Friday, July 31, 2009
After some extremely wild after-hours trading in the solars last night thanks to FSLR, I am out of my SPWRA position at $31.65 for a 4% loss. That was nowhere near my trailing stop loss around $33, which would have had me at breakeven on the position. However, when it moved $1 higher AH and then reversed like that, down almost $3 from its AH highs and $2 from its closing highs, I thought something was wrong and just cut my losses. Given my luck this week, it may be up today, but I didn't like that action at all, and when I don't, I get out.
I am leaving this afternoon to attend a family birthday dinner so there won't be an after-market post. Because of that, in addition to the way I have managed positions this week, I don't plan on doing much today other than manage my two current positions, AMSC and JDAS. Right now, I am not feeling it and my confidence is still waning as I've seen large paper gains disappear this week when I didn't take quick profits and stocks move without me after being stopped out, seemingly a theme for my trading this year. ANR was the latest to do that - I bought a day early and perhaps didn't give it enough room to move. It was up $2.50 yesterday. Either way, I think a day away would probably be good for me right now to catch my thoughts and regroup.
If you're looking for plays, I do see a few stocks setting up in nice flag patterns - check out ONTY, POL, POOL, MEG, TQNT, TBI, UNTD, SPF, EXEL, OGXI, CISG, ARBA, LEN.B. These would all be dependent of course on the market showing renewed strength today after yesterday's weak close. Hopefully that happens. We'll see. Best of luck and I'll see you this weekend. Take care.
Thursday, July 30, 2009
Technically, the Nasdaq gapped to new highs which would normally be super but the fact that it closed at its lows means we could be looking at a pipe or island top here. A break below 1979 would be quite bearish in my opinion. The S&P held up a little better but looks similar to the Nasdaq in that if it breaks 982 to the downside in the next few days, we could be looking at a pipe or island top. I hope I am wrong but I can't understate how bearish I believe the intraday action was today. More on that in a second.
I did make some trades today as the early action looked great and I saw a ton of earnings related stocks moving quickly. I entered AMSC first pre-market at $30.20. It posted a big beat on its earnings ($0.12 vs est $0.00 plus raised estimates) and was gapping out of a base so I went with it. For the first hour or so of the day, it acted as well as a stock could act - moving higher, resting briefly, then moving higher again, all the way up to $36. Near its highs, I was up 20% but based on the overall action, I fought the urge to take profits as I thought this could be a multi-week winner. As has been my luck this week, that was the wrong decision, at least as of now, as it faded the rest of the session and finished well off its highs. I still have a gain in it, but my guess is my stop will be taken out tomorrow and my gain will be minimal. Very frustrating action there because everything looked so good early on - both the market and the stock were acting perfectly. Perhaps if it didn't run up so much I wouldn't have been willing to give it room to pullback.
I also entered SPWRA at $32.975 as it broke out and ASIA at $19.97 on an intraday play. ASIA reversed and I was out at $19.55 with a 2% loss. SPWRA acted OK and I am up slightly, but volume was not overwhelming and I was hoping for more. FSLR is up after-hours so maybe I'll get a little bump tomorrow.
I was stopped out of my ISRG position totally in the afternoon at $226.10 for a 17% gain. This earnings trade worked well but the past few days it has been wedging up on lower volume and that is usually a good sell signal. I've been thinking about selling this for a few days now, and I tightened my stops intraday and they were hit. Overall it was a good trade.
I had my watchlist ready to go this morning and was ready to make more moves, but I am glad I didn't. One more negative about today's action was that I saw very few stocks breaking out and moving up even during the morning hours when the market was moving nicely. The only moves I saw were in the earnings plays, and those (BABY, SHOO, FIRE among others) all faded greatly and closed well off their highs. I probably should have paid more attention to this during the day because in hindsight, it was a warning sign. A technical breakout on the indices that is not accompanied by nice-looking stocks breaking out is a negative divergence that I wish I would have picked up earlier.
We'll see where we go from here, but I am basically in neutral mode after the late action and don't plan on doing much of anything tomorrow other than perhaps get rid of my last few positions. This was a perfect setup for the bulls to take this market much, much higher (with the nice consolidation early this week) and although they finished with gains, I think those gains are very misleading. Perhaps they can right things tomorrow, but if we get more selling, we could be looking at a top here. The market is never easy and today proves that. Keep your options open right now - cash is probably a good one until this gets sorted out. I certainly wouldn't short yet, but going long looks risky too. Take care and good luck Friday.
Wednesday, July 29, 2009
As always, you can right click and hit "save as" to save the videos to your computer. I changed the dimensions to 1024 x 768 so it should be easier for everyone to watch. Best of luck Thursday.
Technically, I really don't know what else the bulls can ask for the past three or four days. Both the S&P and Nasdaq were obviously very extended at the end of last week, but so far this week they have rested nicely on lower volume and both look to be forming bull flags right now. Even more impressive is that if you look at each of the past four closes, they all came at the top of the daily range, well off their lows. This has allowed the market to work off much of its overbought condition - for instance, the McClellan oscillator is right back in the middle of its range, completely neutral. The 9 day moving average is creeping up nicely on the two main indexes, and should offer support if we pullback further, which is still possible. Numbers to watch in the short-term are between 956-963 on the S&P and around 1940 on the Nasdaq.
The only really negative technical development today was the oil via USO had a very bearish breakdown on heavier volume today. I am actually surprised the market wasn't down more with this move lower in oil. Commodities were hit today in most cases and I was stopped out of my ANR position from yesterday a little under $31 for about a 4% loss. This bears watching because as I pointed out in Monday's video, the U.S. dollar is in a spot where it could bounce and therefore hurt commodity stocks, which are still leading this market in some ways.
I didn't do much else today in the market - my only positions are ISRG and JDAS and I will watch one of those a little more carefully now after putting in small advances on lower volume the past two days. Overall, however, my outlook remains the same. Anything is possible, but this sure looks like a bullish consolidation the past three or four days, and as such, it makes sense to look for plays on that side of the market. I see a few that I like that are consolidating nicely - to be honest, not as many as I saw last week, but I haven't gone through my scans yet. I am still on the lookout for earnings plays as well - this is the right type of environment to look at those. Perhaps the oil breakdown will lead to more selling the rest of this week, but most evidence points to a continuation of this rally sometime soon. Play accordingly. Take care, and best of luck Thursday.
Tuesday, July 28, 2009
Technically, the market continues to hold up very well overall and any attempts by the bears to get a pullback going continue to be quickly shot down by the bulls. The nine day moving average is coming up quickly for both the S&P and Nasdaq and should offer support - it normally does during strong momentum phases. The Nasdaq in particular continues to form a very bullish flag pattern and could be setting up a breakout to new highs sometime this week. That may be hard to believe, but the chart doesn't lie right now. Even the BOP for the Nasdaq is turning green, which I have rarely seen happen on an index chart.
After having a pretty good day yesterday with CPSL and BEXP, I had a very frustrating follow-up today. I was tempted to take my 10%+ intraday gains in both of those names yesterday several times, but I decided to hold on for a little pullback to see if they had more gains in them. I basically moved my stops up to breakeven on both but to be honest, did not expect them to be hit with the momentum they showed yesterday. Well, both were hit this morning - CPSL at $2.95 for a 0.47% loss and BEXP at $4.44 for a 1.38% gain. I knew a market pullback was a possibility at any time, but given the strength these showed yesterday morning when the market was selling off, I did not expect them to be down so much.
I was also stopped out of LCRD at $5.96 midday, giving me a 2.58% loss there. It acted OK early on, but after reaching a high of $6.50 (I bought after-hours yesterday at $6.10) it did nothing but drift lower and I moved my stop up to lows of the day around $6.00. I didn't want to give it much room because it was a thinly traded stock and I knew it could have big swings minute to minute. Most really good earnings plays develop strength right away and don't slow down - this one didn't do that, so I was stopped out early. Unfortunately for me and my psyche, it went up for the rest of the day after I was stopped out, basically doing what I thought it would do originally. I missed a significant move there - 15% or so.
Given the later bounce in all of these stocks(especially LCRD), it was an extremely frustrating day, not unlike my experiences earlier this year. In hindsight, I knew CPSL broke out above $2.92 and BEXP broke out above $4.30 and I could have (probably should have) given them a bit more room to move. My problem is that after being up over 10% in both names, I didn't want a decent gain to turn into a loss, so I went with breakeven instead. In terms of LCRD, as I said earlier, I knew it could fall quickly and thought it would when the lows were broken, and I didn't want to take that chance.
Psychologically, I still don't know if I am back to where I need to be as these trades may show. I am still too worried about taking losses and that is affecting the way I play stocks after I enter them. The psychological side of trading is always the toughest side in my opinion. Right now, picking the stocks isn't a problem for me - it's managing the swings in the stocks after I pick them that's the problem. Those issues only become magnified when you see the stock go the way you want to after being stopped out. I may be setting a record in that respect - getting stopped out only to have the stock go back up on you. It sure seems like it. By taking smaller positions (which I am doing) and not jumping full blast back in (which I think I am doing), I hope to gradually defeat these issues and get back to my winning ways of last year. Right now, it's tough, however, as the market seems to have it out for me.
At the end of the session, I entered ANR on the pullback at $32.31. It bounced off its 9 day moving average today and the last two days of selling have come on very low volume. It looked like a good setup so I took although I was hesistant with my earlier trades today. It is not a very large position.
OK, enough about my sorrows. For the rest of this week, I think the outlook remains the same. A continued pullback would be healthy for the market, but that doesn't mean we are going to get it. If you see stocks setting up in nice patterns, then I still believe it is worth taking a shot at them in this environment - just be aware that if we do pullback, you're likely to get stopped out of them. Although LCRD didn't work out for me personally as an earnings trade, I will continue to look for those as well - I am up about 16% in ISRG and JDAS showed a bit of life today, so they usually do work overall. Nothing is perfect in the market however. Take care and good luck Wednesday.
Monday, July 27, 2009
Technically, I mentioned on the video that a rest would be tremendous here for the bulls, and the best case scenario for "resting" would be some sideways action that could form a little flag pattern but allow the market to catch its breath a bit. As of now, that looks to be what is happening here, particularly on the Nasdaq. I would really love to see about two to three more days like today, where we go nowhere but the bulls fight back any selling, as I think it could set the market up nicely for another move higher. Whether we actually get that type of action is unknown. The only complaint I have is that the S&P is wedging higher a bit, and in tmers of consolidating, it is not really pulling-back. You can't fault the bulls today, but I almost wish they were a bit weaker. Short-term support on the S&P remains around 956 and on the Nasdaq it's around 1920 (9 day moving average). A break above Thursday's high of 1979 would probably signal another leg up in this amazing and still surprising rally.
If you follow me on Twitter, you know that I did take a few long trades this morning, all of which were highlighted in the video this weekend. I entered CPSL at $2.95, BEXP at $4.36, and ININ at $17.94 not long after the market opened. None were large positions, as I continue to work my way back into the market, but based on the setups, I felt they were worth a shot when they broke above the trigger points. I also took smaller positions based on the market being quite overextended. I debated between SDTH and ININ and in hindsight wish I would have entered SDTH. Volume was a little underwhelming in ININ and it gapped above a perfect entry point around $17.50, but I decided to enter later anyway. I should have listened to myself - I was stopped out at $17.42 for a 3.17% loss. As of now, I still have about 65% cash on hand in my regular account but am almost fully invested in my IRA.
Unfortunately in the short-term I did not take profits in either CPSL or BEXP today as I decided to let the patterns play out a bit. These weren't intended to be day-trades and in the case of BEXP, I hope it can develop into a trade of several weeks. They finished off their highs but look OK overall. As it is, my stops will be moved up as they hopefully move up as well. ISRG had a nice consolidation day as well where it didn't give up much and my stop remains in place. JDAS broke slightly below support at $20 today but bounced back. My stop is still in place there as well and if it doesn't start moving soon, I expect to be stopped out with a small loss. It is not acting the way good earnings plays should act as of now - I've been disappointed overall.
I will continue to look for strong setups in my scans and will also be checking these earnings reports out as they come out for possible plays there. I plan on being very particular in what I buy due to the extended nature of things, but there is no point right now in being stubborn and fighting this market by being a bear. I still like SWHC after today, and will be watching CSL, SKX, SNS, and RNOW as they form consolidation patterns that look pretty good. ANR and FCL are two others I will be watching closely (volume was perfect today on their pullbacks) but I need them to pullback a bit more before really becoming interested. If the market cooperates, these could all work very well. That's my only fear here - will the market cooperate???
That's about it for today - the bulls remain in total control and although we do need to continue to rest and consolidate all the recent gains, it is not a given it will happen. Anything is possible in this market - remember that. Good luck Tuesday.
Sunday, July 26, 2009
As always, you can right click and hit "save as" to save the videos to your computer. If you are having trouble seeing the entire video on your screen - check your resolution. It should be 1280 x 768 or somewhere around there - at least 1280 on the horizontal side.
Friday, July 24, 2009
In the face of bad news and severly overbought conditions, the performance today by the bulls was certainly impressive. I think everyone (including me) has been expecting a pullback this week and when those earnings came in last night, the thought that went through most traders' minds (including mine) was "well, this will finally be the catalyst that lets this market rest a bit". The bulls were having none of it, and although they didn't have a big day of gains, the fact that they could close this market at its highs for the day shows how bullish overall this tape has become.
Technically, there remains little doubt that this market could use some rest, and further gains from here in my opinion depend on some consolidation so that the market doesn't have a blow-off top. That's was common sense tells me. I know it doesn't have to happen, but I will continue to look for it and in all honesty am hoping it happens. The technical points I made in the video last night remain true - the Nasdaq is right at a long-term downtrend line stretching the entire length of this bear market back to late '07. A pullback or consolidation there would be completely normal and again, very healthy. The S&P is approaching the top of a broadening formation near 1000, which also is a normal place for it to consolidate. Hopefully we will get some. It certainly seems that any pullback that occurs can and should be bought, and that's the outlook I am taking. I know it seems tempting to short a market after it continues to defy gravity, but right now, it is simply the wrong play (as today showed).
I will be back this weekend with a video or two looking at this market more in-depth. I was away most of the afternoon today and still only hold positions in ISRG and JDAS, but will be looking to add more next week depending on how the market acts. Right now, although a few of the stocks I had on my list brokeout today without me, I am watching several more very closely whose patterns actually have me very interested. That hasn't happened in a while, and I am just hoping we don't see another turn like we did in early June, when so many nice patterns quickly turned ugly. Right now, not much is saying that that will happen. Take care and enjoy the weekend.
Thursday, July 23, 2009
Wednesday, July 22, 2009
Second, although it is quite obvious to everyone that we need a pullback soon, we are not as overbought as we have been at some points in 2008 and the beginning of 2009. The McClellan oscillator actually went down again today for the second day in a row. It is below 200 again after hitting a high of 229 on Monday. That is rather bizarre considering we've been up the past two days, but bizarre is the nature of this market right now.
I am not saying we're going to be up another 11 days in a row here, but my point is that further gains are, although difficult to believe, probably not out of the question based on a few indicators. Remember that on those 11 straight days of gains by the Nasdaq, only 4 of those were gains of 1% or higher, and 6 were gains less than 1/2%. Is it possible that we've been sort of consolidating as we've gone up, as weird as that is to say? Just putting that out there - to be honest, I am having a hard time figuring this thing out just like everyone else out there.
As I showed on the video last night, I do contined to find some stocks that I would be VERY interested in if only they will rest and consolidate a bit. I added a few to the list tonight - check them out when you get a chance, although some are repeated from the video: CHINA, GROW, HGG, ININ, VITA, CISG, DAN, ANR, SWHC, CSIQ
One bearish thing I noticed tonight in my scans is that the number of stocks in my BOP scans through Telechart have declined a good amount over the past few days even though the market has gone up. BOP stands for Balance of Power and is a proprietary indicator found only in Telechart - it measure the underlying accumulation in a stock. If you've ever wondered why my charts are green, yellow, or red, it is because of BOP. If you want more information, check out the Telechart website and their 30-day trials. Anyway, a decreasing amount of max BOP stocks with the market going up typically can be interpreted as weakness, since stocks aren't being accumulated as strongly.
Lastly, if we do get that pullback that everyone is expecting, one stock you may want to watch as a potential swing short is STEC. This is very risky as this has been one of the top stocks in the market recently, but looking at the chart below, it has had three consecutive gains but all three came on below-average volume that decreased from the day before. This may have a blow-off top instead, but a sharp pullback, maybe down to $27.50, would not be shocking to me at all. Just saying.
I won't be around tomorrow afternoon as my family is visiting some friends from college so my after-market post may not be up until later or maybe not at all. Good luck Thursday.
Technically, we continue to be quite stretched here to the upside but overall the market just doesn't want to seem to pullback and you have to respect that. That's why I have not shorted anything for a while and don't plan on doing so anytime soon. A few of the shorts I put in the video last night like UNT and CNQ gapped down in some cases, but then reversed right back up which is bullish. WFC and MS also acted similarly in the face of disappointing earnings, which is also bullish.
For the S&P, today was a weak attempt at breaking to new highs that failed, but it isn't the end of the world. As I said yesterday, the best thing that could happen here is some rest and perhaps just some sideways action that would frustrate everyone expecting a pullback, while at the same time working off some of the overbought condition present now. For the Nasdaq, it is coming up to some possible gap resistance around 1947 and really does need to rest for its own health. If you are a bull, it might be nice to see this type of move, especially if you're making money off of it, but for the market to continue higher for the rest of the year, it has to consolidate a bit. If it doesn't, the possibility of a blow-off top comes into play and then a bearish reversal after that. If we do get that needed pullback, 1879 should act as support for the Nasdaq.
I made no trades today after deciding to pass on OFG as an earnings trade, at least for now. It did have a nice move but I think I will simply watch to see if it forms a bull flag soon and then maybe reconsider. JDAS pulled back as is to be expected but as long as it holds the bottom of its range yesterday, I think everything is OK there. There were some breakouts from the video last night including LULU, UNTD, and OGXI, but I stayed on the sidelines for now. I really have a hard time buying regular patterns with a major index up 11 straight days.
We'll see what tomorrow brings, but right now earnings are being well-received and as long as that continues to happen, the chance remains that this market can continue to defy all common sense and move higher. A pullback certainly makes a ton of sense here and I would still watch for it, but it is not a given. Remember, this "new" market we are in is one where what used to make "sense" just doesn't anymore. That's why it's been so difficult. Take care and we'll see you Thursday.
Tuesday, July 21, 2009
Technically, the S&P got as high as 956 this morning (its high from June) but reversed at that very moment. That is obviously the key number right now but I really want to see the market rest here before getting over it. If you're a bull, the best thing that could happen is a pullback the rest of this week, from which the market can regain some momentum and bust through those highs to form new ones for the year. As extended as we are, I continue to have my doubts that new highs will be made here without first a pullback. Pretty much nothing surprises me in this market anymore, but a breakout with rest would be a little surprising. We are certainly setup for one based on price action and volume. First level I would watch for support on the S&P is around 931, but a pullback even down to the 50 day moving average around 910 would be OK without doing too much damage to the bulls, as long as volume isn't too heavy.
The Nasdaq pulled back a bit a today but nothing serious and actually closed slightly higher. Similar to the S&P, I am expecting/hoping for a pullback here and will watch 1879 as the first level of support. Much like the S&P, however, a pullback all the way down to the 50 day around 1800 would not be all that bad as long as volume isn't real heavy. Overall on both indices, however, with these continued slight price gains on weakening volume, a pullback certainly looks like a very realistic possibility. If you've been itching to short recently, you're probably looking at a good opportunity here with a tight stop if the S&P breaks to new highs. I certainly would not be buying breakouts here unless they have a specific catalyst - namely earnings.
In terms of short setups, I would take a look at the oil sector. Crude itself is running right into heavy resistance around $66 and both OIH and XLE are extremely overbought with bearish volume patterns. Take a look at a stock like UPL - running into heavy resistance around $43 and has seen volume decline each of the past four sessions. Again, in this crazy market, that probably means it will be up $10 tomorrow, but based on history, it looks like a good short setup with a tight stop. I will try and look for more tonight and share them in a video if I have time.
As for my trading, I continue to not do a whole lot overall. However, I've been writing for the past week that the only play I feel comfortable with right now in this market environment is an earnings-related move, and last night after-hours I did enter into JDAS at $19.89 and $19.99. This was over 20% higher than their closing price, but with the earnings release they put out, I felt it was one of those times that chasing a gap would work. The company put up $0.47 this quarter versus estimates of $0.30, and beat on revenues as well. I posted this trade live on Twitter - if want to follow me, click here. I like the way it acted today, including the way it bounced back from an intraday reversal to close near its highs, so this is one I will hold in hopes of further gains. Check out the video I made this weekend on earnings play for further information. I may look at one or two shorts soon based on the way the indices look, but if I do they will only be for a few day holding period.
That's about it overall - the markets continue to hold up and make progress, but with volume decreasing as price increases along with extreme overbought conditions, a pullback continues to make sense here. That probably means it won't happen in this bizarre market. Take care and good luck Wednesday.
Monday, July 20, 2009
Technically, the market continues to be overbought with the Nasdaq up now 9 straight days - given some of those days were very slight gains so maybe they don't count, but still, it's extended here. The other main thing I don't like about this move is that the move above 1879 was a sneaky one. I don't know if I can even call it a breakout because it was just a bunch of smaller moves with the exception of July 15, most of which came on below average volume. As it is, there is a little resistance at the gap back on October 6 - top of gap is at 1947 and bottom is at 1905, which is close to where the market closed today.
The S&P continues to lag here and needs to get above the June highs at 956 to put in a new high for the year. Once again, typically it would a negative divergence to see one index breaking to new highs while the other lags badly, but in this market, who really knows? Volume today was quite weak on the S&P, and typically an overbought market moving higher on lower volume bearish. Does it matter in this market? I wish I knew - nothing would surprise me.
In terms of a few indicators, the McClellan oscillator is up in overbought territory above +200, which doesn't come as a big shock. In another bizarre development, the VIX continues to just drift along the bottom trendline it's been forming for a while now - I would expect a sharper breakdown here with the market moving to new highs each day, but again, that would be normal and make sense.
Oil closed higher once again today and as I mentioned in the video, I am very interested to see what happens as it approaches the $65-66 area where it will meet some heavy resistance. Both OIH and XLE continue a massive bounce back and OIH in particular is back above its 50 day moving average after today. Financials did very little today and continue to form a little bull flag - watch $12.40 on XLF for a breakout. RTH had a nice day but is overextended and is about to run into the top of its channel around $81. I will watch that level closely.
In terms of individual stocks, I saw some well-known stocks moving today, but all of these have either extremely volatile, choppy patterns (FUQI, ARST, VIT) or negative volume divergences (GMCR, RGR, KIRK) that makes me stay away. I just can't make myself ignore these divergences based on what I've learned and what the past has taught us about stocks and how they behave. Perhaps I am just not adjusting to this "new" market, but I can't buy stocks like these.
I am hopeful that I see more calm, healthy consolidation patterns or breakout setups form soon, and after a quick look at my scans today, I did see more than I saw this weekend. There are several charts that look poised to breakout with healthy volume patterns (INOD, DAN, JNS, VITA, FCL, SWHC, CPKI, ANR) and a few consolidating nicely (UNTD, OGXI, RIGL). I don't see myself playing too many of these right now without first getting a pullback in the overall market, but we'll see. Earnings are remaining my main focus. JDAS is one I see right now after-hours that I am going to do a little research on right now.
That's about it for now - if you're buying here, just realize that things could turn on a dime and we are overdue for a pullback, but in a market that makes little rational sense, maybe that pullback won't ever come. Good luck Tuesday.
*** I did start a position in JDAS after-hours based on its earnings release. Entry was at $19.89 and $19.99. Not a real large position but the potential is there based on the numbers. We'll just have to see how the market acts tomorrow.
Sunday, July 19, 2009
Part Two - Long and Short Setups - 7/19/09
As always, you can right click and hit "save as" to save the videos to your computer. Best of luck next week - it should be interesting if nothing else. Take care.
Friday, July 17, 2009
Technically, four or five days like this would be very good for the bulls as it would allow the overbought conditions to be worked off next week and set the market up for another leg higher, but who knows if we'll get that. As I've said all week, it will really all depend on earnings and how the market reacts to them. If you know both of those answers, then you will be in good shape. If you're like most of the traders out there and are just guessing what earnings will be and what the reaction will be, then you may want to watch out - you could get yourself in trouble. I remain in cash and will continue to look only for stocks with catalysts (earnings) that make their moves more predictable in this very unpredictable environment.
I'll be back this weekend with one or two videos, but that's about it for now. Enjoy the weekend.
Thursday, July 16, 2009
Question #1 - How can the market pullback when so many stocks I saw were setup in beautiful, bullish consolidation patterns(talking about the first week of June), yet move quickly higher when I see very few nice looking patterns, but a ton of wild, volatile patterns with subpar volume trends?(talking about right now)
Answer #1 - I don't really know. It doesn't make much sense. I'm going through my charts and I found a total of 8 stocks I have on a watchlist to maybe buy(an extremely low number). Only three of these have nice Balance of Power levels (Telechart accumulation indicator). Not good at all and one of the reasons I am considering earnings trades and earnings trades only right now. Back in early June, this same watchlist had between 30-40 stocks on it on any one night, most with max BOP levels.
Question #2 - How can so many bearish chart patterns form all at once, with so many stocks breaking down on very heavy volume(talking late June here), yet just bounce back to former levels with ease on lower volume like the selling never happened (talking right now here)?
Answer #2 - I don't really know. It is happening however. One stock in my scan tonight was ARST. This gave off a sell signal between July 6-8 as it broke its 50 day moving average on quite heavy volume (July 8). If anyone bought at this point, congrats, because this stock proceeded to climb five of the next six days (three of which on lower volume than the day before) and is now at new yearly highs. Go figure.
Question #3 - We are very overbought here as the Nasdaq has been up seven straight days. Does it matter?
Answer #3 - I don't really know. On the RSI (2) short-term reading, we are as overbought as we've been at any point this year on both the Nasdaq and S&P. The McClellan Oscillator is at its highest point since the beginning of May. However, if the market likes the earnings tonight and tomorrow morning, I could see us up another 1-2%. It makes sense that we pullback here soon, but what makes sense doesn't really make sense if you know what I mean.
I don't know if any of the above is worthwhile, but it explains some of my thought processes right now and really why I haven't been trading much at all over the past one or two months. I just really don't have a good feel for this thing. Trading for one-to-two week time frames (which ideally is what I would like to do) is so difficult right now because nothing makes sense. What typically looks good turns out to be awful, and what typically looks awful turns out to be good. I hope that we can break out here and that some really nice patterns will start to form so I can just trust what I see and go with it. For the past few months, I don't think I've been able to do that. Tomorrow is options expiration and with the overbought readings and as crazy as this week has been, I don't plan on participating. Good luck and feel free to share your thoughts and opinions on some of the above questions. Maybe some of you out there are asking yourself the same questions I am.
Oh yeah, I forgot to mention, GS (my key stock from earlier this week) is still fighting that overhead resistance around $154-$156 and has made gains the past two days on decreasing volume each day. That means it will be up $10 tomorrow, right? I wish I knew.
Technically, it looks like we're getting extended here in the short-term, what with the Nasdaq putting in its seventh consecutive positive close. That may not mean as much however in the midst of the earnings we are seeing right now. Tonight, GOOG and IBM report and if the market likes what they say, then we'll probably be up again tomorrow. If they don't, then we are setup to have a big pullback but again, who knows what the earnings will be? It is simply a guessing game. In terms of levels to watch, the Nasdaq is at the moment at new highs for the year as 1879 was broken late in the session. This is certainly the leading index right now and bears the most watching. Support if we pullback should come in around 1815-1820. The S&P is looking at 956 as resistance and should see 911-913 as support.
That's about it for now - again it really does all depend on the earnings right now. UFPI was a nice earnings play today - it was only up about 5% if I remember correctly last night so I didn't think much of it. I will continue to watch for these however and if I go long, it will be with these type of plays. I am working on a video as well for these type of plays this weekend. Take care and good luck.
Wednesday, July 15, 2009
Technically, there were positive developments all over the place for the bulls today. The S&P almost gapped over its 50 day moving average and has cleared the downtrend line I've mentioned many times that extended from May 2008. This is a big deal in my opinion. The S&P dealt with resistance around 931 for most of the afternoon but was able to close just slightly above it (slightly meaning one point). The head and shoulders pattern that developed so nicely now looks like it may be voided. The next level of resistance for the S&P is 956 - a close above there would give us new highs for the year.
Meanwhile, the Nasdaq also gapped up about its former uptrend line in a bullish fashion and took aim at its most recent highs (which was also its first lower low since March). It also fought that 1861 area much like the S&P did and closed just above it by one point. If bulls move this thing higher tomorrow, then they would be clearly in control of the market.
Financials were strong today, with XLF also clearing a downtrend line and climbing above its 50 day moving average. Next levels to watch are $12.67 and $13.08. GS, my key stock to watch for the week, did breakout of its short-term base but struggled to get past overhead resistance between $154 and $156, closing at $155. If this continues higher and can overtake these levels for good, then it means good things for the overall market. I am still watching for a bull trap here however.
Both OIH and XLE gapped above the necklines of their head and shoulders today as well, putting serious doubt into the validity of the original setups. Oil bounced a bit as well and could be putting in a rounded bottom here. I mentioned in a video last week that the USO should have support around $32 and so far that is proving to be the case. If oil continues to bounce back, it probably means good things for the overall market.
In terms of individual stocks, I did see some movers today from decent patterns but I did not play any as they were extended by the time I noticed. I posted these intraday on Twitter - AMKR, RCRC, EGOV, TLEO, SLH, and CKEC. I am not finding a ton of new setups that interest me, but a few that are looking decent include VITA, JOBS, and FHCO. ININ was an earnings mover from yesterday that followed-through very nicely today. If I go long, I believe I will only do so with earnings movers, as they will have a specific catalyst to push them higher even if the market in general chops around.
So overall, about as good as day for the bulls as they could ask for and I am definitely no longer leaning bearish. Perhaps that head and shoulders pattern was too obvious. I guess the real question for me to ponder right now is whether this is real, or whether it is a trick much like July 7 was, when everyone (including me) was bearish and expecting a big fall further. That didn't materialize, and I am curious as to whether this will be different. I am guessing there is quite a bit of bullishness out there after today, so I wouldn't be surprised at all by a pullback soon.
Earnings played a big role today, and I would imagine they will continue to play a big role as we move forward. One thing that is important after GS and INTC the past two days is that expectations have probably been ratcheted up a bit, and it will be interesting to see what the reaction will be if/when reports come in worse than expected. Will we get a 250 point down day? I don't know, and that's why (as I mentioned before) I will be focusing mainly on earnings plays and that's about it.
Definitely a good day for the bulls - let's see if they can keep this thing going. Longer-term, we're still in a three-month range of about 80 points on the S&P, so it would be nice to break out of it. Take care and good luck Thursday.
Tuesday, July 14, 2009
Technically, the numbers I mentioned yesterday and in the video last night (1800 on the Nasdaq and 911 on the S&P) were not broken through today although the Nasdaq got about as close as you can. OIH and RTH both had little moves today above short-term resistance but nothing overwhelming. Financials didn't do much of anything, much like Goldman. With the S&P right below its 50 day moving average and a year-long trendline, along with the Nasdaq touching the underside of its former uptrend line, I do feel it is imperative for the bulls to take control tomorrow and push this thing through those levels if they are serious about getting a rally going. I don't know if they will be able to or not - I guess much depends on earnings.
I was surprised that Goldman just sat there today when their earnings were released. Perhaps everyone knew already that they were going to be so great (thanks taxpayers) and just passed. Perhaps most of the buying was done yesterday. Overall, it was just a weird reaction. There wasn't a "buy the news" or "sell the news" reaction - it was just "sit there and do nothing". I guess I have to look at today as bearish - not being able to bust through resistance on great news isn't very impressive. I am not locked into that view, but if you watched the video last night, you know this is one particular stock I am watching very carefully for a tell for the overall market.
Going through my scans really quickly, I notice a ton of oil stocks that put in big bounces today. This bears watching because if this group starts coming back, it bodes well for the bulls. That being said, all today did for several of these was take them right back into prime shorting area(CHK and EOG for example), so the bulls have to follow-through tomorrow on these bounces in my opinion.
Not much else to say right now - again, earnings are going to be the focus for a while now and because of that, technicals may take a back seat. ININ was a nice earnings move today but I didn't see it last night. Keep your eyes open after-hours and pre-market - this is where you can catch many big movers and get in before trading on them starts. Here are two links for pre-market and after-hours that I refresh several times a night when I am watching.
Take care and we'll see what tomorrow brings - my gut is that the bulls need to move now or they might not get another chance. Good luck Wednesday.
Monday, July 13, 2009
Technically, the numbers I focused on in the video this weekend were 1779 on the Nasdaq and 892 on the S&P. There was serious resistance at both those points and both were overtaken today which is good for the bulls. For the S&P, I will be watching 902 and then 911 as key resistance points - if those happen to be taken out as well, then I will likely reassess my bearish outlook. On the Nasdaq, 1800 is an area where the former uptrend line is at right now, so I will be watching to see if the bulls can overtake that. Just as with the S&P, a move above this level would be very bullish for the markets, but it is not a given.
Sector-wise, financials were the big winners today as they took out short-term resistance and are now have the 50 day moving average and a downtrend line to deal with around $12. A move above that for XLF would be quite bullish. RTH moved up a bit today but is still basically in a consolidation pattern. $76.65 is short-term resistance there and what I will be watching. The one thing that stands out for me today is that oil really didn't participate in the rally, which I find weird. Crude is extremely oversold but was flat for the day. XLE and OIH moved a bit higher but still look to be in bearish consolidation patterns. I would need to see this group as well as other commodities firm up before getting really bullish overall.
Some of you may be wondering why I haven't been trading much at all over the past few weeks and days like today are the reason why. I mentioned a few times last week that I would be surprised if the bulls just gave up so easily here and the market rolled over, and that's why I passed on shorting at the beginning of last week. In hindsight, I probably should have, because it turned out to be a nice area for two to three days short trades. Overall, though, I can't say I am mad about being in cash here. I am still bearish overall but realize that earnings will lead the market in its next direction and therefore am trying to be patient and wait for the perfect moment to make some big moves. I don't think we are at that moment.
What I think may happen over the next week is that these earnings releases are going to play havoc on any technical patterns out there, and that things will be very volatile. For day-traders, it will be great, but for more intermediate-term traders, there might not be a lot to do. I will look to play earnings moves to the upside if they present themselves, because I missed a ton last quarter and am still kicking myself about it. If you want to look back at some of the movers from last quarter and the power good earnings can have over a stock, check out charts like STEC and DDRX. Those have put in multi-week moves that were huge. I will try to post any possibilities I see out there as they happen.
That's about it for today - after this move, I am definitely less bearish than I was but the bulls still have some convincing to do to me. One day does not make a trend, and as I just said, the next few weeks will likely be dominated by earnings releases and the reactions to them. That makes for a tough environment, so be careful out there. Take care and good luck Tuesday.
Saturday, July 11, 2009
By Martin Hutchinson, Contributing Editor, Money Morning
Markets were cheered Wednesday when the International Monetary Fund (IMF) projected global growth of 2.5% for 2010, a slight increase from its earlier forecast of 1.9% growth.
That’s good news for investors – but consumers in the United States and investors focused on it may not see much benefit.
The IMF forecast for the United States does not sound like a lot of fun: The organization is projecting growth of only 0.8% for this country next year. That forecast runs contrary to currently optimistic rhetoric about the recession bottoming out, and may account for the stock market’s weakness over the past year or so as the very real prospects of a sustained economic bottom begins to sink in with investors.
My own view is that the IMF is about right for 2010, largely because the U.S. economy may not yet have bottomed. While economic indicators have certainly improved from their dreadful levels of the first quarter, forward-looking signals – such as consumer confidence – are still at very low levels, indeed. And that signals a moderate decline, rather than stabilization of economic output.
What’s more, the U.S. federal government is running deficits far beyond the records ever seen in peacetime. That has already had an effect on the bond markets, which have seen a substantial rise in yields from a low of 2.07% in December to around 3.4% currently – not a usual feature of an economy whose gross domestic product (GDP) is declining substantially. That suggests that the normal healthy bounce from the bottom of recession may be muted by financing difficulties from the huge federal deficits, with the economy continuing to decline for longer than expected and recovering only feebly thereafter.
In that context, the Obama administration’s $787 billion stimulus may have been misguided, based as it was on economic theories that make very little sense. Such a large amount of extra federal spending has to come from somewhere, and if the government is running a budget deficit, that shortfall has to be borrowed. While a country with a modest fiscal deficit can afford a certain amount of stimulus, that’s not the case for a country whose budget was already in deficit by more than $1 trillion – or 7% of GDP – when President Barack Obama came into office.
By enlarging the deficit so much, the administration may well have destabilized the bond market, preventing the rapid turnaround in the economy that could otherwise have been expected. As a side effect, the stimulus may also have made it more difficult to pass President’s Obama’s hoped-for packages on global warming and healthcare, making it counterproductive politically as well as economically.
Beyond the U.S. borders, the outlook is somewhat brighter. Some countries – such as Britain, for instance – are in much the same mess as the United States, with excessive deficits and a money-printing central bank. Indeed in Britain, the central bank has for the last three months been buying enough government bonds to monetize the entire British budget deficit, reducing the upwards push on bond yields, but managing to re-ignite the British housing market, which had become even more overvalued than its also-overvalued U.S. counterpart.
The IMF forecast for Britain is worse than the projection for the United States – a decline of 4.2% in 2009 GDP, and a rise of only 0.2% in 2010. That looks about right, though some of the 2009 decline may be pushed into 2010 by the Bank of England’s actions.
In China, the picture is unclear. The IMF estimates growth of 7.5% in 2009 and 8.5% in 2010, by far the best performance of any major economy, but this both takes Chinese statistics at face value and underestimates the risks facing China’s economy.
Bank lending in China was more than $800 billion in the first quarter and was again running at record levels in June; it is thus likely that China is over-indulging in real estate projects with no tenants, as well as subsidies for hopelessly unprofitable state enterprises. This means there is a substantial downside risk for China’s growth, and 2010 may be much less pretty than 2009.
This is also true for India, where the IMF estimates 5.4% growth in 2009 and 6.5% in 2010, but does not take account of the out-of-control expansion in Indian government spending – up by 36% this year to spawn a deficit in excess of 10% of GDP.
In the past, India’s economic expansions have at times been choked off by credit crunches that surface when government deficits cannot be financed. This time around the same outcome is likely. As with China, I would expect 2010 to be much less likely than 2009.
Finally, there are two countries I believe the IMF is being overly pessimistic about: Brazil and Germany.
For Brazil, the IMF is forecasting a 1.3% GDP decline in 2009, followed by 2.5% growth in 2010. This looks too low. Brazil’s trend growth rate is around 5%, and it has little trouble selling its commodity-and-energy exports when China’s demand is still growing.
Furthermore, Brazil’s budget deficit is modest and its interest rates are just below 10% -- still substantially above the country’s inflation rate of 4% to 5%. I would thus expect Brazil to considerably outperform the IMF’s forecast, showing little net decline in 2009 GDP and growth close to its 5% trend in 2010, with domestic demand joining exports as a source of strength.
Finally, the IMF is exceptionally pessimistic on Germany, forecasting a 6.2% decline in 2009 GDP and a further 0.6% decline in 2010. Since German industrial production rose by 3.7% in May and its trade surplus rose to a record 10.3 billion euros (about USD $14.4 billion), this is far too pessimistic.
Germany has been notably cautious in its stimulus, and the German budget deficit is still only around 3% of GDP. Consequently, that key European nation is likely to find expansion easy to finance, and will outperform significantly the rest of the EU in the months ahead, showing a brisk recovery from its sharp downturn. I would expect Germany’s 2009 GDP decline overall to be a mere 2%-3% and its 2010 growth to be substantial, at least 2.0%-2.5%.
The IMF and I agree that the world economy is once again decoupling, with 2010 growth much stronger outside the financial-services-oriented economies of Britain and the United States. However, we disagree on where growth would be strongest; my picks would be Brazil and Germany, not the IMF’s fashionable China and India.
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Friday, July 10, 2009
Technically, let's go over the good and bad. On the good side, the S&P once again held the last line in the sand at 875, getting as low as 872 before bouncing slightly and closing at 879. This is clearly now the most important support level out there and if it is broken, the selling will likely pick up once again. To the upside, 888-890 short-term could be resistance as the S&P still hasn't climbed back above that neckline area. On the bad side, the Nasdaq looks like it is forming a bear flag here underneath its 50 day moving average on decreasing volume. It looks similar to many of the patterns I showed last week in the videos and are typically very good short setups. When a stock or an index rides underneath a moving average without being able to get over it, it is not a good sign.
In terms of sectors and ETFs, both OIH and RTH are making very similar bear flag patterns right now on decresing volume and these are two areas I will focus on as I do my scans this weekend. Tech obviously will also be a focus with the Nasdaq looking like it does - I have not seen too many here but will look hard this weekend.
My outlook hasn't changed - I will be shorting any bounces and based on the weakness of the bounce of the past three days, that may happen soon. That is another bearish point - it sure looked after Tuesday that we were set up for a reflex bounce soon, but instead we have gone basically nowhere. Not a good sign for the bulls at all. I just hope I can find more appealing setups than I did last night. Hopefully I will and plan on sharing those this weekend in a video. Take care until then and enjoy the weekend.
Thursday, July 9, 2009
On the short side, I think we need either a bit more of a bounce or more sideways action much like we saw today before nicer patterns set up. There are a few out there that might work, like UA under $20 and AAPL under $132, but not much overall to work with right now. A lot of damage was done to stocks the past week, especially in the commodity sector. They could continue to bounce and if they do in a calm manner, I will start to see some bear flags pop up. I don't see too many yet however, which again leads me to think it is not yet an optimal shorting time.
I wish I could say something different, because I know this is rather boring, but I have to go with what I see. I never want to just make up stuff to sound interesting or informative. I just don't see much to do right now in terms of individual setups and I really don't want to force any just to do something. I will make sure to get a video out as the setups start popping up, but for now, this is about all I got - zorry. Good luck tomorrow and be patient right now, especially with earnings season.
Technically, we are getting a slight bounce here as you look at the charts, but it doesn't look very powerful as of yet. As I stated last night, I will be watching the 1775 area on the Nasdaq and the 910 area on the S&P to cap any bounce that occurs here, although I by no means think it is a given that we bounce that high. When compared to the selling we saw on Tuesday, the gains of the past two days are very weak and continue to paint a bad picture for the bulls.
Individual sectors bounce a bit as well today, but some, like the financials stopped at they came upon former support levels. XLF got as high as $11.37 today before moving lower than that - $11.30 was its former breakout point. RTH hit its 9 day moving average and reversed as well later in the session, closing slightly lower. Energy did the same thing today, with OIH getting as high as $93.56 before closing at $91.56. The neckline on its head and shoulders pattern is at $92.75, so another reversal at key levels there. Oil itself via USO closed slightly higher after getting as low as $32.10 (I said yesterday $32 would be support), but again it wasn't a strong move up considering how oversold it was. Overall, not a real bullish picture here yet.
We can still bounce higher and I hope we do, but I remain bearish and will look to short the bounces we get. I was not able to get to my scans as much as I had hoped last night but will do so tonight and plan on putting a video out with some ideas for the next few days. There may not be any out there, but I'll see what I can do.
I haven't mentioned probably the biggest variable in the market right now - earnings season. It started in earnest today and will have a huge affect on the direction this market takes. I have no idea how the earnings will turn out this quarter, although the expectations are probably not as dire as they were last quarter, so traders will likely be pickier in what they buy. Just be careful - any time you plan to make a trade, make sure to check when the company is releasing its earnings. You don't want to be caught on the wrong side of an earnings move, especially right after starting your position. So please remember that over the next month or so. Take care and I'll be back later, assuming I find some interesting charts.
Wednesday, July 8, 2009
Technically, after having the neckline for the head and shoulders pattern broken around 887, the last line of defense for the S&P today was 875,. That was tested severely but did end up holding by four points. Ideally, you would like to see a much stronger bounceback from that level if you are a bull. It's possible they bounce thing higher sometime this week, but if we get back up to around 900-910, I think it would be a very good shorting opportunity.
On the Nasdaq, a bullish reversal was also put in today but I don't think it will mean much. I am watching the 50 day as heavy resistance over the next week or so and if they can bounce it up, I think it would also make a great shorting opportunity. The number to watch is 1774, which just happens to be the breakout highs from May and a very important number overall. It is funny how these things align sometimes.
In terms of sectors, energy(XLE and OIH) put in another reversal much like Monday, but Monday's turned out to be meaningless, so I don't know if today's will prove to be different. Crude itself (USO) got absolutely murdered again today and is very oversold. I would expect a bounce back very soon - there looks to be some support around $32 for USO if anyone out there is a risktaker. Retailers (RTH) are hanging on by a thread here and could be forming a little bear flag. Financials, after hanging on yesterday, joined the party today as XLF broke key support as well around $11.30. Couple this with bellwethers like GS breaking their 50 day moving averages, and you continue to have a picture that looks quite bleak.
I continue to be in cash here and am expecting a bounce sometime over the next two days. I don't know yet if the bounce will be strong or not - I would love to see us get back up toward the numbers I mentioned earlier in this post. It is not a given, because we are not as oversold as we could be, but it wouldn't surprise me. The VIX had risen over 8 points in five days before reversing a bit today, and that is a big move there.
Overall, I would say just be careful here if you are planning to short. I will wait for a better chance, although I continue to have no interest in going long anything right now. I have some work to do tonight on my scans, but I will try to get some ideas up later in video form for you to think about perhaps early next week if we get that bounce. Take care and good luck Thursday.
Tuesday, July 7, 2009
Technically, the key numbers that held yesterday (1770 on the Nasdaq and 887 on the S&P) did not hold today and therefore it was an extremely bearish day. I've been saying this market is starting a correction for about two weeks now, and if you had any doubt, you shouldn't after today's session. The Nasdaq broke both its 50 day moving average and its most recent low around 1753, forming a lower low and therefore signaling a trend change. The next level of support for the Nasdaq is not really until the 1665-1675 area, which is quite a distance away.
Meanwhile, the S&P closed below its 200 day moving average and also the neckline of the head and shoulders pattern. To be honest, I am surprised this pattern developed as easily as it did - I expected a lot of struggle forming this right shoulder. But the drop confirms it today and the only support left for the S&P is at 875. It's possible they bounce this market at that point, but any bounce will likely be rejected by the 50 day moving average now, which is right around 910.
Oil and retail continued to break lower today, with the slightly bullish reversals seen yesterday completely taken out. That's about as bearish a move as you can see. Oil in particular is getting a bit stretched to the downside but this selloff looks like it has a lot of strength behind it in this sector. The financials are holding on by a thread here to support but look very weak and just may be taking longer to fall into full-fledged correction mode. I expect it to happen, but we'll have to see. Certainly, there is not a lot of strength out there and with tech via the Nasdaq outperforming to the downside here over the past few days, I don't know how anyone can be bullish here.
Hopefully you have been in cash for a few weeks now - I've been talking about this possible top for a while. Hopefully you also were able to take some of the many short setups from the videos last week and profit off those. Unfortunately, I passed on them at this point and obviously missed some nice moves to the downside over the past week. Right now, psychologically, I am still not where I need to be - I haven't gotten over the drawdown I took during March and April and have other interests going on outside of trading at the same time. I really don't have any confidence right now. It is a delicate thing and can make a big difference between being successful and unsuccessful as a trader. What I really just need to do is jump back into the pool and go with what I see. Hopefully I'll take that jump soon. In the meantime, that doesn't mean you can't take some of the things I see and put out here and profit from them. I just need to do the same - follow my own advice. I think it (the advice) has been pretty good over the past two to three weeks.
With the breakdown today and lack of a bounce, I think we could be looking at a very sharp downswing here over the next week or so before a reflex bounce occurs. We're getting a little oversold in the short-term but nothing overwhelming, so there is likely more room for downside here this week. Many of the short setups are now past the point of optimum entry, so if you take some here for a ride, just be aware that they are riskier and you may need to take your profits a little sooner so you don't get caught in a nasty reflex bounce. If you got short last week, congrats - I don't see any reason yet to cover. It looks like this thing is just getting started. Good luck Wednesday.