Friday, October 30, 2009

State of the Market - 10/30/09

Fun market, huh? A day after putting in a huge rally, the market absolutely tanked today, the second time this week. The market opened only slightly lower but steadily and methodically sold off as the day progressed. They tried to bounce things a bit into the close but really couldn't and stocks finished close to their lows of the day. Volume looks to be a bit lower and that is the only positive out there.

Technically, things continue to look quite bad and the fact that the bulls couldn't get more than one day's bounce following extreme oversold conditions is testament to the fact that things have indeed "changed", at least in my opinion. This pullback is definitely different from all of the ones we've seen since March - much more severe and wicked. As this action continues, it is extremely likely we are at the beginning of a serious pullback. The October lows around 1020 on the S&P will be very important support for this market and could be an area from where we try to bounce again. The Nasdaq is very close to its October lows as well around 2040 and that is a key level to watch. One reason I am not shorting yet is because those lows are so close.

Today was a prime example of why I've been in cash for the last week or so and in reality for much of this year. It continues to be a market where swing trading is very difficult and day-trading seems to be the only way to go. The market is getting very hard to predict day to day and until it settles down a bit, I think cash remains the best play, unless again you are day trading the wild swings intraday.

Since it's Friday, this post is short, but I'll try and put something together in more depth this weekend, although I will say this. There probably isn't much more to say - going short is hard to do with such strong oversold conditions but going long could be suicide as well based on the action today. Not much to do overall. Take care and enjoy the weekend.

Thursday, October 29, 2009

State of the Market - 10/29/09

We saw an mostly impressive bounceback session today on Wall Street, as stocks gapped up to start the day on positive G.D.P. numbers and did nothing but move steadily higher after that. The gains were smooth and methodical as the session went on, and stocks were able to finish somewhat close to their highs for the day. The only real problem with the action is that volume looks to be below average and that is disappointing. Even when compared to totals seen Friday, Monday, and Tuesday, it was lower.

I know I did not write a report yesterday but conditions were certainly ripe today for a bounce. The Nasdaq and S&P were quickly approaching some key support levels around their October lows yesterday and the T2106 McClellan Oscillator was at a superextreme reading of -381 yesterday, the lowest it has ever been on my Telechart software (dating back to 2005). So a reflex bounce was certainly not unexpected and if we would have gapped down today, I was ready to play it.

Chart from Telechart and Worden Brothers

As it was, we got a gap up and I did not feel comfortable with chasing it, so I did nothing today. Technically, when looking at things as a whole, I am leaning heavily to the belief that shorting this bounce is the right play and that this market has topped out for at least the next few weeks if not longer. There was a lot of damage done yesterday - the rising wedges on the S&P and Nasdaq were clearly broken yesterday and when eight-month trendlines are broken on very heavy volume, it typically is a big deal and an important event. The Russell 2K looks even worse as it sliced easily through its October lows yesterday. Financials also look horrible although they had a nice bounceback today.

The dollar was down big today and that was another reason for the market to bounce big. Continue to watch this as if it gives back all of the gains it has had over the previous three sessions, then perhaps the market can run again. But if it is forming a little bottom here and the past three days were meaningful, then the market is indeed in trouble. This inverse relationship continues and will likely continue to be meaningful for the foreseeable future.

So where do we go from here? The bounce today took us up into what will likely be some resistance around 1068 for the S&P. That is where the short-term moving averages are as well as the underside of the former trendline that was just broken. I would watch those numbers carefully. The Nasdaq got slightly above its 50 day moving average today but faces resistance around 2120-2125 where its short-term moving averages are converging. Watch those in the short-term.

The way the charts look now, the ever-popular "head and shoulders" setup is also out there as a possibility, although it would take a further bounce to form the right shoulder. We also all know how these setups have worked out so far this year, so who knows if it is worth even considering.

I would still urge some caution here on both sides of the market, because with the end of the month here, a little window dressing off these still oversold conditions would not be surprising. However, that is probably all it will be - window dressing. I don't think you can trust a bounce to be anything more than a one or two day thing right now because there was some major damage done the past few days, both to individual stocks and the overall market, and it will take some sideways action to fix it. I very much doubt that we will be looking at new highs anytime soon for this market (although nothing surprises me after this year). I think this time IS different.

I did not go through my charts yesterday and with trick or treating tonight probably won't get to do so once again. When I do, however, perhaps I will have a better overall feel. My guess is that in a few days, I will begin looking for shorts more heavily and perhaps start entering some inverse ETFs as well. For now, cash is best for me at least. Take care and good luck Friday.

Tuesday, October 27, 2009

State of the Market - 10/27/09

We had a semi-negative day today on Wall Street, as although the S&P was down only slightly, the Nasdaq had another day of large losses. The market opened basically flat, but from there either moved mostly sideways (the S&P) or moved straight down (the Nasdaq). Volume came in close to yesterday but I do not yet know if we saw another distribution day to add onto the count. Not counting today, the running total for D.D. on the Nasdaq is six in the past four weeks and an astounding nine for the S&P over the past four weeks. Those are typically bearish numbers.

Technically, the S&P held just at its uptrend line and has some support as well below it around 1050 (its 50 day moving average) so I am hesitant to get super bearish yet. It is still very possible we are topping out here, but this market has tricked me too many times this year to be sure about further selling here, at least not before a bounce. The Nasdaq did break its uptrend line and that is significant but it too has support around its 50 day moving average coming into play soon around 2090. The Russell 2000 closed below its 50 day and right at its uptrend line.

S&P 500
Russell 2000

With the McClellan Oscillator as low as it's been since March, it would not surprise me to see a bounce soon. When you factor in that the dollar is up against some resistance as well, a bounce even makes more sense. That is why I am hesistant to get short at this particular moment. Of course, there is going to be one time that IS different than all the rest. There will be a time when the bouncebacks we've seen since March stop happening and the selling really does pick up. I don't know if it will be this time or not - based on my luck this year, it probably will be and I will be out of the market not catching the move lower.

T2106 - McClellan Oscillator
U.S. Dollar
All Charts Courtesy of Telechart and Worden Brothers, Inc.

Basically, I think we are either going to bounce a bit here or really fall over a cliff. With as oversold as we are, a move lower that breaks the technical support we are near would be very significant. If it happens, things will get quite ugly in my opinion. We just have to wait and see if we get that break or not. As I've said in the last few posts and videos, the divergences and bearish signals are there - will the market follow them and will the bears step up to make themselves important again?

My birthday is tomorrow so I will be taking the day off - therefore no post but you can look for the normal market summary Thursday. Best of luck tomorrow and Thursday.

Monday, October 26, 2009

State of the Market - 10/26/09

Well, if you watched this weekend video, you know that conditions were ripe for some more whipsaw action on Wall Street, and that's exactly what we saw today. Stocks started higher and things looked good for about the first two or so hours of trading. Right before lunch, however, the bottom fell out, with the Nasdaq falling over 40 points and the S&P falling over 20 points very quickly. The market moved sideways from there into the close, but most of the damage was done by that point and a late bounce attempt was quickly extinguished, which let the market close near its lows. I don't have the final volume totals but it doesn't look like volume was overwhelming, which is the only bright spot in today's selling if it holds that way.

Technically, we have now seen four consecutive days where the market finished with reversal bars. Three of those were bearish reversals, and with the key support around 1080 and 2150 being broken decisively, it certainly looks like we are topping here. Further selling here followed by a weak bounce could form another (dare I say it) potential head and shoulder pattern on most indices, but we've seen how that has worked out before, so who knows?

As for support, the Nasdaq closed right at the uptrend line of its bearish wedge and right at its 20 day moving average. A close below 2130 would likely set off a move lower to around 2080 near its 50 day moving average. The market could bounce there, but if this wedge is broken to the downside, then I think the pullback will get more severe. The S&P closed right near the trendline of its bearish wedge as well but has support below much closer around 1047 (50 day moving average). That is a key level to watch. Overall, with both indices closing right near their uptrend lines, a bounce is a possibility soon, but not a given.

I talked about the financials last night as well and how bad they looked, and they are sitting right at their 50 day moving average as of now as well, a key support level. If XLF breaks this current $14.70 area, it could fall down into the $13.60-13.75 area pretty easily. The real story today was the move in the U.S. dollar, which was also discussed last night. It hasn't quite broken above the bullish wedge pattern it is forming, but if the dollar sees any follow-through to today's move, then things will likely get worse for the overall market. Volume on UUP was the highest ever today. Crude oil was hit big today, although USO bounced off of the $40 level. That is very important support and if it is broken, things could get worse for the commodities. The VIX also spiked back into its range so that's another bearish signal popping up.

As I said last night, the signals are certainly lining up for a meaningful correction to take place. Will it happen? I wish I knew. This market has shown setups like this many times before this year, with bearish volume patterns and negative divergences drawing in bears and then trapping them when the market bounced back up. One of these days, the bounce that has occurred so many times before will not take place and we will get a meaningful pullback. I don't know if it will be this time. As I said, the signals are there. But after being burned several times before, I am hesistant to trust those signals this time. Watch carefully and be careful is probably the only advice I can give right here due to past precedence from this year. It may be safer to wait for a breakdown and then short the following bounce to avoid getting whipsawed like traders did back at the beginning of July and the end of September.

That's about it for today - we'll see what tomorrow brings and if we get some follow-through by the bears. They have a chance right now - will they take advantage of it, something that have not been able to do up to this point? That's the million dollar question. Take care and good luck Tuesday.

Sunday, October 25, 2009

Stock Market Video - Weekend Market Summary - 10/25/09

Hi, traders. Here's a free video for the weekend - I didn't see a ton of quality plays out there so this is a shorter video and available to anyone that wants to check it out. I think caution is the name of the game right now - as I show in the video, there are many negative divergences out there that suggest a pullback is coming soon. However, we are still in a market where anything that looks obvious has not played out so obviously, so be aware. I think a lot of people could get chopped up next week (the past three days were an example of that) so unless we get a clear breakdown or a clear breakout, I will likely be sitting things out. Hope you enjoy the video, and best of luck in the week ahead.

Friday, October 23, 2009

State of the Market - 10/23/09

The "fun" (or should I say chop) continued on Wall Street, as following a bullish session yesterday along with very positive earnings news, the market fell flat on its face today. Pre-market futures faded pretty much the entire morning, and when the market opened flat, it put its highs in for the session. From there, it stairstepped its way lower, closing near the lows of the day. Volume looks to be lower on the S&P but possibly higher on the Nasdaq.

Looking back on the past week and a half, we have seen a potentially significant breakout attempt be met with no follow-through, poor reactions to good earnings, and eventually heavier volume selling (Thursday thru Wednesday). We've seen that heavier volume selling and poor earnings be met with buying and bounces off support (Thursday). We've seen that strong buying and good earnings be met with heavy selling (today). Anyone else out there besides me a bit confused on how to read this market right now? Costanza market it is, I guess.

This is the shorter "Friday" post so I will wrap up by saying I still think the possibility of a significant pullback is high but at the same time, everyone seems to know what numbers to watch for on the breakdown, so if we break those, will it be too obvious for the breakdown to really occur? We could be back in a position where you have to overthink things to try and figure out what happens next. Let's just say I am glad it's the weekend and I don't have to watch this stuff for a few days. Take care and enjoy the break.

Thursday, October 22, 2009

State of the Market - 10/22/09

The George Costanza market is back! After having an awful final hour yesterday that gave the market more distribution and convinced many traders (including me) that the market was in for more trouble, stocks did the exact opposite of what most people expected - they moved a good deal higher today. Stocks were slightly weak early on with both the S&P and Nasdaq breaking key support levels, but buyers came in around 10:00 and from there it was up, up, and away. The market stairstepped its way higher the rest of the day, closing near its highs. Volume however looks to be less than the heavy volume we saw with yesterday's selling.

Technically, who knows? It looks like those 1080 and 2150 levels were defended today but with volume coming in lower than the previous two days, it isn't that convincing. I will likely have to wait to go through my scans before having a good feel for where we go from here. Resistance is around 2190 on the Nasdaq and 1101 on the S&P. Financials were bullish today and rose on heavier volume after many put in breakdown yesterday - again, doesn't make much sense, but oh well. I guess the bottom-line is that the bears remain very weak as a group as evidenced by today.

I was trapped today for two losses - I went into SRS yesterday at $9.95 and ended up being stopped out today around $9.50. It acted well early but as soon as the market reversed, I had a feeling I would be stopped out and I was. I also entered FAZ early today at $19.93 and was later stopped out around $19.35. After that, I was done.

Perhaps I should have expected a day like today after reading through the blogs I follow last night. Every single one (many of which are well-known and respected including IBD) was bearish (as was I) and the arguments presented across the board, whether it was the many negative divergences showing up or the lack of follow-through on good earnings or the distribution days, all made complete sense. I don't know if this is the reason for the reversal today - were too many people leaning one way? I have to think that is the case, but at some point, don't all these cogent and factual points on the bearish side have to have an impact on things? Maybe not. I just don't know anymore.

We'll have to see what tomorrow brings - I'll be honest and say I don't have a good feel one way or the other after today. In the back of my mind, I know I am expecting a pullback and have been for a while, and maybe that is still affecting my decision-making. That being said, the divergences are still out there so be careful. I think we are back to a spot where anything can happen. Good luck Friday - I may be taking the day off. Take care.

Wednesday, October 21, 2009

State of the Market - 10/21/09

Not exactly the best of days today on Wall Street, as an early rally was sold off hard in the afternoon and left stocks with another day of losses and put them right at key support levels. The day started well enough, as stocks rose steadily for the first two hours of trading. They pulled back a bit from there and went into a tight, sideways consolidation until the final hour started. That's when the sellers came out in force, with the Nasdaq falling almost 30 points in less than an hour. So certainly not a good way to end the day, and with volume looking like it will come in heavier, at least on the Nasdaq, more distribution for this market came today.

Technically, I've been harping on the 1080 and 2150ish levels for the two major indices and we closed just above those today. However, the thing that worries me here is that we have yet to see any real follow-through from last week's breakout attempt. All the market has done is chop around sideways in a tight range, and that is good to a point. I thought we needed immediate follow-through to keep this move going up considering how far we've rallied this year, and we haven't gotten it yet. We could break those levels tomorrow to the downside and if we do, I think there is a good chance this is the start of a decent-sized pullback.

Another bearish note here is that the U.S. dollar was down today and the market still couldn't rally. Now, if you look at an intraday chart, you can see that the market tanked just as the dollar rallied late, so maybe there is a tie-in. Crude oil moved higher once again today and $40 on USO is a key level to watch for support. The financials had a small breakdown today as well and XLF is right at its 50 day moving average again. I will be watching to see if it holds. IYR is another ETF that looks like it could be topping and a break below its 50 day could be a reason to get short via SRS.

I made no moves today and really wasn't watching things as the market sold off, so I didn't think too hard about shorting yet. If we get some more weakness tomorrow and those support levels are broken, then I will think harder about taking some inverse ETFs on. For now, I think there is more reason to be cautious on the long side - the distribution days are popping up and that is typically a warning sign, especially in the face of what look to be good earnings overall. I would not be buying anything willy-nilly here - in fact, I will probably stay in cash until we break to new highs and really do get some follow-through action. Good luck Thursday.

Tuesday, October 20, 2009

A Perfect Summary of The Current State of Affairs By Gary Kaltbaum

I just caught Gary Kaltbaum's most recent column and had to post some of it here as I thought he pretty much summed up everything I think about on a daily basis as I watch what is going on in our nation's capital. I usually don't post or link to other articles, but I thought this was worth it. He also talks about the markets - check it out for the full read.

"The Department of Energy was instituted on 8-04-1977. The stated objective for this department was to lessen our dependence on foreign oil. Fast forward 32 has this department done in lessening our dependence on foreign oil? No need to answer! And at what cost? The budget for another government behemoth is in the range of a measly $24 billion/year....16,000 federal employees with a much bigger amount of contract employees.

Need I say more of what I think of a health care bill that will be voted on elected officials that have not read it...foisted upon good Americans by elected officials that in the past few months have floated a: VAT TAX...SODA TAX...STOCK TRANSACTION TAX...SURTAX ON THE WEALTHY...this on top of rising INCOME

, ESTATE, CAPITAL GAINS TAX...on top of the CIGARETTE TAX...and TAXES, FINES and FEES in this health care bill if you do not follow the Bolshevik's government mandate. Oh yeah...and the lowering of deductions on charity and others.

Remember what I have been telling you for a very long time. The scam is simple...scare the heck out of the American public in order to spend money...then tax the heck out of people in order to gain more control and more power over those same order to re-distribute that money to "the masses" in order to tell "the masses" how wonderful you order to have those "masses" continue to vote for you. And who heads the tax committee....someone who did not pay their taxes. Do not forget, this nonsensical bill will not come into play until after 2012 yet most of the taxes would kick in immediately.

There is only one bit of good news from all this...Americans are catching on...and are starting to get the scam. Remember, you and I have not caused the massive deficits. It is 535 people...most who have never run a business or handled a checkbook...but now tell us they can now spend $875 billion TO SAVE MONEY! And we are supposed to believe that that will be the actual cost...and we are supposed to believe it will save money? Name one government program that came in as one program that lowered deficits. Come on...I will give you all the time in the world to come up with just one. The other bit of good news is in a number...383 days. Yup...383 days until the next election with a few in between. I think it is pretty all of them out of Washington...into their next job...which of course would be lobbying....and bring in all new elected officials...and tell them if they want to keep their jobs, they will no longer spend OUR money into oblivion and mortgage

our children's and grandchildren's future. It's that easy!"

State of the Market - 10/20/09

We did not see the most impressive follow-through to yesterday's buying today on Wall Street, especially in the face of good earnings from AAPL. Futures were up pre-market but when trading actually started, the market opened basically flat. They chopped around for about the first and a half of trading, but then a little before lunch there was a big drop. The indices were able to recover slightly from that drop and close off of their lows, but they still finished with losses. Volume looks like it will be heavier and if it is, that would be another distribution day.

Technically, we continue to hold above the 2150 and 1080 levels on the Nasdaq and S&P respectively, although the Nasdaq was tested today. That is bullish and as long as we continue to do that, it is hard to get super bearish about anything. That being said, I would like to see some follow-through to last week's breakout and we still haven't seen much in my opinion. Perhaps this is just due to the news-driven environment we are in, but I think the longer messing around in this area, the higher chance of this breakout failing. Continue to watch those numbers carefully.

There was a rather large bounce in the U.S. dollar today from the bottom trendline of its channel and if this bounce gets follow-through tomorrow, then we will likely see more selling. As I said in the weekend's video, we are in a technical position that a bounce could happen and certainly sentiment is very poor right now for the dollar. Keep an eye on this as well. Oil pulled back a bit in response but is still in a strong uptrend. It will take more than one day of selling to end that.

I entered CBAK this morning at $4.68 as it broke above its pennant trendline - that was the stock I was thinking hard about yesterday. Unfortunately, I got whipsawed here as it went back below that trendline pretty quickly and I was stopped out around $4.46 for a loss. I was also stopped out of CAAS around $11.80, although this was just a case of tightetning a stop too much. When I saw the early weakness, I tightened it and then got whipsawed out of it as well.

Usually, it's not a bad thing to get stopped out of positions - usually it happens for a reason - and that could be the case today. Going through my watchlist, I am seeing some slight breakdowns in charts that were looking fairly strong and that is worrisome. GOL shouldn't have a breakdown like today, even though it finished off its lows. MDZ and SVA had some breakdowns as well today and I thought both of these charts looked good to start the week. We will watch carefully to see if these breakdowns are a sign of things to come over the next few days.

I'll try to get through my scans tonight to check for any other breakouts. If I see some, then I may get more defensive, but as of now, the trend remains in place so you have to play it that way. Take care and good luck Wednesday.

Monday, October 19, 2009

State of the Market - 10/19/09

A nice bounceback session today on Wall Street, as stocks fought back against some early selling and were able to post nice-sized gains a session after some heavy selling on Friday. Stocks rose sharply and steadily for about two hours this morning, but then moved basically sideways for the rest of the session with a slight downward bias. Volume appears to be a good bit lower, even when not compared to the options expiration volume on Friday. That is the only problem I see with the action today.

Technically, I think it was important for the market to bounce back today from Friday's selling, especially when it looked like we might get more selling in the first fifteen minutes or so of trading. We are in a position where we are not that overbought and I personally believe the bulls need to show continued strength this week rather than just mess around here near the former breakout levels. I want to see follow-through quickly in order to trust that last week's breakout was the start of another nice leg up rather than a head fake. For now, continue to pay attention to the numbers I focused on in the video as they remain important technically.

In terms of sectors, the financials lagged the market today and that is a point of concern, along with the chart as I shared in the video this weekend. I would watch these guys closely as this continues to look like a potential failed breakout. Oil was higher as the dollar was lower - the interplay between the two continue. As it is, the dollar is quite oversold and continues to ride the lower channel trendline, so be alert for a bounce at some point soon.

From the video, CA** was the big winner today and I did enter that this morning at $11.14. It wasn't a perfect entry because it gapped up, so there was no chance to buy just as the downtrend line was broken, but with volume being heavy, I felt it was certainly worth the risk. Hopefully you were able to get into that today for a decent gain. G*** closed nicely but was very volatile intraday so I stayed away. Interestingly enough, there wasn't much else that moved today even with the nice gains in the overall market and that perhaps is a bit worrisome. C*** had a decent move of the pullback and could move higher from here, and U** reversed hard off of its lows and also could move higher from here, but the rest of the list was mainly flat for the session. There is one other stock I am watching closely here and thought hard about entering a position today, but it would be an anticipatory buy because it hasn't quite broken out yet.

Overall, the trend remains in place and as long as we hold above those key support levels on the S&P and Nasdaq, then you have to play the upside here. There are a few warning signs out there that could derail this rally once and for all, but until they present themselves more and in a serious manner, I don't know how important those signs are. Good luck Tuesday and take care.

Sunday, October 18, 2009

Stock Market Video - Weekend Market Summary - 10/18/09

Hi, traders - hope everyone is having a great weekend. Here's a 33 minute video that covers a wide range of topics. Topics covered include...
  • Technical looks at the S&P, Nasdaq, and financials with key levels to watch highlighted.
  • In-depth looks at crude oil and the U.S. dollar and where they may go from here.
  • A look at the VIX and the movement it saw last week.
  • A watchlist of 21 stocks with strong potential upside to watch for the upcoming week.
  • A watchlist of 11 potential shorts to watch in case the market weakens further here.
Hope you enjoy the video and best of luck next week. Off to watch some football - take care.

Stock Market Video - Weekend Market Summary - 10/18/09

Add to Cart
View Cart

The process for buying the video is very quick and should take no more than a minute or two. By purchasing the above video, you are agreeing to my website disclaimer.

(If you are looking for a stand-alone player to watch the Flash video in, I would look at Swiff Player. It is completely free and easy to use - just open the file using the Swiff player and you will not have to watch it in your internet browser. It allows you to easily adjust the window size based on your monitor size for optimum viewing.)

Friday, October 16, 2009

State of the Market - 10/16/09

It's the weekend - short post today. The action today looks bad on the surface but the S&P held the 1080 breakout level and the Nasdaq closed above the gap around 2155 so it really wasn't that bad today. Now if we get further selling Monday, then maybe things change, but as of now, today is probably good in terms of controlling how overbought we get in the short term. I still have a decent amount of setups that look good, so I will share those sometime this week in a video (I promise). Take care and enjoy the next few days.

Thursday, October 15, 2009

State of the Market - 10/15/09

After a very important technical day yesterday, we had sort of a snoozer today on Wall Street, although the action was overall bullish. On some disappointing earnings news, stocks started the day lower, and actually fell to further lows by 11:00 after a short bounce. Stocks held there, however, and started a slow climb back to positive territory (at least for the S&P) by the time the session had ended. Volume appears to be a good deal lower than yesterday as of now.

Technically, we are still in an area where this market could really run, but we are going to have to see how the earnings play out. Remember, in a news-driven environment (which we are certainly entering now) technicals will not matter as much. Ideally, I would like to see a few more days of calm trading much like today so that the market can prime itself for further gains. I also feel that the recent resistance levels of 1080 on the S&P and 2169/2155 on the Nasdaq need to hold over the next few days. If we would fall below those levels, then I think the breakout we saw yesterday would have a little doubt behind it. We'll see what happens.

Sector-wise, the financials were weaker today but did hold just above their former resistance levels around $15.44 on the XLF, and that is bullish. Oil broke to new highs for the year today and that is also bullish for the overall market (although reports today say we are not seeing any inflation...wink, wink). The oil/market/dollar inverse relationship continues and who knows when it will stop. As I said yesterday, the dollar is in a technical position to bounce, but right now that is certainly not a given. I did watch an interesting video on the dollar today from Yahoo Finance - sentiment is at all-time lows so a countertrend bounce is a possibility.

I made no moves today and likely will not make any tomorrow with more earnings coming out along with options expiration. Nothing really did anything on my watchlist today anyway, but I am continuing to watch several names for possible entries, most related to China. If I have time I will share them in a video but may wait until the weekend again due to options. Good luck Friday.

Wednesday, October 14, 2009

State of the Market - 10/14/09

After two key earnings reports, the stock market broke to new highs for the year today, as both INTC and JPM impressed traders enough to get them to push this market past some key resistance levels. The market did gap up at the open and after a quick run up, things settled a bit. The intraday-trend was more sideways than anything until the end of the day, when the buying picked up a bit into the close. Volume was heavier but I don't think it was overwhelming, at least on the S&P. INTC provided much of the increase for the Nasdaq.

Technically, it certainly seems like we are starting another leg up here in this amazing seven-month rally, regardless of how hard it may be to believe. The Nasdaq was below its 2009 high for most of the day but was able to close just above it by the final bell. The Nasdaq also is now clearly above some important overhead resistance around 2150 going back to 2008. How far we go from here is anyone's guess - we are not really that overbought and the Nasdaq in particular has some room to run. The S&P could face some resistance at the top of its wedging pattern (a little above 1100) going back to March. A lot will likely depend on earnings reports this week and next

As for other sectors, the story remained the same today - the dollar fell to new lows for the year while oil broke to new highs for the year. On a much broader perspective, this trend continues to be sad for our country, but it is what it is - that's what happens when the people in charge print money to monotize their enormous debt. As it is, the dollar is at the bottom of a steep downtrend channel and could bounce here, but that is not a given by any stretch. Financials were very strong today and could run from here, although XLF may see some resistance around $16, which is the top of the long-term wedging pattern that is still present from March.

From my long watchlist, GOL, ISLN, and HRBN had breakout moves today - all were OK but none were spectacular. CATM tried to move but closed weak and volume was lagging all day. I am somewhat surprised that not much else moved on a day like today when so much seemed to be so good - I don't know if that's a sign or not. RODM had a slight, rather disconcerting breakdown for such a positive day overall. As it is, I will continue to focus on finding potential long setups as that is the only smart play right now. I did get out of both of my inverse ETFs from yesterday pre-market for losses - in hindsight, even if there were bearish things I saw, I had no business taking any position in front of such a deluge of important earnings reports. That was just a lack of foresight on my part.

My struggles this year compared to last continue and this losing streak/drawdown that I keep expecting to end just keeps rolling on. It is quite frustrating as I am seeing stocks in my watchlists move without me and I have inevitably picked the wrong stocks and the wrong entries for some time now. It's not like I've seen too many nice stocks from this year where I've said "wow, why didn't that come up in my scans?" There have certainly been (many) times when I have been too bearish and not bullish enough, and I know that is one reason for my struggles. Even when I've been bullish, however, it seems like I can't get things going. I know this is part of trading, but it is certainly difficult to deal with. I continue to hold hope that things will get going soon, but my confidence remains very shaky and that is probably the main reason I haven't been as successful this year as in years past. I may take the next few days off from trading to recollect my thoughts, and with all the reports coming over the next few days, that's may not be a bad thing.

Tomorrow is another day full of earning reports and Friday is options expiration, so be careful out there. Things look good but that doesn't mean the market has to be easy. Take care and good luck.

Tuesday, October 13, 2009

Some Longs to Watch If We Breakout Tomorrow

Got some work to do in my basement tonight, so I can't put a video together, but if the Intel news carries over tomorrow and we do see a breakout on the indices, then these are the stocks I will be watching. I am still in my FAZ and SDS but could very well be out by tomorrow morning - in hindsight, there was no reason to take those positions before these earnings reports, even if they were small positions. Maybe I will learn someday. If we breakout, I have no problem going long. If we "sell the news", then those inverse positions may work.


Good luck Tuesday.

State of the Market - 10/13/09

Another rather "blah" day today on Wall Street, as the market seems to be in a small holding pattern here until the bulk of earnings start coming on and traders get a better picture of what to expect and how the market will react to the reports. Stocks pulled back at the start of the session, rallied into lunch, and then drifted back and went mostly sideways into the close, leaving the overall market basically flat. Volume was heavier but that is in comparison to two very low volume days on Monday and Friday.

Technically, days like this are exactly what you want to see if you're a bull, as a pause near new highs without giving much back in certainly not a bad thing. It lets the market work off some of the overbought conditions in preparation of a potential move higher. Unfortunately, I would guess today is the last "quiet" day this week as the big boys start with earnings and during the earnings season, technicals really don't work as well as they normally would. INTC reports today, JPM tomorrow, and GS and GOOG on Thursday - all of those will likely push the market one way or the other. The key numbers I mentioned from yesterday's post still hold true overall in terms of support and resistance. Oil made a little move today and is trying to break out of a long, choppy consolidation. That would bode well for the overall market.

I made two small trades today as I said I would during yesterday's post - I went into FAZ at $19.23 and SDS at $39.03. Neither are large positions and I am taking the outlook that if the market moves to new highs, I will be out of those "test" positions. I didn't see anything that I thought was worth buying in anticipation of a breakout, but I am fully aware that the market could make another leg up here if earnings cooperate, so I am not against going long. I would rather wait for the breakout on the long side however. From what I see, I have to lean slightly bearish but not in a manner that it is a guarantee - that's why the positions today were small.

Overall, we are in quite the interesting spot here from where I sit, as the markets are right at their former highs along with some of the companies with big reports coming out soon (INTC and BAC). We could get a move either way, and things are likely to get crazy the rest of this week with the earnings along with options expiration (I believe) on Friday, so take anything that happens with a grain of salt. We could see breakouts, breakdowns, reversals, and all sorts of interesting stuff when the earnings hit. It's probably going to more like a casino over the next few weeks than a market, and because of that, I don't know how heavily I will be trading. Good luck if you are out there taking big positions, though. We'll see you Wednesday.

Monday, October 12, 2009

State of the Market - 10/12/09

What a boring day! Stocks tried to make it six in a row today early on as they rose for the first two hours of trading, but from there faded and ended up closing basically flat for the session. Volume appears to be lower once again, as many trading desks were likely quiet for the Columbus Day holiday.

I would have no problem writing a long summary right now, but there really isn't anything to say that I didn't say yesterday, so today's post will be short. Please check out Sunday's post for a detailed description of what I am watching right now. The market bounced right up to those important levels around 1080 on the S&P before reversing and those are still the key numbers (2152-2167 on the Nasdaq) I am still watching the VIX and U.S. dollar for clues as to where we head from here.

I will say that I am considering putting on a few test shorts here with very tight stops (a bit above new highs) as I sense a loss of momentum. A breakout is still certainly a possibility but we are quite overbought in the short-term and the longer the current technical conditions remain in place, the more bearish I start to lean. We'll see I guess - if we breakout and hold it, then I'll look for some longs to play as perhaps the momentum can pick back up. Good luck Tuesday.

Sunday, October 11, 2009

State of the Market - Weekend Edition - 10/11/09

Hi, readers. I apologize for the lateness of this post, but I've been busy around the house this weekend. Anytime you move into a new house, there are a lot of things to take care - changes to make, big and small. Well, I've done a lot over the last six months but as winter approaches here in the Northeast, one project I still have is finishing off our basement. That is what I've begun doing and spent much of this weekend attaching studs to the wall and then cutting drywall for those studs. I would say I am somewhat handy - certainly not an expert - but I like doing things around the house and learning as I go, so we'll so how it turns out. Anyway, that has taken up a lot of time this weekend and is a main reason for the late post.

I am just going to share some thoughts here as I just went through my scans. I apologize for not putting a video out, but I am just too tired right now and there aren't a ton of great setups out there that are worthy of putting in a video, so I will just share what I see.

The S&P and Nasdaq continue to climb higher as they are now up five days in row but volume continues to be weak. Volume came in much lower on Friday and overall volume continues to lag the volume we saw the previous week when there were three or four days of selling in the market. This could be worrisome, although it is more noticeable on the S&P than Nasdaq. The S&P is still below the former uptrend line I have been mentioning for three or four days now and until it clearly gets above that, I still think a possible top being formed here is a possibility.

The numbers to watch for the Nasdaq are 2141 and then 2167. For the S&P, watch 1070 and then 1080. We are still in a position where a lower high could be put in here if we don't climb any further than the first numbers mentioned in the prior sentence, so that bears watching. Both the financials and crude oil are following the same path as the S&P - they also remain below their former long-term trendlines and it is hard to be overly bullish until they get above them. I would consider shorting these two sectors via ETFs if we see a big break on heavier volume.

Two things I will be paying special attention to over the next few days are the VIX and the U.S. dollar. The VIX is in a position where it has a lot of support (around 22.50) and could bounce, but at the same time if that support level is broken to the downside, we could see a big move higher for the overall market. I have no way of knowing whether it will bounce or breakdown, but I will be watching. The VIX has been moving sideways since mid-July while the market has continued to climb. On the surface, that is a negative divergence for the overall market. The dollar continues to find some support a little below $76 as it bounced from there on Thursday. Same deal as the VIX - if this level breaks, then I think the market runs. If the dollar moves higher from here, the market sells off. I have no way of knowing which of those two occurs.

I don't see a ton of interesting setups on the long side right now which makes sense with the market being up five days in a row. The longs I tried last week did not work for me but that was partly because of less than ideal entry points. Ones I would watch for various reasons include VVUS, CATM, HOLI, GOL, MBFI, RODM, LNET, ISLN, HGSI, and CRMT. On the short side, TNDM, BAC, AIRM, DRI, DST, and PPD are ones that would interest me if we get some selling. There aren't a ton of setups out there on the short-side yet, at least not that I see.

Overall, with the market being overbought in the short-term, I would certainly not be surprised at all if we get some selling soon. The indices are certainly showing some reasons to be bearish. Since there aren't many short setups however, I remain more neutral than anything else. Again, pay attention to the VIX and U.S. dollar as I think they will give us big clues as to where we head from here. Hope this post helps you out and best of luck this week.

Friday, October 9, 2009

State of the Market - 10/9/09

I think this will be a trend for me from now on for Fridays - short posts with longer summaries/videos over the weekend. It just makes more sense. The market had decent sized gains today but they came on extremely low volume. I'll have more tomorrow or Sunday on what this may mean and where we go from here.

I did make one new trade today - entered SVA but it was too late and I showed a lack of discipline here. I ended up being stopped out later for a small loss. I was also stopped out of both FIRE and CBAK from yesterday as neither showed any follow-through following yesterday's moves. Not much else at all moved today from my watchlist and the day overall seemed very slow.

See you this weekend - time to relax a bit and enjoy the time off.

Thursday, October 8, 2009

State of the Market - 10/8/09

We saw some upside action today on Wall Street, but the action was much more impressive early on in the session than it was late. The market started higher after Alcoa reported better-than-expected numbers, but had a very sharp pullback within the first twenty minutes of trading. The market was able to right itself and from 10:00 up until around 12:30 did nothing but move sharply higher in impressive fashion. From there, however, the market just faded for the rest of the session, closing in the bottom half of its intraday range and with a distinct lack of momentum. Volume appears to be higher but not above average.

Technically, I mentioned 2140 and 1070 as key numbers to the upside during Tuesday's post, and today we got as high as 2139 on the Nasdaq and 1070 on the S&P before reversing lower. That could be meaningful and those numbers obviously become important levels to watch over the next few days. In addition, the S&P, XLF, and USO are all continuing to ride the bottom of their former long-term trendlines and were unable to close above those today. This could also be meaningful. I was optimistic when I saw the early action but did not like that close at all given the technical picture I see.

Given the early action, I entered two trades today - CBAK at $4.53 and later in the session FIRE at $23.07. CBAK was showing very strong volume early on so I went in at that point hoping for some quick momentum. It had some but closed off its highs and I don't think I will hold it unless it follows-through tomorrow. FIRE has been on my watchlist for about a week but I was not able to catch it perfectly as it attempted to breakout due to being at work. I entered around lunch as it consolidated nicely into an intraday flag, but from there it did nothing but drift lower and the daily chart looks very unimpressive in terms of its breakout. Unless this follow-through as well, I don't expect to hold it long. I did miss a nice move in XRTX as I was away from the computer when it broke out and I judged it to be too far extended when I did see it. Not much else on my watchlist did much of anything today other than bearish reversals in CBRL and ELOS.

Overall, we continue to be in an interesting spot here as although we saw some nice early action that looked like higher prices were on the horizon, it once again faded late and the technical picture I've been describing the past two days is still present. I am obviously long a few positions after today but the longer we go without being able to clearly bust through those former uptrend lines, the more bearish I will lean. If we close above today's highs, especially on some higher volume, I think we can believe this rally has another leg in it. Right now, it seems to be ever so slightly weaker based on price action and volume than it has been in previous recoveries from pullbacks, and because of that I remain neutral and open to either side of the market right now. Take care and good luck Friday.

Wednesday, October 7, 2009

State of the Market - 10/7/09

Following up two rather interesting days this week, the market gave us a dud today, as stocks did very little but move sideways in a very choppy manner today - for example, the S&P had an intraday range of about six points today. Not very exciting. Volume was much lower as you would expect from such a slow day.

This post is going to be short because from a technical aspect, nothing really changed from yesterday. We are still sitting right below former trendlines on the S&P, XLF, and USO and are either pausing today before busting through them to the upside or pausing here due to short-term exhaustion and will fall back from here soon. I still don't know which of those events is more likely, so as I stated yesterday, I am neutral and watching setups on both sides of the market. Please check out yesterday's two posts for a better, more detailed explanation.

With earnings season starting soon, I am sure we will see some fireworks, so be prepared. Good luck Thursday.

Tuesday, October 6, 2009

A Few Free Charts to Watch

I had to go out tonight so I am short on time and after going through my scans, there really wasn't the quantity of setups that I feel would be worth putting a video together. So, here are some "freebies" to watch tomorrow on both sides. I think tomorrow will be a very important day for determining the short/intermediate term direction of this market. Check out my charts from the previous post for a better explanation. Good luck tomorrow.

Charts from Telechart, Courtesy of Worden Brothers, Inc.

State of the Market - 10/6/09

We saw another up day on Wall Street today, as another fall in the U.S. dollar caused commodities and the markets overall to follow-through on yesterday's gains. The day started slightly higher, but the buying continued for about the first two hours of trading, with the markets topping out around 11:30. From there, they drifted a good deal lower off their highs, but did find some footing after 2:00 and bounced back up into the close. They still finished off their highs, but with decent sized gains for the second straight day. Volume was heavier that yesterday's putrid totals, but still appears to be less than the selling volumes we saw last week.

Technically, both the Nasdaq and S&P saw the immediate follow-through I was talking about yesterday and that is good for the bulls. Those two indices need to get above 2140 and 1070 respectively in order to avoid a lower high being put in here. If those levels are overtaken, I fully expect new highs overall to follow soon after. In terms of the S&P, a closer look shows that it has rallied right up to the bottom of the July-September uptrend line it broke through last Thursday. The highs around 1060 from today are short-term resistance over the next few days because of this. Often times when a trendline is broken, it is retested from the bottom before prices fall for real. That is a possibility here.

S&P 500

The reason I think that is a possibility is that I see the same thing when looking at the USO and XLF charts. Prices on both have rallied right up to the bottom of their former uptrend lines which were broken last week, although in this case these were uptrends starting in March, not July. If these levels, which are around $15.10 for the financials and $37 for crude oil (USO), are broken through, then I think the chances of a serious pullback still occuring are much, much less. In fact, I would not really consider it a possibility at all. As of now, however, the technical setups in these three charts show me that this market may turn down once again soon.

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

In a way, I think today is sort of a sad day because it illustrates very well that for the most part, this rally since March has directly correlated with a plunge in the U.S. dollar, and as such, it kind of takes away some of the luster off the gains, at least for me. Do higher stock prices in terms of a dollar that is worth less really mean anything? Whatever the case, the dollar looks very weak technically as it seems poised to test its recent lows very soon, and lower prices here would likely mean higher prices for stocks as has been the trend this year. The UUP chart is one main reason I am very hesistant to be bearish here.

I made no moves today as I didn't want to chase things - the time to buy was yesterday, as stocks like SCSS, CVGI, PCX, and BEXP all continued moves they started on Monday. Right now, I am still neutral overall and will try and let the individual setups lead me. There are a few short setups that would interest me if we falter soon, but not enough to be overly bearish. There are some long setups that look decent as well, but not an overwhelming amount. I think overall I will not be trying to force things here, especially as earnings season starts this week. I'll probably be getting a video out either tonight or tomorrow going over many of the issues discussed above so if you are interested, keep an eye out for that. Take care and good luck Wednesday.

Monday, October 5, 2009

State of the Market - 10/5/09

We had a bounceback session today on Wall Street, as stocks started the day slightly higher and continued higher in a very choppy manner throughout the day. The S&P had much more of an uptrend going today than did the Nasdaq, which moved almost sideways for most of the session. Volume was very low today and that is something to pay attention to closely.

Technically, the S&P and Nasdaq both closed very close to key support levels on Friday in the form of six month uptrend lines (the Nasdaq actually closed slightly below its support level) so a bounce today was not suprising. We'll have to see where it goes however from here. The indices closed just below their two short-term moving averages and they may act as resistance in the short-term. Watch around 1045 on the S&P and 2085 on the Nasdaq over the next few days to see if those levels can be overcome.

It was a busy weekend for me and my family as we were away for most of the two days and got home just a little before the Steeler game started at 8:15 (can't miss that in my house) so although I was able to go through my scans this weekend, I wasn't able to put a lot of thought into them. I did find some stocks pulling back calmly to support levels, but overall I felt that this was a time where "wait and see" might be a better play than anticipating a bounce one way or the other. For this reason, I didn't put a video up this weekend, although many of the setups that did show up last night worked out well today. There will be other opportunities down the road however - no big deal for me. I do apologize for not getting something out if you were looking for it.

Today could be the start of something meaningful or it could be just like last Monday was - a big up day after the indices touched support level which led to just more selling. Volume was very weak last Monday, much like it was today and that is worrisome. I said last Monday that I wanted to see immediate follow-through for the bulls, and it didn't happen last Tuesday, which did lead to some heavy volume selling. Basically, I am looking for the same thing right now. If the bulls can't get us past the short-term moving averages tomorrow, then I think the top will continue to form and perhaps pick up some steam to the downside. If they do move us higher tomorrow, then this may still be just a healthy pullback. Based on recent volume patterns, I am leaning to the former of those two options, but I think it is a little too early to tell for sure either way. That's why I am taking things slowly here. Good luck Tuesday.

Thursday, October 1, 2009

State of the Market - 10/1/09

A very volatile day yesterday was followed by a very bad day today on Wall Street, as stocks started down and just stair-stepped there way even lower throughout the day in a very deliberate manner that likely signals more than just a little pullback is in store for the overall market. After sharp drops, there were bounce attempts put in around 10:00 and noon, but both simply turned into bear flags and the market fell to new lows after each one. They moved sideways throughout the afternoon without any bounces and closed at their lows for the day. Volume looks to be lower on the S&P but perhaps higher on the Nasdaq. I don't have the final totals today.

Technically, on Tuesday, I talked about the lack of immediate follow-through following Monday's big rally and how it could be a sign that this pullback will be "different" from the others we have seen so far. Based on today, it does look like indeed Mr. Market was sending us a little clue on Monday. Key support was sliced through today on the S&P at 1040 and that is obviously a big deal. There were several layers of support converging in that area which is why the break of that number is so bearish. It's not like just one layer of support was broken today. The Nasdaq closed right at two key levels of support around 2059 and it will be interesting to see if that level holds. It looks like we have now also put in a first "lower-high" which will likely lead to a "lower low" being put in as well.

The markets are quickly coming upon their 50 day moving averages and perhaps the six-month trendlines starting back in March, and I am guessing is area will act as support, at least for the first time they are tested. That's why I am not going to short right here - I would rather wait for a bounce and go from there. I think it is a safer play as I believe this market is not going to fall off a cliff barring some unforeseen world event like Iran or something of that ilk. A top is likely being formed here but they do take time, especially after such a long and strong move upward.

As you may guess, I made no trades today and at least felt better about getting rid of my three long positions yesterday. It was a quick decision because I did not let my stops ride - I cancelled all orders and just sold out at market, which is rare for me. However, I just had a hunch that things were about to get worse. I was looking for immediate follow-through for the market, and when it didn't come, I knew I had to act. That turned out to be a good move. I did see many other breakdowns in stocks I was watching as you may expect on a day like today and that is also not a good sign.

I will be away this weekend with my family so I will not have a summary post up tomorrow and there will probably not be a video this weekend as well. I may do one tonight, but to be honest, I think the best thing to do is nothing right now and let's see where this goes. My guess is that we will see some more selling in the short-term (although a lot depends on the job # tomorrow) and then we will bounce around 1010-1020 on the S&P and around 2035 on the Nasdaq. That bounce is what I would look at shorting.

Bottom line is that I think there is a very good chance the character of this market has changed. We saw bad news sold off which is a change from the past few months. We saw a really heavy move lower today (over 3%) which hasn't happened in a long time. October is typically a horrible month for the market. There are signs in many places that this could turn into a more severe pullback, and assuming it does, I will be ready with some short setups as they occur. In the meantime, I will be sitting back and sitting out the next few days until the short-term picture becomes a little more clear. It is a little late to short after today, but a possible bounce at this moment doesn't look appealing to play from where I sit.

That's it for today. Good luck, enjoy the weekend, and see you next week.