Some other random thoughts after doing my scans:

• Railroads look to be forming bases here - some have already broken out, and some are possibly rounding out the right side of cup patterns in most cases - see BNI as an example.
• Biotechs have been leading for a while, but I am always hesitant to invest in them because I always have a fear of waking up one day to bad drug news that leads to a huge drop in the stock. Prime example - check out ELN today. Yikes.
• I am actually back to looking at some commodity stocks - coals and ags namely. Oils are too beaten down from my perspective, but the other two might run a little. That being said, I can still see the ags forming right shoulders of H&S patterns here over the next few weeks, setting up big-time topping patterns.
• If you check out my last few posts, you can get some individual stock ideas. A few more that I am looking at after today are NCOC, GWR, ARST, NIHD, WAB, and CF for possible swing trades.
• For the time being, I am done looking for shorts. There is no point to fight this market and you must respect the action, even if it doesn't amount to a big rally.

Best of luck Thursday. It should be interesting as always.

Tags: NCOC, GWR, ARST, NIHD, WAB, CF, ELN, BNI

State of the Market - 7/30/08

After a big follow-through day yesterday for the market, stocks followed-through on the follow-through day early on in today's session. Buoyed by a better-than-expected jobs report, stocks opened higher and did nothing but rise from there, hitting their highs around 10:30. It was at this time when the oil inventory numbers for the week came out, which caused a spike in oil, which caused stocks to start a meaningful pullback into the lunch hour. The selling wasn't sharp, but the Nasdaq did break below intraday support around 12:10 and the selling pressure increased a bit at that point. The bleeding stopped a little after 1:00, as the Nasdaq got some support around the 2305 yesterday that acted as support yesterday as well and bounced. But when oil rose to new highs for the day, the bounce failed, and stocks broke to new lows. That didn't last, however, as stocks impressively rallied back up even in the face of rising oil. I am putting this out a little early today, so I don't know we will close, but I do think it is good to see the market hold up decently in the face of a big spike in crude.

Technically, the Nasdaq got somewhat close to that 2350 level before reversing rather hard in a bearish fashion. Likewise for the S&P and Dow, although they didn't get as close to resistance levels as the Nasdaq did. They did finish off their lows which is nice for the bulls to see. The story however remains the same - choppiness is the name of the game right now, and taking any positions for more than even a few hours is difficult at best.

I didn't do a whole lot today - I was a little hesitant to buy anything with the market up so much in the morning, and I really didn't see much that looked perfect to me anyway. I did take a very small position in BWLD last night @ $35.02 to see if it would work as an earnings play, and early this morning, it did look good. It faded, however, after the morning gap and I was stopped out @ $34.29 for a 2.2% on a small position. I also took a position in SKF today at $119.03 as I just didn't trust the early action and it already had reversed off its lows. I was stopped out of this at$122.62 for a 2.8% gain. I was surprised the financials were not down more with oil being up so much.

As oil popped, I tried a smaller position in PDO at $12.04, just thinking it may run if oil continues to bounce. I had no intention of holding this for more than a day or so, hoping to catch a quick move. I set a trailing stop and that was hit at $12.54, which was good for a 4% gain. Not much but I did make some money today.

I really don't like day-trading - I would much rather hold positions for several weeks or months, but right now, this market is making that impossible. It is almost forcing people to be very short-term traders. I really don't know how you can be successful doing anything else in the current market environment. Hopefully we can get into a better trend soon.

I am leaving early today for a family engagement and I don't know when I will get back, so I may not have charts up tonight either. I don't know if it matters - as long as the action continues like it is right now, there is no point in doing a whole lot in this market. I may take a few daytrades like today if I see them, but don't plan on taking any big positions until things clear up.

Oil continues to have a stranglehold on the market, and if it continues to bounce (which is possible - I could see the USO getting up to around $106) then this market will likely continue to be range-bound at best. Ideally, I would like to see things slow down for a few days - maybe have a day or two where the intraday range is less than 50 points on the Nasdaq. If we get that, more bases could set up, the market could work off its slight overbought condition, and perhaps we can setup to move higher in a smoother manner. As of now, I still don't see a ton of great charts, and the action seems to indicate more rough trading for the near future. I currently have a slightly bullish bias, but I don't think the sailing upward will be very smooth, so being careful remains important here. Bottom line - I still don't think we are in a situation where really big money can be made. Best of luck Thursday.

Tags: SKF, PDO, USO, BWLD, Crude Oil

IBD Does Say It's A Follow-Through - I Still Plan on Treading Carefully

Quick post - IBD did say this was a follow-through day. Volume was higher - not huge but higher than the 50 day moving average. This FTD occurs on the 11th day of this attempted rally for the Nasdaq. The best occur in days 4 through 7, but hopefully this one can work. I am still hesitant to get overly bullish - the roller coaster ride of the past six days will tend to do that to a person.

Here are the best looking stocks I see. To be fair, I do think a lot of these setups look pretty good. I wish the BOP levels were higher on some of these charts, but we can't get everything we want.

UAUA, LCC, HA, MDVN, EURX, CRME, IPCM, VRUS, IDRA, CRDC, CRME, SQNM, BVX, EXAC, MNTA, IDIX, WCBO, PACW, OFG, RBCAA, MFLX, CBAK, IMAX, VISN, QLGC, ABAT, CPWR, ARST, ARBA, TACT, IXYS, ECOL, PURE, OME, IDSA, CALM, SOL, CSIQ, SOLF, CLDN

There are also a few earnings plays I am considering right now. I just have the feeling in the back of my mind that as soon as I give in and go long, the market is going to reverse, start selling off, and I will once again be tallying up some small losses. Because of that, I am still going to tread lightly here. I would like to see some follow-through to the follow-through, if that makes any sense. Best of luck tomorrow.

Tags: UAUA, LCC, HA, MDVN, EURX, CRME, IPCM, VRUS, IDRA, CRDC, CRME, SQNM, BVX, EXAC, MNTA, IDIX, WCBO, PACW, OFG, RBCAA, MFLX, CBAK, IMAX, VISN, QLGC, ABAT, CPWR, ARST, ARBA, TACT, IXYS, ECOL, PURE, OME, IDSA, CALM, SOL, CSIQ, SOLF, CLDN

State of the Market - 7/29/08

After selling off heavily yesterday, the market came back and did the exact opposite today, with the help of some lower oil prices. A plan to boost its capital position from MER seemed to spark more buying today in the financials, and led to a higher open this morning. The action was the exact same as yesterday's, just in the other direction. Stocks continued higher in a similar systematic fashion, occasionally consolidating gains but rarely pulling back. Around 2:00, oil spiked much higher, which caused the market to pullback, but support held and oil reversed almost immediately. Stocks continued to run from there and finished near their highs for the day, basically making up all of yesterday's losses and then some. Volume was slightly higher.

Technically, right now, your guess is likely as good as mine. A break above 2350 on the Nasdaq or below 2250 might signal a better trend to trade, but that is a wide range that we could be in for a while. I have a feeling IBD may classify today as a follow-through day, although you really want to see tremendous volume accompanying the big-time gains on those days, and we didn't have tremendous volume today. We'll see what they do, but most of the stocks moving higher right now continue to come from beaten-down sectors that are not going to lead us to a new bull market. There are stocks setting up in nice patterns that could turn into new leaders, but they are not as prevalent as I would like to see. On a huge day like today, I saw very few stocks on my watchlist moving higher outside of the airlines, and that is not healthy. Good looking stocks like OME, ECOL, PARL, CRDC, VRUS, ABMD, and QLGC did nothing today, and some were even down in price.

This market continues to be difficult and personally frustrating. I am not taking large positions or loading up on anything - for the past week, I've been probably 50% in cash - but nonetheless things have been so choppy that I've lost a little along the way. I would have been better off in 100% cash. Today, I covered the RIMM short I took yesterday at $115.88 for a 1.7% loss. When oil dropped, I tried a swing trade with LCC at $4.89 (which I admit was chasing a bit), but I was soon stopped out for a 3.2% loss on a quick spike down below the top of a intraday flag pattern which I thought should have acted as support. I would have been better off staying away from a low-priced stock like that. In the afternoon, I was out of my GU short @ $12.21 for a 1.6% loss on a superspike out of nowhere that immediately reversed. After those three, I decided to just shut it down for the day. I continue to keep my stops tight, and maybe that is not a good idea, but I don't feel like messing around right now. I would rather take a few small losses and stay in the game right now than let losses get out of control and really damage my account.

I am still not trading very well right now, but then again, if you are playing this market perfectly, congrats because I'm guessing you are in the minority. Up, down, up, down - we are in an extremely choppy period right now. To give you an idea, here are the past six days on the Nasdaq - up 24, up 22, down 45, up 30, down 46, up 55. That's crazy and hard to make sense of. If you are a day trader or scalper, then you are probably loving it right now. Everyone else is probably sick of this.

Once again, I need to listen to my own advice and stay out of the market when it is trading like this. I haven't been taking big positions, but even small ones that are wrong can grind your account slowly lower. And a choppy, volatile market tends to make you overthink things as well, at least in my experience. It is just very tough right now to make a lot of money. There are always going to be tough periods like this in the market, but there will also be periods when money is almost easy to make. Hopefully, we get one of those periods soon.

The bottom line as I see it is this market doesn't have a clue what it wants to do right now, and if it doesn't have a clue, how are we as traders supposed to have one. At some point, things will become clearer and a trend will emerge, but right now, that doesn't appear to be anytime soon. Stocks that are down big one day are up big the next and vice versa, which makes only daytrading profitable here. Forcing things in the stock market is never a good idea. After fighting things the past week and trying to force some winning trades, sitting out looks like a good option to me right now until the market does finally make up its mind. I might be saying this at the exact wrong time, but as for now, that's all I can really say. No charts tonight - I need a night off, and I don't plan on taking any trades right now anyway unless I see some absolutely perfect setups show up. Best of luck Wednesday.

Tags: GU, RIMM, LCC, GMXR, USO, MER, Nasdaq, S&P 500

S&P Breaks Short-Term Support, Back to Looking for Shorts

Good evening, traders. Here are the major indices. Some technical damage was done on the S&P today and the same damage may be soon done on the Nasdaq if the bulls don't step up with a better day tomorrow. Volume has been lower on this decline, but we are also in the summer season, and trading has been very heavy up to this point, so I wouldn't be surprised to see overall volume fall for the entire month of August as traders get away for at least a little bit.

The Market Monitor ratios continue to turn more negative and are having the same look as they did back in late February, when what looked like a bounce turned out to just be a pause before the market sold off more and broke the January lows and then set up a true tradeable bounce through May.

S&P 500, Nasdaq

Oil is still holding support but at the same time has not bounce very strongly here. A break below $98 area will likely be bullish for the overall market.

USO

These are the two shorts I took today. I only took partial positions and will look to add if we get more selling tomorrow.

GU, RIMM

I am back to mainly focusing on shorts based on the market's action, but as always there are still stocks I am watching just in case on the long side. I'm not posting the charts, but here are some I am keeping my eye on for various scenarios which I talked about this weekend - IPCM, LCC, UAUA, EURX, VISN, PDO, QLGC, VRUS, IDRA, CLDN, OME, WCBO, PARL, PACW, ABMD, ARBA.

Here are some shorts to watch if we continue to sell off tomorrow. I found a lot of good setups in my scans tonight. The banks are still an area I would look at. One note in their defense - the volume has been much lower on the selling of most banks the past few days. That may not mean anything - stocks can sell off without heavy volume much easier than they can go up without heavy volume.

FBP, OZRK, PACW, EVR

I am still looking at some Chinese stocks as shorts - here are some of those setups I am watching.

CFSG, SOLF, CSR, CDS

Four new setups I haven't posted before that look good to me as possibilities.

GAIA, MTN, RSTI, CPLA

I am even watching some commodity stocks, because even though I think oil is still due for a bigger bounce, these stocks have bounce weakly and in a bearish manner, and still may have further downside based on some of these setups.

ZEUS, GMXR, CRK, XCO

I am looking at some stocks that I got out of recently - they look to be breaking down again.

NEU, SQM, ENER, MELI

All Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

I did not check earnings dates for any of these setups yet so please do so before considering entry. I know a lot of the smaller caps are going to be putting their reports out now over the next few weeks, and taking a position right before earnings is never a good idea IMO.

I did want to mention quickly as a follow-up to the earnings gap-up video from last night that I did not mention the importance of the overall market to the effectiveness of this strategy. After seeing SOHU reverse today and being stopped out of ISRG, I was reminded of this fact. The successful plays I had this year were in April and May, when the market was in the midst of its bear market rally. Right now, these plays can still succeed, but have a much harder time doing so because this market still looks like its headed lower. That's why cutting your losses quickly are important with these. I can't deny that I am surprised ISRG didn't work out better, but that's the type of action you will often see in a bad market.

We'll see what tomorrow brings, but for the moment, it looks like it's back to shorting if the setups present themselves. Bulls need to step up and support things soon on the Nasdaq - if they don't, all the major indices may be looking at a revisit of their recent lows, and if they get there, there is nothing that says they have to hold those. Be careful out there. Good luck Tuesday.

Tags: FBP, OZRK, PACW, FCSX, EVR, ZEUS, GMXR, CRK, XCO, CFSG, SOLF, CSR, CDS, CHDX, SINA, NEU, SQM, ENER, MELI, GAIA, MTN, RSTI, CPLA, IPCM, LCC, UAUA, EURX, VISN, PDO, QLGC, VRUS, IDRA, CLDN, OME, WCBO, PARL, PACW, ABMD, ARBA, RIMM, GU

State of the Market - 7/28/08

Well, I was gone for most of the day until the last hour of trading, so I can't summarize too much of the day's action other than to say it doesn't look very good. The futures got worse as the morning went on and stocks followed suit, selling off once again quite systematically throughout the day. Stocks finished right near their lows for the day and the action was not good to say the least. Volume appears to be lower once again.

Technically, the S&P 500 broke some key support today and looks to be headed lower, possibly down to touch its recent lows. The Dow looks technically unhealthy as well. The Nasdaq is still above the 2250 level and that will be a key support - if it breaks below that, it could test its recent lows as well. The only positive right now is that volume has died off each of the past four days as the market has pulled back, so perhaps things can hold up here. Bottoming is usually a process unless you get a true capitulation day, and since we never had that, perhaps we need to test those recent lows before putting together a meaningful rally. As it is, I would obviously use much more caution right now on the long side of the market.

The USO bounced a little today and still is holding that $98-99 area as support. I have to be honest and say I am surprised there hasn't been a stronger bounce here. If that level breaks, I still think that would be a positive for the market.

I never like days where I am away from the computer all day - I always feel lost. I should have known better this morning to try and play a few earnings plays this morning since I was going to be away, but I did anyway. I got in SOHU and CALM this morning in the pre-market as they gapped up on great reports. Unfortunately, they didn't gain any momentum at all in the pre-market, and when they started to fall, I didn't hesitate to cut my losses and sold back out of them about thirty minutes after buying them. I left SOHU with a 3.5% loss and CALM with a 3% loss. Luckily, I only took half positions in them figuring I would add later if they had nice days. If you look at their charts, I am very happy I did cut my losses here, as both reversed big time.

I set trailing stops on my other positions and was stopped out of my two shorts as well. My UA stop was hit at $27.15, which gave me an overall gain of 10.8% on this short - not bad, but I still think it may head lower from here. My only regret is I didn't add to the position early on. This has an earnings report tomorrow morning so that is a main reason I tightened my stop and basically said, "we'll see what happens." My other short in MELI did not work out so well. I set my trailing stop for my breakeven point, and for some reason the stock spiked up immediately in the first minute of trading before falling back down throughout the rest of the day. My stop was hit right there at $33.67 for a 0.2% loss - no big deal - but I would be up about 6% in this position right now if that spike didn't happen. This was also a bigger position, which stinks even more. Early spiked like that always make me wonder what goes on with market makers. I'd like to think that if I was at the computer, I wouldn't have had to have the stop on and perhaps I would still be in this position, but that type of thinking is usually dangerous.

I was surprised my stop in ISRG was not hit yet when I got home, but I guess I didn't give the market enough time, because it was hit late @ $307.84. I believe I will end up with a small loss (under 1%) overall on this position because I also had positions in the IRAs. I want to officially thank Barrons for their negative article this weekend and ruining this position, although I have to admit this did not act like a perfect earnings play would have.

I did take a few shorts late in the session (RIMM @ $113.70 and GU @ $12.03) as a play on further downside here, but they weren't full positions and although I thought about taking one or two more, I stuck to just those two. I have to remind myself that things are still not completely clear right now, and overtrading, which I have probably done a little of already, is not a recipe for success. I won't hesitate to add to those shorts tomorrow if they fall further or take a few others on, but I want to be sure I am right here before getting too aggressive.

Again, I am a little out of the flow after being gone all day, but certainly today wasn't good for those looking for a sustainable bounce and it seems like the market wants to head lower. The only thing that makes me less than certain of that outcome is the volume hasn't been very strong during the selling we've seen recently. As of now, I would go back to staying away from longs and focus on shorts, but be quick to take profits if you have them. This market certainly remains a difficult one. I will be back later with a better feel for things and some charts to take a look at. Until then, take care.

Tags: SOHU, CALM, ISRG, UA, MELI, GU, RIMM, USO

Trade Review - VISN - It IS Ok to Buy Gaps on Earnings?

Hey, traders. This is a look at VISN from Friday, why I bought it, and why I still would do so again. Someone left a comment that buying gaps was not a very wise move as a trader. My response to that would be it depends on the gap. If you have a breakaway gap, especially out of a nice chart pattern, caused by a true catalyst in the form of earnings, then I will look to buy each and every time. They may not all work, and I may get stopped out of some too early like I did with VISN, but in terms of finding stocks that are set to make big moves, there are few other strategies that I find more effective. It pays to pay attention to the small cap earnings reports over the next month or so. Perhaps you will be able to find the next big earnings winner.

I think the sound is better now - not perfect, but I will learn as I go with these.

Tags: VISN, ENER, ISRG, FSYS, Breakaway Gaps

Oil is Right at Support and Will Likely Affect Where The Market Goes From Here

Good afternoon, traders. Here are the major indices, which are basically chopping around right now and appear to be forming a possible trading range. The range is much tighter on the S&P than it is on the Nasdaq. Ranges are not the best situations to trade in - look back to February if you want an example - that was a very tough time for longs and shorts. Hopefully, we can bust out of this range soon, but perhaps it would be good for stocks to base here, allowing more charts to shape up and giving stocks the rest they need to bust out to new highs and perhaps a bigger rally. So just because we don't break these recent highs in the next week or so, I don't necessarily think that's bearish. Then again, 2300 on the Nasdaq and 1250 on the S&P 500 are the key levels on the downside - if these are broken, then perhaps we are due to test the recent lows. All in all, we're still in a situation where making big bets is probably not a great idea.

S&P 500, Nasdaq

I've been fiddling around with a chart for my Market Monitor scans that I use as a guide to where we are at in the markets, in addition to my index charts. With the main ratio moving above and then back below the zero mark recently, it looks similar to several other times this year, namely back in February. Once again, that was not a good time to trade heavily. I found out the hard way. If I see these numbers move significantly above or below the zero line, it will give me a little more guidance at to where the market is headed.

Market Monitor Numbers

Here is the USO. It is right at key support and my guess is that the direction this chart moves will have a huge effect on which way the market moves in the short-term. Most of the really big earnings reports are now out of the way, so oil prices likely become even more important now. Based on the chart, I would expect oil to bounce sometime soon, which I think would lead to a further pullback in everything non-commodity related. It doesn't have to bounce, however. A break below the $98 area could lead to more selling in crude, which would obviously be bullish for the market.

The Most Important Chart in the Market

Basically I am looking at three scenarios for next week: Oil breaksdown further, oil bounces higher, or oil does nothing. Here are some ideas for those three scenarios:

#1) IF OIL BREAKSDOWN FURTHER.....

Obviously, I would look to be getting long for some swing trades. First, I did want to post the two charts I discussed Friday. These are among the best I see and I am looking to enter on any pullback.

VISN, DAIO

The three areas I would focus on if oil falls further are the airlines, truckers, and (gasp..) the banks. These have run but rested for the past few days, and rested nicely. Volume was lower in most cases the past two days, and although these charts aren't necessarily the ones I look for as longer-term holdings, I think they might work for swing trades. Up first are some airlines...

LCC, CAL, UAUA, HA

Here are the truckers. These are more worthy of being longer-term holdings, as their charts are strong and have just pulled back briefly this week.

JBHT, ODFL, WERN, GLDN

To be honest, I probably won't mess around with any banks, but I have to admit that the pullback many had Thursday and Friday looked bullish - coming on much lower volume. I still think there are many more problems out there so I may let my personal opinions come into play here and just avoid these overall, even though they could run higher.

PACW, WCBO, CACB, OFG

There continue to be nice charts popping up in the medical sector. Here are some that look pretty good right now.

ABMD, MNTA, ALO, AMED

A few others to watch that appear to be setting up for a run higher if the market decides to cooperate. There is one of these that I really like. Keep an eye on IMAX, PARL, and ARBA as well.

ECOL, SXT, WGOV, STJ

All Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

#2) If Oil Bounces...

If oil does bounce, I would look to play some of these beaten down oil stocks as short-term plays. These things can move quickly, especially if oil spikes for one or two days. Longer-term, I think they are done and am still looking to short them, but that won't prevent me from taking a shot as one or two day swing trades.

ROYL, HK, GMXR, PDO

I would focus on shorting the sectors I named above - namely airlines and banks - but I don't see a great number of nice setups here. Actually, I really didn't find a lot of great short setups throughout my scans today. Perhaps that in itself is bullish. Here are a few banks that may work.

GHL, PACW, NMX, FCSX

I posted these China stocks Thursday and still think they could work if the market breaks its recent lows.

SINA, CHDX, CFSG, CDS

A few other tech stocks that may work as shorts if the market falls.

RIMM, ERES, PSEM, OSTK

All Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

#3 - Oil Does Virtually Nothing...

If this happens, we will probably continue to be in a holding pattern with choppy trading. That would make things difficult and it would make sense to make very light committments if you have to make committments at all. Right now, I only have two shorts and one long, and I may close those shorts out soon with small profits.

That is my game plan for next week. I always try to be prepared for anything that happens. We are entering the last month of summer and this summer has been quite eventful already, so there is always the possibility that things slow down as traders finally take vacations. We shall see. Things could go either way right now, so be ready to go long or short as needed and as we hopefully get some confirmation from the market. I am going to try and do another video tomorrow, so be on the lookout for it.

Tags: LCC, CAL, UAUA, HA, JBHT, ODFL, WEN, CLDN, PACW, WCBO, CASB, OFG, DAIO, VISN, IMAX, PARL, ARBA, ABMD, STX, ECOL, AMED, STJ, WGOV, ALO, MNTA, PDO, GMXR, GK, ROYL, GHL, PACW, NMX, FCSX, CFSG, SINA, CHDX, CDS, NEU, PSEM, RIMM, FSTR, ERES, OSTK