Tuesday, June 30, 2009

State of the Market - 6/30/09

Not a great day today on Wall Street, as stocks slid hard after the first fifteen or twenty minutes of trading all the way into lunchtime and then went into consolidation mode for the rest of the session. It appears that traders turned their screens off at lunch and never came back into the office, because the afternoon was very slow. Volume was once again lower, and will likely continue to be low this entire week.

Technically, the 930 area was hit briefly today and the S&P immediately reversed off of it. If that area is overcome, then I would likely reassess my bearish outlook, but there is no reason to do so yet. Support for the S&P is first at 905 and then at 890. It's looking like that 890 number is where the neckline will be for this possible head and shoulders pattern - if it is broken, then the pattern would be confirmed and a top would also be confirmed in this area. The Nasdaq did hold the 1810-1820 area I mentioned last night as short term support and continues to outperform the S&P. 1880 remains upside resistance for the Nasdaq.

In terms of individual patterns, the oil and commodity stocks that I've been pointing out here for about a week now did start to reverse lower in many cases today - the only thing I would want more of in these stocks is volume. It figures that all of these setups would come during one of the quietest volume weeks of the year - oh well. Some like FCX are just hanging on to their 50 day moving averages and I would really like to enter these on a break of these levels just for some confirmation. Overall, I did not see many drastic breakdowns today (mainly 1-2% losses) in my individual setups at all and that is good for the bulls. But the patterns are still there and another day or two like today and the right shoulders will be pretty clear on most of these setups.

On the long side, the story remains the same - not much that interests me besides a few stocks (CAEI and STEC) and DDRX and KIRK continue to go higher and higher. I expected to see a reversal in these stocks today but it wasn't to be - that shows you that the selling wasn't that strong. I guess those two will be at $100 a piece by September, right?

Overall, today was much like yesterday except reversed. We saw nice percentage gains in the indices Monday, but the individual stocks didn't show much going on. There were some decent sized losses today, but the individual stocks didn't show much damage. I hope I am wrong, but it may be like this the rest of this week. Based on the patterns I see, I want to take some trades but this market is so slow right now, I am wondering if the patterns will work the way they should or not. Something I have to think about a little more. Good luck Wednesday.

Monday, June 29, 2009

State of the Market - 6/29/09

Some more quarter-ending window dressing today on Wall Street, as the bulls fought back hard against an opening decline and pushed stocks up a good ways for the first hour of trading. From there, it was basically just a consolidation day, as stocks did nothing but go sideways throughout the rest of the session. They closed with nice-sized gains on lower volume. Now, with rebalancing Friday, volume was extra heavy, but even if you compare volume today with Tuesday, Wednesday, and Thursday of last week, it was light.

Technically, that 930 number on the S&P that I've been harping on continues to be important, as the S&P bounced its head against that level several times today but could not get through it.
A break of that level to the upside would likely bring in some buyers , but we'll have to see if they can push it through tomorrow as June comes to a close. It continues to fight the long-term downtrend line in this area as well from May 2008, so it will likely be difficult. A rollover in this area would form a nice right shoulder on the S&P. The Nasdaq had its fourth straight day of gains today but lagged the other indices on a relative basis. It looks like it is wedging up here a bit. Between 1810 and 1820 should be support for the Nasdaq if it decides to pull back here. I will be watching closely for a reversal.

One interesting development from today's action is that even though the market bounced, I saw virtually no destroyed patterns from my short watchlist - I showed these setups in the video last night. By destroyed patterns, I mean a pattern that looked good but had a move that totally changed the setup. An example would be MWIV - it was forming a nice head and shoulders pattern until June 19, when it took off to the upside and voided the H&S. If I see ones like this, I would be much less bearish here, but I haven't yet.

Chart from Telechart, Courtesy of Worden Brothers, Inc.

The short setups I am watching are mainly from the commodity sector, but they continue to put in bearish flag patterns and form right shoulders on head and shoulder patterns. Now, I realize that all these patterns could be turned upside down in a matter of days. If you remember about two weeks ago, I was bullish because of the number of flag patterns setting up in strong stocks. That didn't work out as those patterns started to break down, and if the same thing happens to occur here (the right shoulders explode to the upside) then I will have to change my tune once again. I am not anticipating it however.

As of now, the sheer number of setups I see developing has me looking to get short in the next few days, perhaps as early as tomorrow. I didn't put all of the ones I found in my scans on the video last night due to the sheer number, but here are some others that are looking like they may reverse soon at the top of possible right shoulders - TRLG, CTRN, DRIV, AMZN, TS, ECA, CLR, EAC, CNQ, PXP, MS, COG, HON, OXY, HP, LHO, DBRN, PEET, HMIN, BOLT, ATLS, GPS, NOV, APD, and even SNDA, which had a heavy volume sell off today.

On the long side, I see stocks like DDRX and KIRK continue to put in what look like potential blow-off tops. If anyone out there was able to ride these two all the way up, congrats. Seriously, though, stay away from these now, please. They are going to end nasty. KONG and FUQI had nice moves today but volume was so heavy I am left to wonder if it had something to do with the rebalancing from last week. The only stocks I see setting up that I would be interested in right now are STEC, CAEI, MLNK, and MNKD. If more start showing up, then I will also change my tune but I continue to see a lot of weird moves.

Overall, my scenario from last week (a bounce for quarter-end window dressing that could form a right shoulder on the S&P) has played out very well and I continue to lean to the bearish side here. I haven't yet made any moves, but am going to start tomorrow if things continue in the current manner. My only worry is that it almost seems too obvious - there are so many of the same type of setups out there right now. Could it really work out the exact way I hoped? Based on my luck so far this year, I have doubts in the back of my mind, but it looks like it may as of now. We shall see tomorrow - one more day for the funds to paint the quarter. I am interested to see if they can do it. Take care and good luck tomorrow.

Sunday, June 28, 2009

Stock Market Video - Weekend Market Summary - 6/28/09

Hi traders - here's the video for the upcoming week. Although with the rebalancing Friday I saw a ton of weird moves on all-time heavy volume, I am still leaning bearish here based on the individual patterns I see on so many stocks. I go through some of these in the video - had to narrow them down but if you check out the last two videos, you'll see more in there. I need to see new highs on the Nasdaq before I would look to go long again based on the charts I am seeing. I believe this is a shortened trading week because of the holiday so things could be volatile. Take care and best of luck this week. As always, feel free to email me or post comments if you have any questions.

To download directly, right click the above link and "save link as".

** Here's another free video to check out as well analyzing gold and energy from INO.com.

Thursday, June 25, 2009

Stock Market Video - Head and Shoulders Setups to Watch - 6/25/09

Hi traders - here's the video for tomorrow going over the head and shoulder setups I am still seeing. I also go over the levels that would need to be taken on the indices by the bulls for me to change my outlook. I am certainly not a hardcore bear here, but am definitely leaning that way based on the overwhelming number of these patterns that are developing. If they stop developing, I will respect that and go long, but as of now, I have to think what we're seeing here (and may continue to see early next week) is some quarter-ending window dressing. Good luck tomorrow - I will not be around but will have a post up for the weekend. Take care.

To download directly, right click the above link and "save link as".

State of the Market - 6/25/09

A good day for the bulls today on Wall Street, as stocks started slightly higher but took off quickly, gaining a good amount in the first half hour of trading. They consolidated for a bit, moved higher to new highs, and then consolidated into lunchtime. Stocks tried to break to new highs again around 1:00, but couldn't and pulled back into the consolidation which lasted for the rest of the day. They finished with large gains across the board and the gains came on slightly higher compared to yesterday, although it was still below average.

Technically, the scenario I envisioned last week of the market rallying into the quarter end seems to be playing out here, but going along with that, there is nothing so far to make me think that the bulls are back in control yet. The S&P and Nasdaq are both back above their short-term moving averages, but if you look at the volume of the past three days, it has been lower than the selling volume we saw Monday. The S&P still has not been able to challenge the 930 level from which it broke down while the Nasdaq is still 10 points below its Friday close (1837). These are the levels I will be watching, although I do believe that the market may get slightly above these levels before a potential reversal happens. If the S&P starts getting back up toward 950 and the Nasdaq starts challenging its former highs, then I will change my outlook and expectations, but for now, I am still leaning bearish and think we could be forming a right shoulder here on the S&P in particular.

In terms of individual stocks, I didn't really see many attractive stocks on my watchlist moving to the upside today with the exception of high fliers like DDRX, DTG, and KIRK. I would not be buying any of these for more than day trades anyway up here, so oh well. There isn't a ton of attractive setups on the long side right now. On the other hand, I am seeing a lot of possible right shoulders form on individual stocks - particularly in the commodity sector. Here is just a quick list of stocks to check out - you should be able to see the full patterns starting to develop now - HMIN, PCZ, CLB, CLR, OXY, CNX, SU, SGR, NOV, PDCO, OIH, XLE, BTU, ATI, ANF, FCX, IPI, IPCS, and TNDM. Now it is possible these just keep moving higher and void the possible H&S patterns, but for now, I am still expecting these bounces to starting weakening soon, and that's where I will look to start some shorts.

I will do my best to get a video out tonight going over some of these patterns to show you what I'm seeing. I can't promise anything however. Since we still have three trading days left in June, I am still hesitant to get short too early, so I remain in cash. Early next week is when I expect to possibly put some trades on, assuming this market doesn't explode up tomorrow. If it happens, I will respect it and adjust, but for now, I would be surprised if we move a significant amount higher than where we are now. So you know, I won't be around tomorrow - we're taking our oldest (and youngest but he won't know what's going on) to his first amusement park tomorrow and will be out for most of the day. Good luck to those of you who will be trading.

Wednesday, June 24, 2009

State of the Market - 6/24/09

We had a Fed day today on Wall Street, and with that, we had the typical volatility. Stocks started higher and rose strongly for the first hour and a half of trading, with the Nasdaq and S&P both rising up to their short-term moving averages. Stocks leveled off from there until the Fed decision around 2:15, at which point all the indices fell sharply and quickly. The last hour was choppy but at least didn't lead to new lows, although stocks closed near their lows for the day. As of now, volume appears to be lower than yesterday.

Technically, I posted on Twitter this morning that 1801 on the Nasdaq and 912-915 on the S&P was short-term resistance (due to the 9 and 20 day moving averages being in these areas) and the markets really couldn't get past those levels. The Nasdaq got as high as 1807, while the S&P only got up to 910. Right now, I would continue to watch these numbers as resistance over the next few days. To be honest, I expect them to be broken to the upside at some point over the next week - I think the Nasdaq could get as high as 1837 and (maybe) all the way up to around 1880 where it could put in a double top. 930 is going to be hard for the S&P to get over in my opinion, and a move to that area followed by a reversal would complete a shoulder in the head and shoulders pattern I've been mentioning for a while now.

Still not doing anything right now - actually had a dentist appointment midday and we're taking our son to his first amusement park on friday - and continue to wait for the best time to short. Over the next few days, I plan on getting a video out of some of the top setups I am seeing developing here. There is still some work to do for most of these setups - some could just turn into little bear flags instead of full head and shoulders patterns. I am aware of this and will try to be prepared, although I still think we have a little more of a bounce ahead of us into the end of the month.

Go USA - watching the US soccer team upset Spain here 2-0. Not a big soccer fan but will watch when the US is playing - hope they can hold on. Good luck tomorrow and take care.

Tuesday, June 23, 2009

State of the Market - 6/23/09

A slow and very boring day today on Wall Street, as stocks started higher, fell quickly, but then bounce back up to flat around lunchtime. This is where they stayed for the rest of the day, trading in a tight range from 12:00 until the close. Perhaps this slow trading is due to the Fed meeting, but whatever it is, there is no doubt days like today are best observed from far away. That's what I did. Volume was lower as can be expected.

There really isn't a whole lot to say right now - this is why I've been talking about patience for the past few days. Some of the stocks that have really been hit the past week or so - namely the commodities - did bounce back slightly today but from where I sit are still not in an area where they can be shorted. As I said last night, I am hoping for some window-dressing here over the next week or so. If that happens and these stocks get back up close to their short-term moving averages along with a bounce in the overall market too, I will likely load up on shorts. Right now, I am just waiting.

The weather is great here in Pittsburgh - if it's nice where you are, get out and enjoy it. Getting away from your computer and not watching this market for the next few days is probably a really good idea, at least from where I sit. Good luck and take care.

Monday, June 22, 2009

A Ton of Stocks Are Setting Up as Shorts, But Waiting is Probably A Good Idea

Just a few points after going through my scans. I'll try to get a video up later in the week but right now, there isn't much point for several reasons.

#1) There was major technical damage done to many individual stocks today and I don't know if it's damage that can be recovered from anytime soon. I do indeed think we have topped here. When you look at the nearly vertical drop in many commodity stocks and even tech stocks like RIMM, along with the heavy volume, it is quite clear stocks are being distributed here.

#2) My outlook on shorting right now didn't change after my scans were complete and is the main reason why there isn't any reason to do a video tonight. I saw a ton of stocks with those nearly vertical drops but those same drops are now right at some major support levels from May. A bounce is not guaranteed but based on the drops we've seen, particularly in the commodity stocks, I am expecting one. I just think shorting here after six or seven days of selling in some stocks is very, very risky. I am expecting some whipsaws for anyone that is trying to short here as they may very well be late to the party in the short-term.

#3) Look at XOM for example - the biggest of big caps. XOM has been down six of the past seven days and is as oversold in the short-term as it has been since the March lows. Do you really want to short there? Wouldn't a weak bounce back up into the $71-$72 area be much more pleasing from a risk/reward perspective? Shorting weak rallies usually works much better than shorting breakdowns, especially if stocks are already oversold going into the breakdown.

Chart by Telechart, Courtesy of Worden Brothers, Inc.

#3) At the same time, I see TONS of charts that look exactly like the one above. If we get lucky here and do bounce a bit, I think you are looking at a major short-selling opportunity based on the number of charts I see in my scans. If we get a weak bounce and then roll over, I don't think it will matter what stock you pick - there will be so many to choose from that your chance of success will be very high. Big cap, small cap, it won't matter. You just have to be patient as I've been preaching for the past week or so for the right time to short.

#4) My only concern is that things are never easy in the market, and a bounce to form a right shoulder may be too obvious to happen. We'll have to see I guess. Someone commented earlier about the end of the quarter markup versus fund managers getting out while they can for their statements. It was a good point and a tough call. If they do mark it up over the next week or so, I think you will see some major selling come in when July starts as fund managers do take their gains for the year and walk away. But it is possible the selling continues in a major way this week without a bounce. If it does and I miss it, it will be fitting for my year in trading so far. We'll have to see - I have to play the percentages here.

That's about it - take care and good luck Tuesday.

State of the Market - 6/22/09

Not a good day today on Wall Street, as the selling started early and kept going for most of the day. Futures were lower to start the session and stocks sold off from there right until lunchtime. At that point, things flattened out a bit, but at no point was there a significant bounce - the market just flatlined and the bulls were nowhere to be seen. Stocks finished at their lows and with significant losses across the board. Volume was definitely lower compared to Friday, but that is a skewed comparison because of options expiration. If you use Thursday as a comparison, volume looks to be well higher on both the Nasdaq and S&P. Not good.

Technically, today was not a good day at all for the bulls as some support levels were broken for both the Nasdaq and the S&P. I've mentioned 1774 as key support for the Nasdaq, and after fighting to stay at that level for most of the session, it did close below it. The 50 day moving average is right around 1740, and if the Nasdaq gets down to that level, I would expect a bounce. More on that later. The S&P closed below both its 50 and 200 day moving averages and now has only 875 as possible support. I would suspect a bounce there as well if we get that low. If that gets broken, then all bets are off.

I talked about oil last night in the video as a key tell for this market and today it had a major technical breakdown, gapping below its 20 day moving average and closing well below it. As I mentioned on Twitter, this will be the first time since the end of May that oil has been below its 20 day moving average, and that is a very big deal. It may bounce as well, but I think there is a very good chance it is topping here, barring any unforeseen events in the Middle East. The XLF also had a technical break today as it closed below its 50 day moving average. It did hold the $11.33 mark, which is where it brokeout from at the beginning of May, but just barely.

In the video last night, I pointed out a series of "tell" stocks that I thought would give big clues as to where this market was headed. These stocks were all big-time movers that had pulled back to their 20 day moving averages and that needed to hold this last layer of support. The group included the solars (SOL, LDK, JASO, TSL, CSIQ, CSUN) and KNXA, GROW, TSRA, LAD, SVVS, and ULTI. If you check this group out now, you can tell very clearly, particularly with the solars, that things are not good. We saw some warning signs starting two Fridays ago that I pointed out here and here, and after a day like today, those warnings signs definitely look like they were trying to tell us something. Hopefully you listened starting last week and weren't hurt by today's selloff too bad.

So where do we go from here? Well, after trying to be as neutral as I could be this weekend, I have to go back to the bear camp here. The evidence is pretty overwhelming that we are putting a significant top in at this point. I don't know how far down we will go, but based on some of the patterns, it could be a big move. Looking ahead, I am still not shorting here and the main reason why is that I expect some quarter-ending window dressing to occur soon. That's really just a guess, but with the low summer volume, it should be very easy for the bulls/government/PPT/hedge funds/insert your own group to push the market back up a bit. We've seen it done many times the past two years, so they should be able to here as well. I think the damage has been done however so their efforts will most likely be futile, but it may give traders like me a better risk/reward setup for entering shorts soon. That's the outlook I have right now. A bounce would also setup some of the right shoulders I've been harping on for the last week or so and make many bearish head and shoulder patterns complete, including on the indices.

I know this scenario might be too easy and obvious, so the other possibility is that we just fall from here without a bounce. It is certainly possible, and if 875 doesn't hold or is broken convincingly, then I think that is probably likely. Overall, however, my point is that shorting here is risky and you may very well have a much better chance to do so in about a week. Patience is key sometimes and I am trying to be patient. If you see some short setups you like, fine - maybe try a few. If I find any tonight, I will try to get them out there. But I am just kind of going with a hunch here. If I miss out and the market does fall straight down, then it won't be the first time this year that I have missed out.

That's it for now - after my scans, I'll see if there is anything interesting to share and maybe see about getting a video up later. Take care until then.

Sunday, June 21, 2009

Stock Market Video - Weekend Market Summary - 6/21/09

Hi traders - here's the video for the weekend. One of the skills I hope I have developed as a trader of five or so years is patience. I certainly need more - every trader probably could use more - but learning when to trade and when to sit back and do nothing is very important for long-term success. As I discuss in the video, there are just too many conflicting signals right now for me to get overly bullish or overly bearish here. That's why I don't plan on doing much of anything here except watch and see what the market wants to do. I try to explain why I have that outlook in the video. There are some charts that I will be watching in particular as "tells" and I show those as well in the video. Happy Father's Day to all the dads out there - take care and have a great week ahead.

To download directly, right click the above link and "save link as".

Friday, June 19, 2009

State of the Market - 6/19/09

Kind of a nowhere day today on Wall Street, as stocks started the day well, pulled way back midday, and bounced back into the close, but still basically finished mixed for the day. Stocks started well, rising for the first hour and a half of trading. From there, they fell quickly and sharply until around 2:00 after they couldn't break to new highs. They bounced at that point, but couldn't get past overhead resistance at the morning lows and drifted back down into the close. The Nasdaq outperformed with decent gains while the S&P was up only slightly. Volume was heavier due to the options expiration.

Technically, there isn't much new to say. The head and shoulder patterns remain a possibility and until the S&P gets over 955 and the Nasdaq over 1879, I am remaining slightly bearish. The S&P did get up to that 925-930 area that was former resistance but couldn't bust through and reversed at that point. I have not yet gone through my scans and probably won't be able to until Sunday, so I don't know how individual stocks held up today.

Since it's the weekend, I am making this post short. I will be back on Sunday with more thoughts but my main thesis that the next few weeks will likely be choppy without much direction is still intact and I don't expect to trade much. If these right shoulders do form, then I would start looking to get short. I think it is still probably a little early to do that. Take care and enjoy the weekend.

Thursday, June 18, 2009

State of the Market - 6/18/09

Although the markets had small gains today, it was overall a pretty slow and boring day on Wall Street, as stocks moved higher for about a half hour before consolidating and moving sideways in a tight range for the rest of the session. There was a late swoon that pulled the indices off their highs for the day and had them finish in the upper-middle of their intraday range. Volume looks to be very much lower than yesterday, although I do not have the final totals.

Technically, a bounce was probably due today, but when you take in the very low volume and the overall gains, it was not that impressive. If you caught the video from this morning, I went over the technical look for the S&P and Nasdaq there, and I encourage you to check it out if you didn't watch it yet. Until the S&P gets over 930, I am not really interested in doing much here, and 930 isn't a magic number. It could even get a bit higher than 930 to form that right shoulder and then fall back down. If we break 950, then I will switch sides and go back to be bullish, but right now I still expect some sideways chop in this area before we head lower.

As I mentioned yesterday, it seems that there has been a subtle change here where the bulls just don't have the firepower anymore to push stocks back up if there is any intraday selling. Today was another prime example of that. We just aren't having strong closes this week and that type of action is typical of a market in correction mode.

There really isn't much else to say - the video went over individual stocks to watch as well so again, check it out. There are quite a few stocks out there that look like they have left shoulders and heads formed on topping patterns - we have to watch over the next few weeks if the right shoulders form or if they rise to new highs and invalidate these potential patterns. That's what I plan on doing - watching from the sidelines until I see a good setup and a clear direction. Tops usually take time to form, and if we are topping here (a distinct possibility) it will likely take a few more weeks. Don't let yourself get chopped up in the meantime, especially in a low-volume summer environment. Good luck Friday - options expiration so be careful.

Stock Market Video - Head and Shoulders Setups - 6/18/09

Hi traders - here's the video I mentioned last night in my blog post. I am not trading right now because I want to wait and see what this market does, but based on the setups I see, a bearish outcome seems much more likely, and I show you why in the video. The individual setups are also leaning heavily to the bearish side of the market, although a lot of them are not yet complete. I go over those as well in the video. Hope it helps you out a bit - good luck today if you are trading. I think the next few days are either going to be crazy or extremely boring - not something in the middle. Take care.

To download directly, right click the above link and "save link as".

Wednesday, June 17, 2009

State of the Market - 6/17/09

Another day of disappointment for the bulls today on Wall Street, as after being hit hard the past two days, they tried to rally a bit today but once again couldn't get much going. Stocks started basically flat, but fell in the first hour with the Nasdaq coming close to its former breakout level and the S&P testing its 200 day moving average. They did bounce from there through lunchtime and into the early afternoon. Things looked good at that point, but the bulls couldn't keep any momentum going, and drifted back down from about 2:30 on, with only the Nasdaq finishing with a gain for the day. Volume looks to be a bit heavier than yesterday but still well below average - I don't have the final totals yet.

Technically, it is good that the Nasdaq held above that 1775 area and also closed slightly above its 20 day moving average. It remains the index in the best technical shape. However, more selling and a break of that 1775 level will take it likely down to the 1730 area. That scenario would form a pretty clear left shoulder and head for the Nasdaq, and a bounce back from there could be the start of a bearish right shoulder. The S&P did close slightly above its 200 day moving average, but similar to the Nasdaq, any further selling would take it down to the 875-890 area and complete a possible left shoulder and head pattern.

We are pretty oversold in the short-term and I am expecting a bounce soon on the major indices, especially with this week being options expiration. On the S&P, I will focus closely on how it handles the 930 area if it gets that high. If the bulls can push it over that, then maybe this pullback was nothing. If it can't get past that level, then we are likely looking at a major top being put in.

Among many other things that have me thinking "top" here is the intraday action of the past two days. I think we have seen a change in character - for the first time in a while, dip buyers have not been out in force the past few days. Before this week, every dip the market had intraday was bought heavily by the bulls and they ended up pushing prices back up into the close. This week, they really haven't been able to do that at all. It has been a subtle change that I am thinking is important to watch.

After going through my scans last night, I began to see a lot more potential short setups occuring. I'll be honest - this may just be my bias skewing the way I look at charts. But particularly in the retail sector, I saw many stocks forming clear head and shoulders patterns(check out FL and FINL) , while I also saw many charts that had the shoulder and head formed, just needing to complete that right shoulder(check out UA, CTRN, COG, OXY, HON, GPS, and DBRN to name a few). Finally, I saw some big names like GE, GS, and WFC show some weakness today - that is also not good. There were a few charts that showed some strength today (SYNO, PAR, and CVGW) but overall the quality of longs I see is still way below what I saw last week. I will try to get a video out over the next few days to go over these charts.

I am still in cash and plan on staying that way for the rest of this week. I think the next few days and maybe the next few weeks will be choppy as the bulls try to fight back here and the bears try to establish control of things. If you really want to play a short-term bounce, I think you may have your chance over the next two days, but overall, I just get the sense things are changing here. I could be wrong of course, but it will take the bulls overcoming 930 on heavier volume to convince me things are OK once again. Until that happens, I think defense is the name of the game, and I will continue to watch for short setups. The more that pop up, the more bearish I will become. Take care, and good luck Thursday.

Tuesday, June 16, 2009

State of the Market - 6/15/09

I said yesterday that the bulls really needed to step up today if this market was not going to fall into correction mode. Well, after about 2 and 1/2 hours of a listless effort to bounce the market, the bulls gave up and stocks fell for the second straight day. The market opened slightly higher but could not get anything going to the upside and basically moved sideways until lunchtime. As the lunch hour started, stocks broke their lows for the day and from their just fell further. They hit a low around 2:30 and bounced slightly into the close, but it was an unimpressive bounce and stocks still finished with decent sized losses. The only good news for the bulls is that volume appears to be lower, which will avoid another distribution day, but I don't have the final totals.

Technically, several areas of support that were holding on by a thread at the end of trading yesterday clearly broke today on the S&P, and based on everything I see, I am assuming we are seeing a top put in here. I have no idea how long of a correction this will be, but for now defense is the name of the game. I am still not shorting because I expect a bounce back soon, and will be watching the following levels carefully. On the S&P, the 907 level (200 day MA), 892 level (50 day MA) and as far down as 875 (former resistance) are all areas from which a bounce could occur. On the Nasdaq, 1775 is former resistance while 1725 is where the 50 day MA is at - I don't expect the Nasdaq to get that low without some sort of bounce.

The financials also broke down out of their triangle pattern today, but just barely. Watch $11.47 on XLF as possible support. The McClellan Summation Index did get the moving average crossover today that I've been watching for, and that is just another reason to think we are in correction mode here.

The carnage continued on individual charts as well today. I've been harping on this fact starting back on Friday, and this remains the main reason I am now bearish for the intermediate-term. Add PMTI, JCG, CSKI, ASIA, WATG, CYOU, CAST, and TQNT to the list of strong, leading stocks that are now looking vulnerable or just downright ugly. I also noticed some stocks that were hit Friday and yesterday try to bounce today, but finish near their lows (FREE, FEED, TSL, YGE, TSRA). Because of the past three days, there just aren't that many charts that look exciting to me, and regardless of what the indices are doing, that would likely keep me in cash. When you factor the break of support in the overall market, then you have all the more reason to be cautious here.

Overall, I am going to probably sit out the rest of this week in cash as although I expect a reflex bounce soon, I am not looking to play it. It just doesn't interest me here. What I would like to see happen is a weak bounce back into the 930 area on the S&P, which would setup some bear flags on these individual charts that have had such sudden drops that past three days. If that occurs, then I would look to get short in some cases. In the meantime, I will just wait. If the bulls recover and push the market above those areas, then maybe I will change my outlook, but everything I see is telling me that there is a very high likelihood we are in correction mode. Take care and good luck Wednesday

Monday, June 15, 2009

State of the Market - 6/15/09

Not a good day at all today on Wall Street, as stocks started lower to open the session and just built on their losses from there. The pre-market futures were lower due to weakness overseas, and stocks gapped down to start the day off. They sold off very hard until around 11:00, where they went into a tight, sideways consolidation for most of the rest of the session. They tried to bounce a bit into the close, but really couldn't and still finished with large losses. The only good news I can find for the bulls is that volume was not overwhelming. It looks to be higher than Friday which would give the indices another distribution day, but volume was still well below average.

Technically, a lot of bad developments out there for the bulls, and because of that, there is a very good chance today was a significant session. I've been mentioning 925-930 as a strong area of support on the S&P, especially with the 20 day moving average and an uptrend line in that area as well, but that was broken to the downside today. It wasn't broken by much, and actually, the S&P sits right on its 20 day moving average as of today's close so maybe the bulls still have a chance IF they step up immediately tomorrow. Things will get mighty tricky however if they don't. If these moving averages are broken, 1774 on the Nasdaq and 910 on the S&P are levels from which I would expect to see a short-term bounce.

The U.S. dollar was the main reason for the selling today, and any further buying here could confirm the inverse H&S pattern I showed in the video last night. Keep a close eye on this. The VIX shot up today and looks like it is trying to poke its head above a downtrend line. This would be bearish if it continues to rise. Finally, the McClellan Summation Index I mentioned in the video Sunday looks like it will have a moving average crossover, and this is likely a very bearish development as well. Again, the bulls need to step up immediately here and if they do, some of these technical developments would change, but if they don't, then I think we are indeed looking at a top.

I posted a lot of my thoughts earlier today so I won't repeat them all here. The damage to individual stocks, many of which look ugly now, is my main concern, even more so than the indices. Some of the stocks I listed earlier did bounce back a bit - for instance, RAX (which I was stopped out of) gained back most of what it lost earlier in the session. However, I am not interested in this stock any more - the chart looks bad. I see a left shoulder and head already formed here, and although the pattern may not play out, it certainly looks like a complete head and shoulders pattern could happen here. Commodity stocks were the ones that didn't bounce back today and I would be very careful here as well. Overall, I just saw so many great setups last week and most don't look nearly as good now, and that is what has me worried.

Overall, caution is very much warranted here and I feel there is a very good chance today could mark the beginning of the end for this bear market rally. If the bulls somehow reverse this and get past the 950 area, then I would change my outlook, but too much damage was done today to too many charts, and that damage will take time to repair in my opinion. I will likely be staying in cash for the next few days, and if the market bounces and fails, I will be looking to get short. A further fall followed by a weak bounce would likely be a nice shorting opportunity in that it would complete a possible head and shoulders pattern on the indices. We have to wait though to see if that indeed happens. Good luck Tuesday.

Morning Update - Lots of Breakdowns - Warning Signs Meant Something

If you watched the video last night, you know I mentioned I was a little more cautious here because of some of the breakdowns I started to see Friday in individual stocks. I mentioned these as possible "warning signs" for the overall market. Well, I guess those warning signs meant something, because I am seeing many more breakdowns today, and some follow-through on the breakdowns I saw Friday. Neither of those is a good thing for the bulls.

If you follow me on Twitter, you know that I was stopped out of both my long positions as both put in bearish failed breakout attempts (RAX and ICO). I liked both of these patterns and the fact that they failed so quickly is not a good sign. Here are some of the other leading stocks from the past few weeks that look like they are breaking down this morning:


As of now, the S&P is still holding support and even if it breaks down below 925, I don't plan on getting short anytime soon. I have a feeling there will be some whipsaws here for the bears as well just like we saw one for the bulls on Thursday. I would not be surprised at all of a bounce back into this range if 925 is broken. However, overall, I am not looking to go long based on these individual charts I am seeing - a lot of damage has been done.

Again, the key for me is not what the indices are doing right now, but what is happening with individual stocks. If we were indeed primed for another move higher (which last week I certainly though we were based on the charts), I would not see so many stocks breaking short-term support. I would not see so many continuation flag patterns turn into something different. So I am in cash now, and will wait to see what happens from here. If you have nice-sized profits, I would definitely consider locking some of them in. I will also start to get my shorts watchlist focused a bit more than it is now, because I am starting to think these warning signs are trying to tell me something. We shall see I guess. Good luck the rest of the day.

Sunday, June 14, 2009

Stock Market Video - Weekend Market Summary - 6/14/09

Hi traders - here's the weekend summary looking at the week ahead. Overall, the outlook remains bullish although there are a few small warning signs I saw on Friday in individual stocks that you should pay attention to here - I point those out in the video. If I see more of those warning signs, I may start thinking bearish but as of now, the consolidation still looks healthy and I would not try to catch a top here. Take care, and have a great week ahead. Congrats to my Penguins - great win on Friday. Let's do it again next year.

To download directly, right click the above link and "save link as".

Friday, June 12, 2009

State of the Market - 6/12/09

Another slow, choppy day today on Wall Street, as stocks started slightly lower, traded lower for about an hour, and then went into a holding pattern until a little after 2:00. They tried to bounce there, but couldn't and fell back down into the close, finishing basically flat for the day. Volume was very light.

Technically, we are still in a range here and there isn't much else to say. I'm still watching the McClellan Summation Index for a possible moving average crossover, but so far, we still don't have that. I am also keeping a close eye of the financials (XLF) as they are coiling very tightly here right at their 200 day moving average. A breakout for this group could mean a breakout for the market.

While the indices were pretty boring today, I did see some things in individual stocks that makes me take a bit of a pause here. If you follow me on Twitter, you know I talked throughout the day about several strong stocks that were breaking down below short-term support. For me, I like to use the 9 day moving average as one level of short-term support, especially in very strong momentum stocks, and today I saw a lot of stocks breaking down through that level. Normally, that is not a good sign in the short-term. Now, overall, a lot of these stocks did bounce back and closed at or above that level, which is bullish. Those include SYNO, MCRS, TSRA, KONG, RAX, CSIQ, JCG, and RTI. Others that were strong that didn't bounce and look bearish to me now include GROW, PDO, and FRPT.

After seeing so many great setups this week, my outlook had to be bullish, but for now, I would say I am a little more cautious after today. I still am holding my RAX and ICO positions and that's it. The markets weren't down enough for the strong stocks on my watchlist (from the previous paragraph) to get really hit, but they did and that perhaps that is a warning sign. Again, most closed above short-term support so maybe it won't be a big deal. As it is, I probably will be more hesitant to jump into more longs early next week until we get a clean breakout above 950-955 on heavier volume. I am certainly not shorting here - no way, not until a clean breakdown - but I am more cautious.

I hope you enjoy your weekend - I have game 7 to look forward to tonight as my Penguins go for the Stanley Cup. 2009 has been a great year for sports fans here in Pittsburgh, as my three favorite teams (Steelers, Pitt basketball, and Penguins) have all either won or competed for championships. Detroit is tough and I am not holding my breath about tonight's game, but you never know what can happen in a one-game situation. Take care, and go Pens!

Thursday, June 11, 2009

State of the Market - 6/11/09

Wow, day traders must be loving this market. A day after starting higher, falling down midday, and then bouncing into the close, the market did the opposite today. Stocks opened basically flat but rose from there until around 10:30, where they consolidated until lunch. They broke to new highs a little after 1:00, and at that point it looked like we may have a breakout on the S&P. Alas, it wasn't meant to be, as the S&P got as high as 956 before pulling back late back into this consolidation. Stocks closed with small gains but finished well below their highs. Overall, a disappointing day for the bulls, just like yesterday was disappointing for the bears. Volume appears to be lower on the S&P today once again which is not what you want to see in a breakout attempt. On the Nasdaq, volume appears to be slightly higher.

Technically, I guess nothing really changed today. We are still locked in this range and may be locked in it for a while with the slow overall trade, as the longer this goes, the stronger those support and resistance levels will become. This is what summer trading is - volatile moves intraday due to low trading volumes. Without heavy volume, the bulls just don't have the oomph to get us through resistance, and the bears just don't have the firepower to break us through support. You know the numbers by now so on the indices, things are just the same.

I haven't been paying too much attention to my oscillators recently but one thing I am trying to watch is the McClellan Summation index. Right now, it is moving sideways much like the market. It did the same thing back in January and the patterns look almost identical. What I am watching for is whether the 9 and 20 day moving averages will cross, like they did in January. The difference back then is that the market was trending down, even though it didn't have a clear breakdown yet. Now the market is trending higher. If those do cross, I may reconsider, but for now, this is remaining bullish as well.

McClellan Oscillator
Chart from Telechart, Courtesy of Worden Brothers, Inc.

I entered ICO this morning at $3.47 - this is a stock I've been watching for a while as it hasmoved relatively sideways since November and now has some volume coming into it. I am hopeful today's breakout will be meaningful and can take it up to around $5 or so. It didn't finish as strong as I would have liked but we'll see. I still have my position in RAX but didn't make any other moves today.

My watchlist however continues to look very strong on the long side so I may be making more moves over the next few trading sessions. I am taking APSG, ORCC, and MAPP off the list as they all had either weak breakout attempts today or in the case of MAPP, a key breakdown. However, the bullish flag patterns continue to develop left and right and until I see more of these break down, I have to remain overall bullish. Ones to watch include GROW, AHD, SYNO, KONG, JCG, CSIQ, XTXI, PDO, FREE, TSRA, KNXA, FRPT, CORE, PAR, CDII, BAA, PMTI, MCRS, and RTI. There are some new names in there so check them out on your own.

We have a very interesting market here. The indices are consolidating and basically going nowhere, yet there are individual stocks that continue to work and continue to set up in bullish patterns. In some cases, it is probably better just to ignore what the market does and focus solely on the individual stocks. In the back of my mind, I still feel like, "hey, we're going to get a nasty pullback one of these days", but I have to fight those thoughts and just trade based on what the market is telling me. With the bevy of continuation patterns I see out there, that message is for now very bullish. No reason to argue, especially when my opinion counts for absolutely nothing. If we break support, then my outlook might change. Good luck Friday and take care.

Wednesday, June 10, 2009

State of the Market - 6/10/09

Another day, more choppy trading today on Wall Street, as stocks gapped up, fell drastically from there, but held support and bounced back into the close, finishing only with small losses. The morning selloff had the Nasdaq losing almost 50 points from its opening highs and the S&P lost almost 25 points off its opening highs. Stocks righted themselves right around 2:00 when the Beige Book came out. Volume appears to be higher on the Nasdaq, which will give that index another distribution day, but may be only slightly higher on the S&P and once again well below average.

Technically, we continue to chop around in this range - the Nasdaq briefly got to new highs today but reversed. The S&P got as high as 949 (resistance is at 951) and reversed, but once again held support around 925. Both indices did bounce off their 9 day moving averages which is bullish and I can't get bearish until they at least can break these short-term moving averages to the downside. Meanwhile, a clear break above 950 would likely be very bullish and give the market another leg up. The financials continue to coil and the number to watch as key resistance there is right around $12.60 on XLF.

I did not make any moves today, but my long watchlist held up remarkably well given the way the market sold off hard at the open. RAX, my purchase from yesterday, moved up and followed through a bit, although it did not close at its highs. A few small oil stocks (WH and DBLE) had nice, heavy volume moves today. The only real breakdown I saw was CVGW, and even that bounced off its 20 day moving average (although I am no longer interested in that stock given the way it looks now). I continue to find an inordinate number of bullish flag patterns setting up and consolidating nicely, and based on these, I have to assume we are more likely to move higher from here than fall. I am not discounting anything and a break of support would have me changing my tune quickly, but based on what the charts are telling me right now, things remain very much bullish.

Top charts I see out there (most of which I have mentioned this week in a video or in a post) include GROW, APSG, SYNO, AHD, KONG, JCG, UTHR, XTXI, PDO, GMXR, KNXA, CORE, NOG, FRPT, SVVS, ICO, and LVS. I may be entering into a few of these over the next few days as swing trades if the market continues to hold support.

That's about it - right now there is a lot of volatility intraday but when you look at things from a longer-term perspective, we are still basically locked in a 25 point range on the S&P. I am doing my best to ignore these intraday swings and just focusing on those levels to see what happens. With volume decreasing over the summer, this is probably going to be the norm for a while. Take care, and good luck Thursday.

A Few Videos to Check Out

A few videos that I found recently and thought may be worth checking out...

#1) Video #1 - Deals with inflation and an indicator not related to gold. With oil running here, I thought it was applicable.

#2) Video #2 - Deals with the U.S. Dollar and the technical outlook for it in the near-term and its affect on other commodities - also very applicable right now.

#3) Video #3 - Deals with the S&P outlook and some possible negative divergences showing up now. I am relatively bullish here but it is always good to check out other opinions.

All the videos are free - good luck trading today.

Tuesday, June 9, 2009

State of the Market - 6/9/09

Another choppy day that took us nowhere on Wall Street today - stocks meandered up and down throughout the day but ended up basically flat except for the Nasdaq, which once again showed relative strength. It got to a new high at 1869 but could not close at a new high, although volume was heavier. The S&P traded in a ten point range for the entire session on slightly lower volume.

Technically, we are still in the consolidation pattern although I don't know if I can say that as much for the Nasdaq. I worry a bit that it may be wedging higher, which is never good, but we'll see. I wish the Nasdaq moved more sideways here like the S&P is doing. 950 is the resistance for that index, with 925-930 acting as support. The consolidation continues to look bullish but I would likely wait until we get a break above or below those levels before making any huge moves.

I did make one trade today - bought RAX at $12.05 and $12.10. It was breaking out to new all-time highs on heavier volume and has good IBD ratings. I figured it was worth a chance here even though the market is still consolidating. A break below $12 would not be good and I will probably keep my stop pretty tight. I saw some bearish or weak breakouts today in stocks I liked like AEPI, SIGA, and TIVO and that gives me a bit more pause here than I had going into the session. However, the flag patterns I showed in the video for the most part continue to form and most look very good still, so I am not that worried.

That's it for today - I know it's a short commentary but there isn't a whole lot to say right now. I've got a train table to put together for my three year old son's birthday tomorrow and a hockey game to watch tonight as my Pens try to force a game seven, so I don't think I'll be back later. Maybe tomorrow morning if I find anything really interesting. Take care.

Stock Market Video - Tuesday Watchlist - 6/9/09

Hi traders - here's a video going over some of the long candidates that I continue to watch. Basic thesis for me is that the market appears to be consolidating in a healthy manner, and the chart setups I see back this idea up. There is no reason to be bearish unless we see a breakdown, and after fighting this market for much of the year, I will do just that - wait for a breakdown before changing my outlook. Good luck today.

To download directly, right click the above link and "save link as".

Monday, June 8, 2009

State of the Market - 6/8/09

A wild and crazy day on Wall Street today, as stocks moved significantly lower in the morning before absolutely exploding in the final hour to close with gains. The day started with a gap down and further selling that took the S&P down to key support right around 930. The market bounced for a bit, fell back down and in some cases to new lows for the day, but once again righted itself and moved higher for most of the afternoon. Around 3:15, stocks took off to the upside, with the S&P gaining 12 points and the Nasdaq almost 25 points in less than 15 minutes. Those gains faded a bit into the close as stocks finished basically flat, but well off their lows for the day. Volume appears to be very light.

Technically, today was another strong showing by the bulls as they held support, and really, that's all you can ask from them. The S&P continues to hold its 9 day moving average, the 200 day moving average, and its previous breakout point, all very bullish developments. The Nasdaq reamins well above its previous breakout point but also held its 9 day moving average today. Short-term, resistance for the Nasdaq is 1865 and for the S&P, it's at 950.

In terms of individual stocks, I did see a few nasty moves lower today in some leading stocks (JST, KIRK, MED, and TNDM) but sometimes this happens with these small caps. I would be more wary though if I see more big volume moves like that in more stocks. Overall, my watchlist held up well - I see stocks like CVGW, RAX, MAPP, SIGA, ORCC, JCG, GPOR, and PXP consolidate very nicely and continue to hold short-term support. I am very much considering putting a few trades on in a few of these names with stops below short-term support.

Overall, we have had a lot of chop and misdirection the past two days, but that typically happens when markets consolidate. Perhaps the arrival of summer is making for these volatile, light-volume moves, but so far, that's what looks to be happening right now(consolidation)., Unless support is broken and I start seeing some breakdowns in individual stocks, there is no reason I see to be bearish here. I plan on focusing on my watchlist and as I said, entering into a few stocks depending on how they continue to consolidate. If we do break support, then I will be ready to go on the short side a bit. Good luck Tuesday.

Friday, June 5, 2009

State of the Market - 6/5/09

Not a great day today on Wall Street, as stocks could not hold onto their early gains following a better-than-expected jobs number and finished flat for the session. Stocks gapped up to start the session, but that gap was immediately sold. Stocks tried to bounce back starting at 10:00, but could never get back to their opening highs and went back down to test the morning lows around 2:00. They bounced a bit into the close but finished basically flat for the day. Volume was lower on the S&P and perhaps a bit higher on the Nasdaq.

Technically, the reversal may be bearish but it doesn't look to be that big of a deal on the daily charts. If it came on major volume, then I may be more worried, but everything looks OK for now. The S&P did briefly get above 950 at the open, but looks to be trading in a 20-point range now between 930 and 950. A break of either of those levels would likely be significant. The Nasdaq could stand to pullback a bit but support sould come in first around 1806 and then around 1775. The only main worry I have about today's action is that XLF looked to be breaking out from a symmetrical triangle but reversed after touching its 200 day moving average. That bears watching.

I didn't make any moves today but my work committments are officially lessened greatly now and I will be getting back into the swing of things starting next week. If you follow me on Twitter, I will be looking to post there more often intraday if I see something interesting. In terms of the stocks I showed last night, most were not damaged much from today's reversal and actually, a day like today could benefit many of them, giving them a bit more rest. We'll see if I have more bullish patterns setting up in my scans this weekend or if I find a bunch of bearish reversals in individual stocks.

Enjoy the weekend - I'll be back at some point. Take care.

Thursday, June 4, 2009

Stock Market Video - Some Long Candidates - 6/4/09

Hi traders - here's a quick video going over some of the long candidates that got me a bit excited today going through my scans. Ideally, we get a little more rest tomorrow and even into early next week, but who knows with this market? Off to watch the end of the Lakers-Magic. Go Pens - great win tonight to tie this series up!

To download directly, right click the above link and "save link as".

State of the Market - 6/4/09

We had a bounce back session today on Wall Street, as the bulls were able to overcome a flat to slightly weaker open and pushed stocks slowly and steadily higher after lows were put in around 10:00. The gains weren't massive, but they did allow stocks to make back what they lost yesterday. Volume looks to be quite low once again.

Technically, it looks like this week has been mainly some consolidation after Monday's breakout, and since it has come on decreasing volume, the consolidation looks very healthy. The S&P did hold that 930 level yesterday and although it does seem to be pausing right around a year-long downtrend line, the chart looks bullish. 950 will be resistance for the S&P. The Nasdaq continues to lead and made a fresh high today. Financials picked up a bit today but are still lagging overall - between $12.75 and $13 on the XLF looks to be resistance.

As I go through my scans quickly here, I am finally seeing a lot of bullish patterns. Maybe I was just being too picky, but as I looked at my scans just now, I started to get interested. Some stocks that I was watching but that had just gone too fast too quickly have rested the past few days. I am actually kicking myself that I didn't pay more attention to a few of these like CSIQ, which bounced perfectly off of its 9 day moving average yesterday and was up another 23% today. I have a long list right now of stocks I am either interested or about to be interested if they rest just one or two more days. Check out the following stocks:


All of these stocks are forming bullish flag type patterns and if they break out, then they will likely move to higher price levels. So I will be paying a bit more attention to the market tomorrow and into next week based on these patterns showing up. As long as these patterns keep forming and don't break down, I think it bodes well for the overall market as these are typically continuation patterns.

I will try to do a video if I can tonight to go over these and others, but there is a hockey game on, so I really don't know if I'll be able to or not. Overall, the action of the market the past three days looks bullish based on the technicals, and as long as yesterday's lows aren't broken on heavier volume, the bulls remain firmly in control of this thing. Good luck Friday and go Pens!

Wednesday, June 3, 2009

State of the Market - 6/3/09

A rough day today on Wall Street, as stocks started weaker, tried to bounce back after about an hour, couldn't do so, and then fell sharply for the rest of the day starting at lunchtime. Stocks moved basically sideways for the final two hours, until a bounce into the close took them slightly off their lows. Volume looks to be lighter than yesterday, at least at this point, so distribution was avoided.

Technically, I said that any pullback we get needed to hold the previous breakout levels of 1775 and 930 - as long as they did, we wouldn't have a problem. Today, the S&P did go below that level but not drastically and held it OK. It also held its 200 day moving average which is bullish. I don't know yet that we can say it successfully tested that previous resistance level - we have to see if it bounces off of it - but overall today was not bad. The Nasdaq held up well and is nowhere near its previous resistance as it continues to be the leading index.

It looks like oil and commodities in general pulled back today as the dollar rose. In some cases, there were what look like significant breakdowns (see stocks like POT and AEM). I pointed out two days ago that the U.S. dollar was in a technical position to put in a bounce, and that you must be careful with commodities here. Hopefully you didn't get hurt today. What we have to see is if this pullback is just starting, or if it will be a one-day wonder with the commodities rising back up tomorrow. Much of this two-month rally has been on the back of these commodities and specifically rising oil prices, and if that changes, along with lagging financials, then things could get tricky for the bulls.

I continue to look for really attractive setups on the long side but for now, I am remaining patient and am still in cash. Some of this is due to a lot of things I have going on at my workplace right now which has kept me busy. Those duties will lessen greatly next week, so hopefully I will be able to get back in the right frame of mind soon and the overall swing of things soon. Of course, that is dependent upon this market and the opportunities it presents to me.

Overall, nothing really to worry about today other than the commodities getting hit - just keep an eye on that. I wouldn't want to see much more selling in that area if I was long. I would like to see this area hold on the S&P and if it does, the bulls remain in control. The things to watch for (as always) are if heavier volume comes in on any further selling we get and how leading groups hold up. Good luck Thursday and take care.

Tuesday, June 2, 2009

State of the Market - 6/2/09

Once again, I was away from my desk for almost the entire session so this post will be a little short. Today looks like it was a slow day based on volume, as stocks had slight gains but on volume lower than yesterday. You can't expect the market to rise 2% everyday, so a day like today is just fine. The bulls showed strength by not giving any of yesterday's breakout back, and they remain completely in control. The only thing I would watch here is that just like with individual stocks, you don't want to see the indices making new highs on low volume, especially volume below average. Keep an eye on this, particularly on the S&P, where volume was below average yesterday on the breakout - not good.

My watchlist from last night didn't do a whole lot today - OCLS was a risky stock I highlighted and that was up 22% today, so hopefully a few of you out there kept it on your radar. TAM put in a nice move today, as did some of the shippers like TBSI and FREE. Others just rested quietly (BRCD, SMRT, and WX). I still want to see more quality stocks and charts come into my watchlists over the next week or so in order for me to have total confidence that we are starting a big move higher in the overall market. We could be, but I am having trouble getting over my doubt.

I don't know if I will be back later with any charts - game 3 is tonight for my Pens - but if I find anything interesting in my scans, I'll see what I can do. Take care and good luck Wednesday.

Monday, June 1, 2009

A Few Charts of Note and Other Thoughts

After going through my scans, I am finding some stocks that interest me. I still have some problems in that I am finding a lot of stocks with very low average volume (below 100K shares per day which I don't like) and still finding a lot of low-priced stocks (which I also don't like), but what can you do? We'll see how this goes and if the patterns keep developing. Some to watch that are new for me - BRCD, UTHR, MIDD, ROSE, and TAM.

Here's one stock in particular to keep an eye on tomorrow. Description in on chart.


Shipping is one area I am also watching closely along with some of the commodity stocks like coal, of which I see many that look poised to break to new highs past their March peaks. The new theme and a very likely reason behind this two-month rally is inflation. The only problem I see with this over the short-term (week or so) is when looking at the dollar, it is in an area where it could get a decent technical bounce, and this would likely cause a pullback in commodities. We'll have to see if that happens - just be careful chasing commodity stocks.

U.S. Dollar

Overall, there is nothing major that I saw that makes me think the bulls are in any need to worry here. I am still confused as to why the financials were so weak today in the face of such a strong rally, but I am done trying to rationalize what this market does. I will be paying attention to the following group of big-caps (MS, MET, USB, GS, WFC, and BAC), all of which lagged mightily today. I think the financials need to participate if we are in the beginning of another leg higher. If they keep lagging like today, I may start to get a bit more worried.

Good luck tomorrow. I will likely be away from a computer so I don't know that I will be able to trade, but just wanted to share these thoughts. Take care.

State of the Market - 6/1/09

Well, like I said in the video last night, let me start by saying that I was away from my desk until about 2:30, so any observations here are from a late viewpoint on the intraday action. That being said, today was obviously a very good day for the bulls, as the market gapped open, and rose strongly from there, easily passing some key resistance points on both the Nasdaq and S&P. They pulled back slightly into the close, but stocks still ended up with major gains across the board. As of now, volume looks mixed - probably higher on the Nasdaq, but lower on the S&P. I have to wait for the final totals, but I would hope volume could come in above average across the board on a breakout like today.

Technically, the bulls are in total control here and that is all there really is to say. The S&P not only cleared 930 to make another higher high, but also cleared its 200 day moving average on the first attempt . It also looks like it will close slightly above the long-term downtrend line I showed in the video last night. That is a very impressive showing from where I sit. The Nasdaq's move today could probably be classified as a breakaway gap, which is something you rarely see in an index.

I will paying special attention to see if the 1770 and 930 areas on the Nasdaq and S&P respectively now become support on any possible pullbacks - they should be. I said in the video last night that while the Nasdaq has a real air pocket above it in which it could take off for a while without much resistance, the S&P has some heavy resistance above 930 and that it would be interesting to see how if the slight divergence caused a problem. As of today, there is no problem at all and really, the Nasdaq has room to run here all the way up to around 2150 from strictly a technical standpoint, where it will likely face some overhead resistance from early in this bear market. I somehow doubt that will happen, but technically, it is there.

The only two oddities I saw today was that the VIX actually closed slightly higher, which is beyond odd and to be honest, I have no clue what that means. It makes no sense that it would be up on a 3% higher move on the indices. Another oddity was that the XLF (financials) lagged quite a bit today and that is another possible divergence here when compared to the major indices. $13 is still a key area of resistance for the financials and I am very surprised they did not challenge that area at all today, given the strength of the overall market. Retailers did come back strong today.

Mainly because I was not near a computer, I made no moves today other than getting stopped out of my SDS position around $54.60 - oddly, my stop was set around $55.50 and was never hit on Friday, even though it closed below that. That ended up costing me a bit, as I ended up with over a 5% loss on that one. Obviously those test positions didn't work.

Looking through my long watchlist, I see sort of a mixed bag. There were some nice breakouts in stocks like GIL, FEED, OMX, THQI, FSIN, MTD, and WPZ, but half of those (GIL, OMX, MTD, and WPZ) look like they moved on underwhelming volume. I also saw stocks like WFC, ITRI, SIRO, OCN, RUTH, and PRU from last night's video that did virtually nothing today, and that is a little disappointing. As I mentioned last night, I still don't see many stocks that are really exciting me here - maybe I just have to look closer. There are a lot that are extended but I don't know that they are going to pullback after today's move. I'll remain patient.

I will likely be away from the action tomorrow as well, so I don't know that I will be making any moves, but overall you have to respect the performance of the bulls today. The only thing that would make me even think about shorting right now is a move below the 1770 and 930 areas that were such important resistance. If we see that, maybe I would reconsider, but for now, after today, the correct play is to stay focused only on the long side. I wouldn't buy just anything, but hopefully after doing my scans, I will find some that excite me a little more than what I am seeing currently. Good luck Tuesday.