Friday, December 31, 2010

The Top 10 Stocks of 2010 and Lessons Learned From Them

Here's the final post of the year, and since the market has been sleepwalking for the past week or two, I figured it was a good time to look back at some of the biggest movers from the past year and try to learn from them.   It is always beneficial to study past winners - for me, at year's end, I go through my scans to find the biggest winners for the past year and keep them in a watchlist in Telechart.   I encourage you to do the same.

To start off, here's a quick look at the overall market this year.   Was it an easy market?   At times, you could say yes, given the relatively smooth uptrends we saw from February to May and also from September to December.   Volume was not always there in those uptrends, but overall, if you stayed patient you could make some nice gains.  

Nasdaq YTD

Now May to September - that was another story.  Total chop.  Let's hope we don't have more periods like that in 2011.   As I reviewed my basic timing system over the past year, most of the false signals I saw took place during these months.  You'll have that however - trading lightly when signals get whipsawed is probably the best thing you can do.

In terms of individual stocks, I am sharing ten with you that I think are important from the past winners.   There are many that could have been chosen, but these are the ones that stood out to me for one reason or the other.   Some are IBD-type stocks that had year-long moves (although quite choppy moves) while others were recent IPOs that had quick one or two months bursts in which they doubled or more.   They all are worth studying.

APKT
 AUMN
 
CVGI
 IDT
JKS
MIPS
MOTR
NFLX
SPRD
VHC
All Charts from Telechart, Courtesy of Worden Brothers, Inc.

As I studied these, I found some common factors that I have discussed in previous years and are again important to remember heading into 2011....
  •  All of these stocks started with a heavier volume, one-day move of over 4-5% (and in some cases the move was much higher).
  • In several cases, the first move was a result of positive earnings being released.  
  • Buying stocks that have had a big, one-day move is very difficult (at least for me) as your mind tends to think they have moved too far, too fast and will pullback as soon as you buy (at least that's how my mind thinks).   That does happen, but most of these big winners see immediate follow-through the next day.   
  • Simple method for riding your winners as long as possible - use the nine day moving average as a trail on a CLOSING basis.   When the 9 day starts to flatten out or it is broken, typically the stocks will have a consolidation period or get choppy, so it is usually best to take your profits and move to the next opportunity.
  • As your gains increase, in some cases you may want to use the 20 day or even 50 day moving average as a stop loss level.  That is up to you and your trading style.  
I hope this helps you out going into the new year.   My main account transfer is now complete from Scottrade to ThinkorSwim (I am waiting on the IRA transfers until the arbitration case in closed) and I look forward to having a positive trading year.  This weekend, I will look at some stocks to watch closely going into 2011 and also discuss my basic timing model that I have worked on at various points this year - the Nasdaq model may go to a "caution" signal after today.   Take care and happy new year!!!

Wednesday, December 29, 2010

State of the Stock Market - 12/28/10 - "Holiday Trading - Focus on Momo Names"

This Sunday, I posted some charts that I felt would be worth watching this week as holiday trading environments are typically boring and slow from an overall market perspective, but not so boring from an individual stock perspective.   In thin environments, certain low-float names can quickly attract attention from momentum traders and make big moves in thin trading environments.   SHZ is a prime example of this type of situation.  

SHZ
 
 Chart from Telechart, Courtesy of Worden Brothers, Inc.

Hopefully a few readers were able to get into this stock at some point this week and make some nice change.  If I was in it (still waiting from the transfer process from Scottrade to Think or Swim, so I am not), I would certainly be looking to take any profits that I had and would sell into any further pop tomorrow, but it was certainly a very powerful move.  Over 100% in three days??? - yeah, I'd take that.

Since I can't trade at this particular time, one thing I am doing this week is trying to fine tune my strategies for the upcoming year.  One problem I believe I have as a trader is that I have too many strategies, too many scans, etc, and therefore too many decisions to make.   I am in the process of eliminating a lot of the "fluff" that I have in Telechart and really getting down to one or two main ideas that I know can work as long as I execute them.   Finding potential winning stocks has never been a problem for me, but deciding which are best and entering them at the proper time has been, and I hope streamlining my "system" will help eliminate a lot of the problems. 

I am also working on streamlining my basic timing system for the overall market, combining breadth, accumulation/distribution, and moving averages into one system that I can use and actually trade from more often.   Because of the difficulties I have had adjusting to being an "end of day" trader instead of one who can watch the market intraday, I really would like to keep most of my main account and both of my IRA accounts in 2011 in ETFs based on this timing system.  

Good luck Thursday - as the year comes to an end, I would be surprised if the market moves much at all in either direction just due to the thin environment.   All signals that I follow remain bullish, and until we see signs of weakness, keep riding your longs if you have them.  You can probably day-trade some of the momo names with success if you're not invested, but I wouldn't do much else until the new year starts.   Take care.

Monday, December 27, 2010

State of the Market - 12/17/10 - "Snoozer"

Not unexpectedly, we saw a slow and sleepy session today on Wall Street.   With the mix of holiday trading along with a blizzard that crippled the East coast, volume came in very low today.   The action intraday was bullish as stocks started the day with a gap lower but fought back for the rest of the session to finish just slightly higher.   The Russell, Nasdaq, and S&P all tested their 9 day moving averages successfully once again today and as I've said for a while now, as long as the market is above this mark, there is simply no reason to be bearish.

There were a few individual movers today in some small caps - these are the type of stocks to focus on during slow market periods because they can still draw some attention and get pushed higher in thin conditions.   REE is a name that has been basing for a while now and had a heavy volume move up today through its 50 day moving average, putting in a pocket pivot.   This is certainly one to watch.   SHZ (shared here last night) is another stock that was up early today and didn't give much back - this could see follow-through soon from the momo players and is also worth watching.   AGM was also up over 5% but volume was light.
 REE
 SHZ
 Stocks from TC2000.com, Courtesy of Worden Brothers, Inc.

If you're trading, good luck Tuesday.   I would stay small and stay nimble as the rest of the week will likely be similar to today - some pockets of action in individual stocks, but overall not much movement on the indices.   Take care.

Sunday, December 26, 2010

Outlook for the Week Ahead - December 26, 2010

Hi, traders - I hope everyone had a great Christmas holiday and were able to spend some quality time with family and friends.   Having two young kids makes Christmas very fun so I enjoyed Friday into Saturday a good bit.  I know that I may buy stock in Fisher-Price soon after having my house now full of Imaginext toy sets and the Imaginext Big Foot toy (I can't tell you how many times we had to watch that video before Christmas morning).   Good stuff however...my boys are loving it (and their dad thinks it's pretty cool too.)

I hate to sound repetitive, but I think we are in for a boring week this week as the holiday trading environment will remain, with low volume and likely little action.   Supposedly Friday is a full trading day, but I can't imagine that trading will be heavy.   When you also factor in the "blizzard" that is coming to the East coast, I think there is a very good chance we don't see much happening this week.   We are extended after last week's holiday meltup, but as the year concludes, I would not be surprised to see further meltup as hedge funds and mutual funds try to tack a few more percentage points onto their yearly totals.   I don't know how much technicals matter in a low-volume environment like this.  The beginning of January should be interesting, as this run-up may set us up for a sharp fall, but for now, continue to focus on longs until the market gives us a clear signal that it is not the right thing to do. 

Instead of the video, I am just going to share some setups to watch here from the long side this week.   My money is in the process of being transferred from Scottrade to ThinkorSwim, so I won't be trading, but if you plan on being active this week, I would stick to short timeframes and be nimble.   Hopefully, some of these setups help you out.  
Good luck this week as the year comes to an end.

AGM
 IMAX
 JKS
 LIWA
 MKSI
 PCLN
 RITT
 SHZ
Charts from Telechart, Courtesy of Worden Brothers, Inc.

Wednesday, December 22, 2010

State of the Stock Market - 12/22/10 - "More Christmas Meltup"

More melt-up today on Wall Street, as stocks closed with very mild gains and trading was light.   Financials led the way with a 1% gain, while small caps slightly lagged the overall market.   Volume was light and will continue to be light the rest of this week going into Christmas.   It will likely remain light next week as well.

Overall, the indices are overbought on the RSI(2) and this melt up has left the markets extended, but it is Christmas and without any sellers coming into play, it is likely this melt-up continues a bit longer.   I don't know that I would be buying anything up here but as I've been saying, if you're already long, just sit back, show some patience, and hopefully keep making some money.   This type of melt-up on low volume can lead to quick bouts of selling, but I don't know that we'll see that the next two days.   More than likely, the next two days will be like today - slow and choppy with a slight positive bias.

I have been slacking recently with scanning for individual plays simply because my accounts have been in a state of flux.   I was finally able to get the paperwork done today, however, to transfer my main account from awful Scottrade to ThinkorSwim, so hopefully I will get back in the swing of things now.   Of the brokers I read, TOS seemed to get the best reviews.   From a commissions perspective, they are a bit higher, but I am usually not trading in lots of over 500 or so shares at a time, so their pricing system will in some cases be less for me that Scottrade.   It should take a week or two for the transfer to go through, but I hope to be trading again by the new year.   I still am working on getting my IRAs transferred over as well.

That's it for today - classic holiday trading right now and if you're not in the market already, there is nothing saying you can't just take the next few days off.   I think we'll see some snoozers like today, but if you are invested, then it pays to keep riding them out.   Good luck Thursday.

Tuesday, December 21, 2010

State of the Stock Market - 12/21/10 - "Christmas Meltup"

Hi traders - I apologize for the lack of posts the past few days, but it has just been a very busy time of year for me and after Christmas is over, things should slow down considerably.  I am also still trying to get my arbitration filing complete with FINRA over the Scottrade disaster and getting accounts established with other brokers, so my head has kind of been spinning here for the past few weeks.

The title of this post describes the market right now - we're in meltup mode.   I have seen some divergences in my numbers and with some individual stocks showing breakdowns (discussed last week) but last Thursday, the indices all tested their 9 day moving averages, held, and have been moving up since then.   Today's action was a prime example of what a meltup is - the market had a slow and steady move higher today, rarely pulling back but volume was quite low and the gains were modest - in no way did today feel like accumulation.   It seemed to be more a lack of sellers.  

Strategy-wise, I would keep it simple.  If you're long, I would stay long with a stop underneath the 9 day moving average on the indices.   I have preached this for a while now and this has worked very well.   There have indeed been divergences and some divergences remain out there.   An example of this would be the main breadth signal I follow, which turned neutral last Wednesday and has remained neutral since.   The reason why is that there just haven't been any real strong days in the overall market recently with lots of breakouts in individual stocks.   Since December 2, we haven't had any days were the breakouts vs. breakdowns was larger than 130 (+ or -).   That's rare to see and the reason the main signal is neutral instead of being bullish.  Basically, neither the bears nor bulls have much enthusiasm for this market right now, but the bulls I guess have a bit more.


Another small divergence I see is that as I go through my scans, I don't see nearly as many stocks extended as I would expect with the market up the past four days.  There are a few, but overall I see more stocks that look like they have pulled back over the past few days and maybe are ready to move higher.   To be honest, I really don't know what to make of that - is it a sign of weakness that the indices moved higher but many individual stocks couldn't or is it a sign that perhaps there are more gains to come?

Overall, there is no reason as of now to do anything but stay long if you have been long over the past few weeks.  We might pay for this action at some point soon (perhaps as the new year begins) but until it happens, don't anticipate it.   If you're not already long, be careful and stay small, but if you have positions in place, ride them I guess.  Good luck Wednesday.  

Sunday, December 19, 2010

No Market Video This Week

I apologize, but I have been very busy this weekend and will not be able to put out a video for the upcoming week tonight.   After the next three days, I will get a brief vacation from work and will try to get more material out for that week after Christmas.   Best of luck this week - my signals are slightly neutral (turning from bullish on Wednesday) but overall I would say there is a better chance of this market heading higher than moving lower.   Being it is Christmas week, I would bet volume will be light and therefore, be careful.   I'll be back tomorrow with the normal market outlook.   Take care.  

Thursday, December 16, 2010

State of the Stock Market - 12/14/10 - "Better Action"

We finally saw a somewhat strong session today on Wall Street, as stocks started flat but were able to climb midday and finish near their highs for the session with decent gains.   This positive action was in contrast to the weak closes we've seen all week, so that is a plus.   Volume as of now looks to be a good bit lower than yesterday's totals, however.

Technically, the major indices look like they have put in a nice bull flag here over the past week, resting right on the 9 day moving average before bouncing today.  From a strictly visual perspective, the S&P, Nasdaq, and Russell 2000 look quite good after today's action and seemed poised to make more gains from here. 

Nasdaq

If you put the visual appearance of the market aside, however, there has been some weird action this week that I am a little confused about to be perfectly honest.   We have seen some distribution this week (2 for the Nasdaq and 1 for the S&P) but no real damage.  When you accompany that distribution (however slight it was) with some of the breakdowns in individual stocks I talked about Tuesday, I would expect the indices to look worse than they do.   The main breadth indicator I follow also turned neutral yesterday and remains neutral today.   All in all, a lot of weird signals and I don't know what to make of them as a whole. 

Commodities were generally mixed today but gold had a mini-breakdown that would typically have me thinking bad things as well.   Oddly enough, I expect gold to bounce here soon - just a hunch.  Silver and oil held up better with silver bouncing off of its 20 day MA and actually closing slightly higher.   After two positive sessions in a row, the dollar backed off today and looks to just be chopping around right now.

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

Overall, this has been a weird week and I don't quite know where we go from here.  The indices look good and there is certainly no reason to short anything - I would continue to look for buying opportunities as they present themselves.  At the same time, just be aware that there are some anomalies out there that bear watching, so keep your stops in place and respect them on the long side.   Good luck Friday.

Wednesday, December 15, 2010

State of the Stock Market - 12/14/10 - "Intraday Selling Remains The Trend This Week"

It was Groundhog Day today on Wall Street, as for the third time this week, stocks started the day somewhat strong but ended up giving most of their gains back by the end of trading.   Yesterday's selling took place in mainly the final hour, but today's selling started soon after the open and ran through the rest of the session.  The selling we've seen has by no means been heavy, but you never like to see the market close near its lows for the session, and that's what we've seen this week.   Volume appears to be heavier, giving the Nasdaq its second distribution day this week and the S&P its first.

Technically, I'll share some charts below that will give you an idea of what's happening right now.  Overall, just visually, this looks like a healthy consolidation and with the markets near their 9 day moving averages, it is probably a chance to enter some longs if you have not done so previously (although there are other things going on that bear watching).  


The dollar looked awful on Monday but has bounced back the past two sessions.  Gold and silver has acted how you would expect them to with the dollar bouncing, but oil has seemed to hang in rather well and the chart looks bullish.

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

Of the charts I mentioned in yesterday's post, I don't see many that all of a sudden look better.   I do think those breakdowns were meaningful in some respect and although the overall market still looks OK, for some reason I think caution is a good idea here.   There has been some subtle distribution this week and although this dip may well be one to buy, I don't know how aggressive I would be at this moment.   The intraday action of the past three days suggests the bulls may be a little tired and perhaps you wait until they show strength through an entire session before getting long.   Good luck Thuesday. 

Tuesday, December 14, 2010

State of the Stock Market - 12/14/10 - "Worrisome Action in Individual Stocks"

I have a really bad headache right now so this post will be short.   Today seemed to be a session much like yesterday was - strong early, but quite weak late.   Overall, this may be just normal consolidation - however, I see some warning signs in individual stocks that has me pausing my "just a pullback" outlook at least a little bit.

I'm going to give you a list of stocks below.  Some are small-caps, but some are bigger-cap leaders.   These are stocks that had technical breakdowns today (through short-term moving averages).   Although the markets have not been hit hard yet, seeing this type of action in so many stocks (on what was a flat overall day) is something worth watching. 

TGA, RITT, URRE, SNCR, APKT, ASYS, SVN, MIPS, GPOR, ACTG, TZOO, OVTI, GMXR, TSLA, KNDI, HSFT, CRM, ATML, CSTR, RVBD, CTEL, EZCH, SIMG, FFIV

Based on this action, I would perhaps tighten my stops on any long positions and watch this market carefully.   Maybe it is nothing, but again, that action is not something to ignore, and a heavier volume breakdown in the overall market would confirm that this market needs a more significant pullback before moving higher.  Good luck Wednesday.

Monday, December 13, 2010

State of the Stock Market - 12/13/10

Not a great day today on Wall Street - the market tried to rally a bit early in the session but at no point could really get something going.   The final hour of trading was particularly negative, with both the S&P and Nasdaq selling off and finishing at their lows for the session.  Volume appears to be heavier, and that would give the Nasdaq a distribution day, as it underperformed the other indices and finished with losses.

Technically, both the Nasdaq and Russell 2000 finished with losses today (albeit small ones) and as I mentioned this weekend, the markets are looking extended and after today, perhaps  a bit tired.  I guess being up eight days in a row like the Nasdaq just was will do that to you.  No damage was done today and there are still no clear signs that the bulls are losing control of things - we just may pullback or consolidate a bit here.   That is normal.   Watch 2600 on the Nasdaq and 1225 on the S&P as potential bounce areas (9 day moving averages) over the next few days.   If those would happen to be broken, then I would reconsider my stance. 

One interesting development today is that the dollar broke down once again from what now looks like a bear flag, but the market didn't follow in kind (meaning higher).  Silver was up strong in correlation, but gold and oil were up only slightly, which is also interesting.  Perhaps this is another sign that this market is a little tired here - when the dollar puts in a big move lower and the market doesn't respond by moving higher, you should pay attention.

Charts from Telechart, Courtesy of Worden Brothers, Inc.

Although I recommended caution on entering new positions at the start of trading today, there were a few nice moves today from the weekend video.   CCME, GMXR, and CGNX moved early with gains of 7, 6, and 5% respectively (although not all closed well).   RITT was one breakdown from today - the 9 day moving average did not hold on a closing bases for the first time in a long time so I would take it off the watchlist for now.

We'll see what tomorrow brings - no need to sell if you are long from two weeks ago, as we still haven't seen anything that tells us this move is over.   We are a bit extended, however, so chasing stocks early today probably got you into trouble.   If we do get a dip, it will likely be a buying opportunity, at least based on what the market is telling us now.  If things change, I'll let you know.  Good luck Tuesday.

Saturday, December 11, 2010

Stock Market Video - Technical Outlook and Setups for Week of December 13, 2010

Hi, traders. Another bullish week on Wall Street - hopefully you were able to get in last week and hold on for the ride.   We do have some slight negative divergences out there with commodities not bouncing back strong the past two days and volume on the indices kind of iffy, but price is the most important thing to watch.  Certainly, the market continues to move higher and so there is no reason to fight it.   We are extended here so if you're not currently invested, you may want to wait for a brief pullback, but overall things remain bullish and until we get some heavier volume selling, no need to overthink it.

Part two goes over some long setups worth watching this week. I was kind of surprised that I found as many decent charts as I did because the market overall looks extended. I guess you don't argue with it - just go with it.

Hope you find the videos helpful and informative.   As always, feel free to email me with questions or comments - I enjoy hearing from my readers.  

To see the video in HD, please click "720p" and "Full Screen" on the video bar - HD will be available after processing.


Thursday, December 9, 2010

State of the Stock Market - 12/9/10 - "Still Looks Like Consolidation"

Kind of a slow day overall today on Wall Street, as stocks started higher but sold off right from the open.   The selling lasted until lunchtime and from there, stocks basically chopped sideways for the rest of the session.  Both the Nasdaq and S&P came slightly off of their lows and finished with modest gains, but the action still looks like consolidation to me and that is not a bad thing.

Technically, the overall picture remains bullish as no damage has been done to the market following Monday's intraday reversal.  The Russell 2000 in particular looks like it simply just forming a bull flag here. 


Financials have had quite the run and are also overbought, but look like they want to move to new recent highs.   I would not be buying a breakout here as they are very extended, but it is something to watch.   IF these get going, that might give the market a nice boost.  Of course, if the financials rally while gold and silver fall, it might all be a wash.

Charts from TC2000.com, Courtesy of Worden Brothers, Inc.

One interesting event for me today was an email I received from Worden Brothers.   The email let me know that they are coming out with a new, updated version of their awesome Telechart software.   I was able to get a beta copy and will enjoy checking out the new features during my "hiatus" from trading until probably after the new year as I get my accounts worked out.  Here are some of the additions to the new version of Telechart (taken from the email)....

Here are just a few new things about TC2000.com (Gold or Platinum):

Online-access from any computer anywhere (including your personal settings, WatchLists, etc)
Personal WatchLists—now shared across all Worden platforms
Data feeds (US—common, preferred, BB, PS; Canadian; Forex; Mutual Funds; Indexes)
Bar Intervals—Daily and above; Intraday (supplied by BATS)
Indicator Library—huge library; ability to overlay and daisy chain
QuickSort—fastest sorting ever!
WatchList Columns—created by conditions directly from your charts
News/notes window—streaming news, personal notes and notes from the TC community
Drawing Tools—great list of powerful tools including trendlines, Fibonacci, Gann, text and more.
Alerts—trendline, price, condition & reminder
TC Menus—still have EasyScan, PCF’s, Custom Date Sort, etc.
Full Integration with Twitter & Facebook

Completely compatible with Macs!

As I learn more about the release of the new software, I will be sure to let you know, and if you are not using Telechart currently, you don't know what you're missing.   There is always a free 30-day trial for new customers - I think you will find it very helpful to your trading and organization.  

That's it for today - tomorrow might be another slow day into the weekend, but the picture remains bullish overall.   Until we get some heavier volume selling, I don't think that picture is going to change.   Good luck Friday.

Wednesday, December 8, 2010

State of the Stock Market - 12/8/10 - "Constructive"

We saw a slow but constructive day today on Wall Street, with stocks once again bouncing back from some early selling and finishing near their highs for the day.   The late selloff from yesterday's tried to carry over a bit into today's action, but the bulls said no and the overall action continues to be bullish.  Volume appears to be quite low today.

Technically, we could still use some consolidation here but there are not too many reasons to be bearish here from a longer-term time frame - a few, but not many.  One thing that I would worry about is that both gold and silver had some downside follow-through today to yesterday's reversal, going against the overall market in that regard. I would not want to see further selling in the precious metals over the next few days - dip buyers need to come back soon.
Gold
Chart from Telechart, Courtesy of Worden Brothers, Inc.

My only other worry I would have is China.  I talked about China this weekend and some of the stocks that might be worth watching if Shanghai bounces at all anytime soon.   After (in most cases) moving nicely on Monday, many of the names on my watchlist have acted poorly the past few days - names like CCME, HTHT, XUE, and MY.  I would be careful about any China names right now simply because this seems to be one of the few areas of the market where buyers aren't coming in very strongly. 

I don't have much else to say here - the markets remain strong overall and although there are a few things to watch carefully, most signs put to a market that wants to continue higher.  Until we see some heavier volume selling that breaks the short-term moving averages, the long side is the correct side of this market.   Take care and good luck Thursday.

Tuesday, December 7, 2010

State of the Stock Market - 12/7/10 - "Short-term Fatigue"

Not a great day today on Wall Street, as stocks started the day hot and simply faded from there.  After selling off the opening gap, the market tried to bounce back slowly into the 2:00 hour, but some late selling came back in and stocks did end up closing at their lows for the session.   Not a killer by any stretch, but the action is a sign that the market might be a bit tired in the short-term and could use some consolidation.   Volume was heavier.  

Technically, when you look at the chart of the Russell 2000, it is quite easy to see that stocks were extended this morning and the gap up was taken as a chance to book some gains from last week's move higher.   There isn't anything wrong with that - it's completely normal - but what it tells us is that buying at this point might get you in trouble.  The Nasdaq and S&P both put in similar reversal bars today but neither was as extended as the Russell was. 
Russell 2000
Chart from Telechart, Courtesy of Worden Brothers, Inc.

I have said for the past few days that a pullback to the short-term moving averages should be seen as a good buying opportunity and today doesn't change that outlook.   If you are already long or were long since last week, there is no reason to sell here unless you are looking for only smaller profits.   Now if the short-term moving averages are broken and volume gets really heavy the next few days, then yeah, obviously today meant something.   But as of now, there is no reason to think today's action was simply a market getting ahead of itself. 

Good luck Wednesday - we need some consolidation and perhaps the rest of this week will give it to us.   Take care.

Monday, December 6, 2010

State of the Stock Market - 12/6/10 - "Consolidation Day"

A pretty slow day today on Wall Street, as stocks started lower, fought back to regain the early losses, and finished mainly flat on the session.   It is good to see dip buyers continue to come in and be there - it wasn't like this morning was a major selloff, but the market still bounced back which is a big positive.   After the big gains last week, the market had a right to sell off, but a few more days of this type of consolidation would be even better.  Volume appears to be quite low today.

Technically, we continue to be in an area where we may consolidate, but there is nothing that says we can't go higher first.   The small caps continue to lead (Russell 2000 outperformed today) and that is also always a good sign.  Overall, things remain bullish and it certainly appears any dips back to the short-term moving averages are simply buying opportunities (as I mentioned this weekend).

As I continue to do research and decide on a broker to switch to from Scottrade, I remain out of the market - it kind of stinks but I accept it.  Right now, I am thinking about Think or Swim, Interactive Brokers, and Trade King.  This is not a decision I want to jump into without doing research however, so I am doing my due diligence now to hopefully avoid the type of mess I was put in by Scottrade.  When I do pick a broker (, it will still take probably a week or two for things to clear, so I may not be trading myself until the New Year.    I do hope, however, you have been able to benefit from my videos - we had some nice winners today.

Both REE (+14%) and CCME (+11%) were highlighted in this weekend's video as potential movers and both obviously acted well today.  HTHT is the only one the acted "poorly" and I would take that off any watchlists you may have for the time being.  Most of the setups are still valid but you may want to wait for a bit more consolidation in the overall market.

That's about it for today - good luck Tuesday.

Saturday, December 4, 2010

Stock Market Video - Technical Outlook and Setups for Week of December 6, 2010

Hi, traders.  Obviously a very bullish week on Wall Street this week, and as such, all signals point to getting long if you are not already long, or staying long if you got in early in the week.   We are a bit extended after three days higher so a pullback could come early next week, but any pullbacks to the short-term moving averages should be viewed as buying opportunities unless they are accompanied by major volume.  Part one looks at these issues in more depth.

In part two, I go over some setups to watch - many stocks already started moving this week so there aren't a ton of lower-risk setups, but I share the ones I would watch.  China has been weak recently but I continue to think those stocks are worth watching for a bounceback rally.

Hope you find the videos helpful and informative.   As always, feel free to email me with questions or comments - I enjoy hearing from my readers.  

To see the video in HD, please click "720p" and "Full Screen" on the video bar - HD will be available after processing.


Friday, December 3, 2010

Final Scottrade Post

Some of you will likely be happy today because I will no longer be talking about Scottrade after today.  I guess this whole mess has in a way come to a conclusion today after I talked on the phone to Scottrade's compliance office this afternoon.   I was informed that there was a mistake execution of my original stop loss back on November 7 or 8 and that they had to "bust" the execution (reverse it) because it was an error.   I was then told that they do attempt to tell customers when this occurs but are not required to do so.  For some reason, "the ball was dropped" and I was never informed.

I asked the officer what I exactly I did wrong in this whole mess, and he told me "nothing".   He also told me that Scottrade will not be reimbursing me for my losses - basically I am out of luck.  I can try and write a letter requesting reimbursement, but realistically, nothing will happen.  I am out the money lost because of an error on their part.

So to review, an execution of a stop loss order was first messed up (by either Scottrade or their trading/executing partners) and then the attempt to contact me about the first mess up was messed up as well.  I am out over $1000 on this position through no fault of my own, and even though Scottrade admitted it was their fault, there is nothing that they will do about it. $1000 may not be big a big amount to a lot of traders out there, but my accounts are only in the low five-figures so for me, when you lose 5-10% of your account on one trade (through no fault of your own), it does suck.

I apologize if my market posts have been shorter or less focused recently, but this event has really thrown me for a loop, so much that trading hasn't really been something I would have wanted to do anyway over the past week even if I was able.   Those of you who suggested brokers for me to check out, I do thank you - that research will begin in earnest I guess now.  Have a good weekend and I'll be back with a video at some point.   Take care.

Thursday, December 2, 2010

State of the Stock Market - 12/2/10 - "Finally, Some Follow-Through"

A really nice day today on Wall Street, as stocks finally saw some follow-through and tacked on more gains to yesterday's tremendous session.   Stocks started the day only slightly higher, but buyers slowly and steadily pushed stocks up throughout the day and they finished with very nice sized gains.   This action (the slow, steady gains through the session) was really what I wanted to see today, but oh well.   It looks iffy as to whether volume will be heavier than yesterday, but the action seemed more like accumulation than yesterday did if that makes any sense. 

Technically, the breadth signal I follow went bullish yesterday (I posted this on Twitter last night) and the reason I am more optimistic right now than I was a few weeks ago was that we finally saw follow-through today.  We've been waffling around here for a month with neither side taking control of things, but with the bulls now putting two very positive session in a row together, you have to assume they are back in control.

Both the S&P and Nasdaq are quickly approaching their late October highs and could slow a bit in dealing with that resistance, but I think there is just as good a chance that the market busts right through those without much resistance.   The Russell 2000 made new highs today and when small caps are leading, you have to like your chances with going long.  Hopefully you were leaning that way before yesterday as I kept discussing and were able to get into some positions at good entry points.   Now you just ride them up (hopefully) because things look good.

I posted some setups last night on Twitter and a few like FOSL, GGAL, and CALX put in nice sessions today.  HTHT was the miss, as I guess my "hunch" it would pop soon wasn't a very good one.  I was a little disappointed that I didn't see more quality setups in my scans than I did last night - normally I would take that as a warning sign - but with the overall market acting well, all you can do is go with the ones you see.   There are setups out there - they're just a bit harder to find.   Ones to consider tonight are ACTG, MIM, BIDU, BG, ZAGG, CGNX, and REE.

The November jobs number will be released tomorrow morning, and that could possibly throw a wrench in things, but overall things look very good for this market.   If you are not already long, continue to watch for low-risk entries in strong stocks.   If you are already long, just sit back and ride this (hopefully) new uptrend.   Take care and good luck Friday.

Wednesday, December 1, 2010

Another Update on Scottrade Fiasco

Just got off the phone with a compliance officer at Scottrade and I feel it is important to share what he told me, as it is quite important.   He could not get into specifics of my case because he did not work on it (although he did tell me their response was mailed today, which means I will get it next week, not this week), but he did say one thing that absolutely blew me away and that I still really can't fathom.  

I asked specifically about their company policy in terms of reversing trades - if they go in and reverse a trade, will they let the customers know?   He told me no - traders are made aware via statements and such, but are not told about reversed trades immediately via either email or a phone call.   I tried explain to him the complete recklessness of a policy like this to a trader, but he just said it was in the brokerage agreement and that was pretty much the end of our discussion. 

If you are a Scottrade user, I just think you should be aware of this policy.   Actually, I think you should be scared.  Basically, according to their policy, it is always YOUR responsibility to make sure THEY executed the trade correctly and didn't decide to reverse it later.  Don't do what I stupidly did and assume that when a stop loss is hit and you are sent an sell order confirmation by email that said the stop loss was hit and the stock was indeed sold, you don't have to worry about the position anymore.  Boy, what a fool I was.  Make sure you check your account often (theoretically you really shouldn't take your eye off of it ever) because you'll never know if they find an error with a trade and then reverse it on their own.   They certainly won't tell you about it - it's YOUR job to find out.

I could write more but I really don't know what to say right now - I am again just blown away by this.   I always thought I was relatively safe trading because I used stop losses religiously.  Now I realize that with Scottrade, stop losses really don't even matter in theory.   I do apologize for continuing to vent about this mess but I feel it is important to share and encourage you to share this information with others that may trade as well.  Hopefully no one will have to go through a similar situation again if others are made aware.   Take care.

State of the Stock Market - 12/1/10 - "Finally"

A very strong day today on Wall Street, as stocks gapped up at the start of trading and moved higher from there, closing with very large gains.   The intraday action was suprisingly slow given the percentage gains, as the only real action took place in the first half hour of trading and right around lunchtime.   The rest of the day was basically sideways action.   Volume looked to be

I have written from a slightly bullish slant the past two days but in no way did I expect a move this strong today.   Technically, the S&P cleared the key 1200 area and looks poised to run if it wants to, with resistance still about twenty points away.   The Russell 2000 also broke key resistance and it is always bullish to see small caps lead the way higher.   As always, follow-through will be key - in a market going nowhere, the bulls have to keep this going tomorrow for today's move to mean anything.  

 S&P 500
 Russell 2000
 Charts from Telechart, Courtesy of Worden Brothers, Inc.

I remain in cash due to Scottrade's idiocy (no response yet again today - now 16 business days and still waiting) but hopefully you were able to make some money on the long side today.   I don't think it was an easy day to make it if you weren't already invested due to the boring intraday action, but it is what it is.   There were some decent movers from this weekend's video today like CVGI, SM, OII, and EZPW, but to be honest, I was kind of surprised the gains weren't bigger given the overall market action.  I don't know if that means anything or not.

We'll see where we go from here but the move today could obviously be the start of something big considering we've had about a month-long pullback and are in a typically bullish time of year.   I haven't been hitting my scans as hard this week due to my account situation, but I'll try and take a look tonight and share any setups I may see.   Good luck Thursday.

Tuesday, November 30, 2010

State of the Stock Market - 11/30/10 - "Support Holds Again, But Still Going Nowhere"

Maybe a shorter post today because our power was out at work today so I was completely disconnected from following the intraday action and don't really have a good feel for what happened.   The market was obviously down with the Nasdaq leading the way, and we saw no follow-through to yesterday's reversal off the morning lows.  At the same time, it wasn't like the bears killed it today - stocks once again bounced off their lows with the S&P testing that key 1173 area once again and holding.   In my opinion, this remains a market full of weak bears and weak bulls, and until one shows some ability to control trading for more than a day, we will continue to chop around going nowhere. 

There are a few bullish charts I see right now which should give some hope to those going long right now. Both gold and silver were up today, and in the face of a weak market and another positive session for the dollar, that is nice for the bulls to see. 

Chart from Telechart, Courtesy of Worden Brothers, Inc.

With the dollar very much extended, I continue to think we're more likely to see the next move go up rather than down.   It's not certain - just more likely - and I don't necessarily see a big move anyway.   I continue to believe we will see a choppy, frustrating rest of the year overall.   For the bears, I would look to short some below 1174 on the S&P, as a break of that level could really crack things open, but I am not anticipating that move.   I'll wait for it.  

Be careful out there right now - we have a market that isn't really going anywhere.   Having a strong opinion one way or the other could get you in big trouble at this juncture, so keep an open mind and react when the market starts moving again.   Above 1200 on the S&P and you go long.  Below 1173 and you go short.  In the meantime, doing nothing is probably best.   Take care and good luck Wednesday.  

** Still no official "U.S. Mail" response from Scottrade today - the fifteenth business day since they told me I would be contacted in seven to ten business days.   Are there any customer service awards that I can nominate them for?

Monday, November 29, 2010

State of the Stock Market - 11/29/10 - "Still Going Nowhere"

A good day overall today on Wall Street, as the bulls fought back from some heavy early selling to post only modest losses and in some cases, little loss at all.   The day started with a gap down and some continued selling from that gap for about the first hour of trading.   From there, stocks moved sideways until a bit after 2:00, when they bounced back into the close and finished near their highs for the day.   Volume looks to be heavier than Wednesday's totals. 

Technically, there was some key action today on the S&P, as it tested key support at 1173 (recent lows) and also at its 50 day moving average.   Since it bounced strongly off of that support, it passed the test with flying colors.   However, they are still below their short-term moving averages and follow-through will be the key.


The Nasdaq and Russell 2000 also bounced off of their lows but the technical action was more significant on the small caps, as they tested their 20 day moving average again and passed.  The Nasdaq overall is a mess - not really bearish, not really bullish - just a mess.

Commodities were fairly strong today across the board with the dollar getting quite extended here and overbought (at least according to UUP).   This bodes well for further bullish action over the next few days - the rise in the dollar has coincided strongly with the recent overall market pullback.   Perhaps the bulls need the dollar to sell off before taking back control of things overall.  

 Charts from Telechart, Courtesy of Worden Brothers, Inc.

I made no trades today and until this Scottrade mess gets resolved, I won't be trading.  That doesn't mean you can't.   I didn't see a ton of great setups this weekend but one from the weekend video (CPE) was up nicely.   I see some that look like they want to pop (CVGI, CCME, and SM stand out to me right now), so if you're looking for longs, there are some ideas. 

If I had to pick a side going into tomorrow's session, I would side with the bulls simply because the dollar looks tired, but really, what matters right now is seeing some follow-through.   In the past nine trading sessions, we've seen four moves of over 1.4%, and that's not counting today's big intraday reversal.   The problem is that two of those moves have been positive, and two have been negative - in the grand scheme of things, we've gone nowhere.

My basic outlook in the weekend video was that I expected more chop over the next few weeks, perhaps even into the new year, and for now I stand by that.   Until one side can put a few strong days together in a row instead of this back and forth crap, I think cash remains a pretty good option, at least for swing traders like me.  The numbers I follow are neutral, so I guess I am as well. Good luck Tuesday.

** If you're wondering about Scottrade, I have still not received their "official" response via U.S. mail yet - today was the fourteenth business day since the original email was sent and received.   I guess the part of their email response that said "You will receive a written response via U.S. Mail directly from our Compliance Department in approximately seven to ten business days" was a typo or something on their part.  Yep, great customer service there at Scottrade.  

Sunday, November 28, 2010

Stock Market Video - Technical Outlook and Setups for Post-Thanksgiving Week - 11/29/10

Hi, traders.   I hope everyone had a great Thanksgiving and is enjoying the weekend.   We had a choppy week last week, which is pretty typical of holiday trading, but it leaves the market in a questionable position.   Neither the bears nor bulls seem very strong right now, so trying to figure out which way we go from here is hard.   Keep an open mind - personally, I am leaning for more chop through the end of the year.  I discuss why in part one of the video.

In part two, I go over some potential setups for the week ahead, although one reason I am expecting more chop is that I just don't see that many quality setups out there right now.   Not too much excites me.   This may be partly subconscious because I can't trade until this Scottrade mess gets worked out and I decide which brokerage I want to move to so be aware of that. 

Hope you find the videos helpful and informative.   As always, feel free to email me with questions or comments - I enjoy hearing from my readers.   Have a great Thanksgiving week and good luck.

To see the video in HD, please click "720p" and "Full Screen" on the video bar - HD will be available after processing.


Friday, November 26, 2010

Update on the Scottrade Fiasco

Just updating those who emailed about the ongoing situation with Scottrade.   I talked directly to someone in their compliance department this morning, trying to find out what exactly happened and what they would do to resolve the situation.  The first response I received was that the person on the phone will need to do a little research and that he will call me back.   Fine - that seemed perfectly reasonable.

When I received a phone call back, all the person could tell me was that there was someone who was assigned to the case and that I will be receiving Scottrade's "official response" via U.S. mail next week.  He said he could not answer any other questions in relation to the case because someone else was handling it.

I didn't have much of a problem with this response overall - OK, I understand someone is working on the case and you (the person on the phone) really doesn't have any information.  Fine - although I will point out that in the original email, they stated that I would receive a formal written response via U.S. mail in seven to ten business days.   Today will be the thirteenth business day and if I get it late next week, we will be going on sixteen-seventeen business days.   I don't know how that is acceptable.

I ended my conversation by asking this simple question: Does Scottrade have an official policy for letting customers know when a trade is reversed?  He first gave me some crap about how each trade is different and how they let the branches know, and then the branches let the customers know (which I now personally know is not true) and he doesn't know for sure how long this takes.   I pressed him again and repeated the original question, "Does Scottrade have an official company policy for letting customers know when a trade is reversed?"  He could not give me an answer.

If you are a Scottrade customer, this would worry me.   I am unfortunately still a Scottrade customer until I figure out what to do from here, so it worries me immensely.   That they can reverse a trade and then not immediately contact the customer via email or phone is extremely worrisome - such that I wouldn't want to put any money at risk until I knew there was an official policy.  I never even fathomed something like this could happen until it happened to me.  Maybe I was naive - I don't know.   I'm done trading until this gets worked out - at least if I am in cash, I know they can't do anything to my account.  Right now, that's the only safety measure I guess I have.

Thanks for the emails and comments - I'll keep those of you interested up to date as this progresses.   Those that don't care - I apologize for the rant, but let's be honest, this week has been nothing but chop and from a swing-trading perspective, very difficult to trade.   Take care and enjoy the long weekend.

Wednesday, November 24, 2010

State of the Stock Market - 11/23/10 - "I Am Through With Scottrade"

No market talk today because I am about as blown away as I could possibly be with the brokerage firm I use, and I wanted to share my experience so as to hopefully prevent others from getting involved with the same sort of problem I experienced today.  

A few weeks ago, I posted about some weird stop-loss activity in my IRA.   I was stopped out of two positions in BORN and ASTI but only in opposite accounts, and only at the lows of the day.   I emailed Scottrade to inquire about the situation and they said they will be in contact soon.   I never heard back from there and I guess really didn't think much about it - I just figured that there wasn't anything that could be done and I was out of luck for the time being.  

I got home today and had a message from my local Scottrade branch explaining how they were just made aware (some two weeks after the incident) of some questionable trades and he wanted to follow-up on this issue.   The message also informed me that one of the trades was actually reversed.   I said, "What?"

You see, Scottrade never told me the trade was reversed.  No phone call.  No email.  Nothing.  On November 8, I was stopped out of ASTI at $4.37.   On the same day, they put the original position back into my account at $4.37.   IF I was made aware of this, I wouldn't have a problem.   Unfortunately, that's where the problem comes in to play.  

Somehow I was supposed to know that this happened I guess.   Somehow I was supposed to log into my account every day (which is not something I do anyway because I don't trade my IRA very often) and check to see if the position was reversed.  I never asked for it to be reversed - I simply wanted some details about the bid-ask at the time of the trade and what the original stop-loss orders were.  I wanted an explanation.  Because I am stupid I guess, (I really don't know what to think right now), I didn't and I am now a proud owner of ASTI at its current price of $3.40, after "rebuying" it unknowingly at $4.37.

If you follow my blog, you know that I don't mess around with losses too much.  I don't hold stocks longer that they need to be held - I keep my stops and let them work.  Often times my stops are too tight if anything.   Now I am sitting on a position that is 22% underwater.  Actually, I did sell it today at $3.39, so I am taking a loss of 22%.  Thanks Scottrade!  

The best part in talking to the broker when I called him back was that he said he's never seen something like this really happen, and that he doesn't know why the compliance officer didn't contact me or him at the local branch.   I asked him if anything could be done, but (without saying it directly) he said I am basically out of my money.   I can "draft a letter" (his words) and send it to the compliance department and perhaps something can be done.   That gives me a lot of confidence, because Scottrade's compliance departement has been so on the ball through this whole thing. 

I guess I should count my blessings that they didn't reverse all of my trades over the past few weeks, because then I would be sitting on potentially even bigger losses.   Perhaps this is something that happens a lot and I am getting worked up over nothing.   However, I am pretty ticked off right now, not because of the lost money, but because I had no control over the lossed money.   If I lose money on my own accord, I can handle it.   If someone else screws up and costs me money, I have a bit more difficulty handling it.   I guess I better check in to all my accounts on Friday to make sure nothing else was reversed without my knowledge. 

I guess I will now start the process of looking for a new brokerage for my main account and my wife and mine's IRA.   If any readers have recommendations, feel free to share.   This was kind of a rant (I wonder if you can tell) so if it is a bit incoherent, I apologize.   If you feel inclined, please share this story with others, because I don't want anyone else to have the problems I just went through.   Disappointed doesn't begin to describe how I feel about the Scottrade brand. 

I do hope you all have a great Thanksgiving - short session Friday, so be careful - it will likely be choppy.   Take care.

Tuesday, November 23, 2010

State of the Stock Market - 11/22/10 - "Bearish Action"

After a relatively bullish day yesterday where stocks came well off their intraday lows and finished flat to slightly higher, today saw a very bearish follow-up on Wall Street.  Stock gapped down to start the session, sold off further until lunchtime, and then moved basically sideways until the close, coming off of their lows only slightly.  I don't have the final volume totals, but overall it looks like volume was slow.

Although we didn't break to new lows today, the action certainly was bearish and although it is a holiday week, the market could see further selling from here.   The S&P is closing in on what should be heavy support around 1173, but the Nasdaq still has room to fall before it gets close to testing its 50 day moving average around 2450.  It really is hard to predict what will happen the next few days because trade is going to be very light, but the overall picture for the market continues to be iffy at best. 


The worst chart out there right now for the bulls is the U.S. dollar.   A breakout today preceded by a very natural and controlled pullback is not good news for further increases in commodities and likely the market in general. 

Chart from Telechart, Courtesy of Worden Brothers, Inc.

I have yet to go short as I think this week will remain difficult to trade (other than intraday) but overall my signals remain bearish and are actually starting to deteriorate further.  They held in there late last week and yesterday, but today was different.  I am considering starting some short positions soon - I just have to decide if I want to do it in the trading environment that will be the next two days.   Good luck and more importantly, be careful - it's a tricky market.  

Monday, November 22, 2010

State of the Stock Market - 11/21/10 - "Typical Holiday Volatility"

A volatile day today on Wall Street, as stocks started the day lower, sold off through lunch, and then bounced back into the close to finish mixed.  The Nasdaq was up while the S&P was slightly lower.   It is certainly good to see stocks bounce off of their earlier lows, but overall the action was choppy and difficult to trade from a swing trading perspective.   I described this in the weekend video and days like today are the main reason I will remain in mostly cash over the next week.  

Thanksgiving week usually has a positive bias, and I would guess we'll see some upside this week.  How much is unknown - I don't know if we'll be challenging new highs anytime soon, but if you're trading, I would focus on that side for this week.  I would keep my time frame short however - the volatility could chop you up if you're not careful.

Good luck Tuesday - given the holiday week, posts might be a little short this week - there isn't that much to talk about.  Hope you understand.  

Sunday, November 21, 2010

Stock Market Video - Technical Outlook and Setups for a Holiday Week - November 21, 2010

Hi, traders - it's a holiday week, which means trading will likely be slow and could very well have an upside bias.   The videos for the week go over the technical outlook, but overall the market is quite a mess right now - it's hard to tell what side has control of things.   I will likely be staying mostly in cash this week, but if you are looking for some short-term trade candidates, I included some in the second part of the video.  

Hope you find the videos helpful and informative.   As always, feel free to email me with questions or comments - I enjoy hearing from my readers.   Have a great Thanksgiving week and good luck.

To see the video in HD, please click "720p" and "Full Screen" on the video bar - HD will be available after processing.

 

Friday, November 19, 2010

State of the Stock Market - 11/18/10 - "No Change"

Not much happened today on Wall Street in terms of the overall picture - stocks did bounce back from some early selling which is a big positive, but the overall gains were very light and I don't think today can qualify as "follow-through" for yesterday's big rally.   We really have a mixed picture right now and it might take a few more days until we get a little clarity about where the market heads from here.

I remain in cash - I saw a lot of ugly charts last night that told me it is best to stay on the sidelines right now.  The charts weren't necessarily bullish or bearish - they were just all over the place.  Hopefully we'll get some patterns to form next week and have a little more confidence about which direction this market wants to go.   I will be back this weekend with a video - until then, enjoy the next few days away from Wall Street.   Take care.

Thursday, November 18, 2010

State of the Stock Market - 11/18/10 - "Overdue Bounce"

A big day today on Wall Street, as stocks finally bounced back from their recent beatdown and oversold conditions to put in a strong session with large gains.   Most of the intraday action took place during the first hour of trading, and from there stocks just moved sideways or slightly lower in the case of the Nasdaq.   Volume looks heavier but was not heavier than Monday's totals.

Technically, today wasn't a surprise, although I have to admit that after yesterday's lackluster performance and so many news "question marks", I fully expected more weakness.   Now we have to see if today was the start of higher prices once again, or if it was just a relief bounce that will lead to further selling.   Both the S&P and Nasdaq bounced right back into their short-term moving averages and that is an interesting stopping point for today's action.   If we see follow-through tomorrow to today's bounce, then I think bulls have reason for optimism.  However, if the markets pause or move back down, then I think today will look more like just a relief bounce and nothing else.   Basically, it's too early to tell.
 S&P 500
 Nasdaq

Commodities were strong today but gold was not as strong as I would expect, and the dollar looks to be having a completely normal pullback here, which is not good for the bulls.   This recent selling hit commodities hard, and they need to bounce stronger than this if the overall rally is going to continue.
UUP
GLD
Charts from Telechart, Courtesy of Worden Brothers, Inc.

Today's action didn't affect me one way or the other as I remain in cash.   I debated whether to put some shorts on last night, but since my signal did not officially turn bearish, I waited.   I am glad I did, but the signal did turn bearish today so I am now torn.   You may ask how it would turn bearish on a day where the market was up so much and it's a good question.   Basically, the scans are saying that today's action (although nice) was not strong enough to overcome the strength of the selling we've seen over the past ten sessions.  

We'll see what happens tomorrow, but I may add some test shorts after-hours just to follow what the signals are telling me.  If we get further follow-through tomorrow to the upside, then I think there is good reason to be optimistic and I would get out of any shorts, but until that happens, the burden of proof still lies with the bulls in my opinion.   Today's action just didn't totally do it for me - I remain neutral to slightly bearish overall (although am willing to change with proof).  Good luck Friday.

Wednesday, November 17, 2010

State of the Stock Market - 11/17/10 - "Very Weak Action"

A poor showing today on Wall Street for stocks, as oversold conditions hardly mattered and a weak opening bounce could not hold, sending stocks to a day of basically flat action.   Volume was lower, but the fact that the market couldn't bounce after such a beatdown yesterday is telling.   Again, the character of this market seems to have changed and you must respect that right now - dip buyers continue to be nowhere to be found. 

The main breadth signal I follow has not officially turned bearish, but it's about as close as you can be and barring an huge move tomorrow from the bulls, it will turn bearish then.  When it looks like a correction and smells like a correction, then that's probably what it is, and that looks to be the case here.   It may last a few more days or it may last a few months - I don't know.  We do remain oversold but that alone should not be a reason to buy stocks.   The bulls continue to show little strength and until they regroup and take control, I would recommend cash as the best position.  

In regards to the whole "oversold/overbought" thing that so many talk about, remember that this year, we have had a number of moves where stocks basically went straight up with no consolidation (March through mid-April, September to last week) or went down with no consolidation (6/21-6/30, 5/12-5/24, the Flash Crash).   Particularly in the up moves, overbought conditions have seemed to relieve themselves only intraday, where stocks would sell off briefly before bouncing right back up into the close.   The market stayed overbought for a long time but continued higher, in part due to these intraday relief "selloffs" - that was all the bears could muster.  We could see the same thing here, but to the downside, where stocks attempt to bounce intraday but sell off and finish near their lows, still staying oversold but in some ways relieving that oversold condition intraday.   Maybe today is all the type of positive action the bulls can muster right now.

One of the main reasons I would be surprised if this correction didn't last longer is that we are back to a very uncertain news environment.   Uncertainty is not something the market likes, and until the China situation or the EU bailout situation gets resolved in some manner, the question to consider is whether the bulls are willing to come back to the plate and start buying stocks in this type of environment?   That's the question, and I don't think the answer is "yes".   Do you feel comfortable buying stocks right now?  That's why defense remains the name of the game in my opinion.

Overall, we are still in a technical position where a bounce could occur, but the longer it takes to develop, the better the chance is of that bounce failing in my opinion.   I will be looking to start adding shorts soon, as my signals are bearish and I have to follow them.   Good luck Thursday - be careful out there.

Tuesday, November 16, 2010

State of the Stock Market - 11/16/10 - "Caution Pays Off"

Not a good day today on Wall Street at all, as the negative intraday action of the past three days finally played itself out in a more powerful way and pushed stocks down past key support.   The day started out with a gap down, and dip buyers were nowhere to be found throughout the morning hours, as stocks fell steadily until the lunch hour started.   From there, stocks found some support, but it wasn't like they bounced back - they simply moved sideways instead.   Volume looks to be much heavier.  The action was certainly bearish and the market looks to be moving into correction mode.  

Technically, I've said for the past two days that things could really break open if Friday's lows were broken, and that's what we saw today.   We were a bit oversold going into the session, but that really didn't matter.   We are even more oversold today, but again, that may not matter either tomorrow or the rest of this week.   I said this weekend that a break of the 20 day moving average would likely lead to at least a test of the 50 day moving average, and that looks to be what we're going to get soon (although the indices still have more to fall for that to happen).  

S&P 500
Nasdaq
Charts from Telechart, Courtesy of Worden Brothers, Inc.

Hopefully you have been in cash these past two days and weren't hurt today - my stops did their job last Thursday and Friday and got me out of all positions before this breakdown today.   Now we have to try and figure out what the next move as a trader should be.   While I would not encourage going fully long until we get some indication that the bulls have taken back control of this market, I do think we will probably see a relief bounce soon.  

We are indeed oversold on various measures.   The McClellan oscillator is down around -300, which is certainly in a territory where stocks usually bounce.   A custom indicator I use with Telechart based on the number of stocks with extreme RSI (2) measurements is also at very stretched levels.   The dollar continues to move higher and is overbought and due for a pullback (which would help the market).  With support via the 50 day moving average not that far away on the major indices, a bounce is likely - not certain, but I would say likely. 
 McClellan Oscillator
Charts from Telechart, Courtesy of Worden Brothers, Inc.

Do you want to try and play the bounce?  That's the real question.   I think I won't know that answer until I go through my scans and see the damage done to individual stocks today.   If I don't see a ton of damage, I may look to put some small positions on around the 50 day if we get there.  My breadth signals have almost turned bearish but haven't officially done so, so I know I am not shorting yet.   More than likely, I will remain in cash until we get some confirmation from the bulls that they are ready to go again.

Overall, the past five to six days have been pretty bad for this market, and it does look like this market has changed its character.   With the market rising so much from September to early November, a pullback or correction is certainly normal - that doesn't mean you don't protect yourself from it.   It is possible this will be a great buying opportunity, but I think it's too early to tell, so remain careful and cautious.   I am not a raging bear here, but I realize that this correction could continue for as long as it wants and I will respect it.   Take care and good luck Wednesday.

Monday, November 15, 2010

State of the Stock Market - 11/15/10 - "Caution is Warranted"

We saw a flat day today on Wall Street, at least according to the closing numbers.   However, under the surface it was quite a negative day given the circumstances, with stocks not being able to hold a bounce even after selling off a good amount last week.   Stocks did start slightly higher, but although they rose a bit throughout the first half of the session, the action was choppy and at no point did it seem real buyers were coming in to push the market up.   Around 2:00, stocks began to fade and fade they did, all the way into the close, with all of the indices finishing at their lows for the day.   Volume as of now looks to be lower.

If you watched my weekend video, you know I preached caution this week, and I believe that holds true even more after today.   The bulls had a nice chance to push this market back up after getting hit last week, and they just couldn't do it.   Any bounces we saw intraday last week were quickly sold off as well, usually the next day.   This all marks a subtle change in character for this market, one that bears watching (no pun intended.)

Technically, the lows from Friday remain of utmost importance, and if those levels of 2506 and 1194 on the Nasdaq and S&P are broken, then I continue to believe this market will fall further, probably down to the 50 day moving averages on the main indices.  Those two indices remain perched right on their 20 day moving averages for now but couldn't bounce today. Yes, we are short-term oversold, but overbought/oversold hasn't mattered that much for a while now, so I don't know why now would be different.   Don't just assume we are going to bounce because we're "oversold".  If more selling comes in tomorrow, then I think you could see the market really crack in the short-term.  

The numbers I follow breadth-wise continue to deteriorate and if we see any more heavy selling this week, I believe they will turn fully bearish.   Right now, the bulls need to make a stand and push this market back up - otherwise this pullback becomes a little more serious.   I remain neutral overall but with further selling, I will start to look at some short positions - not yet however.   Overall, caution is very much warranted here and I said in yesterday's video, there really isn't a whole lot to do here other than stay in cash and wait to see if the bulls put up a stand.   Don't be a hero.  Good luck Tuesday.