Monday, November 30, 2009

State of the Market - 11/30/09

A slow and boring day today on Wall Street, albeit a higher one, as stocks rose early on, pulled back to their morning lows by lunchtime, and then slowly climbed back into positive territory by the end of the session. Some late-buying/short-covering allowed all indices to finish at their highs for the day and with modest gains. I am sure volume is heavier than Friday's half-session but I don't yet know how it compares to volume earlier last week.

Technically, we are basically still in this sideways range shown last night on the video (1080-1110ish on the S&P and 2140-2200ish on the Nasdaq) and until we break one of those levels, trading lightly probably remains smart. Financials via XLF bounced back nicely today after a bearish gap down Friday but still remain below their 50 day moving average. Oil also bounced back today as the dollar was down slightly.

I did watch the open closely today looking for potential movers from last night's video, but the only one that stood out was CAAS. It moved about $1.50 in less than two minutes this morning, and realistically there was no way to catch an entry perfectly as it moved above the $17.60 level in a flash. By the time it settled, it was extended so I passed. However, that stock acted very well and if you did get a good entry, congrats. Anticipating the breakout would have been key there. A few other China plays like RINO, CYD, and SEED all were strong momentum-wise today and day-traders probably made some money in those names. However, these names are getting a bit frothy so be careful - don't chase them.

Overall, not a whole lot changed today. It seems like Dubai may be just a little blip news-wise as it is bullish to see the market bounce back off of Friday's bad open with very little difficulty. However, all of the negative divergences remain out there, with both the financials and small-caps continuing to lag the other indices (although to be fair both put in some bullish action today). There are small pockets of momentum to play in individual stocks if you are so inclined, but overall, light and careful trading probably remain the best strategy here, as the market remains tricky overall. Good luck Tuesday.

Sunday, November 29, 2009

Stock Market Video - Weekend Market Summary - 11/29/09

Hi, traders. Here's a video for the upcoming week with a look at the indices and some potential plays, mainly on the long side. Right now, the market remains difficult and in my opinion, less is more in this environment in terms of trading. We have moved nowhere over the past two weeks and with the holiday season starting along with the Dubai situation, I have the feeling we are going to become a much-more news driven market over the next week or so, which is always tough to predict and to trade. Just be careful out there if you're trading heavily.

Weekend Market Summary - 11/29/09
Click above link to open video in a pop-out window.

Friday, November 27, 2009

Some Morning Thoughts - Dubai and the Dollar

I have to start by saying that with Thanksgiving, I did not go through any scans yesterday so I don't have a great feel for where we are at at this very moment. With the very low volume so far this week, I didn't think it mattered much anyway. However, today should be an interesting session. Half-day, probably lower volume still, but with some panic thrown in with the Dubai situation - certainly a wild setup.

So what will happen? I don't know. I won't be trading it - I do know that. Asia closed very rough and futures are down big right now, but Europe has rebounded from what I see to actually be positive on the session so seriously, anything is possible. I think as always, the dollar will be the key. This article from Zero Hedge caught my attention - Japan Prepared To Sell Yen To Keep Currency Below 14 Year High Against Dollar. The market has been running on fumes for a while now in my opinion, and one major event that would spike the dollar and put in at least a temporary bottom could crush the overall market, as the falling dollar has obviously been one of it not the key factor in pushing the market continually higher. Is this an event that would do it? I don't know but it bears watching.

Good luck today - a huge gap down on lower volume in a half-day session is not the situation I want to short just because of how volatile things will likely be, but perhaps this will be a turning point in the overall market, especially if it's a turning point for the dollar. Then again, we are in a Costanza market until proven otherwise, so be careful. 1084 is key on the S&P but the 50 day moving average is right below it, and 2137 is the number to watch on the Nasdaq. Interestingly enough, we are set to open right near those numbers. Fun as always.

Wednesday, November 25, 2009

State of the Market - 11/25/09

It was an expectedly boring day today on Wall Street, with little price movement and extremely low volume. It was so boring in fact that I see little reason to comment on it. I hope next week will see a pick up in volume and some better trading conditions because right now there simply isn't much to do.

I hope all of the readers of this blog have a wonderful and blessed Thanksgiving. I know I am blessed in so many ways - a great wife, two healthy and active young sons, a steady job, a new house. Especially in these difficult economic times, I do give so many thanks to God for blessing me so much. Take care and enjoy the holiday.

Tuesday, November 24, 2009

State of the Market - 11/24/09

We had a pretty "blah" day today on Wall Street, with stocks selling off very slightly but in this very low volume holiday environment, nothing can be taken too seriously in terms of the action. Volume looks to be even lower than yesterday's putrid totals and it looks like this entire week will be quite slow, although the price action may actually fluctuate more due to the low totals.

Technically, we may be forming little flags here on the indices and financials - rest would be good to continue these formations. Of course, if we would break above them, I would want to some decent volume accompany the move and until it does, I still have doubts in the back of mind.

I am still in cash and will be the rest of this week. Someone commented yesterday to remind me that cash is a position, and that is true. In my opinion, it is the best position right now because we are just in a chopfest. There are very few individual setups that look good at all, and while you may be able to catch a CGA or SEED for an intraday move if you day-trade, holding them more than a day or so is very tricky in this environment, as you can see with SEED today. So as a swing trader, cash remains my play.

That's all I have for today - good luck if you are trading heavily right now. It is just too slow and choppy for me to do that. Take care.

Monday, November 23, 2009

Update on US Appliance TV Order

I posted a few days ago about my experience purchasing a TV (the LG 47LH90) through the website At the time, I was very disappointed that they charged my credit card and then three weeks later told me they would not be getting any more TVs in and that I was out of luck.

Well, after talking to them several times today, it does look like they have found stock of the TV and have told me that I should be receiving tracking information on the TV by next week. I wanted to share this information to be totally fair to their website - they have always been very polite through my interactions with them, but I was just disappointed with their ability to deliver the goods in a timely manner.

I will update this issue as next week approaches. If I get the TV I ordered in the first place, then I will officially take back any comments I posted last week. I still don't like their policy of charging credit cards immediately, but as of now, it looks like they have worked hard to come through with the TV. Maybe my negative comments were made too early, and you should check them out this holiday season, at least as of now. We'll see when next week arrives. Just passing on the information. Take care.

State of the Market - 11/23/09

Same old story today on Wall Street - dollar down, stocks up. Futures were up big in the pre-market session and stocks did open strong due to positive news on home sales and of course the falling dollar. They stayed strong for the first hour or so of trading, with the S&P rising as high as 1112. Interestingly enough, 1113 was the high last week for the S&P. Perhaps because of that, stocks slowly drifted back from there, never able to regain their early momentum and finished in the middle of their intraday range, although with large gains. Volume was extremely low and likely sets the tone for what this week will be like volume-wise due to the holiday.

I did nothing today and am glad I did. Looking at my watchlist from last night's video, I see quite a few stocks that opened at or above resistance and looked like possible breakouts, only to reverse hard and probably frustrated a lot of buyers. Remember the article from last night? The action in stocks like KNDI, TSTC, PCLN, and to a lesser extent UFPT, IUSA, and RDWR fits the description of common setups that are perhaps being manipulated by the HFT traders. I have no way of knowing if this is the case or not, but all started the day at or near their highs and quickly reversed off those highs. Probably tomorrow they will all be up.

To be perfectly honest, I am really losing interest in this market and just haven't spent as much time studying charts and going through scans recently as I have in past months and years. Perhaps a part of this is the losing streak I can't seem to get out of, but part of it is that the market doesn't make sense to me right now and I continue to lack a feel one way or the other as to where we head on a weekly basis. If the writing or videos on this blog suffers or has suffered because of this, I do apologize, but it is what it is. There isn't a lot I can do about it. My normal analysis and way of looking at things just isn't working and I have yet to figure out the alternative method to use, or at least I haven't allowed my mind to believe that alternative method.

This week has the look of a total chopfest due to the very low volume so I will likely continue to do other things and remain totally in cash. I remain hopeful that we will get into a better trading environment soon but as of now, that good swing trading environment is not there, at least from where I sit. Take care and if you are trading this week, best of luck.

Sunday, November 22, 2009

Stock Market Video - Weekend Thoughts - 11/22/09

Hi, traders. I'm taking my chances trying to figure this market out again with this video, although a big part of me is doubting the validity of technicals in this crazy environment. If you are like me and use technicals to read the market, you may have had a difficult time in this market over the past few months. Maybe I am the only one experiencing this - I don't know. Anyway, here's an interesting article to check out sent to me by Position Trader about high frequency trading and the affect it is having on traders. I think it is worth a quick read.

In the video, I look at the all-important dollar, which is at a very interesting point and will likely continue to drive trading as we go forward this week. The video also includes some short-term momentum setups that may work if Thanksgiving week proves to be bullish - of course, that again comes back to the question raised in the article. I will not be trading heavily if at all this week due to the holiday, but it is always good to have some ideas on hand just in case. Good luck.

Weekend Thoughts - 11/22/09
Click above link to open video in a pop-out window.

Friday, November 20, 2009

Consumer Warning - Don't Buy From This Website

The stock market did nothing today - it was quite a boring options expiration. Since it's Friday, I don't have much to say but I will look over things more this week and see what may be happening. I still don't have a good feel overall for many of the reasons I have explained this week.

Although this has nothing to do with the stock market, I wanted to share a consumer experience I had, which I feel is especially appropriate right now as the Christmas holiday season approaches. I have been looking for a new LCD tv for awhile now - one that's a little bigger than the one we have now with better features. Anyway, I found a deal November 1 on for an LG LED tv with a free Wifi Blu-ray player included. The price was excellent and so I went with it as the TV had terrific reviews. The web page said it would be delivered in two to three weeks.

On November 4, I noticed that US Appliance had already charged my credit card the full amount of purchase. I thought this was odd considering they didn't even have the item in stock yet and called to inquire. Their response was that "this is just our policy". No other business that I have ever bought from charged my credit card before the item was in stock and shipped. I didn't even think this was legal, to be honest. I had a problem with this but felt the deal was so good on the TV that I would wait until the three week period was up.

I emailed last week as two weeks came and went and got a response that they were waiting for the stock to still come in and that it might not be until late November now, but they would let me know. After checking in today again as the three week mark approached, I received the following email.

"We are sorry for the delay in updating you on your 47LH90 + free BD390 bundle order. After promising we would have a 47LH90 shipment this week, LG has now informed us that this model is no longer available and they have no models with which to substitute."

Interestingly enough, I called LG and asked about them discontinuing this model, and they said there were no plans to do that. Why would they - it is a very popular and well-reviewed TV.

So basically US-Appliance took an interest-free loan out for three weeks on my behalf and then couldn't deliver the product. If that's the type of company you want to deal with this winter, feel free to do so. To be fair, they were always very polite to me and they did offer me another package when they told me about the cancellation, but it included a blu-ray player that's not even for sale anymore (after checking online it came out in the middle of 2007) and a TV that is somewhat comparable to the original TV, but it is not nearly as well-reviewed. So anyway, I am back to looking for TVs. At least I learned there is one website that I will not even consider in the future as my search progresses. I just wanted to share my experience to hopefully prevent anyone else from having to go through the same ordeal I did. Stay away from US-Appliance.

Thursday, November 19, 2009

State of the Market - 11/19/09

We saw a down day today on Wall Street, as stock sold off very sharply for the first hour or so of trading, paused for a bit, and then fell to new lows before lunch. From there, it climbed slowly and steadily off its morning lows, but still finished with large losses by the time the closing bell rang. As of now, volume looks to be lower on the S&P but higher on the Nasdaq.

Technically, today could be meaningful because three week uptrend lines were broken today on both the S&P and Nasdaq. In addition, key breakout levels around 1100 on the S&P and 2190 on the Nasdaq were broken today to the downside as they could not hold as support two days in a row. Does that mean we sell off tomorrow and get follow-through to the downside? Normally I would say yes - we could be looking at a failed breakout attempt here. We however are not in a normal market, not by a long stretch.

S&P 500

We all know (or at least I do - maybe it's just me) how well technicals have worked recently and I tend to think today's selling may have simply been some game-playing before options expiration tomorrow. There is no way of knowing for sure however so I am still open to anything here and really remain without a good feel for things. Having been burned so much over the past few months trusting technicals, I have a hard time putting any faith in the pierced trendlines and broken support today - that's all. A big part of me thinks it may have just been a fakeout to try and reignite shorts to add fuel to another bounce up.

As it is, divergences remain all over the place so there are certainly reasons out there for the market to fall further if it wants to do so. No volume on the most recent move, negative divergences on several indicators, lagging small caps and financials - I've pointed them out many times here the past few weeks. I noticed today that GS (a bellwether for this whole rally) has lagged tremendously as well over the past few weeks, never rising above its 50 day moving average even with the S&P moving to new highs. AAPL broke down a bit today as well on heavier volume - another bellwether that couldn't break to new highs when the market did. Maybe these leaders breaking down would throw another log on the bears' fire, that is if they ever have enough confidence to ignite it.

I remain totally in cash and don't plan on doing anything tomorrow with options expiration occuring. I continue to just have little faith or confidence in any of the things that happen or signs I see just because of the past few months, and it will probably take those historically correct indicators and signs to start working again before I put my confidence back into them. There haven't been many individual setups anyway over the past week, so maybe it's for the best that I remain in cash. Overall, I think it may be the best play right now. Good luck Friday and take care.

Wednesday, November 18, 2009

State of the Market - 11/18/09

For the second straight day, I really don't have much to say. Today was quite a boring day with more low volume and very little price movement. The S&P and Nasdaq do keep holding their former breakout levels around 1100 and 2190 respectively, so that is good news for the bulls. Those numbers should remain important. Perhaps the Thanksgiving holiday is starting early with the volume being so low, but it's been that way for a while now.

I remain totally in cash and don't plan on building any big positions anytime soon because I just don't see much that is worthy of big positions right now. Swing trading remains difficult as many strong stocks are very extended and just won't rest, but also that leaves them very vulnerable to sharp pullbacks like we saw in NANO today, so chasing them is risky. I have my eyes on a few plays that are forming little flag patterns (RDWR, ISSI, EXLS, IUSA, UFPT) or cup with handles (G) but that's about it.

My guess is that due to seasonality and the continued weakness of the dollar, this market will grind its way higher over the next week or so. If the dollar ever does bounce significantly, then heaven help those that are aggressively long, but right now it doesn't appear the bears will ever come out of hibernation. Take care and good luck tomorrow.

Tuesday, November 17, 2009

State of the Market - 11/17/09

We saw another up day today on Wall Street as stocks were able to bounce back from some light early selling to close near their highs for the day. Volume however was once again lower and below average. All in all, it was a pretty boring and slow day.

I really don't have much to say today - nothing has really changed. I still don't have a good feel as to where we head from here and much will depend on the dollar. I would not be surprised we keep heading higher because nothing surprises me anymore, but I am unfortunately still not seeing a great amount of long setups out there. Because of that, I will probably keep my 100% cash position and not do much this week. If I would make some trades, I have a feeling I would just get chopped up and be making them for the sake of trading - never a good idea. From where I sit as a swing trader, there still just isn't much to do here, as boring as that sounds.

Good luck tomorrow - like I said, there isn't much to say today that hasn't been said before. Sorry for the lack of ideas or analysis - I just don't have any for today. Take care.

Monday, November 16, 2009

State of the Market - 11/16/09

Another new low for the dollar, another new high for the stock market. That statement pretty much sums up today's session on Wall Street, as stocks started the day higher at the open and added to their gains thanks to short covering as the session progressed, finishing a bit below their highs for the day. As has been the trend recently, volume appears to be anemic and well below average, at least on the S&P. On the Nasdaq, volume was closer to average but it looks to still be below as well.

Technically, I don't think anything matters right now. Technically, this market should have gone down many times and it just doesn't. Normally, you would think that means we have a super strong market, but super strong markets don't go straight up on way below average volume. I continue to be at a loss for why this market keeps going up but the theories I shared last week seem to make more sense to me as this goes. I'll probably figure it out just in time for the market to start acting "normal" again (by normal I mean based on historical tendencies). The longer this goes, the more it looks like a anti-dollar rally driven by cheap money, government intervention, and short covering. That's it - wash, rinse, and repeat.

For what its worth, there continue to be all sorts of negative divergences out there. Moneystreams on both the Nasdaq and S&P are continuing to lag price and volume continues to remain below-average - since November 2 (the start of this most recent rally), neither the Nasdaq or S&P has seen a day where volume to the upside was above (or in many cases even close to) its 50 day average volume. The financials and small caps continue to lag here as well. Does any of this matter? Probably not.

The dollar is all that matters, and it broke to new lows today for 2009. Once this happened this morning, you saw shorts start to cover and therefore we had another new high for the year on the indices. That's about it - I don't know what else to say from a technical perspective. The bottom line is that this has been a pretty bad few months for technicals and as a technical trader, that makes it rather hard to be successful.

I was stopped out of all my inverse positions early on in the session - SRS at $8.87, SDS at $35.98, and QID at $20.67. All gave me small losses. I don't know if I can say I am becoming used to these losses as the losing streak goes, but it could be the case. They don't bother me as much any more, which I don't know is a good thing or a bad thing. If it was just losses on shorts, I might feel less apathetic, but even my longs haven't worked so it just is what it is.

I wish I could buy here but as I said earlier, as a technical trader I see virtually nothing that makes me think buying here is smart. That doesn't mean we can't move higher, because we likely will, but what I have used in the past to make trading decisions is not working right now and it is tough to give up on what has worked historically so well and just "buy blindly" which, when we look back on 2009, will probably be listed as the best performing strategy out of anything. There are a few stocks on my list like FSYS that moved today, but I am just finding it hard to buy here. Not a ton of candidates and only a "theory" of why the market keeps moving higher to go from. Luckily I continue to not get very agressive on the short side, but after today, I am in cash and will likely remain mostly there for the forseeable future.

Good luck Tuesday - if the dollar keeps heading lower, I would fully expect to see more low-volume gains caused by short covering. If you want to play, feel free. Take care.

Sunday, November 15, 2009

Weekend Thoughts from A Professional Trader

You know, after a lot of activity this weekend, I was just getting ready to look at my scans and put a few thoughts down when I read a post from another trader that couldn't possibly sum up any better exactly what is going on in this market and where we may be headed. Here's the link from Upside Trader. Check out the whole article - it is worth it.

Here's a snippet (from Upside Trader's website)....

"First the Bull Case:

1- Low Rates- The Fed has corporate America convinced that they will be borrowing money at zero forever. Their language is vague but excruciatingly clear at the same time, the buzz phrase that they like to use is is “extended period”. The banks are having a bigger and better party than any other sector because they borrow from the FED at zero and loan to the Treasury at higher levels. I’ve heard of borrowing low and lending higher, but that is ridiculous. By the way, it’s great work if you can get it. The reality still seems to be though, they are still not lending, but hoarding, at least that’s what successful business people tell me and friends of mine that have high level banking jobs.

2–Liquidity and the Carry Trade- Mutual fund inflows have been lackluster, money is coming in, but at a drastically reduced rate. Joe Sixpack may have had enough, buying all those fake bottoms may have shattered his faith and his wallet. Some won’t EVER come back. But as I mentioned in a post the other day, who needs mutual fund liquidity when corporate issuance is exploding? That money has to go somewhere.

The carry trade is when institutions borrow relatively cheaply in the short-term financing markets, and then use the proceeds to buy, on a leveraged basis, longer-term and higher-yielding assets. Treasury bonds are the most common asset that banks purchase with the carry trade, but hedge funds will also purchase anything from corporate bonds to emerging market stocks with the proceeds.

This setup usually occurs after a crisis, as the Fed keeps short-term rates lower for a longer period of time than would naturally occur, thus allowing banks to earn back some of their losses by capturing the spread.

The Fed has been unusually clear in stating that conditions are “likely to warrant exceptionally low levels of the federal funds rate for an extended period.”

Despite this clarity investors have not believed the Fed and have been betting on higher yields. These bearish bets have actually hindered the carry trade; but have gotten crushed in the last few weeks as the Fed reinforced their message.

The crushing of those bear bets is likely to open the financing market further, which will likely intensify the carry trade. The carry trade is nothing new to us, but it could pick up steam.

3- The Dollar- This one could go either way, but if the greenback does cave and go lower, and by that I mean a break last months lows, the market should fly and the remaining shorts will be squeezed.

4- Disbelief Factor- No one can understand why we are where we are. The market seems to go higher everyday on lousy volume and bad news. Don’t kid yourself, that could last, again, to reiterate, there are NO sellers. Markets stay over bought and oversold longer than we ever think.

The Bear Case

Earnings- Bears think the current earnings reports were and are a joke. With the exception of some real organic growth numbers, they believe the bar has been lowered to the ground and “beats” are/were due strictly to the slashing of corporate spending and general poverty level spending.

GDP- Bears think it was a jacked up, hacked up number with more smoke and mirrors than a fun house.

Unemployment- We are at 10.2% and going higher, many astute economists say the real rate is closer to 18% when you take in to account the “under employed” and those that have just given up. I classify an M&A analyst at Lehman who now works at the DMV or the Fed as under employed.

The Dollar- Many bears will argue that the dollar is oversold and the short trade in that currency is way crowded. They hope for something, anything to set up a short squeeze in the greenback.

In that sense, every move upwards in US stocks or gold or the Aussie dollar or junk-bond indices is another step in exactly the wrong direction: it’s a step towards yet another massive crash. And it’s all being turbo-charged by Fed policy. If there’s a painless way out of this situation, they don’t see it.

Volume- Let’s face it, it’s anemic. I’ve needed epinephrine blasts just to stay awake the last few months. The bears don’t believe the market should go up or stay up with such light volume.

Interest Rates- The bears argue that when rates do go up, the economy and corporate America will not be able to handle the sugar shock wearing off. When I started in the business in the eighties a very smart guy told me “Son, remember one thing, it’s an interest rate sensitive market and never fight the FED”. I honestly never did forget that and it served me well over the years, but rates were 20% then, Carter was getting kicked to the curb and there was room to lower rates then. It’s hard to get excited by rates going to… 1/8th????????"

I've made some attempts this week in my posts to explain what is going on in this market and why (perhaps) it has been so difficult to trade from a rational and historical perspective. I don't know if it will remain that way, but I have a feeling it will and that very few people are going to play it perfectly from here to the rest of the year. I am short right now but will get out if we break to new highs without hesitation. The bearish signs remain out there, but they've been out there for a while now, and it hasn't mattered. Who knows when it will matter? I am off to watch Curb Your Enthusiasm - good luck next week. .

Friday, November 13, 2009

State of the Market - 11/13/09

Friday the 13th turned out to be a little scary for the bears today, as stocks did bounce back a bit today due mainly to dollar weakness. The market started only slightly higher, but from there steadily rose through the morning into lunchtime. They broke to new highs around noon, but really couldn't move any higher and challenge yesterday's highs. Around 2:00, there was a sharp pullback but the market did bounce back into the close to finish with decent gains. Volume was lower as has been the case recently on any up days we've seen.

Technically, the bears saw no follow-through to yesterday's heavier volume sell off and still may not be ready to take control of this market. Both the Nasdaq and S&P could possibly be forming a little handle here on a cup pattern - however, the volume patterns are still completely wrong, with several heavier volume declines and very little upside volume in the cup. You know what that means, right? Yes, we will probably break to new highs next week based on the way this market has acted this year. Common sense and historical tendencies?? Forget about it.

The dollar had a very rough day today and has really been chopping around recently. UUP almost broke to new lows for the year and you know the drill - if this happens next week, I would expect the market to rally in reaction.

Going through my scans last night, I saw many short setups and everything I see continues to point to that side of the market, but that really hasn't meant anything this year so who is to say it will mean anything now. I am still in my three inverse ETFs but added nothing today and remain mostly in cash. If we happen to breakout and nice charts set up, then I will have to consider going long, but right now there just aren't many nice charts at all.

It's Friday so I will end it here - I'll try to be back at some point this weekend with a video or more commentary but it looks to be a busy two days so I can't promise anything. Not that there is a lot to say - the market seems to just be moving in response to the dollar so whatever happens there will likely dictate where we go. Enjoy the weekend.

Thursday, November 12, 2009

State of the Market - 11/12/09

We had a definitive down day today on Wall Street, the first one in a long time, as stocks responded to a rising dollar the same way they have all year - by selling off. The day started with an attempted move higher, but stocks couldn't make their way through yesterday's highs and started to fall when that occurred. There were some bounces along the way, but all turned into just bear flags on the intraday chart and stocks finished slightly off their lows for the day thanks to a late little bounce. Volume appears to be heavier on the Nasdaq and lighter on the S&P. Overall, volume has been very light over the past five to six days.

Technically, today was certainly not surprising given that the market had bounced straight up over the past eight days and had gotten quite overbought in the short-term. Of course, this might be surprising simply given the fact that this market rarely does what it "should" do, but at least for this one time, it did. Now we just have to see if the bears have any ability to follow-through on today's pullback. Up to this point, they haven't, and the S&P and Nasdaq are still above their short-term moving averages. I will be watching the following levels for support - breaks of these would be bearish. For the Nasdaq, 2140, 2128, and 2119 could act as support, and for the S&P, 1078 and 1071 are where the short-term moving averages are as of now.

Although the Nasdaq and S&P are holding up OK, the main reasons to be bearish right now lie with the small caps and the financials. The Russell 2000 reversed hard today right at its 50 day moving average and continues to lag the other indices. There looks to be a pretty clear bear flag that was pierced to the downside today, and the head and shoulder setup is still present here. The financials via XLF also went back below their 50 day moving averages today and also have the potential to be forming a right shoulder here. Maybe today was nothing and the bulls will shape these two charts up quickly, but if we see further selling, it would be quite bearish.

Russell 2K
(Click for larger version)

In other sectors, energy has been holding up fairly well up to this point but today we also saw a slight break in both OIH and XLE, and this could also be bearish. If we get further selling here, the charts will look like bear flag breakdowns. This weakness in energy was most likely tied to the strength in the dollar today, which could be putting in a little double bottom here after breaking its most recent low yesterday and then bouncing back. As always, dollar strength should equal market weakness.

I am short right now via SRS, SDS, and QID, which I added yesterday. I am not heavily short - I still have about 60% cash in my account. I still have trust issues overall with the market so I am not being super aggressive yet, but if we get some follow-through over the next few days to the downside, I won't have a problem adding to these positions or starting others. I need to take a look at my individual short setups as I was not able to yesterday, although playing the inverse ETFs is easier in some ways for me.

Good luck tomorrow - we will just have to watch and see if the bears can get follow-through tomorrow to the downside. Lots of bearish charts out there, but you and I both know that this market doesn't enjoy doing what makes sense, so be careful and alert. Take care.

Wednesday, November 11, 2009

Some Morning Throughts

Here you go...
  • The U.S. dollar is set to open at new lows for the year and that of course is pushing the market higher. The dollar has a bit more to fall until it reaches the bottom of the downtrend channel it is currently in, therefore you can guess the market has some more room to run to the upside.
  • If you've read my last two posts, you have some possible ideas as to why this market keeps rallying. My guess is that we are in the middle of another major short squeeze and if the S&P gets above 1101 (it should open close to that) I expect more shorts to get squeezed further and then you know the drill.
  • Unfortunately, after going through my scans, I see nothing worth buying - just a bunch of choppy, unattractive charts, not only on the long side but the short side. Everything looks like a mess. I guess you could just play the indices but I can't get over my skepticism.
  • Several extremely good traders that I read from time to time are very bearish right now, probably because there are so many signals pointing that way. Harry Boxer, who is an awesome trader, ended his summary yesterday with this quote - "Stepping back and reviewing the hourly chart patterns, tomorrow’s going to be a very interesting session, as the indices stand precariously on the edge of the abyss in my opinion. We’ll see if we get a sell-off in the next day or two. Many technical indicators at this point are screaming sell." At least I don't feel too bad when I read experts seeing the same thing I am seeing.
Good luck today - as I said yesterday, I won't be around today and probably won't have a post up later. Not that there is much to say - the dollar is falling, free money is rising, and shorts are getting squeezed by the big boys. That's the story of this market and looks to be for the near future.

Tuesday, November 10, 2009

State of the Market - 11/10/09

A little different post today, as the market did absolutely nothing overall and I still don't have a good feel for where we go from here, at least not any better of a feel than I had yesterday. I actually have spent most of the time that I spend thinking about the market (which conicidentally is becoming ever smaller as this year goes on) wondering why the market is doing what it is doing this year. I've been trying to figure out a reason for all of the bizarre behavior seen this year and why most things that have worked historically just haven't worked well this year. So I came up with this step by step process that might explain some of the behavior we've seen this year. This is the best I could do and feel free to share you comments.

A Step by Step Guide for Market Behavior in 2009

Step One - Flood the market with (virtually) free money and low interest rates that make investing in anything other than the stock market foolish. This pushes the market higher off of a bottom even though it lacks any fundamentals to back it up.

Step Two - Get the market to overbought levels on less than stellar volume(due to no real interest from buyers other than those with the free money). This pulls in bears that realize there are no fundamentals to back prices up and starts them on the path to shorting the market heavily.

Step Three - Have the big brokerage house (i.e. Goldman) come in as a buyer with that (virtually) free money and push stock prices back up just when it looks like things will break and the negative factors present will come into play. Remember 2008 virtually eliminated competition on Wall Street as Lehman and Bear Stearns are no more. Goldman is no doubt the top dog, perhaps the only dog. Basically let them roast the bears that are heavily short based on the merits of the market.

Step Four - As step three occurs, there begins a natural short squeeze that becomes more powerful as it goes as more people jump on the negative bandwagon based on the merits or lack thereof of the market. This short squeeze pushes the markets to new highs regardless of fundamentals and technicals.

Wash, rinse and repeat. As this process occurs over and over, it gets to be a self-fulfilling phenomenon and a more powerful one each time it happens. As the technicals and fundamentals get worse and as the market keeps moving higher regardless, more people recognize these factors and think "well, these negatives have to matter at some point. I will start shorting." As soon as that happens, the (virtually) free money comes back into play and another short squeeze is ignited.

I don't know how long this can keep going on and how long this market can be out of whack with its fundamentals and technicals, but as of now, it doesn't look like it will stop soon. What this may lead to is indeed a blow-off top where finally everyone that is using common sense and historical tendencies (i.e. the IBD style system) up to this point to prematurely short the market throws their hands up and says, "that's it, I'm done, this market is never going down, so I am buying." Then of course the market does go down on all of its merits. Or maybe it doesn't because the free money doesn't look like it will be ending soon. Either way, the historical strategies that have worked in the past don't seem to be working in this market and traders need to adjust accordingly.

Good luck Wednesday - I have the day off work and my wife and I will be taking our two boys to the local Children's Museum, so I won't be trading. That is probably a good thing. Take care.

Monday, November 9, 2009

State of the Market - 11/9/09

Well, it looks like we are going to get a repeat performance from July, September, and October with this market, because stocks today once again threw to the side all the bearish signs out there and just rallied higher throughout the entire session. Stocks gapped slightly higher to open the session due to a weak dollar and from there just worked their way steadily higher, closing at their highs for the day. Volume appears to be below average but above Friday's poor levels.

Technically, I really don't know what to say. Perhaps the reversal on the dollar last Tuesday was the clue that this market was ready to bounce straight up once again, but that was it. As I showed last night in the video, there were tons of negatives and very few positives from a strictly technical perspective with this market, but it doesn't matter. The weak dollar was the story today and it looks like we could be back to the weak dollar, strong market play.

The S&P climbed back above its recent former trendline today and the potential head and shoulder pattern looks now like it's voided. For the Nasdaq and XLF, the pattern is still out there but after today, I don't think it will work, just like it didn't back in July. Highs for the Nasdaq are at 2190 and for the S&P are at 1101 - it looks like those will be challenged if not broken through soon.

I was stopped out of my SRS position early on today at $9.83 for a small loss and am back in cash. I am glad I haven't gotten heavily short this past week, although the small losses from continued test positions do add up over time. Unfortunately, as I go through my scans, I see virtually nothing that looks interesting to buy - the charts just aren't there right now, at least not the type I look for. CTDC, HGSI, and SLH are the best I can find right now.

Overall, it looks like the beat will go on for this market, and I have no problem admitting I am clueless about things anymore. I've always tried to be completely honest on this blog, and I am being honest when I saw I just don't know what is going on. Everything I learned and believe as a price/volume, IBD-style technical trader seems to be getting thrown out the window. I believe IBD will put the market back in rally mode today after moving to a correction a week or so ago. They are the experts and yet this will be the third or fourth time in a row their system has basically been whipsawed.

Right now, I just am at a loss for what works besides buying every dip blindly and use ETFs to do so. Even buying individual stocks is a difficult task because they have become so volatile that normal stop-loss levels don't work as they used to, so you get stopped out before the stock makes its big move. I hope I don't sound bitter here - I really don't intend to sound that way. Confused would be a much more accurate description of how I feel. Perhaps in several years I can look back on 2009 and say I learned an important lesson from it in regards to trading.

To wrap up, although I feel a little weird for putting this on here, I feel it's worth it. I read this today on the comment section of a TechTicker post on Yahoo Finance and thought it was well written and well thought out. And as I try to find a clue as to what is happening out there, this made some sense. Good luck Tuesday.
"Rick - Monday November 09, 2009 10:49AM EST

I THINK I FINALLY GET IT! I have been scratching my head trying to understand … Good news, market goes up … no news, the market goes up …. bad news, the market goes up … how can this be possible. Logic says that smart people would be getting out when stocks are as overvalued as they are today. Then I talk with people and find out that the smart people are out of the market. The normal people are just letting their 401K go with the flow (and still contributing), and the dumb people do not have any money to be in the market. BUT the part I had not been getting is that the investors, banks, speculators, etc … all have free money with no risk (thanks to Obama). This market is not a market of earnings and performance; it is a market of government induced greed from free money! Each of them are feeding the market the billions of free government money … the value of stock has nothing to do with it. I guess the question becomes … when do they run out of free money … when will Uncle Sam shut off the printing presses … OR Is this the future, the stock market always rising because the government will not let it fall (too big to fail) … A subsidized market that will insure peoples 401ks are there for their retirement and replaces the Social security system (think justification) … A giant, never ending, government run, ponzy scheme … NOW I am thinking …. If I was smart, I’d be back in the market. The true indicator of when it is time to get out is … When will the government free money stop flowing."

Does this make rational sense to anyone else, or am I going crazy?

Sunday, November 8, 2009

Stock Market Video - Weekend Market Summary - 11/8/09

Hi, traders. Here's a free video for the weekend - I don't have much time to make a longer, in-depth video so here's another freebie, although I do thank all of you who have purchased the pay version in past weeks. As I've stated many times this week, almost all signals are bearish for this market and if the market follows those signals, I expect more selling to pop up this week. About the only thing I see that this market has going for it is its completely irrational nature this year, and because of that, I only have one short position right now and will wait for confirmation before getting more short. I remember July well, when things looked quite bearish and the market just kept grinding higher, so I know it can happen again. Unfortunately, I don't know what type of research and analysis you do to figure out if it is going to happen again. Hope you enjoy the video, and best of luck in the week ahead.

Weekend Market Summary - 11/8/09

Click above link to open video in a pop-out window.

Friday, November 6, 2009

State of the Market - 11/6/09

In yesterday's post, I stated that "my guess is we do see a big move tomorrow, but I don't know which way it will be because it will likely be news-driven." Well, I couldn't have been more wrong, because although we had the news event early, the market did nothing of significance today after vacillating early on. All of the action took place in the first hour and a half, as the market opened lower, ran higher off the opening gap, and then fell back down to test the lows. From there, stocks grinded back to their morning highs, but could never break past them and finished only slightly higher for the day. Volume appears to be lower once again, continuing the trend of the week.

This is the shorter Friday post so I will hold most of my thoughts until the weekend. I made no moves today and am still in SRS - I didn't think being agressive in adding shorts was smart before the weekend. I am seeing quite a few bear flags out there (for instance, the S&P, Nasdaq, small caps, XLF, and IYR all look like bear flags with bearish volume patterns) and as I've said this week, most signs do point to lower prices. We are also looking at a potential right shoulder being set here if the indices roll over, although after the July fake-out, I don't know if I trust a similar setup here. It's just a matter of trusting whether all these signs will actually matter this time, because we have seen them before several times since March.

I'll be back at some point this weekend likely with a video - many of the short setups I have watched this week continue to look quite good and I am guessing there will be more in my scans after I go through them. As for longs, I didn't have many at the beginning of the week, and I don't know that I'll have many now either. We'll see. Enjoy the next few days and I'll be back tomorrow or Sunday.

Thursday, November 5, 2009

State of the Market - 11/5/09

We had another curve ball thrown at us today on Wall Street, as the very bearish reversal seen yesterday into the close was completely erased today and then some. Stocks started the day strong and after an initial burst, it stairstepped its way higher and finished at its highs for the day. Volume however looks quite low and unless there is a late surge this will be the third straight day we've seen that has come on lower volume.

Technically, it looks like we have had the bounce that was to be expected from last week's oversold conditions, and now we just have to try and determine if this is just a relief bounce or if the market is once again going to move straight up after looking so poor technically last week. The S&P is now above its short-term moving averages and the Nasdaq is back above its 50 day moving average. When looking at a sixty minute chart, it is interesting that the S&P closed right at 1066. That is a very important level and I will be watching closely how it is handled tomorrow.

S&P 60 minute chart

Based on volume and technicals, this certainly looks like a bounce that should fail. We've seen heavier volume selling with lots of distribution followed by lower volume up days. That is not historically a recipe for success. There has also been a lot of damage to individual charts and very few look nice and healthy right now. There are many more short setups out there that look good than longs. When you line these things up, it makes sense to be bearish.

At the same time, we saw the exact same thing at the beginning of July and the beginning of September and the beginning of October, and the market rallied higher off each of those pullbacks. Who knows if the beginning of this month will bring us the same action? If we happen to rally strongly here like we have the previous two months off of such bearish technicals, I am going to seriously consider throwing away the historically-proven method of following price and volume when trading and find something else like flipping a coin or throwing darts or something. Maybe I will have better luck. Maybe the time will come for me to truly adopt the George Costanza method of trading and do the exact opposite of whatever makes sense.

I made a few small trades today, one I still have and one I was stopped out of. I entered SDS at $39.46 with the intention of getting out if the S&P went to new highs. When it did, I was stopped out at $38.95 for a small loss. I also entered SRS at $10.16 as well in the afternoon with the same strategy. I am still in this but my guess is I will get stopped out of it as well. I may have mistimed these trades - we'll see I guess. I am still watching these inverse ETFs as trades over the next few days.

The big story tomorrow is the jobs number and I am sure that will dictate trading. We are still in the period of time after a Fed decision where things are crazy, so remember that as well. My guess is we do see a big move tomorrow, but I don't know which way it will be because it will likely be news-driven. I'll say this - the shorts that I had on my watchlist from last night still look quite good for the most part, even after a big move in the markets today. I would assume that is bearish. You know however how well common sense has done this year. We'll find out if this time is any different very soon in my opinion. Good luck Friday.

Wednesday, November 4, 2009

State of the Market - 11/4/09

We saw a messy day today on Wall Street, as the Fed decision had stocks moving all over the place in the afternoon, leading to a close that puts up a lot of question marks. The day started well and stocks were up strongly for the first hour and a half of trading. From there, they drifted lower until the decision came out, at which time things got crazy. We saw a quick move lower, followed by an immediate reversal higher. That move higher met resistance at the morning highs however and from there stocks faded mightily into the close, particularly in the last half hour of trading. Volume appears to be a good deal lower.

Technically, things are messy. Support is still holding around the October lows, but we haven't seen much of a bounce at all from historically severe oversold conditions and that is not very good news for the bulls. The S&P got slightly about its 50 day moving average today but reversed below, while the Nasdaq wasn't able to even get up there. Perhaps the Fed decision put too many traders on pause for a nice bounce to occur, but the fact that it didn't happen is bearish - the longer we go without one, the better chance we have of further breakdown.

The dollar was down today a good amount which is likely one main reason the market was up a good bit this morning. However, there was not a huge spike in the dollar this afternoon that caused the market reversal and that is not bullish either. The market reversed on its own doing, not because there was some hawkish comments in the Fed decision, at least not that I heard. After looking quite nice on Monday, UUP looks somewhat uglier now. I am much less optimistic about a potential breakout in the dollar, and normally, that would be bullish. However, is it possible this market fools everyone and the dollar and the market start heading lower??? Just something to think about.

As you may guess, I made no trades today and remain totally in cash. There is just too much chop right now to do much of anything for more than a few hours, let alone a few days. A break of the recent lows would have me getting short, and I plan on focusing on IYR and XLF for targets if that happens. The short watchlist I had last night still looks quite good overall, so perhaps some individual plays would be a good idea here if we get a breakdown. My favorites include UA, GFA, SPG, FITB, BX, KIRK, WSM, and SMRT. Virtually nothing on my long watchlist moved today, even early on, and that is not a good sign either.

Overall, I am definitely more bearish than bullish right now based on the individual setups I see and the overall market action recently. The longer we go without a strong bounce, the less oversold we become and the higher the chances become of us heading much lower. It is not a given, but it is looking more and more likely. As always, the days following Fed days tend to be volatile, so be careful out there. Good luck Thursday.

Tuesday, November 3, 2009

Some Random Thoughts After Going Through My Scans

Had a little time to go through my scans for the first time in a few days and drew some quick conclusions.....
  • My list of potential longs to watch (not buy, just watch) was cut in about half over the past week from around 400 to around 200. I could have cut it much further but gave some momentum names the benefit of the doubt as it is just a list of stocks to keep an eye on. There was a LOT of damage done to individual names the past week, and I feel more confident in my statement that it will take some time to correct that damage.
  • I do see quite a few short setups right now. Several from the retailers. If you're interested in potential names, email me as I don't have time to do a video. Quite a few bear flags are setting up right below the 50 day moving average on individual stocks and those typically are juicy plays.
  • VIX is forming a little bull flag on its daily chart and that is not good for the overall market.
  • IYR is one sector I will focus on via SRS if the Fed hints at rate hikes in the future, causing the dollar to rally and the market to fall further.
  • I don't like the reversal today in the dollar and that does have me wondering about its breakout potential here. I guess it all depends on the Fed tomorrow.
  • The crude oil chart looks bullish and that is one good sign for the bulls. Nice bull flag forming on XOIL.
  • I don't have nearly as many names to watch on the long side but you do have to be prepared. If you want those names, email me.
All in all, I see some mixed signals - individual charts look more bearish right now but being oversold and holding support a bounce remains a strong possibility. What really remains a strong possibility in my opinion is some whipsaw action the next few days, much like we've seen for the past week, so be on high alert. I don't expect to get aggressive with any positions for the next few days. Take care and good luck Wednesday.

State of the Market - 11/3/09

We had a choppy, choppy session today on Wall Street, but overall a slightly bullish one as stocks fought back against early selling to finish slightly higher on the day. The U.S. dollar was up big pre-market and with that, stocks opened lower to start the day. However, the dollar traded lower throughout the rest of the session after attempting to break above its 50 day moving average, and stocks responded by moving slightly higher in a volatile manner throughout the rest of the session. Volume appears to be lower overall.

Technically, just based on the charts, it continues to look like the market wants to bounce here as the Nasdaq hold 2040 fairly well and the S&P has yet to even test its October lows around 1020. The market is still quite oversold (McClellan around -260) so a bounce would not surprise me. This is even more true based on the U.S. dollar not being able to get above its 50 day moving average today, although it could just need a bit more time before really breaking above it. If the dollar pulls back further, I fully expect to see a nice bounce, possibly up into the 2100 area on the Nasdaq and the 1060 area on the S&P.

I didn't make any moves today and remain totally in cash - I am going to go through my scans tonight to see if there are any possible pullback plays that look good. I would only play these on further pullback in the dollar, and more than likely I won't be going into anything too heavily. At the same time, if the dollar clears today's highs, I won't hesitate to get short and perhaps heavily short as I still think this market could get hit hard if the dollar spikes and looks like it is really bottoming over the short-term. It (the dollar) could be putting in a bottom here, but it will likely be a process, much like the topping process takes a few weeks for the overall market (perhaps what we are seeing right now).

That's about it for today - things don't look that much different from yesterday. With the Fed due to make a decision on interest rates tomorrow (I believe) we are probably in a bit of a holding pattern. The wording of their statement will likely have a huge impact on the dollar and with that the overall market. If they hint at raising rates at all, I think you see a breakout in the dollar and a 2-3% down day for the markets, maybe worse. If they state clearly that they will not be raising rates at all, I think the market takes off for a 2-3% move to the upside. Unfortunately, I can't tell the future, and I don't want to guess what they will say ahead of the statement. Again, that's why cash looks good to me right now. Take care and good luck Wednesday.

Monday, November 2, 2009

State of the U.S. Doll..I Mean Market - 11/2/09

We had another volatile session to start the week today on Wall Street, as stocks started strong, gave up all their gains by 2:00, but then bounced back to finish with some gains overall. The day started slightly higher, but around 10:00, there was a massive spike upward, with the Nasdaq gaining almost thirty points in fifteen minutes. The market consolidated a bit there but could not really get going again, and fell steadily through lunchtime and until 2:00, when they did bounce back up into the close. Volume appears to be lower as of now.

Technically, we had some indices and sectors break their October lows today intraday before finishing above them, namely the Nasdaq and XLF. This bears watching and as I stated last night, there should be some short-term support near those lows considering how oversold the market is. The S&P did not get down to test its lows around 1020 and may still need to do so before bouncing back, but who knows? Right now, the 1050-1060 area looks to be resistance for the S&P, and the 2090 area bears watching on the Nasdaq as that is where the 50 day moving average resides. The market does looked like a bounce is likely strictly based on the charts of the indices.

All of the above technical information, however, probably needs to be taken with a grain of salt, because as I discussed in the video last night, it is still the U.S. dollar that is controlling where and how this market trades. The dollar once again traded inversely to the market today, and since the dollar was volatile, the market was volatile as well.

Really, in my opinion, that's all that matters right now. The market looks like it could bounce here from oversold conditions, perhaps forming a right shoulder on a topping pattern. But with the daily chart of the dollar looking cautiously bullish, I would not be surprised at all if the market keeps falling, oversold or not. If the dollar gets above that $76.60-$76.75 area I showed last night, I do think all bets are off and this market could tank hard. That's what I will continue to watch for and plan my trades accordingly.

I will attempt to go through my individual charts tonight but really, I do have the sense that now is not the time to get heavily invested on either side, at least in individual plays. We have had some very volatile trade recently which is great for daytraders but makes things difficult for swing traders. If the dollar breaks out a bit more, then I would not hesitate to put my foot on the pedal in terms of going short but probably with just index shorts. However, if the dollar just consolidates a bit more, I think it makes sense to wait for a bounce to materialize before getting short in individual setups. Just my two cents. Good luck Tuesday.

Sunday, November 1, 2009

Stock Market Video - Weekend Market Summary - 11/1/09

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 we are in a position where a bounce is very probable and that's where I am going to wait to get short from, because the more I look at things, the more I think this time is different than all the previous times. There is one thing that could change my game plan in terms of waiting, and that is shown in the video as well. Hope you enjoy the video, and best of luck in the week ahead.