Sunday, August 31, 2008

Video - Labor Day Market Summary

Hey, traders. I am back for a video this weekend discussing the market and hopefully if the market cooperates, I will be back to regular posting next week. Right now, it just is pointless to write the same thing over and over each day. Let's see if volume picks up now with the summer ending and traders coming back from vacation.

Overall, I see almost no long candidates and quite a few short candidates, which vibes with my bearish outlook. The video goes through these charts. However, it is important to remember the market can do whatever it wants, so just because Labor Day has passed doesn't mean we have to start selling off on heavy volume starting Tuesday. Maybe we will, but I wouldn't be suprised of another week or so of choppy trading before this bear market rally really ends.

Finally, say a prayer for the folks down in the Gulf Coast, as it looks like Hurricane Gustav is going to be a big one. Obviously, this will affect oil prices and therefore the market overall, but there are more important things than the market. Let's hope that this thing loses strength in a hurry and those people can be spared more heartache.

Good luck this week and let me know if you have any questions about the video.


Wednesday, August 27, 2008

State of the Market - 8/27/08

I can't write about this pointless market anymore for the time being, so I think posts will be sparse until Labor Day is upon us. Really, what's the point? There are times that the market presents us as trader excellent opportunities to make money. This is not one of those times. This is the exact opposite, and as such, I am just going to step away until this week is over.

If I had to predict what happens the rest of this week, I would say I expect more of the same low-volume melt-up that we saw today for the next three days, or at least I hope so. I would love for this market to get overbought again and then I will look to get heavily short. I still think we are due for another leg down in this market. But right now, it is just too tough to short effectively. At the same time, going long is pointless as well because there really aren't any of the type of stocks I look for when going long. So therefore, I will talk to you probably sometime this weekend in preparation of what hopefully is a big volume move in this market that will give us some nice opportunities to make money. If anything meaningful happens between now and then, I will be back, but I don't expect anything. Take care, and good luck if you are still active in this mess.

Tuesday, August 26, 2008

What a Frustrating Market

After going through my scans, I can say that I can't remember a market that I have been more frustrated or bored with (I am not sure which word fits better). There just isn't much out there that looks good on either side, and I continue to have very little feeling either way of where we will head the next day. I am watching the following charts, but just as I passed on a few shorts today, I will likely not take many of these trades at all due to their questionable nature.

Long - XSI, MASI, EL, TACT, FRM, MCCC, ONNN, AEIS, FUQI, ATRO

Short - PENN, EVR, FCSX, WCBO, OFG, UAUA, MOS, GHL, AGU, DSX, FHN, CREE, MON, AEM, LVS, CXO, SINA, CF, EXM, EWBC, WYNN, KEY, ASCA, SHO, SOHU, PACW, KMX, SUSQ, LM, KALU, WLT, GU, MI, SOL, OSBC, CLF, CINF, POT, BDC, ANR, PNK, ZION, PWRD, STI, GNK, FITB

The only shorts that look like real possibilities are the casinos right now on further breakdown. However, I am kind of expecing a little bounce in the markets overall for the next few days, which could make shorts difficult. All in all, it doesn't look like things will get easier any time this week. Ugh.

State of the Market - 8/26/08

Another very boring day today for the stock market. I really don't even know what to say anymore about the action that I haven't already said. Today was choppy and although I considered a few short positions early on, I once again did nothing. My only position is short MON.

Technically, the S&P and Nasdaq both closed above the important levels I mentioned last night, so I am somewhat expecting a few up days now. Volume was very low again today, and even though it was higher than yesterday, it still doesn't mean much when it is so low.

My game plan remains the same - I am looking to get heavily short at the right moment, but I have to have the patience to wait for that right moment. Maybe we have already had it, but my guess is we continue to chop around for a while until trading volume moves higher. The 1260 level on the S&P 500 and the $19.75 area on the XLF are the two levels I am watching the most. If we get below these, particularly on heavier volume, then I think it will be time to get heavily short.

There really isn't much to do right now. I will keep doing my scans and stay alert for possibilities, and if I find any charts to watch, I will post them tonight. But overall, it is still a very boring market that doesn't deserve to be played in a heavy manner. Someday, hopefully soon, this market will get more interesting. We just have to wait until it happens. Mr. Market always has his own time frame, and none of our thoughts or feelings will affect it. That's about all I can say right now. Hopefully, you are not trading too much right now so you will be ready for the next big move. Good luck.

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Monday, August 25, 2008

Indices At Critical Support Levels - Bulls Must Hold Here

Good evening traders. Here are the major indices, which are at critical support levels. Volume was still very low today, but stocks can move lower on lower volume much easier than they can move higher on lower volume. 1260 on the S&P 500 and 2360 on the Nasdaq are the key levels from my perspective - if they are broken, then I think this downtrend will be in full effect. That being said, let's remember how many times over the past few months this market has actually followed-through on any buying or selling it saw. We could easily bounce tomorrow and just get back into the continued chop. Therefore, I may wait for a little more confirmation that I normally would in terms of getting heavily short. I do think we are headed much lower over the next few months, but timing it right will be important.

S&P 500
Nasdaq

I really didn't even go through my long scans tonight - perhaps that means we're headed higher. I just don't see any need to right now - I am not interested in going long here regardless of what the chart may look like. It is just not worth the risk.

I am looking for nice, low-risk short setups, and here are some of the charts I am watching for tomorrow. Financials are still the main area I want to focus on. If XLF breaks below $19.75, I would likely look hard at SKF again.

WCBO, EWBC, FHN, EVR

Here are some of the others I am looking at. They are kind of a mix of sectors.

PNK, CREE, KMX, FLS
ALK, SOHU, SNDA, SINA

I still think commodities and now shippers look rather weak here and could be setting up some nice short plays.

AEM, CXO, DSX, EXM
All Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

Let's see if we get follow-through tomorrow and break these key support levels, or if the bulls step up tomorrow and put the next large decline in the market off for another week or so. I would not be surprised by either outcome, and will be prepared either way. Best of luck Tuesday.

State of the Market - 8/25/08

Not a good day today for stocks, as the market gapped lower to start the week with the financials leading the way down. The first hour or so of trading was pretty much sideways, but around 10:30, things broke open and stocks move lower, with the Nasdaq leading the way. Another hour of sideways action followed until lunchtime, when things got really bad really quickly. The market fell very sharply, and for the rest of the afternoon couldn’t manage much of a bounce, basically going sideways again all the way into the close. Stocks finished with large losses, but volume continues to be very low, even compared with Thursday and Friday’s totals.

Technically, this was not a good day for the bulls, even if volume was still light. The 50 day moving average did not hold for either the S&P or Dow, and the Nasdaq broke back below both of its short-term moving averages. The key levels I am watching right now are 2360 on the Nasdaq, 1260 on the S&P 500, and 11,290 on the Dow. I mentioned this weekend that I expected a little more sideways chop this week before we headed lower, but if those numbers are broken tomorrow or Wednesday, then I would be looking to get more short more quickly than I expected.


The only thing I did today was take a short in MON at $116.81 midday. This touched its 50 day moving average in the morning and reversed from there. It may bounce from here, but I figured that with a stop above the 50 day, it would be a low risk short with possibly a good reward. I am back at work now and for some reason can’t get Telechart installed back on my computer, so to be honest, I was a little lost without it today in terms of looking for other shorts intraday. Hopefully, I can get that taken care of without a problem.


As I said this weekend, we are now in a position to watch and try and time this breakdown. I do think it will happen – perhaps today will be the start – and I want to be short when it does. With the low volume, anything is possible tomorrow – we could be up 200 points – but as September approaches and the big boys come back to play, I still think this market is in for some pain. Be careful out there, stay away from longs right now, and be on the lookout for nice, low-risk entries in shorts. I’ll be back later with some charts.


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Sunday, August 24, 2008

Video - Weekend Market Summary - 8/24/08

Here's another video looking at the indices and the setups I am seeing right now. This week was the lowest volume of the year so far based on the weekly charts, and I have a feeling next week could be very similar, so be careful out there. Trendless, low-volume markets stink, and that's what we're in right now. Hopefully September will bring some heavier volume and some easier, tradeable trends. Good luck next week.



Friday, August 22, 2008

State of the Market - 8/22/08

I wasn't able to be at my computer for the first hour of trading today, and by that time, it was too late to do much of anything, so this summary will be short. I will put a longer one together this weekend discussing where we go from here. If you watch CNBC tonight, you will hear how great today was for the bulls and might be thinking of buying stocks. And I do admit, on the surface, today was a nice day for the bulls that are out there. Anytime all the indices are up over 1%, you can't complain too much. However, I once again did nothing today and am still 100% in cash and there is one main reason why - volume, or the lack thereof.

Yesterday was one of the lowest volume days of the year across the board, even factoring in half-day trading sessions. Today was even lower than yesterday. The fact that we have gone up two straight days on ridiculously low volume is not bullish in my mind. Only three stocks in my long watchlist were up over 4%, with 5% being the biggest gainer. That is also not super bullish.

Technically, the Dow and S&P have rallied back up past their 50 day moving average but right to their former trendline. This could be a very logical place for them to fall back down. The Nasdaq couldn't get above its 200 day moving average and I think that will act as resistance. If you look back to the top in June, you will see that it took a week or so for stocks to begin to really sell off hard. I still think that same thing could happen here.

Actually, I am very happy with the action the past day because it could be setting up a perfect shorting opportunity and a tradeable, sustainable move lower. I don't know that we are going to move significantly higher or lower without volume, so I wouldn't mind seeing us melt up a little more on low volume next week. Again, check out June to see what I'm talking about - after breaking the wedges, the market did bounce around a little before breaking down in earnest. The only thing that would have me turn bullish here would be some massive volume coming in on days like today, when the market is up significantly. Until we get that, I will continue to wait in cash, looking for the right time to strike again on some short positions. I think that's the best game plan, especially as we enter a typically bearish time of the year with September and October on deck.

I'll be back this weekend with either a long post or a video. Until then, take care.

Thursday, August 21, 2008

Commodities Running Into Overhead Resistance, Could Pullback Here

Good evening traders. Here are the major indices. I kind of see two different stories on the Nasdaq and S&P 500. The Nasdaq has pulled back rather significantly over the past week but volume has been below average. I could see this bouncing soon, perhaps back up to test the 200 day moving average, much like it did back in June before crashing for real. Meanwhile, the S&P has bounced the past two days - perhaps due to commodities also bouncing. If you check out the top from June, you can see it took a week or so of sideways action before the market really broke after breaking below the rising wedge. We could have a similar situation here. I guess I am slightly bullish short-term on the Nasdaq and neutral on everything else. I think the big, for-real breakdown is coming, but it might not be here quite yet.

S&P 500 and Nasdaq

The XLF still did not break below lateral support today, and in the face of the higher oil we've seen the past two days, I think that is impressive. I am not saying I am buying financials here - I just think it may also work its way sideways or perhaps slightly up a bit further before breaking down in earnest.

XLF

I still am not looking to get heavily long here, but I wouldn't be surprised if a bounce happens, so there are stocks I am watching for possible small entries. THOR, EL, ICAD, HIL, TACT, SAPE, ONNN, GFIG, TKLC, BRKR, ODFL, IXYS, OFG, and NPSP are some of the stocks I am keeping an eye on tomorrow.

The story the past two days has been the bounce in commodities and if you played any of these starting on Tuesday you are probably quite happy right now. I am not invested in any oil or energy stocks, but if I was, I would consider taking some profits soon. Here is the USO - it has bounced impressively but the pattern in this overall market for the past month has been one of bounces not lasting long, and drops not lasting long either. With USO near some overhead resistance around $93, I wouldn't be surprised to see a pullback soon.

USO

As such, I may look at attempting a few shorts in the commodity sectors. I saw a lot of individual setups tonight of stocks running into resistance, either in the form of former levels of support or moving averages. If they get to these areas, putting a short might be a good risk/reward play assuming you have the discipline to get out if they do end up blasting through these resistance levels. You can check out the charts I have below as examples of what I am talking about. Again, my main reason for thinking this way is that this market can't keep trends going for more than a few days, so if that holds, I expect the commodities to pullback soon. Buying DUG or SMN might be a way to play this possible pullback as well.

PXP, SWN, ECA, EGY
CXO, PXD, MCF, REXX
ACI, BTU, ICO, PCX
JRCC, ANR, MEE, WLT
MOS, AGU, MON, POT
GLD, AEM, KGC, GG
All Charts from Telechart 2007, Courtesy of Worden Brothers, Inc.

A few stocks in other sectors that I am watching as possible shorts are PENN, CMX, CREE, HST, SOHU, CINF, CSUN, and MFLX.

I am likely going to be away from my computer tomorrow morning as well for meetings, so I don't know if I will be able to make any moves anyway. If I do, I will still keep them smaller than usual due to the lack of volume I discussed in my earlier post. I do see some stocks setting up in patterns that may work, so my interest in the current market is a little higher than it was the past two days when I saw virtually no setups. Be careful regardless - it's still a tough market. Good luck Friday.

State of the Market - 8/21/08

I was away from my desk for most of the day today once again, so this commentary will be brief until I go through my scans, but my first impressions are that today was another day where I could have easily lost some money if I was trading. The market started lower today as the story was oil - a big spike in crude seemed to spook stocks early in the session. However, I have to admit I am impressed that the market made its lows right away and was able to move higher for most of the rest of the session, even with crude holding most of its big gains throughout the session. Stocks finished mixed, with the Dow and S&P up slightly and the Nasdaq down slightly.

Technically, the Nasdaq continued to hold its 20 day moving average today, but the Dow and S&P are right below their 50 day moving averages, so that will be a hard area to overcome. The XLF held support once again today around $19.75 and until we get a true break below this, I would wait a bit to get short in the financials. The USO is right at some overhead resistance, so I wouldn't be surprised crude pulls back a bit soon.

The real story from what I can see, besides the spike in crude, is the volume, or should I say, the extreme lack of volume. I believe that it might come in as the lowest total since July 3, which may have been a half day anyway (I can't remember). When you have such extremely low volume, you will see days like we have seen this past week - up, down, up, and down intraday - and it is hard to put much stock into anything that happens. That's why I have sat out the past two days and will likely do the same tomorrow. There is no point risking capital in a market where really not much is happening. When the big boys come back to play, and volume picks back up, I will be ready to act, but until then, it seems prudent to wait or at least be careful.

I will be back later with some charts, but my early scans show very few great short opportunities. Actually, this commodity bounce may present some very nice opportunities if they continue to bounce for a few more days. There continue to be a few longs that look decent, but without higher volume, they are susceptible to false breakouts. If there were more nice setups presenting themselves on either side of the market, I might be more interested in doing things here, but that fact along with the low volume tells me to take it easy here - still.

I'll be back later with some charts or a short video. Take care.

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Wednesday, August 20, 2008

State of the Market - Late Edition - 8/20/08

Good evening traders. As I mentioned last night, I had much more important things to attend to today and was away from my computer for most of the day. Based on what I can tell about today's trading, that was a blessing for me, as I probably would have lost some money if I tried to trade the whipsaw-filled action it appears we had. Early on, it looked like stocks might follow-through to the downside earlier than I expected. Then they bounced strongly and everything looked good. Then they fell back down right to their morning lows. Then they rallied back up into the close to finish with modest gains. Doesn't sound like much fun to me.

The main reason I am glad I was gone today was that the two sectors I have been following the most over the past few weeks, oil and financials, were particularly choppy today. I would have very likely entered back into SKF early in the session, but that would have led to a quick loss when it reversed. Same with some of these oil stocks that were very volatile today. I am just glad I had something else to do today.

Where do we go from here? Well, I said yesterday we may bounce a little but I still expect the trend to now be down. It is just a matter of timing the real fall in terms of when it begins. We still have a whole week and a half of August trading to go, so I don't know if it is going to get any easier to figure that out. If you look at the indices, the Dow and S&P 500 are under their major moving averages now and I think those will cap any rally attempt. Meanwhile, the Nasdaq has held its trendline so far and could bounce a little here, but I think the 200 day MA will cap any rally attempt it has. If the market gets over these levels, then maybe we rally a little longer before things get bad.

S&P 500 and Nasdaq

The XLF held lateral support today again, so it could bounce a little more here. I think $21 will be tough to overcome, so financials could just be in a little range for a few days. A big break below $19.75 would definitely be bearish and I would look to get short. At the same time, if XLF gets over $21, I would probably cover any shorts I would have (I am in 100% cash though) and stand back, because that could trigger another short squeeze.

XLF

Crude had a very volatile day but did finally close above its 9 day moving average. Now, that means absolutely nothing if it falls back below it tomorrow, but today could signal a short-term trend change for crude. I say this also based on how individual oil stocks acted today. I am not planning on making many trades the rest of this week, but I will be watching some of the oils like HK and GMXR as I think they could make a move here if crude does. A lot of commodity stocks look to be setting up possible moves here. Again, follow-through is the key.

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

My Market Map scans are almost completely neutral across the board, which adds to the difficulty. We are not overbought, nor are we oversold. There still isn't a strong trend on the major ratio either. Since that is the case, it makes sense to continue to take it easy here.

I am seeing stocks set up in patterns(high BOP levels that have rested nicely) that interest me on the long side, and it is good to see high growth stocks like SOL and ENER rally the past few days. I may test out one or two of the patterns I like the next few days, but there is no reason to go crazy long here. I may also look at some oils and commodities like I mentioned earlier.

On the short side, I don't see that many nice setups tonight, so I don't think I will do anything there either, unless we really breakdown big-time on the overall market. If that happens, I will likely go with some inverse ETF's.

All in all, it looks like we are still in a short-term, stock picker's market. The mantra remains the same - stay small, get out quick, and keep most of your accounts in cash until things pick up volume-wise. Nothing that I see makes me think any different. Good luck tomorrow.

Tuesday, August 19, 2008

Trend is Definitely Down, But We Could Still Bounce a Little

Just a Few Points Tonight:
  • I sold out of QID after hours at $40.58 for a 3.7% gain. It's not a big gain, but I have a lot of stuff going on the next three days and I don't know how much I will be able to be at my computer, so cash isn't a bad option for me right now.
  • IBD did put the "rally" as under pressure tonight, which is not surprising. They have mentioned for a while that this rally was not acting well, and that there were not many stocks setting up nicely.
  • I am just posting my watchlist tonight. The only thing that really interests me on the long side is PDO and ROYL as oil lottery plays if it rallies. Some of the others have pulled back and rested nicely, but there are just are too many question marks with the market for my tastes.
  • Most of the shorts I have posted have already started breaking down, so you would be chasing here. If we continue to fall straight down, then shorting here would work. If we bounce a little before heading lower, then you could get some quick losses.
  • We could go either way here for the rest of the week - we are no longer overbought, so the selling could subside for a few days. I don't have a good feeling either way, which is one of the reasons I will likely be sitting out.
Longs I am Watching


Shorts I am Watching


My wife and I have a sonogram tomorrow morning to find out if child #2 is a boy or a girl, so I will not be around the computer or thinking about the market tomorrow morning. Thursday and Friday, I have meetings that will keep me away from the computer for much of the day as well. No big deal - with the low volume and summer trading conditions, I have no problem with stepping away for a few days. I am hoping for a little rally that I could short into next week, but we'll have to see if that happens. I definitely think the trend is lower now. I will try to post though the next few nights about what I see happening. Take care and good luck.

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State of the Market - 8/19/08

The bears inflicted a little more technical damage today on stocks, as traders sold stocks at the open and through the rest of the morning to break through the important levels I mentioned yesterday to the downside. Stocks slid steadily until around 12:00, when the XLF hit some support around $19.75, which caused a mild bounce that lasted for about the next two hours. Around 2:00, stocks began to slide back down to test their lunchtime lows, although the Nasdaq slid right through its respective lows. The last hour turned out to be relatively quiet, as the earlier lows continued to hold for the S&P and Dow, and stocks just moved sideways into the close. I think volume will end up being slightly higher, but certainly it wasn't strong today.

Technically, the USO bounced right off its 9 day moving average and reversed lower, so maybe oil isn't ready to move higher yet. Until it closes above this level, I am going to assume oil is still heading lower. The XLF bounced right off of support at $19.75, but it wasn't that impressive of a bounce. A break of this level would likely lead to a much bigger breakdown in financials. As for the indices, the Dow and S&P are now clearly below their wedge patterns and I am looking for the 9 day moving average to contain any bounces upward for the time being. Meanwhile, the Nasdaq is sitting right at its 20 day moving average, so it should be interesting to see if that holds here and it can bounce.

I did not add to my shorts today like I said I would. I don't know why - I think this market has just spooked me enough that I am hesitant to add and get caught in a quick whipsaw. I know my style of trading has become much more short-term recently than I would like, but it still seems like that is all the market is presenting to traders right now. I am still in the mindset of taking gains when I get them and cutting all my losses very quickly, which might not be that bad of a thing. As of today, my main account hit new highs and is up almost 90% for the year. I'll take that.

The one trade that I wish I took and considered pre-market is shorting UAUA. I obviously didn't, but I saw it gapping up and though that it can't go much further than it was at. I passed, and who knows, it did spike higher a little later so I may have been stopped out anyway, but it sure looks nice right now.

Around lunchtime, I decided to take my profits in SKF at $134.54. That was good enough for a 10% gain. The main reason was the XLF had fallen right to $19.75, which was a key lateral support area and I expected a bounce to occur. I figured that if it closed below that area, I could always get back in, and I definitely will continue to look at playing this ETF as I do expect financials to drift lower over the next few months. I tightened my stops on the two other positions I had at this point to protect most of the gains I had. My stop was hit at $31.10 in my PENN short which gave me a 7.8% gain. I used the 20 day moving average as my guide - I didn't want to see it get above that so quickly after breaking below it, so when it did, my stop was hit.

I was also stopped out of the last short I took yesterday, ENER, at $68.87 for a 1.95% loss. I knew this could happen when I took it, but figured that a small loss was worth the potential fall this stock could have. I was looking at about $1 risk versus about $7 possible reward. Just didn't work out - this stock moved higher and above its 50 day MA in a rough market environment. The only position I have now is my QID long but my stop is pretty close.

I am leaning toward a little bounce soon - nothing major, just something on weak volume that takes the Dow and S&P back up toward their short-term moving averages. I was hoping for a bigger move lower today but didn't get it. I was also looking back at the breakdowns from late May and noticed that when the bearish wedge patterns were broken then, it did take another week or so before stocks really broke down in earnest. This scenario would go along well with September coming upon us soon. August is typically very choppy, and we may get some more of that for a week or two until all the big boys come back. I still think the direction is down, but I just don't know that it will happen immediately and will trade as such. I could be wrong. It is possible we just continue to drip lower on low volume.

I am still staying away from the long side though - I see absolutely no reason to be interested in buying stocks. There are two that I am keeping an eye that I mentioned in the video this week, but that's all I am doing - watching them. As for shorts, I think the intermediate-term trend is back to being down, but that doesn't mean you just short whatever you want. If you short right here, they may work, but you may also get run in for some quick, sharp losses. In the current market environment, shorting after the market has moved lower for two straight days in not a surefire recipe for success. So be careful there. If we bounce tomorrow or Thursday, that's when I would look to get back in some short positions.

I don't know if I will have charts up tonight or not - we are heading out for the evening so I'll see what I can do. Good luck Wednesday.

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Monday, August 18, 2008

The Bears Have A Big Opportunity in Front of Them - Will They Make the Most of It?

Good evening traders. Here are the indices and you can see that they are at some pretty critical levels if the bulls want to prevent a breakdown. If more selling comes into play tomorrow, then I think perhaps this bear market bounce could be over. But as I mentioned earlier, rarely has the market recently followed-through on what looked to be the likely outcome, so we'll see. If we do breakdown tomorrow, I will look to add to the shorts I have.

Dow and S&P 500
Nasdaq and Russell 2000

The XLF is also at a critical level technically and further selling could lead to a more serious pullback in this ETF. Oil - honestly, I have no clue. I am looking for a more serious bounce if the USO gets over its 9 day MA around $93.50.

USO and XLF

Here are the shorts I entered today (SKF was a long but is inverse). They have yet to break through some support (or resistance in the case of SKF) that is close by, so if further selling comes in and these areas are broken, then it may be a good point to add to these shorts.

SKF
PENN
ENER
All Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

Here are some other shorts I am watching for tomorrow, although I probably won't look to add too many more if we do sell off further. I would rather be focused in on no more than four or five short positions and manage those closely. Feel free to ask about these if you have questions.

ALK, UAUA, AMR, ABFS
DKS, MELI, MNST, FLIR
FMC, TECUA, JASO, GU
All Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

I am also watching many financials if the XLF breaks down further - here are some to watch: EVR, WB, IBKR, FCSX, LM, LEH, SUSQ, OSBC, FITB, KEY, ZION, and AMG. The charts all look similar and breaks of the trendlines would be the signal to short.

As much as I would love to see further selling tomorrow, I have no feeling either way if we will get it. Volume is still very low and I doubt it gets higher until September gets here, so we could still just chop around for a few more weeks. If you decide to take any shorts, please remember to honor your stop losses and get out if the positions move against you. Although a breakdown looks more likely here, that doesn't mean it has to happen. We're still in an environment where getting too confident in your outlook can get you into trouble with the volatility we are seeing.

A trend would be nice here, even if it is down. Let's see if we get it tomorrow. Be careful and good luck Tuesday.

State of the Market - 8/18/08

It looked early on that Wall Street was going to start off this new week in a positive way, as futures were up pre-market and stocks did start higher at the open. This optimism did not last long however, as after about five minutes, stocks started heading lower and continued to do so throughout the morning. There was a little bounce and some stabilization around 10:00 that lasted for a few hours, but around lunchtime, stocks fell sharply and quickly through the morning lows and headed even lower from there. The market continued to fall steadily through the afternoon until around 3:05, when the S&P 500 hit the key 1275 number that I have mentioned several times and bounced a little into the close. They retested this area about thirty minutes later, but it held again and a late bounce took stocks slightly off their lows for the day, but still with large and significant losses.

Technically, today was significant because it dropped the Nasdaq below its 200 day moving average and the Dow and S&P below their 50 day moving averages. The selling also took the Dow and S&P below the bearish wedge patterns I have mentioned here, but they closed pretty much right at the bottom trendline. I was hoping they could bust through these to give us a possible trend to trade, but of course they couldn't do that. Volume was low again today so I don't know how much credit we can give the bears here, especially considering they couldn't finish the job late. The XLF is now well back below its 50 day moving average, but the key number here for me is the $20.25 area. If it breaks through this, I see it falling to at least the $19.75 area where it may get some support. Oil continues to trade relatively quietly, but could be forming a bottom here. A close above $93.50 on the USO would likely lead to a bigger bounce in crude which may act as a dagger in the heart of this bear market rally.

I took positions today in SKF ($122.05) and short PENN ($33.81). Although these are decent sized positions, I would be willing to add to them if they break down further. I was on the lookout for more shorts but wanted some confirmation that these positions, along with my QID position from Friday, were going to work before getting more aggressive. As they look now, I will wait until tomorrow because all three of these positions closed right at or bounced off of key moving averages. (QID at its 9 day, SKF at its 20 day, and PENN at its 50 day). If they can bust through those tomorrow, I will likely go ahead and add to SKF and PENN.

I did end up shorting ENER at the end of the session $67.69 - it closed below its 50 day but is right at its short-term moving averages. My stop will be quite tight here just in case the market feels like bouncing tomorrow.

I have said that I don't have any trust in the bulls or bears right here, and today doesn't really change that. I would have loved to see a true breakdown, but of course, we had to close right at some important levels and that leaves the direction here still in doubt. I am obviously bearish based on my positions and I hope to see more selling tomorrow, but follow-through has been a consistent problem with this market since probably June, so I am not yet convinced. The bulls will have to step up tomorrow and do so quickly - any heavy selling we get could lead us to a more significant move lower - at least it should. Who knows with the way this market has traded for the last two months?

As such, I will have no problem getting out of my current positions tomorrow with just small gains if we do move higher. That's still unfortunately how you have to trade right now in my opinion. We've had several situations the past month just like today - the market looks like it is ready to breakdown (or breakout) and then does the exact opposite. That's the definition of a range-bound market, and that's still what we have until proven otherwise. Looking for shorts is fine here, but be ready to get out quickly if Mr. Market still feels like frustrating us all for a few more weeks by bouncing higher. I'll be back later with index charts and some shorts I am watching.

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Sunday, August 17, 2008

Video - Weekend Market Summary - 8/17/08

Put another video together this weekend with some of the stocks I have on my watchlists. As I state in the video, I am still waiting here to make a big move - I don't know if it is the time to do so yet. I am expecting an end to this bear market rally at some point, but they often go further than most people expect so timing and patience is critical. Check it out and feel free to let me know what you think or if you have questions. Good luck this week.


Friday, August 15, 2008

State of the Market - 8/15/08

Another tough and volatile day today on Wall Street, as lower oil prices caused a nice opening ten minutes for stocks, but that higher open was quickly and sharply sold off, even in the face of new recent lows for crude oil. The Nasdaq was able to break above its little consolidation in the first ten minutes, but then proceeded to fall 30 points in the next 25 minutes. What was strange was that oil didn't bounce during this fall. From there, they bounced higher for the next hour, regaining most of the losses they just incurred. The rest of the day was choppy, range-bound trading in which not much could be done. Oil did spike higher mid-afternoon, finishing well off its lows, and stocks did sell this a bit, but then bounced right back up, climbing back into the range they were in for most of the day. The Dow and S&P finished with small gains, while the Nasdaq finished with small losses. Volume, even with the options expiration, was very low once again. It definitely looks like we are in the "dog days" of summer.

Technically, the Nasdaq tried to break above this little consolidation early in the session but fell back into it. The Dow and S&P are above their 50 day moving averages, but still in bearish wedge formations. The USO did bounce off its lows and finished near its highs for the day - maybe it is forming a little bottom here. The XLF tried to get above its 50 day early in the session but finished right at it. The confusion continues.

I was shaken out of my two long positions early on today on the morning reversal - one for a gain (BWLD at $37.45) of 3.3% and one for a loss (STEC at $10.56) of 2.7%. They basically cancelled each other out because the STEC position was slightly larger. BWLD got a pop on an IBD article, which was nice, but I didn't like seeing STEC move back below its 50 day. I could have given BWLD more room in hindsight but I don't trust any stock right now. It tried to breakout later in the day but quickly reversed. STEC did the same thing. I don't like to see stocks act like these two did today.

I also really didn't like how the market reversed its highs so quickly in the face of new lows for oil, so after I was out of these longs, I did buy QID at $39.14, setting a stop at the low of the day. I jumped in this a little too quickly though and made the position larger than it should have been. We'll see how it goes. Although I was watching the financials to possibly re-short today, I didn't do anything else. This is my only position. I am looking to get more short than long here, but I have to wait for the setups to present themselves.

For being an options day, today was extremely boring in my opinion. As I go through my early scans, I see many long candidates that tried to break out, but couldn't and are acting poorly. This rally has been disappointing because from April to May, there were many stocks that looked good and acted well and allowed for some quick gains to be made. Unless you bought the banks and airlines, there have been very few stocks on the long side that have acted well during this "rally".

At the same time, I see many shorts that continue to bounce around their moving averages, making establishing a low-risk position difficult. I hate to say it, because I have done so seemingly a million times over the past month or so, but there isn't a whole lot to do right now except watch. I really do think this rally is getting long in the tooth and will fail soon, but I have no idea when it will happen. I will continue to watch for signs, but in the meantime, will probably keep most of my account in cold, hard cash. I am glad the weekend is here. This market is giving me a headache. See you later.

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Thursday, August 14, 2008

A Few Charts to Look At - Not a Ton of Setups Tonight

Going through my scans, I just didn't see a ton of super setups on either side right now. On the long side, most of the charts I like need a few more days of rest. If they get that, I think I would be very interested in some of these. On the short side, I see some commodities that could be shorts, but that is only if they move lower tomorrow. Will that happen?

Here are the two longs I currently have positions in - these are my only positions. If these work, I will have a lot more confidence in getting bullish here on the overall market.

BWLD, STEC

Here are some of the charts I am watching on the long side. Again, I want to see these rest for a few more days - I don't feel comfortable buying these right now. I still see a lot of crappy stocks (financials, airlines, casinos) rallying and setting up, and I am not that comfortable with trading these stocks.

BYD, TACT, RMG, GB
ONNN, IXYS, USPH, GTIV

Here are the commodity charts I am watching for breakdowns. These have hit their short-term moving averages, which has been a point of resistance throughout these recent drops. I was not impressed that oil couldn't get anything going, so I am watching oil stocks both short or long right now, based on what crude does. I think these are close to a bottom anyway, but if crude falls, these might still work for a quick swing short.

ATW, SFY, CXO, GLF

Same story with the ags - after breaking down, many have bounced up to their short-term moving averages, which could be possible resistance points.

MOS, TITN, POT, CF
Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

Football is about to start, so I have to go. As you can see, without a plentiful amount of great setups for tomorrow, along with a market that could still go either way, it is smart to be cautious here. I think a lot of the recent trading is due to the summer "dog-days" and we will be out of this fairly soon. As long as volume stays low, making big moves is not recommended. I am still mostly in cash and probably will stay that way, save a big-volume breakout or breakdown.
Good luck Friday.

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State of the Market - 8/14/08

More of the same up and down action today on Wall Street, as after two down days, the market was able to shake off a higher-than-expected CPI number pre-market and rose throughout the morning after gapping lower to start the day. Stocks slowed down a bit around 11:15 and went sideways into the lunch hour, but were able to break to new highs around 12:40. That breakout didn't last long, as stocks pulled back as they entered the afternoon as oil bounced after selling lower for most of the morning. They held support on their first pullback, bounced slightly, and then drifted lower again through previous support. The selling remained controlled however, and basically stocks drifted sideways into the close, ending in the middle of their ranges with moderate gains. Volume was very low today, and although the indices did move higher, the overall action was listless and boring.

Technically, the Dow and S&P 500 are now above their 50 day moving averages, but not by much. The Nasdaq has held over its 200 day moving average and continues to be right in the area of its long-term downtrend line for this bear market. I can't deny that the consolidation looks quite healthy here so far. The number of overextended stocks continued to pullback today and is back to a relatively normal level, so that is good for the bulls. However, I would need to see more volume come into play on a breakout to become really bullish.

The two main ETF's I am watching as clues to where we go from here are the XLF and the USO. The XLF could not get back above its 50 day moving average today and is sitting right at the $21 area that I said was important yesterday. As long as it stays under this area, I would be looking to short any breakdown in the financials. If it climbs above this level, that would show strength and you may want to wait to short these stocks. The USO could not get over its 9 day moving average and until it does, it stays in selling mode. I don't think there is a whole lot more downside to oil here, but I could be wrong - stocks can go as low as they want to go. A close below $90.80 would probably lead to a testing of the 200 day moving average around $88.

I didn't do a whole lot today. I was happy that I did get out of my shorts yesterday maintaining most of my gains and didn't want to force a whole lot else. As I stated yesterday, I was looking for the USO to get over $95 before looking hard at going long some oil stocks, and since that never happened, those stocks were taken off the watchlist pretty quickly. I did add a little to the BWLD long from yesterday at $36.27 as support held early and the stocks bounced from there. I also started a small position in STEC at $10.79 as the market reversed higher - it looked like it was getting over its 50 day, and I like the fundamentals of this stock and thought it could run if it did clear that area. I was willing to add a few more longs, but I really didn't see much else that interested me. I added a little more at $10.94 as it did move higher intraday. These look OK but I would have liked to have seen more of a move on these. These are currently my only two positions.

Just like yesterday, I think we could go either way here. I am expecting this bear market rally to end soon, but the last time it ended back in May, it was a week or two process on the Nasdaq and Dow, so that could happen here as well. Maybe this rally will take us into September, when the institutions come back, selling in force. If we would breakout here on huge volume, especially on the Nasdaq, then perhaps I would reconsider my bearish longer-term stance. Right now, however, this seems to be a pretty typical bear market rally. My trading timeframe will continue to be short, because it has to be in this market. If you get profits, I would continue to take them, and if you are in cash, then you are smart. There continues to be little reason to trade a lot or make big bets in this market. Tomorrow is options expiration so be careful. There is pre-season football tonight so I don't know if I will have a watchlist up tonight or not. Because I don't have a good feel here for Friday, I may pass. Good luck tomorrow.

Wednesday, August 13, 2008

Video - Looking to Play a Few Oil Stocks, Maybe

Put a short video together tonight. I am still cautious on both sides of the market here - while I expect a true breakdown that will take us down to our recent lows sometime soon, I don't know that it will be this week. The volume needs to increase on the selling right now. I am watching the 1275 area on the S&P as a tell. If oil keeps bouncing, then maybe it will be this week. I am still take it slowly here until I'm sure.


I did make one mistake in the video - the level on the Dow to watch is 11,450, not 11,630 as I said in the video - I was looking at the wrong number. Sorry.

State of the Market - 8/13/08

Not a good morning for Wall Street today, as higher oil prices and lower-than-expected retail sales led to a slightly lower open, but the bears took the reins at that point and ran. Stocks steadily sold off from the opening bell, and although there were a few small attempts at bounces, they didn't amount to much. Bears kept control into the lunch hour, as oil prices rose after the inventory numbers were released at 10:35 and, although volatile, kept rising. Around 12:05, the S&P 500 and Dow hit their upward trendlines, which stopped the bleeding and from there stocks rose into the afternoon. The rise was impressive and steady until around 3:00, when stocks pulled back rather strongly and ended up losing most of their afternoon gains, although a late bounce still kept them off their lows. Volume was a little higher today, but not huge.

Technically, the Dow and S&P 500 did hold their trendlines in the afternoon but still could break them tomorrow. Both are forming bearish wedges and were rejected by their 50 day MA on the bounce attempt in the afternoon. A break below the levels I mentioned in my earlier post would lead me to getting short again. However, it is possible they are just consolidating here before moving higher. A break above or below the wedge will be what I am watching for. The Nasdaq appears to consolidating near its 200 day MA - the question is whether it is a bullish consolidation before moving higher, or a bearish consolidation just postponing a major fall. The USO looks like it could be ready to breakout from a falling wedge and this could lead to higher prices for oil, and maybe oil stocks.

I took a starter position short in WB this morning at $15.38 as the XLF did break below the $21 area I mentioned last night. I set a stop a little above the lows of yesterday. At the same time, I tightened the stops on my SKF and USB positions to protect some of the gains I had, and never did add to them. In the back of my mind, I was still expecting another reversal up for these financials and "someone" coming in to save the day for these stocks again. I guess I've just seen it happen too often to feel secure in letting these ride, even though common sense says these stocks are dead in the water. I did add a little to the WB short at $15.37 after the oil numbers came out. Later, I covered at $14.91 for a 2.7% gain.

I also took a position in PDO at $11.65 after the oil invetories based on the intraday chart. This stock was already up a bunch, but I thought it may breakout and I know this can run fast, so I took a chance. I knew it was risky however and not the best play I could take, but the possible reward made me give in and buy. I sold this later as a day-trade at $12.83 for a 10% gain which was a little too early. Perhaps this was a mistake and I should have given this more room. However, the recent choppiness of this market has changed my trading and it will probably take some time before I am willing to sit back and let positions develop properly the way I would like to do. I thought about going back into PDO or trying ROYL at the end of the day, but passed. They will be on my radar screen.

When I noticed the Dow and S&P 500 pulled back to their trendlines on volume that was not that heavy today, and that the number of overextended stocks pulled back significantly intraday, I decided to act. These observations caused me to take the nice-sized profits I had at that point - check out my post earlier. I sold SKF at $128.81 for a 14.5% gain - it was dealing with its 20 day MA. I sold QID at $40.15 for a 0.7% gain. I covered USB at $29.48 for a 6.9% gain - it was right at its 50 day MA and I thought that might act as support. I just didn't feel like giving any of the gains I had made back to a market that has loved to snap back gains very quickly for the past month or so. The gains put me back up over 80% in my main account for the year, and allowed me to get back almost all of the small losses I have sustained the past month or so probing this market short and long. I am happy with that for now.

As the reversal happened, I decided to try a test position in BWLD on the pullback to its 9 day MA. I got in at $36.014, but this was a small position so I wasn't too concerned if it didn't work out. I wanted to see if it would be worth trying more longs over the next few days. This is currently my only position.

With options this week, we will likely continue the crazed, up and down trading for the next three days that we've had for the past month. I don't really have a good feel either way right now where we go, and because of that, I may sit out the next few days again. This is a market where you take what you get, and be happy with it. I could see us rallying a little higher this week, pulling in some more bears who think that maybe the bottom has been put in, and then next week we fall in earnest. That's just a thought. I am still longer-term bearish, and any longs I would try here would be short-term trades. That said, I am not overly anxious to get short right now, after being down two days in a row. If the S&P 500 breaks below 1275, I will reconsider. Oil will likely play into things as well - a break above $95 on the USO could lead to more gains, which would probably hurt the overall market.

Basically, just tread lightly here and take what you can get. Today was a microcosm of this whole market - down, then up, then down, then up. We can go either way, and if you get yourself too locked into an outlook, you can get yourself into trouble. When August is over and the fall trading season starts, perhaps then we will get a much clearer trend that is easier to trade. Let's hope so. I am going to try and do a short video tonight showing the oil situation and the overall market. Best of luck Wednesday.

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Taking Profits Here

I may be completely wrong - probably will be - but I took my gains on the shorts I had today along with a few daytrades in PDO and WB. I am back to 100% cash. I will have the % gains up later today. Why would I do this? I am looking at the S&P and Dow right at their uptrend lines and the selling today has come on low volume. The number of stocks over 50% in a month has dropped big-time today (down to a little under 40 compared to over 100 the past two days). With options expiration this week, I just sense something fishy will happen the next few days. These weeks are rarely a one-way path down or up - they are usually more like a roller-coaster. I still don't know that this is a market to stick around in for long periods of time. Perhaps I've just been burned too much by whipsaws the past few weeks. Either way, my account is up 7% over the last three days and is close to highs for the year, so I am taking those gains here.

Dow and S&P 500
Chart from Telechart2007, Courtesy of Worden Brothers, Inc.

That being said, if we close below the 1275 area on the S&P 500, and the 11,460 area on the Dow, then I will probably reenter some of these shorts at the end of the day. For me, it is just a trust issue right now with this market - I don't trust it as far as I can throw it. It should be an interesting afternoon - this is a crucial point for bulls to defend their turf. Best of luck.

Tuesday, August 12, 2008

Is Oil's Decline Over?

Interesting Post by the Novice Bear tonight about oil. He uses signals from Thomas DeMark and notes that crude oil is hitting a buy signal tonight based on the DeMark indicators. These things are not 100% guaranteed, but they are typically reliable. Something to watch over the next few days. A significant turn in crude could push this rally over the edge and cause some serious selling. We have to wait for it though - don't jump the gun here.

A Few More Potential Shorts to Add to the List

After going through my scans, I did add some more shorts to the watchlist. As I said earlier, however, I need to see the market follow-through to the downside tomorrow before adding other shorts. With volume being down today, this is so far just a normal pullback. I am watching $21 on the XLF and today's close on the S&P for signals as to where we go from here.

Here are the shorts I am watching. Many of the charts look similar.

Travel and Casinos: RCL, MGM, PENN

Airlines or Transports(only if oil moves higher): NWA, AMR, ABFS

Banks: ZION, WB, FNH, KBE, KEY, USB, MI, EV, STI, XLF, CINF, FMBI, PACW, EWBC, BBT, WBS, MTB, FITB

Others: ALO, OFI, IIIN, NEU

Check these out and perhaps you can find some you like. Again, we have to wait for a little more downside confirmation - this market has a way of bouncing right when you think it is ready to fall of a cliff, so just be careful. See you tomorrow.

State of the Market - 8/12/08

A rather choppy and listless day today in the stock market, at least for most of the day, as disappointing news from some big financials cancelled out somewhat lower oil prices and stocks traded lower for most of the session. Stocks started lower at the open, were very choppy for the first half hour of trading, but then fell for the next hour or so. This was only on the Dow and S&P however - the Nasdaq actually rose right after the open, pulled back, and then bounced to get positive into the lunch hour. Into the lunch hour and early afternoon, stocks didn't do much besides drift sideways with a slight downward tilt. As the final hour approached, the selling increased quickly, pushing stocks to session lows. Another bounce in the last half hour stocks off their lows, but the market did still finish with moderate losses across the board. Volume was again quiet, finishing close to yesterday's totals.

Technically, I've been saying that we are long overdue for a pullback, and perhaps today is the start of that. However, volume still wasn't really heavy and I didn't see a ton of breakdowns, outside of the financials. The key, as always, will be if we get any follow-through on the selling tomorrow. The levels to watch on the Dow and S&P 500 are 11,690 and 1290 respectively. These are the former "breakout" points, and if we close below those and stay below them, then I think we may have seen a false breakout on these two indices. The Dow did close far below that today, but the S&P finished right at it. It is entirely possible we bounce tomorrow - it's happened before - but if we do head lower Wednesday, then I think the selling could build on itself and we could get a more severe pullback.

I was also watching the XLF closely today and am looking at a close below $21 as a significant event, in that it would then be below all of its moving averages along with some support at the $21 level that has held for the past few weeks. It bounced right off that level at 3:30 and finished a bit higher, but financials are definitely looking weak here. You never know what's going to happen with this market, but if the XLF does get below $21, that could signal a trend change and more severe pullback in the financials, and is what I am watching for tomorrow. If this happens, I may be inclined to add more shorts.

Remember, this entire rally has been built for the most part on heavy short covering and a precipitous drop in oil prices. How long are those oil prices going to continue to drop like they have the past month? If that stimulus is taken away, and oil prices move higher, even for just a relief bounce, what is going to continue to push an already overextended market higher? I just don't know. That's why I continue to stay away from longs here.

In addition, I still had over 100 stocks showing up in my momentum/overbought scan today intraday even with today's selling, so certainly one day of selling is not going to make suddenly make things great for buying from a risk/reward in my opinion. We need more selling and for more of the stocks that have run to pullback quietly, and as long as that happens on lower volume, then it will be healthy for this market. Watch the volume, that should be a signal as to what to expect next.

I decided to not add to any of the shorts I took yesterday, although the USB and SKF positions so far look very good. I still want to take my time here until I have more confirmation that my bearish outlook is justified. The market has just been too crazy to get overconfident expecting something to happen, especially when it seems to make sense. Making sense is something that this current market rarely likes to do. There will be time to add to these positions if they continue to act correctly, and I will do so. I will also look to add a few more shorts if the market acts as I expect it to. If we are up big tomorrow, I will likely take some profits on the positions I have and sit back again, letting the market act crazy again on its own without me involved.

Thanks to those of you who gave me some feedback on the videos. It is something I will continue to do, particularly on nights when I see a lot of setups. However, I will not be posting tonight because I just don't see many stocks setting up right now - I am going to list a few shorts I am watching now and you can check them out on your own. STI, MI, EV, CINF, LM, ZION, WB, and FMBI all look like possible shorts if the XLF breaks below $21, even with some of these down big today. You can email me if you have any questions about them. Just be ready to get out quickly if they do reverse higher - you know the powers that be will do all that they can to continue to keep propping these stocks up.

I am hoping today is the start of a more severe pullback - I think that would be the best thing overall right now. It would allow some shorts to be played on the move lower, and would also allow a possibly better "bottom" to set up if we fall and test the recent lows of July. But this market continues to be volatile with lower volume, so it pays to not get locked into any expectations right now, especially with options this week. I am still staying away from longs, and will short if the setups present themselves, but slowly. That's about the only way to play things right now in my opinion. Good luck Tuesday.

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