Wednesday, June 30, 2010

State of the Stock Market - 6/30/10

Yesterday I did two posts and discussed in both the good possibility that we are officially back in a bear market.  Well, if you had any doubts, I think today should officially change your opinion.   In what was another terrible session for the bulls, the market couldn't put in a bounce early on of more than a few points after being taken to the woodshed yesterday and chopped sideways for most of the session.   In the last forty minutes, however, the bears took total control and sold the market off very hard, with the Nasdaq losing thirty points in less than an hour.  The market bounced back very weakly into the close and the action shows how feeble the bulls are right now and that's the key - there just aren't any buyers out there right now.   Without buyers, it is hard for prices to do much of anything but fall. 

I am kicking myself a bit today because most of the session, I sat there amazed that the bulls couldn't push the market higher at all and kept thinking, "man, I should put some inverse ETFs on here because this market is going to fall further."  For some reason, I didn't - the only move I made was shorting some GMCR at $25.72 late in the session.  It is hard to short a market that has fallen so hard and so swiftly but today it was the right move.   The real scary thing is that along with the market, a lot of stocks are just now breaking key support levels and since the bulls seem to be on vacation, their falls through those support levels could continue to be swift. 

Are we oversold right now?   On some measurements, yes, we are, but on others such as the McClellan Oscillator (which is not even below -200 yet although I don't have today's final reading) we aren't yet at extremes.  I'm sure you've heard this before, but oversold can always become more oversold, and I would not be surprised to see that happen here.   Don't just think that because we've fallen so far that we can't fall further.  We certainly can and with the jobs number coming out tomorrow, there may be a good chance that we will.

In terms of strategy, the key right now is to play defense, not try and catch these dips, and save your capital for better opportunities.  Trying to be a hero right now is just stupid. We will bounce at some point. I don't know when that will be and frankly I don't care that much.  With the damage done over the past week and a half, any bounces will likely be capped not too far above the key levels of 1040 and 2140 on the S&P and Nasdaq.   We've officially gone from a "buy the dip" market in 2009 to a "short the bounce" market in 2010.  Play accordingly.  

Tuesday, June 29, 2010

State of the Stock Market - 6/29/10

Nasty stuff today as stocks fell hard and cut through some key lows with relative ease on Wall Street.   Futures were down big this morning and the market gapped lower and continued to sell off for the first hour or so of trading.  They moved sideways for most of the rest of the session, holding above key levels of 1040 and 2140 on the S&P and Nasdaq, but then broke down further in the final hour, closing with major losses.  Volume will come in a good bit heavier.

After today, if you're holding onto any hope of new highs in this stock market and a true bull market starting back up soon, you must be smoking something.   Sure, we will have some bounces here and there - for all I know, we could gap up tomorrow 1-2% and kill shorts just for the heck of it - that's still the type of market we have here.  The 1040 may end up being defended one more time and that is one reason I am hesitant to short here.  Overall, however, I do believe the bear market has officially started back up after a hibernation period between March 2009 and April 2010. 

I say this not simply because the market was down today, but mainly because leaders died all over the place today.   There was more carnage on individual charts today than I have seen in a while.   Check out BIDU, AAPL - two of the biggest names out there and both were crushed technically today.   Smaller leaders like CMG, SKX, HMIN, CTRP, RDWR, LVS - all were holding up very well until today when they were also crushed.   During last week's selloff, most individual stocks pulled back but did so in a relatively calm manner, leading some (including myself) to believe that perhaps the bulls still could take control of things.  After today, I don't think that is going to happen. 

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

I posted earlier today a comparison of this market to the 1930 stock market - make sure you check it out.  If history is repeating itself, we are in for a very difficult market for not only the next few months, but the next few years.   Shorting and cash are really in my opinion the only two options you have right now, for although there will be bounces, they will be difficult to play and difficult to time.   Only the nimblest and bravest of traders should be thinking of going long and trying to catch these falling knives that are seemingly everywhere.

I remain in cash and will continue to keep most of my account in cash, but I may try a few shorts depending on how brave I feel.   Names like BAC and JPM are ones that could just be breaking through key resistance soon and are not that oversold.   Shorting here is risky due to the possibility of a reflex bounce but it could work.   It really depends on how much risk you want to take.   Whatever you do, be careful because it looks like we're back in bear territory based on a number of factors.   Take care.

The 1930 Stock Market vs the 2010 Stock Market - A Visual Comparison

Given the absolute beatdown we are seeing today on Wall Street, this post could very well mark the bottom of this pullback, but even so, I thought I would share.   I've been thinking a lot recently about the economic situation we are in and how it compares to past situations that were similar - namely the 1930's in American history and the 1990's in Japan.   The charts of Japan and our current market didn't match up exactly, but using Telechart's "past chart" feature, I was able to look closely at the 1929-1930 stock market and our current market.   To be honest, the correlations were somewhat scary.

Here is a chart that shows the percentage gains/losses of the major rallies and pullback seen in 1929-1930 and in 2008-2010.


Index Dow '29-'30 Dow '08-'10 S&P '08-'10
First Bear Market -49.40% -53% -57%
First Reflex Rally 52% 70% 83%
First Real Pullback -15% -13% -14.7
Second Reflex Rally 10% 8.50% 8.75%


Are the percentages identical?   No (our recent reflex rallies were stronger but lasted longer), but they are a little too similar for my liking.   The scary part of this comparison is easier understood when looking at the charts.   Check them out below.



There are slight differences on those charts and one main difference - the time frame.   The first part of the epic bear market of the 1930's took place much quicker - that's why 1929 was labeled as a "crash".   Our bear market lasted for more than a year, but the percentage losses were similar.   Is history repeating itself?  Only time will tell, but if these comparisons continue to align, the chart below shows what we may have to look forward to in the upcoming years.  I am not an economist, but there are quite a few macroeconomic similarities between the late 1920's/early 1930's and today as well. 

All Charts from Telechart, Courtesy of Worden Brothers.

I have been longer-term bearish for some time now but on the shorter and intermediate-term time frames, I have been bullish at various times.   As I look at these charts and the action in the market now, I am starting to believe that we could be starting the second big wave of the bear market.  I have no way of knowing for sure, but for my trading, I will be staying away from longs for the foreseeable future until we get clear confirmation that things are going to be OK and that this market wants to move higher.   Shorting or cash remain the only smart places to be in this environment.

This weekend, I posted some long candidates to watch.  I was expecting the bulls to put up at least some fight after being knocked down four straight sessions last week.   They did nothing.   They are extremely weak right now and today is proof of that.   I don't know that I would short here, but I am certainly not going to be playing around with longs right now anymore.   Caution and patience remain key here.  Good luck.

Monday, June 28, 2010

State of the Stock Market - 6/28/10

What a boring day today on Wall Street.   Stocks fell early on, but bounced nicely before lunch.  At that point, it looked like the bulls might be able to get something going.   That didn't happen however - stocks drifted to the flatline after lunch and just chopped sideways throughout the afternoon, finishing almost exactly where they started.  

The technical picture obviously didn't change much today - check out the video from last night for a more detailed description of what's going on right now.   It is pretty sad that after being beaten down four straight days last week, the bulls have yet to be able to produce any sort of meaningful bounce the past two days.   Intraday, both attempts that they made were quickly beaten down both Friday and today.   It looks like the indices could be forming little bearish consolidations here so I think it is possible 1040 and 2140 is tested sometime this week on the S&P and the Nasdaq.   Another day or two like today and we won't be oversold anymore either.

I made no moves today but have to admit that I came close to getting into YGE and BEE mid-morning - I was watching both closely.   Over the last week, anytime I have had the urge to get long, I have just walked away from the computer for 10-20 minutes and then came back to see if the stocks I was watching were still looking good.   Without question, when I have come back, they don't look worth it anymore.  Doing that has saved me some heartache this week in terms of the small losses I would have taken had I not shown some discipline in staying out of this horrible market.   Really, right now, I can't see how anyone is making any money - it is very tough out there and volume remains very light.   The mantra "less is more" remains a great one to follow, as boring as it is.   Take care and remain careful and disciplined, because if you don't, this market will chop you to bits.  

Sunday, June 27, 2010

Stock Market Video - Outlook and Setups for the Week Ahead - 6/27/10

Hi, traders - here is this week's video.   It remains a difficult market overall but there are some things to watch with the indices as we continue to chop around in a wild range.   A few patterns could be forming here - one a potential long-term topping pattern and one a potential shorter-term bottoming pattern.   I don't know which one it will turn out to be, but it bears watching.   Part two has some setups that look like they have potential and are worth watching this week.   As always, please let me know if you have any questions or comments. 

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







 

Friday, June 25, 2010

State of the Stock Market - 6/25/10

Short post for Friday - to be honest, there isn't much to say really.  We saw some further selling early on today, but around 11:00, the bulls came in and pushed stocks up off their lows.   By 1:30, stocks were up nicely and it looked like we were going to see a nice bullish reversal with the Nasdaq moving up 35 points off their lows.   That of course would be too easy however, and stocks fell back into the close to finish up only slightly and in the middle of their intraday range.   Volume today was extremely low and the last half hour in particular was a complete chopfest.

This was my Twitter post from today around 3:00 - "I see stocks that look good here (APKT, PWER, ENTR, ARMH, AAPL, RDWR) but I simply don't trust this market enough to go long anything."  I think that pretty much sums things up for me.  I was tempted to put some longs on this afternoon but passed - turned out to be a good decision.   I was tempted yesterday as well and passed - another good decision.   Discipline is very important right now and I am trying my best to be disciplined.  It remains a very difficult market that can't really be trusted either way.  I don't know how anyone can take a position right now and have any confidence in the direction of the stock.  We could be up or down 2% on Monday and either one would not surprise me in the least.   


Enjoy the weekend and the time away from this choppy mess we have right now - I'll be back to share some setups but again, it is hard to play anything right now.   Take care and go U.S.A. soccer!

Thursday, June 24, 2010

State of the Stock Market - 6/24/10

Short-term oversold conditions simply didn't matter today on Wall Street, as stocks sold off for the fourth day in a row, and sold off rather hard.  Stocks started the day lower and sold off further for the first half-hour of trading.  They then formed a bear flag, broke down again, and hit a temporary bottom around 11:00.   They worked their way higher from there and it looked by mid-afternoon that a potential reversal was at hand.  However, the 2:00 hour brought the sellers back in and stocks tanked from there right into the close, finishing at their lows for the day after a feeble bounce attempt failed late. 

Technically, the volatility continues and it remains a difficult market.   Stocks have gone straight up (June 8-21) with little or no consolidation and now are going straight down with no consolidation either.  Rational thinking traders (like me) have trouble making sense of these moves because they happen so fast and go so far, but we are in a very irrational market right now.  Eventually, buyers will come in and stocks will bounce a bit, but I have no good way of knowing when that will be.  Technical indicators seem to be of little help right now because this seems to be a market with little volume and with that lesser volume comes these extreme moves and volatility.   I expressed several times back in May my fear that volatility would actually increase as volume decreased due to the summer trading environment and unfortunately that seems to be true. 

The RSI (2) indicator I showed in the charts last night is as low as it can get, but it (like every other indicator) is not perfect and could just stay in this low range as we continue to sell off here.   Other oversold indicators like the McClellan are not yet at extremes.   The past four days has retraced a little more than 60% of the move from June 8-21, so there is still room to fall from here before the 2140 and 1040 levels that everyone knows about could be tested once again.   Will we get there?   I wish I knew.  I expected a bounce today and guess I still do at some point - a straight drop down from 1125 to 1040 on the S&P is hard to believe but it seems now like that could happen.

Although I was tempted to buy the dip today, I passed and remain in cash.  Frankly, I don't have the guts to buy this dip because I know that there is a good chance I would be stopped out tomorrow on another gap down.  The moves we're seeing are so extreme that this particular selloff could be long from over.  That being said, there still are charts on the long side that I am watching and that look OK - AZPN, ARMH, CROX, AAPL, ENTR, APKT, RDWR, ARST, SKX, PWER, and UAUA have all held up relatively well.  I would love to be aggressive here with some of these names, but I just can't - this market remains extremely tough, especially for swing traders, and the motto "less is more" remains very practical.   The less you do right now in terms of trading, the better you likely are.   Take care and be careful out there.

Wednesday, June 23, 2010

State of the Stock Market - 6/23/10

The Fed day came and went today with little fanfare, as the market didn't do a whole lot.   Stocks continued to sell off hard for the first hour of trading, but bounced back from there and slowly climbed off of those morning lows to close with small losses.  Volume was lower and has been lower all week.  

Right now, we are at short-term oversold territory on the indices so a bounce wouldn't surprise me over the next few days.  It's not a given as you can see but usually when we fall from extremely high RSI(2) levels to extremely low RSI(2) levels so quickly, a bounce is somewhere in the cards.  The last time the RSI(2) rose and then fell so sharply was back in September of 09.  Check the charts out below for a better look at those possibilities.

 Charts from Telechart, Courtesy of Worden Brothers, Inc.

As I look through individual charts, most leading stocks have held up fairly well the past three days (meaning they are all still above their 20 day moving averages) and are also oversold in the short-term.   When you look at charts like APKT, AKAM, CROX, VMW, and DECK, there were buyers coming in today when they were down to push them positive and that is also a good sign.   So although the previous two days saw some extremely bearish intraday action, the bears really haven't done as much damage as it might seem so if I had to pick a side, I would say I am leaning slightly bullish here, at least for a little bounce.   My numbers remained mixed overall however so I will probably remain heavily in cash.   It remains a difficult market overall and remaining nimble and flexible is key.   Good luck out there.

Tuesday, June 22, 2010

State of the Stock Market - 6/22/10

Another nasty day on Wall Street - stocks chopped around doing nothing for most of the morning and through lunch, but then around 2:00, the bears took control and sold stock off hard once again, closing the market much lower and below some key areas of support.

In terms of where the market goes from here, your guess is as good as mine.   The action was very poor today and could certainly lead to more selling as the bulls put up little fight around the support levels of 1105 on the S&P but support around 2265 held up slightly better on the Nasdaq although the short-term moving averages were still broken.  Some leaders have been hit the past couple days as well - take a look at NFLX, CROX, UAUA - some breakdowns out there.  A lot of my breadth numbers are back to being bearish. 

At the same time, the market is also getting into oversold territory in the short-term so chasing on the short side might be tough to do here.   Late last week, I was hoping for a quiet consolidation.   The last two days have been anything but quiet, but it is possible this is the pullback that was bound to come - it just turned out to be a very volatile one.  Although the past few days have been very ugly, I am not ready to dismiss the bulls yet.  However, if we get more selling like today over the rest of this week, then maybe the bulls are dead and everyone really starts talking about that head and shoulder pattern.   The next few days should be key.   

This post will be a little off-task because to be honest, I am frustrated.   I came out of my "hibernation" trading-wise late last week because I thought the risk/reward was good for some shorts - I took BEXP, CRZO, and FCX.   I highlighted a bunch of other names here as well.   Turns out that I was about two days too early on those shorts and I was stopped out of all my positions with small losses.   Take a look at some of those names I highlighted now - XCO, COG, CRZO, SII - all rolling over here now.

Since the shorts weren't timed right and the market kept going up, moving my indicators toward bullish signals, I went long two stocks yesterday in CVGI and YGE - stocks that had consolidated slightly and were not as extended as many others.   I was stopped out of both today for 5% losses (thanks in part to a horrible fill in CVGI).   I was about two or three days too late with my longs.

I wrote about a month or so ago about the market overall and how I really think it had changed and I am still feeling that way.  Maybe my trading outcomes this week is having an influence on me right now, but as of now, I will be going back to the sidelines as I still am not executing well enough to be successful.   You have to constantly adapt to any market in order to be successful as a trader and I am secure enough to admit that I have yet to adapt well enough to this "new" market.  That's the bottom line for me - I haven't adapted.  Since I have obviously not done so yet, I need more time to figure it out and that's why I am back in cash.

I thought an article from Doug Kass this morning put the current state of the market well when he stated....

"The disproportionate influence of high-frequency trading strategies has resulted in an increasingly volatile, trendless and often random market over the past several months -- difficult for most investors (especially a buy-and-hold kind) to navigate."

He goes on to discuss some adjustments he has made to his trading over the past few months in the rest of the article

Another article worth checking out on how to adapt to the "new" market was written by Brandon Rowley over at T3live.com.   It is to be honest a little depressing because it states that things are going to be much harder for traders in this new computer age, but offers some suggestions on how to deal with it successfully as a trader.  I will continue to share as I find articles that are worthwhile.  Take care and be careful - it remains a very tough market out there.

Monday, June 21, 2010

State of the Stock Market - 6/21/10

A nasty day today on Wall Street, as stocks gapped up at the open, putting themselves in very overbought territory, and then proceeded to sell off for pretty much the rest of the session.  There was a bounce late that took stocks off of their lows, but the intraday action was very bearish and the pullback that I've been saying would be beneficial may happen soon, starting today.   Volume was lower - that's the only positive about today's action.

Technically, a big gap up after a huge run is always worrisome, and that proved to be true today.  The S&P and Nasdaq were not able to get up to their 50 day moving averages, but they came mighty close before reversing.  The Dow hit its 50-day almost exactly before reversing hard.   The market is still overbought short-term so we could see further pullback from here.   Although today's reversal looks bad on the charts, we have to see if we get some follow-through before considering this rally dead in the water.   If the S&P holds 1100 and the Nasdaq holds 2270ish, then the bulls still have a chance to make higher prices.  If those break, then I think all bets are off.

My market numbers actually did turn bullish across the board early in the session today, but only one remains bullish after today's reversal, so I am basically neutral on the market here.  A quick, sharp reversal on the breadth numbers I look at is typically not a good sign.   I will keep an eye on them over the next few days to see how they react, but much like the technical picture, if the bulls don't show some strength or if the market sells off on heavier volume, perhaps that right shoulder that everyone sees as a possibility right now could indeed form.  The breadth numbers will certainly deteriorate if we get more selling soon.

I made two trades today, both from the long side.   I knew it was risky getting in with the market overbought, but neither of the stocks were very overbought and I wasn't chasing overextended stocks, so I went with it.   I went into CVGI this morning with a small position around $12.20.....or so I thought.   When I entered my market order, the stock was at $12.20-12.21.   When my order had filled, it jumped $0.30 instantly, so I was filled at $12.54.  I have no idea why I got that bad of a fill - it's not like volume was extreme and the stock was moving super fast.   I would not have bought CVGI up there because it made the risk too high, but I was stuck with it at that point.  Thanks Scottrade for the great execution!  I also entered YGE at $10.86 as it was trying to poke its head above key resistance.   Both stocks reversed along with the market and I will likely be stopped out soon, although I currently still have both positions.  

We'll see what the market has in store for use tomorrow - today's action certainly looks bearish and we have to look for follow-through.   Watch those support numbers mentioned earlier to see if they hold.   A pullback was overdue, but ideally we wanted to see a calm one, not one like what we saw today.   This remains a tough market to play.  Good luck tomorrow.

Sunday, June 20, 2010

Stock Market Video - Outlook and Setups for the Week Ahead - 6/20/10

Hi, traders and happy Father's Day to all the dads out there like me.  Things overall look bullish here and most of my indicators have turned bullish(not all but the other two should turn Monday barring a heavy volume sell off.  Therefore, you have to look long here and I show why in part one.  Part two highlights some setups for the upcoming week - hopefully we can find some like UPI (highlighted here in last week's video and up 29% since then) and CPE (also highlighted in last week's video and up 14.5% since then). 

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





 

Thursday, June 17, 2010

State of the Market - 6/17/10

Kind of a slow day today on Wall Street but a relatively bullish one even thought stocks were down a bit.   Stocks opened the day slightly higher but quickly sold off for the first hour of trading.  Given that the market has moved straight up for the past week, this could have been bad.   However, the bulls managed to keep the selling well-contained and even bounced the market back to the flatline - bullish action overall.  The action was also boring today as volume came in lower and it seemed like most traders were watching the World Cup or U.S. Open because there wasn't much happening overall.   Not that that's a bad thing - a few slow, boring days with slight pullbacks or sideways action is exactly what bulls should hope for here.  The U.S. plays tomorrow so perhaps even more eyes will be on that and the slow action will continue.

When you look at the charts of the Nasdaq and S&P right now, they look to be consolidating nicely the past two days, perhaps forming little bear flags.  Again, this would be very positive action if it continues.   On the other hand, the Nasdaq has still not really made a closing "higher high" so a roll over from these areas would be very bearish as it would complete a potential right shoulder on both indices.   Let's wait and see what happens - in terms of support, I wouldn't want to see the S&P get below their short-term 9 and 20 day moving averages around 1095 (which are also about to cross which would be bullish).  Ideally, the S&P will hold 1105.  On the Nasdaq, I wouldn't want to see the Nasdaq get much below 2265.
 
Charts from Telechart, Courtesy of Worden Brothers, Inc.

I remained in cash today and with tomorrow likely being a slow day I will probably go into next week in cash as well.   My overall market signal remains bearish but one of the main two I use will likely turn bullish by Monday unless we see some heavy volume selling tomorrow.   I showed you some possible long setups this morning in the video and my basic outlook here is to be cautiously bullish.   If we rest tomorrow and hold support, I will get more bullish going into next week and start looking at taking long positions, especially if my signal turns bullish.   I don't see too much damage out there in leading stocks (beside ARWR) and if names like RBCN, NFLX, CROX, UAUA, LVS, DECK, and SKX take another day or two to consolidate, the setups will be there to play.  Let's just see what the market has in store for us - hopefully it's not a nasty surprise.  As always, I am not discounting anything and am not locked in one mindset. Take care and good luck Friday.

Stock Market Video - Thursday Setups - 5/2/10

Here are some setups to watch right now.   Ideally, we would get some consolidation here to let us work off the overbought condition (and none of these setups would be hurt with a few more days of rest).   The main problem I see with these setups is that most are either low priced or very thin in terms of volume, so be careful. 

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



Wednesday, June 16, 2010

State of the Market - 6/16/10

Sorry for the early post, but I have family coming for the afternoon and evening and will not be able to post later.   As for today, the bulls have to be happy with what has transpired so far.   As I said yesterday, this market was and is very stretched to the upside in a number of ways, and with the day starting with bad numbers from FDX and a small gap down, the setup was there for the bears to take the market down a bit.  They really couldn't do so, however, and that is a good sign for the bulls.  We'll see what happens with the rest of the session but as of now today was another strong showing. 

I was stopped out of both of my short positions today with small losses - CRZO at $20.54 and FCX at $67.07.  I am back to 100% cash and will likely not look at shorts now that a technical follow-through day has occured.  All of my timing indicators are still bearish but some are very, very close to turning bullish.   If and when the two main ones I focus on turn bullish, I will do my best to find longs and stay on that side of the market.   I am still market neutral here but will not fight the trend once I get the sign that I should definitely be buying.  At the same time, I want to stick my numbers and can't get too aggressive until I get that signal for sure.

We are still quite overbought here and it is options expiration this week, so it pays to be careful, but keep your watchlists ready for potential longs.   Ideally, we would get some consolidation in this area where a little of the overbought condition could work itself off, but how often do we really get what we want in the market, especially a market as volatile as this.   Good luck Thursday. 

Tuesday, June 15, 2010

State of the Market - 6/15/10

Another fun day on Wall Street today as what happened yesterday continues to have no effect whatsoever on what happens today.   We saw the market test and in some cases break through key resistance yesterday only to reverse and sell off hard, frustrating (I would guess) a large percentage of bulls and emboldening a large percentage of bears.   So what does the market do today?   It moves higher by almost 3% in the case of the Nasdaq, frustrating a bunch of bears and emboldening most bulls.  The volatility continues.   The market started slightly higher today and just climbed slowly and steadily from there with the market closing at its highs for the day - the intraday action was actually not volatile at all.   As of now, volume is heavier on the Nasdaq and S&P, but not above average on any index.

So where are we at and where do we go from here?   Let's look at the first part of that question.   Today likely qualifies for an IBD "follow-through" day since the Nasdaq and S&P had a large percentage gain and volume was heavier than the day before.  This doesn't mean the market is going to take off from here - all you have to do is look at June 2 and see what happened after that FTD.   What it means is that there is a good chance that the market rallies further.  We'll see what happens - I have explained my opinions about this idea before on this blog - the fact that I really want to see a huge surge in volume across the board on a FTD - but it is what it is.   

Technically, the markets have now clearly broken through their two month downtrend lines.  That is good. The S&P has made a closing "higher high", although it is also a bit worrisome that both the Nasdaq and Russell 2000 failed to make new closing highs today as well (the Nasdaq came within two points of doing so).   We are also as overbought as we have been since this correction began back in April, with the S&P showing a 94 RSI(2) rating, the Nasdaq showing a 97, and the Russell 2000 sporting a 98 rating (all out of 100).   The McClellan oscillator is around +275 as well, the highest its been since March of '09.   None of this means we can't keep moving higher - I am just putting this out there as facts that need to be considered.

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

I made no trades today and am actually still in both of my shorts (FCX and CRZO).  That may change tomorrow as FCX came very close to being stopped out, but we shall see.  I thought about adding a few more shorts intraday but had a feeling that this melt-up would occur so I passed.   Not many of the stocks on my long watchlist did anything today - both CROX and SKX were up nicely but in the case of CROX volume was only average and both stocks have been up now six days in a row.   Does that sound like a place you want to buy a stock?   I have to pass.   The other leaders out there like NFLX, BIDU, DECK, SNDK, VMW all have charts that are not very attractive either from a buy perspective.  They are strong stocks, but the setups aren't there.   Some rest or consolidation here would help in this regard.

I don't want to make it seem like I am really bearish here - I am not.  More than anything after today I would classify myself as neutral.   I have two shorts on but remain mostly in cash.   As of now, none of my signals have turned bullish but it looks like could change soon with a few more days of buying.  If they turn, then I will concentrate only on going long.   As it is, this is still a tough market to trade frequently and less is probably best.   A small pullback here would be super but a continued melt-up is going to be tough to play.
All I am doing is just trying to lay out the facts here and tell you that it is important to remain disciplined here.  Chasing stocks can get you in trouble, and just because things look great at the end of today's session doesn't mean tomorrow is going to be great - all you have to do is go back one day to remind yourself of that idea.
 
We remain in a very volatile environment with options expiration coming Friday, so I'll wrap up this wrapup by saying don't be surprised by anything and keep your options and mindset open.  Anyone that is super bearish or super bullish and really confident in their position is likely setting themselves up for trouble. Take care and good luck Wednesday.

Monday, June 14, 2010

State of the Market - 6/14/10

 Another volatile day on Wall Street today as stocks tried to clear very important resistance early on in the session and looked to be successful doing so around lunchtime.  Stocks opened slightly higher, consolidated a bit, and then pushed themselves higher and by 11:20, they had large gains for the day.  That, however, was the top as stocks sold off for the rest of the session, slowly at first, but then licking up steam in the final few hours.  News of a Greek downgrade by Moody's supposedly set off the afternoon selling.  Regardless of what caused it, it was not bullish action.  Volume appears higher than Friday but still very low overall.

Technically, I said in last night's video that today would be important and it very well could be.  The descending trendlines on both the Nasdaq and S&P were temporarily broken to the upside during the morning.  The key 1105 area on the S&P was not broken however (it came mighty close) and from there stocks just reversed in a very bearish manner.  Now, with as volatile as this market has been, we could gap right back up tomorrow over today's highs, but on the surface, today looks bearish and I expect the market to sell off for at least a few days.  With the market as overbought as it's been since this selloff begain in April, I think there is a good chance 1040 is tested again - this time it might not hold however.

I actually came off the sidelines today and made a few trades - we'll see how they go.   The first one was not good - I shorted BEXP at $18.23 near the open.  By 12:00, I was out at $18.74.  That gave me about a 3% loss.  I would have still had this position if I gave it more room, but I respected the possibility that the market could take off here, and so I kept my stop fairly tight.  Later on, I went back into the short side with FCX at $66.13 and CRZO at $19.93.  If you checked out last night's video, most of the short setups shown look very good right now with bearish reversals all over the place.   I posted a few of the better ones on Twitter intraday as well.  Meanwhile, I saw very little moving on the long side for most of the morning which was a clue that the market was weaker than it seemed. 

We'll see where we go from here - I have to admit that I am nervous holding overnight right now because of how crazy this market has been but I am still in mostly cash so that helps calm my nerves.  I would love to be more aggressive here but I just can't due to the volatility.  I also have not seen many people (at least that I follow and read) expecting a sell off here - most seem to be expecting a further move higher.  As I said this weekend, unless we get some major buying to show up with volume, I have to trust my indicators which are still bearish and technically, this looks like a very logical place for the market to break back down a bit.  We'll have to see if it is that easy - my guess is no just because nothing has been easy for the past two months.  Take care and remain careful.

Oh, by the way, I realized today when I started writing this post that last night's video was my 1000th post overall.  For me, that's a pretty big deal.   I didn't really know where this would go when I started blogging over 2 years ago, but I am happy to still be writing and hopefully somewhat relevant after that long.   I thank all of you readers that continue to read what I put out, and as always, please let me know if you have any requests or suggestions for the next 1000 posts (God willing).  I am always open to suggestions and comments.  

Sunday, June 13, 2010

Stock Market Video - Weekend Outlook - 6/13/10

Hi, traders. We are at a very important technical level right now so Monday and Tuesday should be very interesting days.   Since my indicators are still all bearish, I have to lean that way unless volume really starts coming in and we get some clear indications of buying going on under the surface.  We'll see what happens - part one deals with the overall market and part two deals with setups for the week ahead. 

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






Friday, June 11, 2010

State of the Market - 6/11/10

None of my signals have turned bullish yet but we are approaching a very key technical point as well so next Monday should be interesting.   Because the signals haven't moved, I am more inclined to short around here but I have to see how my scans look which is what I will do this weekend.   Enjoy the weekend.

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

Thursday, June 10, 2010

State of the Market - 6/10/10

An interesting day on Wall Street today as stocks were up a large amount but made those highs on what appears to be weak volume.   I said the following in yesterday's post...

"I showed some long setups last night in case we bounced but I also mentioned how it would take a move above 1110 and 2270 to get me really bullish.   Maybe it still happens (today's action looks very similar to 5/26 and the next day we saw a 3.7% move so who knows?) but the proof is in the pudding."

You may think today is the "proof" - the all clear signal to go out and buy stocks.  However, due to the striking similarity between the past three trading days and 5/25-5/27, I have to maintain my stance that we are just in a volatile range here until either 1110 and 2270 get broken to the upside or until 1040 and 2140 get broken to the downside.  Following May 27, the market sold back off, moved up again two days in a row, and then fell hard.   I would not be surprised to see the same thing happen here, especially considering the volume levels on today's trading, which also strikingly (or should I say eerily) similar to those three days.  Oh yeah, the three days from then match up day-wise as well - Tuesday, Wednesday, and Thursday.   Kind of spooky if you ask me. 

Due to the overwhelming volatility of the past month or so, I have been in cash, but that doesn't mean I have been doing nothing.   One thing I have tried to do is tighten up my overall market timing system and make it a bit more mechanical.  It was a weakness I recognized and wanted to work on, especially in an environment controlled more and more by machines rather than humans.  Looking back at 2009, I realize I was going too much by feel and ended up missing a large portion of the rally from March.   My signal is still clearly bearish as of now and that is another reason I am hesitant to chase anything like today's rally.  

We are just lacking buying pressure.  Today was a prime example.  Just not really enough breakouts for such a large percentage day (I don't have the final numbers yet but will share later on Twitter).  Theoretically, IBD could call this another follow-through day, but again, with such underwhelming volume, I don't know that they should.  If we keep moving higher and volume comes in and we get over those important resistance levels, I believe the numbers I look at will take care of themselves.   Until then, however, I have to continue to wait and be patient.  If I get the "signal" to start going long, I'll be sure to share it.

That's about it for today - as always, if you're out there trying to trade this chop, best of luck.   If you're like me and sitting on the sidelines, our time will come soon - just continue to be patient.   Take care.

Wednesday, June 9, 2010

State of the Market - 6/9/10

"Weak" is probably the best word to describe today's action on Wall Street, as the market once again proved it cannot bounce for more than a few hours, let alone a few days.   After holding key support levels yesterday, the potential for a bounce was certainly there for the bulls, and early on today, it looked like it would happen, as stocks started higher and after a brief period of consolidation, moved nicely higher into lunch.   That was it, however, as stocks faded during the afternoon, slowly at first, but around 2:30 they picked up steam to the downside and gave back all of their earlier gains, finishing with losses.  Volume was lower.

Technically the market was rejected right near its 9 day moving average and the intraday action was terrible.  I showed some long setups last night in case we bounced but I also mentioned how it would take a move above 1110 and 2270 to get me really bullish.   Maybe it still happens (today's action looks very similar to 5/26 and the next day we saw a 3.7% move so who knows?) but the proof is in the pudding.   Right now, the bulls don't seem to have any sort of power and instead of getting chopped to bits like a lot of traders who aren't in cash and who aren't daytrading probably are right now, I would rather wait for some confirmation.   In addition, the more we test those 1040 and 2140 levels, the more likely we are in my opinion to break through them to the downside and have another move lower.   Those short setups that I showed in Monday's video still mostly look good and they bear watching.  

Not much else to say - all of these reversals continue to prove how high volatility is right now and it makes it very, very difficult to do much trading in an environment like that.   I haven't traded a single share in at least a month now and have no problems at all going another month or so doing the same thing.   It's all about getting the right setup and it is not there at this time.  Now if we break 1040 and 2140, then I would look to jump in, but until then, patience remains key.   Good luck and be careful. 

Tuesday, June 8, 2010

State of the Market - 6/8/10

Sorry for the late post - had a meeting to attend.   I'll just show some charts here and take a look at what's happening in the markets via those charts.  Today the market bounced off of some key support and we could bounce here for a day or so, but I can't get very bullish until we see some real buying come into the market.  

Charts from Telechart, Courtesy of Worden Brothers, Inc.

If you're looking for potential bounce plays (short-term only) here are a few to perhaps watch.   I showed you some short candidates to keep on your watchlist last night.

Charts from Telechart, Courtesy of Worden Brothers, Inc.
 
I'm still in cash but if you must trade here, we could see a little upside the next day or so.  Of course, you know how well the market has followed through on any move recently, so be careful as always.   

Monday, June 7, 2010

Stock Market Video - Short Setups to Watch - 6/7/10

Hi, traders.  Here's some short setups to watch this week - I'm not saying I am going mad here, but I definitely have my eye on some of these.   Only problem for me is shorting a market down big two days in a row.   Either way, keep these on your radar.

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



State of the Market - 6/7/10

Another very bearish session today on Wall Street, as stocks could not bounce at all following a shellacking Friday, and ended up closing at their lows for the session once again with large losses.   The market opened up slightly and tried to bounce in the first hour of trading, but couldn't get anything going.  They sold off for about an hour, tried to bounce again starting around 11:00, but that attempt also failed and after some sideways action until around 1:30, stocks fell hard into the close.   The Nasdaq led the way to the downside with a loss of almost 2%.   Volume looks to be lighter but that's the only bright spot at all in the action.  

Not much changed today in regards to what I said yesterday.  The "rally" that lasted one day is dead, and right now the only thing to do is sit and watch from the sidelines or short when you can.   In hindsight, I wish I would have gone short at the end of Thursday's session as I though it was a good technical level, but with the jobs number due, there was no realistic way for me to start a position there.   Oh well.   We are a little oversold in the short-term but there is no reason we can't go lower from here.  Maybe we bounce a bit when the market gets around 1040-1045 on the S&P and 2140 on the Nasdaq (where it could get some support) but any bounces we get should be shorted.   It is starting to look like the past three weeks was just a very choppy consolidation phase before this market moved lower.  

Gold had a nice session today and that is about the only positive I see out there right now.   I saw further breakdown today in some individual "leaders" shown in last week's video or posted on the blog at some point last week, and this is obviously bearish as well.   Names like CSTR, OSTK, DNDN, CRUS, DCTH, ATSG, RPTP, and CREE look like death and that's a sign of further selling for this market in the future.   The only stock that I see continuing to hold up is VMW, which is one to watch.

Story remains the same - be very careful out there.   I am still on the lookout for shorts but since I would rather short rallies than breakdowns, my work is cut out for me.   Good luck Tuesday.

Sunday, June 6, 2010

Stock Market Video - Outlook for the Week Ahead - 6/6/10

Hi, traders.   First off, as a former basketball coach, I had to mention the passing of the coaching legend John Wooden.  When I started coaching, I read many of his books and was surprised to see how much of them dealt not with the game of basketball but the game of life.  He was truly a man of wisdom, faith, and humility.  My local paper linked to this story in the L.A. Times about Wooden, and I thought it wrapped up the man pretty well.   RIP Mr. Wooden.  The world needs more men like you. 

In terms of trading, we just got through another week of intense volatility and crazy trading and in the video I look at the issues we are facing right now.   We did see a follow-through day on Wednesday, but for various reasons (all discussed within), that FTD seems completely dead in the water to me as of now.   Cash remains the best place to be and patience remains key.   With volatility remaining high and news remaining very imprortant (see Friday's action as a prime example), it is difficult to make any moves outside of an intraday time-frame.   Yes, it is boring to do nothing, but trading isn't about the excitement, it's really about doing what's right.   Sometimes it is boring.

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








Thursday, June 3, 2010

Stocks to Watch Into the Weekend

I didn't find all that many short setups in my scans, so I am a bit hesitant to listen to my own thoughts from this past weekend.   Here are some stocks that look like potential breakouts if the markets decided to move higher here.   A lot will probably depend on the jobs number tomorrow.

All charts from Telechart, Courtesy of Worden Brothers.

State of the Market - 6/3/10

A mixed day on Wall Street today as the Nasdaq had a nice session with almost a 1% gain but the S&P lagged a bit and had gains of less than 0.5%.   As you probably know by now, yesterday's gains on the Nasdaq were enough to constitute a follow-through day for the overall market, putting it back in "rally mode".   That is good, but it is not enough of a green light for me to start buying everything in sight.  There are several problems with yesterday's follow-through.

The percentage gains were certainly large enough yesterday to warrant a FTD, with the Nasdaq and the S&P up over 2.5%.   Volume, however, was not impressive - Nasdaq volume was just barely higher than Monday and Tuesday's totals and volume on the S&P was actually less than Monday and Tuesday.  I never like to see only one of the indices have a true follow-through day - I would prefer to see a really powerful move where volume is much heavier across the board, signifying a true increase in buying interest.   I don't think we saw that yesterday.  There is also the issue of buyable stocks, or the lack thereof.  There are simply not many great candidates on the long side right now and that traditionally is not bullish on a FTD.   It is possible however that it just might take more time for candidates to emerge due to the volatility we've seen recently.   CRM, CSTR, and VMW are three IBD-type stocks that are out there as potential leaders, but I don't see many more.  Maybe I am just missing them. 

From a technical perspective, the Nasdaq is reaching a very interesting level as it is quickly approaching the downtrend lines that have established themselves during this correction.  The S&P is not quite as close to heavy resistance but it is getting there.  I said in this weekend's video that I would look to short in this area and I will have to decide soon if I am going to put my money where my mouth is or just stay in cash.   With a big jobs number coming out tomorrow, I would not be surprised to see a gap and we'll have to see how we trade off of another big news event.   My guess is that the volatility will be back in play big time.   A gap up might be a good fade opportunity and I have to consider it (although I will be at a funeral tomorrow so I may not be around to consider it anyway).

 Charts from Telechart, Courtesy of Worden Brothers.

That's about it for today - the next few days should tell us a lot about where we head from here.   A FTD is present so I am not discounting higher prices, but I still lean slightly bearish and think this FTD could fail soon.   We'll see what happens.   Good luck Friday.

Wednesday, June 2, 2010

State of the Market - 6/2/10

So I ask again....are you having fun yet?   The roller coaster ride continues on Wall Street, as intense volatility remains the number one story out there.   After seeing a very bullish 3% gain last Thursday, we saw two back to back selloffs on heavier volume of over 1%.   Today, we saw a very strong session with gains of over 2%, except that it came on much lower volume.   So what exactly will tomorrow bring?  I haven't a clue.

I think it is still possible we are forming a very choppy bottom in this area but given volume patterns it is far from certain.   I still tend to think the best play is to wait for a bounce up to the descending trendlines now forming and look for short candidates at that point, but that is just a guess too.   I remain in cash and am completely content in doing so.   If we clear Thursday's highs, I may look at some small long positions, but there is still resistance above those levels so a rally is not certain.

I look at it this way.   When you have increasing volatility, you can theoretically combat it with smaller positions and larger stop loss levels which allow for the large swings you see with increased volatility.  That makes sense, and although I prefer to cut my losses very quickly, I think I could withstand those larger swings if I had enough confidence that my overall outlook was correct.   I guess that's my problem.  Do any of you have enough confidence in the future direction of this market over, let's say the next two weeks, that you really want to risk taking the very large losses that would occur if you are wrong?

One of the first lessons you learn as a trader is that you are probably going to be wrong at least half of the time - it is just how it is.   With good money management, however, you can still do well.   If I make a mistake or am wrong about a particular stock, I get out, take my losses quickly, and move on, leaving myself plenty of capital (both physical and emotional) to look for the next potential play.    This market however is just too easy to make mistakes in.  If you follow good sell discipline, you will likely drive yourself batty because you will be stopped out constantly.  The swings we are seeing are just crazy and unpredictable.  Trading a market like this with discipline will cost you not only a lot of physical capital but also a lot of emotional capital.

This again is all from the mouth of someone who would prefer to hold a stock for a few days to a few weeks.   I am not a daytrader due to work commitments - it is not really an option for me.   So I remain in cash and am fine with it.   Someone posted last night the following comment - "The bounce has already happened. Not sure what you are waiting for ? We will slide down to 950 while you are waiting for a good bounce."   I am curious on how he feels after today's session.  

I am slightly bearish longer-term but I also realize that in order to take positions in a market like this, your timing has to be almost perfect.   That perfect time to short is not yet here in my opinion so I wait.   Sometimes that is all you can do.   Unless you're day-trading, I would urge you to do the same.   I haven't made any money the past month or so, but I haven't lost any either, and I would guess that's much better than most non-day-traders out there right now.   Take care and be careful. 

Tuesday, June 1, 2010

State of the Market - 6/1/10

June opened with a more bearish action today, as stocks gapped down, gained almost all of the losses back, but then gave it all back in the final two hours to close with large losses once again over 1%.  I really don't have much more to say than that because not much changed today.   We are still in a downtrend.   There are chances of bounces but every bounce we get (including intraday) is sold off.   The only real play right now is to short bounces, but I prefer to wait until we get up into a safer area from which to short, something I talked about in this weekend's video.  My guess is that we will continue to see volatile intraday action and the mantra remains the same for me - cash is a great option (the best option) unless you're daytrading. 

I did post one main short to focus on in this weekend's video (BEXP) and posted it again this morning on Twitter.   I did not take this short but it does really look good.   Being down two days in a row, I don't want to chase but it is one worth watching.   BEXP was a former leader from 2009 and now appears to be topping out - it is these type of former leaders that you want to watch out for in terms of forming nice short patterns.  CREE and GMCR are two others I would watch although neither is anywhere near being a short right now - they both need bounces.  

Good luck Wednesday - patience and discipline remain key right now.   Take care.