Friday, July 30, 2010

State of the Stock Market - 7/30/10

Another extremely volatile day on Wall Street, as stocks went down, up, back down and made things difficult for most traders out there.  The GDP number started things off on a bad note, and stocks sold off hard off an opening gap down for the first ten minutes of trading, taking out yesterday's lows.  From there, however, dip buyers came in much like yesterday and pushed stocks all the way back to the plus side by 10:45 in a very, very bullish manner.   Stocks paused there however near yesterday's close and then drifted lower and lower throughout lunch and into the afternoon.   A little after 2:00, they started rallying again up to top of their intraday channels and that is where they sit as I write this at 2:45.   If we close in positive territory, it will indeed be a very bullish day.   If we fall into the close and end up near the lows, then I honestly have no clue what to expect of next week.   Either way, I will write more this weekend as I have to leave now for a family function - hence the early post.

I made a few more trades today.  First, I was stopped out of ZQK from yesterday at $4.40, giving me a quick loss there.  When the bulls reversed things, I entered two more stocks - IGTE at $17.30 and CSR at $5.76.   Both looked like nice pullback plays given the morning reversal.   This gave me a total of four longs and I became fully invested in my main account for the first time in a long while.   I have not made any trades in my IRA and may wait further for either an earnings play to emerge or for the overall picture to become more clear.

Good luck the rest of today - hopefully we can get a strong push into the close and have this so-far bullish pullback end and start a decent move higher.   Have a great weekend and we'll see you back here Sunday.

Thursday, July 29, 2010

State of the Stock Market - 7/29/10

An interesting and volatile day today on Wall Street, as stocks rode quite the roller coaster up and then down and then back up to finish with small overall losses.   The market started off positive but that open was quickly and harshly sold off, with the Nasdaq falling over 50 points from top to bottom by lunchtime.   A little before 1:00, the trend changed and stocks rose just as steadily as they fell in the morning, climbing throughout the afternoon to take back all of the losses by 3:00.   The last hour was not nearly as strong as I hoped for, with stocks giving some of the bounce back, but all in all, it was a positive day.  

Technically, today looked quite bad early on but it turned out to be a relatively positive technical day.  Both the Nasdaq and Russell 2000 got low enough this morning to test their 50 day moving averages and then bounced powerfully off of those levels, which is obviously good to see.   With the morning dip, this pullback probably went farther than most anticipated (especially with the strong open) but it is always good to put a little fear into the market to test each side.   The bottom line is that dip buyers came out when the market was down and that leads me to believe that we can expect further upside from here - at least that's what seems likely. 

Because of the volatility, I ended up making quite a few trades today.   Due to the morning gap up, I decided to exit my SDS and QID positions pre-market basically flat, as I really did think the pullback was likely over based on the open.   I entered SKX last night at $38.00 and expected good things based on its pre-market action, but that also surprised me by reversing hard after the open and stopping me out at $37.93, again basically flat.   I decided that cash was probably the best play at that point, as I saw many earnings plays reversing hard to the downside as well.
When the reversal took place in the afternoon, I reversed my thinking as well and went long three stocks as starter positions - UCTT at $10.80, ISLN at $16.97, and ZQK at $4.57.   I had been planning on buying this pullback when I felt it had played itself out, and so I stuck with the plan and started some longs.   There are many others that look quite good here and I have cash at hand but for now, I will see how these act before getting more aggressive.  I have my stops in place and want to see some immediate follow-through with these plays.  I also like to keep money in hand for potential earnings plays. The winner in that respect today was clearly CTXS, which I posted on Twitter last night but passed on because I didn't think the growth was that impressive.   I could have gotten in at $49.50 or so last night, and it will close above $57 today.   Not bad at all.

Chart from Telechart, Courtesy of Worden Brothers, Inc.

Nothing surprises me anymore, but I hope to see some further strength tomorrow as a sign that this truly was a buying opportunity today.  I would have really like to have seen the strength last all the way into the close today - that's why I want to see an up move start tomorrow.  If we don't get it, it is very possible we chop around in a new range between today's lows and Tuesday's highs - boy, that would be frustrating.   Overall, the line in the sand has now been drawn in my opinion at today's lows and as long as those hold, the bulls remain in control and you have to look long.   If you need setups, feel free to email me - there are plenty out there, many of which I have shared on Twitter.   Good luck Friday.

Wednesday, July 28, 2010

State of the Stock Market - 7/28/10

Another pullback day today on Wall Street, but once again that's not a bad thing.   Stocks sold off a bit to start the session, but then bounced into and through the lunch hour, with the Dow turning briefly positive.   Starting at 1:00, they started selling off again, but a late bounce in the final thirty minutes took them off their lows and left them with decent sized losses.   Volume was light and the selling did not appear heavy really at any time during the day.

Technically, the past two days have been completely normal and no technical damage was done.   Given how overbought we were, the action has been pretty darn good.   Support-wise, I would like to see the markets hold their 9 day moving averages around 2250 and 1097 on the Nasdaq and S&P respectively.   Really strong moves typically get support at this very short-term moving average, and hopefully we are in the start of a really strong move upward.   If those levels happen to be broken, I would then look for 2235 and 1080 to be key levels, as a break below the 50 day moving average might signal more than just a normal pullback. 

There was one really nice earnings play from last night that for some reason I passed on but figured I would share as a lesson about what to look for in earnings plays.  SIMG released after-hours yesterday and posted earnings of $0.03 per share - not that impressive but it was against estimates of -$0.03 (a 200% surprise).   Estimated growth is strong for the future as well.   The chart was not extended - in fact, it was rather beat down, but that is a good thing.   The surprise pushed it much higher today and this is definitely one to keep on your radar for a flag to form.   I may have passed because it was such a low price stock - I really don't know.   I could have gotten in around $3.85 last night and it will close today around $4.30.   Not bad for less than 24 hour swing.  For tonight, here are some possible names to watch based on current chart patterns - CTXS, NETL, CCI, WGOV, ORLY, TLEO, SKX, TMK, TQNT, HMN, IRBT, SFLY, FIRE, GPRE, and GMCR.

I am still in my QID and SDS positions but may take them off tomorrow - I still think until proven otherwise that this pullback looks extremely constructive and that perhaps it is just a matter of time before we start moving higher again.   I hope that's the case, because there are quite a few setups that good (many recent earnings plays that have rested nicely the past few days) and I would be fine with entering several of them in a more aggressive manner if the market cooperates.  We'll see what tomorrow brings, but another day or two like today would be perfect.   Take care and good luck Thursday.

Tuesday, July 27, 2010

State of the Stock Market - 7/27/10

A slow and choppy day today on Wall Street, but that's not necessarily a bad thing.   In fact, in the context, it was a pretty good day for the bulls.   The day started with a gap up, putting the market even more overbought than it was yesterday.   This was a perfect opportunity for the bears to sell things off, and they did for almost two hours.  However, a bottom was put in around 11:15, and from there the bulls fought back and just chopped the market sideways into the close.   The market finished lower, but not with large losses and overall the action looks constructive.   Volume looks like it will be lower again.

Technically, the McClellan oscillator I talked about yesterday opened up at +346 this morning, which I believe is the highest it's ever been (one point higher than January 6, 2009).  A pullback is certainly long overdue so although the indices put in reversal bars today on the daily charts that might look ominous on the surface, I don't think those bars mean we've topped longer-term or anything like that.  I'm looking at anywhere between 1080-1095 on the S&P and between 2230-2260 on the Nasdaq as support levels with moving averages now below price rather than above.   If those levels are broken, then the outlook changes, but for now, I would say pullbacks are a buying opportunity, especially if the pullbacks are like we saw today.

If you follow me on Twitter, you know that I made one earnings trade last night, entering UCTT at $10.26 after hours.   This company beat by $0.05 ($0.25 vs. est $0.20), beat on sales, and raised guidance.   It has tremendous fundamentals and since the daily chart was not yet extended like so many, I thought it had a good chance to be a nice earnings play, even with the overall market extended.   It held up relatively well early on, forming a tight range between $10.30 and $10.60 when the market sold off.   However, due to the extended market, I tightened my stop to breakeven when I didn't see much early follow-through to the gap up, and I was shaken out at $10.24 (basically flat).   Not great for me, because it really was a shake-out - it reestablished its range quickly and ended up closing near its highs for the day.   You'll always have trades like this, but it is what it is.   Certainly this is one to keep on your radar as it now has a catalyst and if it flags for a few days here near the top of its cup base, it would be a very good buy.  

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

For those interested in earnings trades, here is a tremendous website that lists companies that are reporting and automatically updates with information as those companies report.  Quite simple to follow. Until we rest, these trades are the only ones I will consider on the long side.   A few to watch tonight include USNA, ACAS, PNRA, HGR, VISN, SPWRA, SUPX, and VISN (no knowledge of what they'll report - only know they aren't that extended going into earnings.)

I also was stopped out of my CIGX position from yesterday - rose a little in the morning but couldn't follow-through and I sold at $2.13 for a 3.7% gain.  My stop was a bit higher however.   The only other move I made today was trying more SDS as a pullback hedge here - I guess I didn't learn from my mistakes yesterday.   Right now, QID and SDS are my only positions and they are not long-term ones - I am not a raging bear - rather just still looking for a pullback here.

Overall, the bulls really can't ask for more than they got today - the gap open was a perfect opportunity for stocks to sell off hard, and they sold off only slightly.  Tomorrow could be different, but even a 2-3% pullback from here would not be a bad thing.  I said on Twitter last night that a ton of stocks have now completed or are very close to completing right sides of bases.   A rest here would allow a ton of stocks to set up great patterns from which to breakout from and (hopefully) move much higher.   We'll see if it plays out that way or if Mr. Market has another one of his surprises in store for us all.  Good luck Wednesday.

Monday, July 26, 2010

State of the Stock Market - 7/26/10

Another very positive session price-wise for Wall Street today, as stocks had another nice move in the morning, and consolidated throughout most of the afternoon.  They broke down a bit around 2:20, but righted themselves and moved to new intraday highs in the final hour, closing with large gains once again.   The only problem is that volume was quite low and that is not what you want to see as the market moves to new highs.   Perhaps there was a late surge as I do not have the final totals, but at 4:05 as I write this (with a 20-minute data delay), Telechart has S&P volume about half of what Friday's totals were and Nasdaq volume just a little more than half Friday's totals.

Technically, the market put in its fifth day of gains out of the last six sessions, but volume was low today and that is never a good sign after a large run-up.  The S&P bumped into the 200 day moving average several times today around 1110 and managed to close above it.  The Nasdaq was able to clear its 200 day on Friday.   The markets are certainly extended in the short-term in a number of ways but that doesn't mean they can't go higher I guess.  My breadth indicators have turned bullish across the board so that is positive.

I did make some trades today - this morning I entered CIGX at $2.04 as it broke above key resistance.   Being a very low-priced stock, I took a very small position but the chart looked good and it was shown in last night's video.   There were other names I passed on, namely AONE (which has also been shown here several times over the past week) but I am OK with going slowly on the long side.   As I said this weekend, with the market extended, I don't know how prudent it is to get aggressively long at this particular moment.   It's much better to wait for a pullback and go from there in my opinion.

Later in the session, as I noticed the McClellan oscillator moving above +300 (my readings showed +325) and to the highest it's been since January 7, 2009, I thought it was smart to start taking profits on my two positions and I even went ahead and initiated some shorts as hedges.   I sold out of WPRT at $20.57 for a 7% profit.  Then I went into SDS ($32.13) and QID ($16.99) with stops at the lows of the day.   I kept my position in CIGX and just let the stop run its course there, so I wasn't fully short.   I ended up getting stopped out of SDS at $31.79 for a 1.2% loss but I still have the QID (just barely) as the market grinded its way higher into the close once again. 

Chart from Telechart, Courtesy of Worden Brothers, Inc.

We'll see where we go from here but I think if the market keeps running up without a rest like it did at the beginning of June and the beginning of July, then we eventually have a nasty pullback.   You would like to see the market stair-step its way higher, resting for a few days as it moves up - that's what healthy markets do and I am hoping we have finally arrived in a "healthy" market.  That action hasn't happened for a while, however, and maybe it just won't.  Since all of my breadth indicators did turn bullish today, I am not a bear here, but I would like to see a pullback or rest so this move can be maintained to the upside - that's all.  

Good luck Tuesday - I will follow earnings plays for potential short-term trades but will have a hard time initiating any new longs at this point.  Take care.

Saturday, July 24, 2010

Stock Market Video - Market Outlook, Breakouts from Friday, and Stocks to Watch - 7/25/10

Hi, traders - here are some videos for the upcoming week.   Thursday and Friday were certainly very bullish days and the action has me more bullish than I have been for a while.   In part one, I will look at the indices and discuss what I would like to see happen this week if this potential move higher is going to be something meaningful.   Let's hope it is and we can trade it successfully.

In part two, I go over one reason I am more bullish here - the sheer number of breakouts seen Friday with good looking charts breaking to new highs.   This is very easy to check in Telechart and I will discuss one way to use Telechart for this purpose in this video.   I do aim to do more instructional videos for Telechart over the next few weeks as my time allows, because I do view it as such an important and useful tool for trading.

In part three, I go over the setups I will be watching early this week - many stocks are extended right now so you have to be very careful, but hopefully if we get a little rest, we'll see a lot more later in the week.

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

Friday, July 23, 2010

State of the Stock Market - 7/23/10

Short post today - I was gone for the afternoon and have to go to a wedding tonight, but today was a very positive one for Wall Street.   I wasn't really sure what to think of things midway through the session because the market showed no follow-through from yesterday's nice gains, but it also didn't sell off hard and reverse those gains like it had quite often in previous sessions.   The afternoon action, however, made it clear that the bulls are in control right now and going long some stocks is the right play for the time being.  We'll see if the market keeps acting super spastic and is down big next week, but as of now, things look good.   The trendlines and moving averages that were overcome yesterday should now be support on any pullbacks, which could come next week as a way to test whether this move to the upside is legit or not.

I made one trade today, entering WPRT at $19.16 this morning.   It acted very well and I am hopeful I can hold this for more than one day.   That hasn't happened for a while.   There are other setups and I watched some but didn't bite as I was not at my computer this afternoon.   If this is going to be a big move higher in the overall markets, there will be plenty of time to get in and that's what I plan on doing.   I'll try to get another video up this weekend looking at the best stocks in this market - until then, have a great weekend!

Thursday, July 22, 2010

State of the Stock Market - 7/22/10

After a very negative day yesterday on Wall Street, we had (what else?) a very positive day today on Wall Street, as stocks gapped up to start the session, added to their gains in a constructive manner through the morning, and then basically consolidated sideways for the rest of the session.   It was not that "calm" of a day however, as stocks sold off hard around 3:15, scaring the bulls a bit before a bounce took stocks back up into the close.  I don't have the final volume totals but it would surprise me if the totals weren't higher than yesterday due to the number of earnings reports traded today.

Technically, the downtrend lines from the middle of March were broken through today on both the S&P and Nasdaq, but only slightly.   Ideally, you would have liked to have seen a real surge into the close today, but with all the big companies reporting after the close (MSFT, CMG, AMZN, AXP, QLGC), perhaps that was too much to ask.  Obviously, follow-through is key right now - the potential for a big move higher is certainly there for the bulls to capitalize on but only if they decide to do so. 

I watched some stocks today and posted a few of the better setups I see on Twitter, but stayed in cash.   I just don't trust anything.  Perhaps this will cost me if we move much higher from here, but if a big move is really at hand here, there will be plenty of time to get in.   Until this massively heavy news week ends, however, I am fine with sitting on my hands.   Trading is often compared to poker, and I think this week's market is very much like playing poker, only after every hand is dealt, you switch tables and are faced with new players around you every time, players you have no knowledge of and have no clue of what to expect from them.  Obviously that would be difficult, just like this market.  

I was not surprised we were up so much today just like I won't be surprised if we are right back down 2% tomorrow.   I know AMZN is down big right now but there's earnings pre-market as well so the whole mix as well as the reaction to it is hard to predict.   I am ready to move if we get some further confirmation of this move up, but I would rather wait for a less volatile environment, which hopefully we will have next week.   Good luck Friday.

Wednesday, July 21, 2010

State of the Stock Market - 7/21/10

It always takes a few days to get back into the swing of things trading-wise when you are away from the market for a few days, so bear with me, but it seems like it is extra difficult in a super-volatile market like the one we continue to have.   Today was looking like a decent day overall for Wall Street, as stocks digested yesterday's reversal and moved sideways for most of the session.  However, around 2:00, when Ben Bernanke started speaking, the market tanked and although they bounced just slightly back into the close, the damage was already done and the indices across the board ended up with large losses.   Volume looks to be lighter. 

I did a short video this morning to catch myself up a bit and overall, the market did look relatively bullish.   After Friday's massive selloff, the action on Monday and especially Tuesday was very bullish and there was reason based on the charts to be somewhat optimistic.   As such, I put some long setups that were looking good overall as well.  Ideally, if yesterday was going to be a key reversal day, you would have really liked to have seen follow-through today.   While the selloff today doesn't kill the possibility that we still move higher from here, it does reinforce the idea that we are back in a very news-driven market that has little volume and therefore extraordinary volatility from day to day.   Perhaps we never left that type of market - it's been that way for a while.   As I've said many times, it makes swing trading very difficult.

I read a quote from Upside Trader this morning that I thought was very interesting - "If buy and hold is dead, then swing trading is in stage two of pancreatic cancer. Long term has become maybe a day or two (if that), and the whippiness has been epic." I get the sense that a lot of traders are feeling that way right now.  I know I am and have felt like that for a while now.

I am 100% in cash (still) and although I watched some stocks this morning, I don't feel much of an edge going short or long here, so there is no reason for me to do anything.  We have some big reports coming out tonight (NFLX, BIDU, ISRG, EBAY) and I honestly would not be surprised with the market being up 2% or down 2% tomorrow.   When you have that kind of outlook, it is hard to do much.  The bulls aren't dead here unless Tuesday's lows are broken, but I don't think the bears are dead either unless the S&P can get above today's highs and stay there.  We'll just have to watch to see who wins.   Good luck Thursday and be careful.

Stock Market Video - Potential Long Setups If Market Cooperates - 7/21/10

Hi, traders - back from my mini two day vacation.   As I try to get caught up in this volatile market, here's a quick video looking at the indices and the charts I am watching on the long side today.   Good luck.  AND PLEASE CHECK EARNINGS DATES BEFORE MAKING ANY TRADES.

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

Sunday, July 18, 2010

Stock Market Video - What is Up With This Stupid Market? - 7/18/10

Hi, traders.   First of all, I will be away on a little beach trip with the family for the next few days so there won't be any posts until Wednesday.   Given how crazy and difficult this market remains (and with all the earnings reports coming out this week), it seems like a great time to get away.   In the videos this week, I look at the major indices and sectors as always and try to show why this market has been so difficult to trade.   I also go through some stocks to look at, but again with as many earnings reports as we have this week, trading will remain difficult.   Cash remains a good option along with hobbies, family time, sports, reading, video games....anything to get your mind away from this up and down chopfest.   My guess is we head lower from here but nothing would surprise me.  Take care and good luck this week.

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

Friday, July 16, 2010

State of the Stock Market - 7/16/10

About as nasty a day as you can get today on Wall Street, as stocks started lower this morning and then steady and methodically sold off as the day went forward.   At no point was there even an attempt for a bounce, as the bulls were simply nowhere to be seen.   Key technical support levels were sliced through with ease and the bounce we saw last week looks like it may be dead.   Volume was lower but that is the only positive about today.

I think when you look back in hindsight at this market, it is going to look like it was very easy to trade.   Since the middle of April, we've established a clear downtrend channel that continues to act as support on the downside and resistance on the upside.   As always, however, the market has not made it that easy.   From the temporary low that was put in on June 8, we've seen a move straight up to resistance, straight down to support, and now again straight up to resistance.   Again, it sounds easy, but the market continues to give headfakes at those support and resistance levels that are making things difficult.  

From the June 8 "bottom", the market rallied up strongly, got over its 200 day moving average, and then moved sideways for three days, getting bullish support intraday.   At that point, based on the intraday action and the breadth numbers I follow, I got bullish.  IBD also had a follow-through day.  However, that three day consolidation was just a headfake, as the market gapped up and reversed hard the next day and fell straight down.

Let's go to July 1.   The market was deeply oversold and had fallen 8 out of 9 sessions.   Many people where looking for a bounce, and when the market reversed well off of its lows that day, most thought the bounce was here.   It was, but the next two days make very little upside progress, selling off both afternoons into the close after being up earlier in the session.   Certainly not bullish action.   Then we went straight up.

Now we have our current market.   We have had an up move that went farther than most probably expected.   My breadth numbers turned bullish a few days ago.   IBD posted another FTD.  Although the market was quite overbought, it showed tremendous action intraday on Wednesday and Thursday as it fought off early selling and finished near its highs on both days.   The action was bullish enough to have me seriously considering that this market could move much higher.  So what do we get the next day?   A three percent selloff. 

Right now, I believe you really have to have a lot of patience and belief in your positions and outlook in order to succeed.   Actually, that's the only way to succeed.   It seems like the market is doing just enough before key turning points to change the minds of traders, and then after those minds have been changed, boom - now the move takes place.   IBD has now had three follow-through days in the past month and a half or so, and assuming today's action marks the end of this "rally", all three failed soon after.  If you have been able to hold on during any of these moves and the early headfakes, congratulations - you deserve it.

I am still in cash so I wasn't hurt or helped by today's move.   As you may know, I tried to short this bounce but was too early and ended up getting stopped out.   As I look at my two favorite short possibilities from last week (CREE and AMZN), both appear to be genuinely breaking down now, but only after moving past key technical points (be it trendlines for AMZN or moving averages and trendlined for CREE) that made many traders (including me) to throw in the towel. 

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

This is the market we have and there is anything to do about it but adjust.   We have to realize that technical levels will very often be broken through (up or down) only for the direction to be reversed soon after.   We have to realize that the short-term market moves will last much longer than people expect, and that they also may throw curve balls at traders during key points to confuse them and test their convictions.   In reality, this realizations are not that different from other markets in history - they've always been present.  I do strongly believe they are more present now than ever before (for whatever reason) and that's why things have been so tough.  Adjusting is difficult but it is also the key to be successful.   I know I personally have work to do in that department, and hopefully I will be able to do so as time goes on.  Until I do, the majority of my account will stay in cash, as it has the past few months. 

As for next week, I am sure we'll see some volatile action due to earnings but today was a pathetic showing for the bulls and based on the intraday action, it certainly looks like the bears are back in control.   Today looks a lot like June 22, when the short-term moving averages has just crossed but then were sliced through to the downside with ease.   If that comparison holds true, it does not bode well for next week.   We'll see I guess.   Enjoy the weekend and look for a video Sunday.   Take care.

Thursday, July 15, 2010

State of the Stock Market - 7/15/10

If you looked only at the closing numbers today, you would expect that it was a pretty boring day on Wall Street.   On the contrary, the market had two distinct moves today and under the surface, the action once again was positive and bullish.   The first hour or so of today's session saw some heavy selling, but the market never even got as low as the key support I mentioned last night around 1075 and 2205 and after chopping around a bit through most of the afternoon, a bounce took stocks well off their lows in the final hour and stocks closed basically flat.   For the second consecutive day, the bears had a golden opportunity to take this overbought market lower and they couldn't do it very well, and that is very important.   Volume appears to be heavier today.

Technically, things look very good overall for the bulls.  We are still overbought and could afford further rest here - we'll see if we get it.   A lot will still depend on earnings - as I write this, GOOG is down after-hours, so we could still see some selling come in at this point.   The key thing to watch is whether the dips continue to be bought as they have been the past two days.   This action represents a change in character for this market and as long as it continues, you have to start looking for longs and if nothing else, hold off on shorting anything.   We are still below the 50 day moving average and the 200 day is still overhead as well on both the S&P and Nasdaq, but if these bull flags continue to form as they are,  I think the market has a decent chance to bust through them.

I did not make any moves today and remain in cash, but I am looking.   I would ideally prefer further rest or pullback here - actually a real test of 1075 and 2205 would be tremendous, with perhaps an intraday move below those levels to really test the bulls' strength.   Who knows if we get something like that?   It's possible on this options expiration week that we get a headfake tomorrow.  Overall, however, my numbers are turning bullish and because of that and the intraday action of the past two days, I am strictly looking for long positions right now.   I don't see a ton (again, further consolidation would go a long way to establish more patterns) but there are some I have my eye on and if they trigger, I may just jump on board.  If I have time, I will try to share some of those charts.   Take care and good luck Thursday.

Wednesday, July 14, 2010

State of the Stock Market - 7/14/10

I was gone for most of today's trading session so the commentary will be brief.   All in all, however, it really doesn't look like a bad day from what I can tell looking through my charts.   The market ran even higher this morning until lunchtime, reversed, but found support around 2:00 and bounced back up into the close to finish basically flat.  With the Nasdaq losing only twenty points from its top to bottom and the S&P losing only ten, I don't get the impression the reversal was very harsh or intense - probably more of just a long overdue pullback.  Volume appears to be a good deal lower than yesterday.

A few more days like today would give a lot more credence to the possibility of a true trend change happening over the past week with the move higher that we saw.   I still tend to think we are more likely to reverse here, but an open like today where stocks ran again was a perfect opportunity for the bears to really take control, and I can't say that they did.  To me, today seems much different than June 21, when the market fell straight from the open and the action was very bearish.   We'll just kind of have to see where we go from here, but I think keeping your mind open is a good idea.   The bears could certainly take control back quickly, but the bulls are also making a case now so let's see who steps up.   The breadth numbers I follow have started to turn bullish again so that has opened my mind as well.   It's not foolproof - the last time they changes was June 21 - but if they stay bullish over the next few days, that would be a good sign.

I'm still in cash right now as I need to see some consolidation before going into any longs and I need to see some confirmation that the bears are strong again before going into any shorts.   I don't think today was any sort of confirmation that way.   Watch 1075 and 2200 for support and as long as those levels hold, I think you lean toward the bulls here, as crazy as that sounds based on what we saw over a week ago.   Take care and good luck Thursday.

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Tuesday, July 13, 2010

State of the Stock Market - 7/13/10

Another very strong day today on Wall Street, as good earnings reports opened stocks higher and from there, the bulls simply squeezed more out of the bears and stocks climbed slowly and steadily throughout the rest of the session.  They finished near their highs of the day and with very large gains.   The Nasdaq outperformed with a gain of over 2%, which is even more impressive considering AAPL was down on the day.  Volume looks like it will be heavier but I don't know if it will be above-average.

Technically, both the S&P and Nasdaq are either at or approaching the final key level of resistance around their 50 day moving averages and their declining trendlines from the end of April.   So far on this what is now six-day run, stocks have barely even paused at resistance levels around 1040 and 1070, so we'll have to see if we punch through these levels as well with little pause.   We are very overbought but I've said many times that moves now go much further than people expect and overbought/oversold doesn't seem to matter as much now.  It's hard to just ignore it however.   This is the final level that makes a LOT of sense as a short point but so far shorts have been killed so we'll have to see.  If we blow through here all bets are off.

I made one trade today that I was stopped out of rather quickly - shorting CREE at $67.66 and then getting stopped out at $68.55.  I see the same thing most see right now - a market that until today was rising on very weak volume up into major resistance and that was quite overbought.   I thought it was worth trying one more short as I still expected a pause or pullback at some point today.   Obviously that didn't happen.  I have not been hurt badly this week with my AMZN, FAZ, and CREE positions - all losses were less than 2%, but it is frustrating.

This continues to be a difficult market overall.   A few weeks ago, this market looked like it was done - leading stocks were slicing through moving averages on heavier volume and the market was breaking support levels on heavier volume.   All over the place, those same leading stocks then formed bear flags, bear pennants, bearish wedges, all with volume patterns that were bearish as well.   On the surface, it certainly appeared that the market was ready at some point to move to further lows.  Only it just didn't happen.   Those bearish patterns slowly broke through resistance levels much like the market did and moved higher, but not in impressive ways.  Certainly not in ways that would get people excited about buying and make you think "whoa, I think I should change my outlook, there is some strong buying here".   And now we are here, with a market that doesn't appear like it wants to stop moving higher, but also doesn't appear to be overly bullish in terms of charts or underlying accumulation.   What do we do next?

I wish there was a simple answer to that question, but I don't know that there is.   I know I am frustrated.   Last week, I said that I thought it was entirely possible for the market to rally much higher than people expected, perhaps up to 1070 and maybe even up to the 1100 level on the S&P.  But when I wrote that, I also said I would be very surprised if we get that high (1100).  Well, count me surprised.   Perhaps we do reverse soon - maybe this move is just a way for Mr. Market to get rid of most of the bears out there before really falling back down without them. 

This market, however, is starting to remind me a lot of February, where stocks really broke down for the first time since March of '09, and then simply moved higher on very low volume and continued moving much higher than probably most thought (including myself) on much lower volume.   The market was very overbought back then as well and it just stayed overbought - pullbacks lasted one, maybe two days.   That is possible here because I sense many people have the same "disbelief" in this recent move that I do. 

Strategy-wise, I am in cash and after getting stopped out of several shorts so far, I am very hesistant to put anymore on at this juncture.   Perhaps it would be better to wait for some downside confirmation before initiating any positions, and perhaps this was my mistake in the first place.   On the long side, I really don't feel comfortable buying with the market as overbought as it is, but I will respect this move and keep my eyes on potential longs setting up in buyable patterns.   Best-case scenario for the bulls is a quiet pullback here and then another move higher, much like we saw in February.   IF that happens, I would get bullish.   Until then, I am neutral - my eyes tell me bearish but my gut tells me more squeeze.   We'll see.

I won't be around tomorrow but best of luck if you're trading.   Earnings will likely dominate things now for a while so be careful - technicals might not matter.   Take care.

Monday, July 12, 2010

State of the Stock Market - 7/12/10

Another day, another grind higher on Wall Street.   For the fourth consecutive day, the stock market finished slightly higher with the gains coming on lower overall volume.   Stocks did try to sell off a bit after a nice open, but the 1070 level acted as support for the S&P and stocks were able to regain those losses.   Not much happened after lunch other than some sideways chop, and the indices finished with very small gains.   It was a very boring day overall, perhaps due to the big earnings reports coming out later this week. 

Technically, this market looks like a screaming short, as we are very overbought in the short-term and the declining volume as we wedge higher is hard not to notice.  In fact, everyone notices it and that is what has me a bit hesitant here.   For a while now, this has been the ultimate "screw you" market where stocks move higher on lower volume and sell off on higher volume, confusing and frustrating many traders including myself.   The moves have always gone a bit farther in both directions than most expect as well, again frustrating technical traders, and that is one reason this had been such a tough market to trade.

A recent example of this was last Thursday and Friday, when the market frustrated bulls that were expecting a bounce by bearishly reversing hard intraday three days in a row before finally bouncing hard Tuesday and going on the current run, likely without many of those early bulls who got frustrated and left their postions.  I am wondering if we are going to see a situation now where the market keeps moving higher here like it has for the past several days, frustrating shorts who see the same things I see just enough for them to throw up their hands, cover, and then watch the market go down without them.   Perhaps I am overthinking the situation, but I think it certainly is a possibility and is one reason I am hesitant.  I was already stopped out of several short positions on Friday and have to be really careful with my timing here. 

Overall, however, from a strictly technical perspective, the market continues to look bearish.   I said in yesterday's video that it would take several days of consolidation or slight pullbacks to get me thinking bullish, and today at least was a start.   IF the bulls can recreate today and do it three or four more times, then the overbought conditions can work themselves out and I would give the bulls more respect.   I still don't think they deserve that respect yet however. 

All of this really might not matter, too, because technicals always take a backseat when earnings reports start coming out.   Certainly with the market where it is, the bulls have a tough situation - it looks a lot more likely that good news will be sold coming off of the recent run, but we'll have to wait and see how the market reacts.   Overall for me, I am in cash, not planning on even looking at longs until the end of this week at the earliest (again, depending on what happens over the next few days) and will continue to watch these shorts setups carefully but not be too aggressive without some confirmation.   Best of luck Tuesday.

Sunday, July 11, 2010

Stock Market Video - Market Outlook and A List of Stocks to Watch - 7/11/10

Hi, traders - here's the weekend video.  We certainly got the bounce many people were expecting this week, but each day came on lower volume and we have lots of resistance above to deal with.   Although IBD put the market back into rally mode, I still believe we will reverse and head lower soon.  Timing has proven difficult however.   Unless the bulls move sideways here for three or four days, I am sticking with that outlook.

Part two of the video focuses on the names that I would keep on my watchlist both on the long and short side.  I am not going long in anyway right now, but perhaps if the bulls consolidate the market without selling it off, then I would reconsider.   As such, you always want to be prepared.   I also include the shorts I am watching because overall that's still the more likely scenario in my mind - a selloff after perhaps a little bit further meltup.

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

Thursday, July 8, 2010

State of the Stock Market - 7/8/10

An interesting day today on Wall Street, as the bulls started the day very strong.  Stocks were up a good amount in the first ten minutes of trading, but that follow-through from yesterday quickly faded, and stocks chopped their way lower for most of the rest of the session.   There was a bounce-back into the close but the two major indices closed near the top of their intraday ranges and with decent gains.   All in all, not a bad day at all for the bulls - I expected worse based on the action mid-morning.

Technically, both this weekend and yesterday, I discussed some potential resistance areas to watch now that the markets did get through their necklines on those head and shoulder patterns.   As of now, the Nasdaq is still below its 20 day moving average around 2200, but the S&P finished right near that level around 1070.   This is where I felt the market had a chance to reverse and begin another move down, but it didn't happen today, so I may be wrong.  As I said yesterday, it is entirely possible for the markets to move all the way up to their 50 day moving averages - I would be surprised by it, but for the past two months, we've seen nothing but moves straight down (usually farther than people expected) followed by moves straight up (usually farther than people expected) with very little consolidation along the way.   There is no reason it can't happen again.  Perhaps we are just in the middle of another one of those straight shot moves - this time up.  

I did make some trades today as the S&P got near 1070 as I felt I had to test my thesis of the past week or so.   I entered AMZN short at both $116.51 and $115.27 for an average price of $115.86.   This is a large position but it is my only position and I am not planning on holding it if it goes against me - my stop is in place and I will honor it.   I really however liked the setup and as it gapped right into resistance today around $117, I took a shot.  I mentioned CREE in yesterday's post as a possible short and am kicking myself for waiting too long today - it gapped right into its 50 day MA, but I hesitated to see how it acted from there and it reversed too quickly.   Perhaps some of you took that trade today.   I also entered some QID ($18.71) and SDS ($35.01) for my IRAs, again testing my thesis.   Stops are in place there as well because I am certainly aware we could still move higher from here.

We'll see where we go from here, but overall today was good for the bulls in that they didn't give anything back from yesterday's big move and they certainly had a chance to do so this morning.  I did see reversal or partial reversal bars in quite a few stocks today (NFLX, CRM, AAPL, SPRD, BIDU, CREE, TSL, F, CVGI) and the overall market is right near important resistance, so perhaps stocks need to consolidate a bit before moving higher.   We are also getting overbought in the short-term, so I wouldn't chase any longs here.   Interestingly, IBD put the market back into rally mode last night as they said the NYSE composite posted a follow-through day yesterday.   The past two FTDs have failed quickly, but perhaps this one will be different.   If it is, then I will respect it and look only at long positions.  I need to see some more evidence in order for that to occur.   Right now, I'll sit with the positions I put on today and let the market tell me if I am right or wrong.  Until then, the rest of my portfolio will stay in cash.   Good luck Friday.

Wednesday, July 7, 2010

State of the Stock Market - 7/7/10

After three days of sputtering, the bulls finally delivered the big bounce that everyone was expecting today on Wall Street.   The day started flat, but it was a slow, steady, and methodical move higher from there, with very few periods rest and no pullbacks intraday at all.   By the end of their session, stocks had posted gains of over 3% across the board.   Volume looks barely positive.  

Technically, the S&P cleared a key resistance level at 1040 early in the session and it is positive to see it close and hold well above that level.  It also was able to close above its 9 day moving average around 1049 which is also positive.  I don't think, however, that today was the green light to go out and load up on the long side. 

If you watched this weekend's video, I pointed out that it would not be surprising to see the market get over that 1040 level before falling back down.   That level was pretty obvious and I'm sure a move above it like we saw today forced a lot of shorts to cover their positions, which is probably one reason behind today's move.  In this market where HFT makes things trickier, moves often seem to go further than simple technical analysis says they should, and therefore I would look closer at the 20 day moving average around 1070 as a potential reversal area for this bounce.   I guess it is even possible for short covering to push the market up to its 50 day moving average around 1100 (which would also be the top of the downtrend channel) but that would surprise me. 

The Nasdaq meanwhile was also able to climb slightly over key resistance around 2140 and closed above its 9 day moving average near 2150.   I would look at 2190 as a potential area where this bounce could reverse but a move up near 2280 is possible I guess - again I would be very surprised to see the market go up that far but stranger things have happened.

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

I said yesterday that I passed on putting shorts on Tuesday because I had kind of had a feeling that the market would try to bounce one more time and I am happy I did pass after today.   I was surprised at the strength in a few of the short setups I have been watching recently (VMW, NFLX, and BIDU for instance) but many setups still look good as potential shorts.   It often takes several bounces followed by failures before stocks really break down on the short side and perhaps this bounce will provide those type of setups - for instance, if CREE gets back up toward its 50 day moving average (for the third time) on weaker volume, it is a lower risk short.   There are still a lot of potential setups out there.   I was again tempted on a few short setups today but passed and will remain patient here as timing remains tough.   A gap up tomorrow may get me to finally pull the trigger on a few shorts, but being early is always the risk.  

We remain in a tricky market for both bears and bulls because timing these moves has proven difficult.  For instance, many bulls were really expecting a "bottom" last Thursday after selling off for so long.   Instead, they had frustrating sessions with intraday selloffs Thursday, Friday, and yesterday.  I am curious how many bulls gave up after those three days and didn't benefit from today's squeeze.  For the bears, the terrible intraday action of those three days along with a failure at 1040 for the S&P gave many of them courage to stay short or initiate shorts expecting the market to really fall apart since it didn't bounce.  I am sure many of them were frustrated today as well.   The market (and this is probably due mainly to the thin summer volume) is throwing a lot of false signals to traders and it is tough to make complete sense out of them.  Perhaps it is just me however. 

I have learned not to be surprised by anything in this stock market so I will keep my mind open to further upside here but I continue to think we have lower prices in store for us over the next few weeks to months.  The bounce that finally has come may last longer than some think (again, just to frustrate and confuse as many traders as possible) but overall I think it will fail.  If my numbers start looking more bullish and I see more patterns start setting up, then I will change my outlook, but as of now, I still see a lot of ugly charts and a lot of damage that needs time to be fixed.  Good luck Thursday.

Tuesday, July 6, 2010

State of the Stock Market - 7/6/10

The rally that everyone seemed to be expecting came and went pretty quickly today, as stocks started the day much higher, but the bulls just didn't have the strength to keep a rally attempt going more than an hour or so.   After gapping up, stocks ran hard until around 10:15, when the S&P just got slightly above the key 1040 number.   That number proved strong enough to reject stocks and they sold off hard from there, with the S&P losing 24 points from top to bottom and the Nasdaq losing almost sixty points from top to bottom.   They bounced things a bit into the close and did finish positive across the board, but the action intraday was anything but positive.  Volume appears to be lower.

I continue to see a lot of people expecting a bounce and talking about how the market is due to move higher from here.  If you are looking at a very, very short time frame, you may be right.  However, none of the indicators I look at point to extreme levels of fear or extreme levels of selling occuring at any point over the past week.   Actually, today's open was about the worst thing that could happen for the bulls.  Typically, playable bounces occur in bear markets off of extremely negative readings.  Important reversals occur when stocks sell off hard intraday only to be rescued later by true buyers attracted to the extremely low prices.  When those extreme levels aren't yet acheived and then the market gaps up big, all it becomes is a chance for more people to get out of their long positions, which is what we saw today

Technically, not much to say today that I didn't say in yesterday's video.  Hopefully you weren't buying the gap this morning.  I continue to believe we are back in a bear market and in a bear market you'll see days like this.   You'll see markets fall to what seem to be oversold levels where they "can't go any lower" and then still move further south.  You'll see former support levels as well as moving averages become resistance instead of support.  You'll see former leaders sell off and for the first time in a long while not bounce back.  (As I look at the watchlist of stocks I shared in part three of the video, I also see a LOT of bear flags forming and nice patterns developing from which to get short.)   We're seeing all of the above right now, and all of this evidence shows the market has clearly changed, at least to me it has.   You have to change your trading as such.

As for tomorrow, I don't know why, but I kind of think they will try to bounce it a bit more again (so I did not start any shorts today) but I don't expect the overall outcome to be much different that today - we're still going lower.  Ideally I would rather short around 1060 or so on the S&P but this market is so weak, I don't know that there is much chance of us getting that high.   As it is, another day or so of higher trade would be tremendous for allowing these short setups to develop even further.  (Make sure you check out the vids if you haven't seen them for those setups). We'll see if we get it.   Good luck Wednesday.

Monday, July 5, 2010

Stock Market Video - Market Outlook and A List of Stocks to Watch - 7/5/10

Hi, traders - hope you enjoyed the Fourth of July weekend.   In this week's video, I look at the indices in the first two videos.   Everyone seems to be calling for a bounce here and it is certainly possible because we are a little stretched, but there is a big difference between a bounce and a bottom, and I try to point that out in this video by looking back at 2008.  If we are in a new bear market (which I think is a good possibility) then new trading rules apply.  One of the biggest mistakes you can make is buying every single dip thinking the market is bottoming or "has gone down enough."   A bounce is certainly possible here but far from a certainty (if that makes sense).  I continue to believe any bounce we get will be stopped by the 9 or 20 day moving average.   We could also just consolidate a bit and move sideways.

Part three of the video focuses on the names that I would keep on my watchlist for short setups over the next few weeks.   They were all leaders in the previous move higher and if we are entering a new bear market here, they will likely be the best names to get short as we move forward.   I'm not shorting here, but if we do bounce, I will look hard at getting short.

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

Friday, July 2, 2010

State of the Stock Market - 7/2/10

Not much going on today on Wall Street - it was a volatile day but nothing really changed from yesterday.  A lot of people were calling a bottom yesterday and today proved we are not yet at a bottom.   Perhaps we are forming one here but right now, cash remains a smart play as the market is down too much to short and I don't see enough extreme numbers and levels that makes me think we have a nice bounce coming soon.  I am still of the opinion that any bounce will be very shortable and I am actually hoping we get one.  Former leaders like BIDU and AMZN are starting to set up nice short-term setups and there are many other former leaders that also look like they will be potentially great shorts.   I showed some charts this morning that were still holding trendlines.   Unfortunately, I believe it is only a matter of time before those trendlines are broken.

I'll be back later this week and look at some of these charts as they are the ones to really pay attention to over the next few weeks.  Meanwhile, enjoy the three day weekend and I wish all my readers a happy Fourth of July!   Take care.

Trendlines Holding For Now In "Leading" Stocks

As I went through my scans last night to see how the charts were looking, I noticed that many of the "leading" stocks of the past move from March of 2009 were holding longer-term trendlines after today.   There were many breakdowns earlier this week for these stocks through key levels like their 50 day moving averages, but if these trendlines continue to hold, it is certainly possible for the market to bounce a bit soon.  I am not saying we aren't headed lower overall, but that bounce that gives a better short entry point could be on the way.   Check out the charts below.

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

Thursday, July 1, 2010

State of the Stock Market - 7/1/10

An interesting day today on Wall Street, as we started the day rough - stocks slid hard once again for the first hour and a half of trading.   Around 11:00, they found a bottom and methodically stairstepped their way higher.   They hit some resistance around yesterday's lows near lunch, but formed nice looking bull flags and things still appeared to be positive  the action was bullish.   Around 2:00, stocks broke out from these bull flags but those breakouts were simply traps at that point, as stocks reversed and headed lower into the final hour of trading.  Frustrating many I am sure, they rose back into the final hour but were not able to break those earlier highs and finished with small losses.  Overall, it was good to see the market not totally crash but at the same time, how impressive is a reversal that doesn't finish positive on the day?  Volume was less today as well (correction - volume was heavier today) and the early selling didn't seem very panicky.  A true reversal day would likely have finished much stronger so it is hard to say if today matters at all.  My guess is that it won't. 

Tomorrow should be interesting because we have what should be a huge news event with the June jobs number coming out before the market opens.   There is probably a good chance of a big move one way or the other - if it happens to be received well, there are enough shorts to get a squeeze going.   If it is received poorly, then we could have another bout of serious selling.    I do hear quite a few people coming out and saying that this is the bottom and that a great buying opportunity is at hand.   Doug Kass tweeted the following today -  "i beleive today will mark a classic bottom $$".   Perhaps it could be, but overall I don't sense an overwhelming sense of fear out there and I need to see much more strength before thinking that a buying opportunity is at hand.   I don't have many extreme numbers yet on the breadth indicators I watch and the McClellan Oscillator is still only around -200.  Anything is possible, but I am pretty sure we are in a bear market and those trading rules apply.

I put a post up earlier today comparing this market to late 2007, and it probably does pay to go back and look at previous bear markets to see how they traded.  One thing I know and remember about 2007/2008 is that we saw a lot of reversal days and rarely did they lead to much higher prices.  Over the next few weeks, every time the market comes off of its lows to finish positive or close to it, you'll have several people come out and exclaim that a bottom is in.  Eventually, things do get bad enough that the markets bounce for several weeks to several months and eventually these people will be right, but often a one-day reversal will lead to maybe one more day of higher prices before the 9 day moving average rejects stocks and sends them lower again.   I think the same thing will happen now.

I was stopped out of my only short (GMCR) at $25.92 for less than a 1% loss and I am back in cash, waiting for the market to figure out what it wants to do.  I am looking to get short but have to wait for a better entry.  1040 and 2140 is now obvious resistance on the S&P and Nasdaq, and if we bounce here, those areas are going to be hard to overcome.   That being said, it wouldn't surprise me for a bounce to go further than those levels because they are so obvious, so I would focus more on the 1060 and 2180 levels as great potential shorting areas.   I would not be shocked for us to get above 1040 and 2140 on a bounce, but I would be very surprised to see the market get above 1060 and 2180.  

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

Good luck tomorrow - I will keep track of my numbers and when I think we could see a meaningful bounce but as of now, I don't think today was it.   As always, I could be wrong - it's really up to Mr. Market, as it always is.   Take care.

Another Historical Market Comparison for You to Check Out

After looking at the 1930 bear market and attempting to compare our current market to it a few days ago, I thought, "why not look at the most recent bear market we've had and see how they compare?"   Once again, the visual comparisons were a little too similar for my tastes.   We'll see if this means anything over the next few weeks.

First up is the S&P from late 2007 to right now.   Charts look very similar.

S&P Late 2007
S&P Now
 What Happened After the 07 Top

Now the Nasdaq - same visual similarities are present.

Nasdaq Late 2007
 Nasdaq Now
What Happened After 07 Top
All Charts from Telechart, Courtesy of Worden Brothers, Inc.

Again, these comparisons may not work out the exact same but I think they are worth looking at.   Based on what happened then, we should probably see some attempted reversal days soon where the market sells off hard but then comes back to close positive.  I would not be surprised to see one today or tomorrow - that's why my one short is very short-term - but back in 2007-2008, those reversal days more often than not amounted to nothing.   I would specifically watch for resistance around the 9 day exponential moving average and then the 20 day exponential average for the market and shorts as those levels worked well in 2008. 

Overall, we are likely in for some volatile trading conditions for a while, so be careful.   If time allows, I'll try to put a video together over the next few days about how to look for shorts using Telechart and what to look for in potential shorts.   Seems likely we'll be needing to use that information for the foreseeable future.