Sunday, November 6, 2011

Stock Market Outlook for Week Ahead - "Lots of Bullish Charts, But Also Lots of News" - 11/6/11

It was a tough week for the overall market and for swing traders this past week (at least it was for me.)   The overall market was down about 2% for the week but the action was extremely choppy both day to day and intraday.   Monday and Tuesday were about as bad as you can get on Wall Street, but that was followed up with a marvelous session on Thursday.   It was hard to get gains as stocks moved above many trigger points but then right back below sensible stop points, leading to some whipsaws.   Looking back, it was a week best spent on the sidelines in most cases.   Unfortunately, that's much easier said in hindsight.

Friday could be considered a good consolidation day, especially considering the market bounced off of some heavy selling in the morning and closed near its highs for the session.   My main concern here, however, is that I am seeing some mini head and shoulder patterns set up on the main indices and if we close below Friday's lows, I fear that those patterns will be confirmed.  I also continue to see somewhat extreme numbers in my momentum scans which normally lead to pullbacks. See the charts below (click to see larger image).

Major Indices

The U.S. dollar is also setting up a bullish flag pattern which is not good for the overall market.   
 U.S. Dollar

News remains the driving force of this market and until this mess in Europe is figured out one way or the other, the roller coaster ride will continue.  It remains a difficult environment to hold stocks for more than a day or two (and in some cases less that that), so you have to adjust.   Until the news dies down, I just don't think we're going to see many opportunities to start a position, hold it for a week or two, and take a nice 20-30% gain.   The market is just too volatile for that unless you don't use stops (which is a no-go in my book). 

I am still leaning long because that's where most of the individual charts are pointing me, and these are the setups I will be watching most.   PLEASE CHECK EARNINGS ON THESE NAMES - I HAVE NOT DONE SO YET.   I usually eliminate any name that is reporting earnings during the week ahead automatically.  

High RS Flag Patterns
Lower Level (or Thinner Names) FlagPatterns
Potential Bottoming Patterns
Momo Names to Watch (Daytraders Especially)
Solars Worth Watching Here?

If we do fall soon, I am going to look at the big cap former leaders on the short side, many of which continue to look like they are topping or have indeed topped.   TVIX is also on my list.


Good luck next week.  Hopefully it will be a little less news-driven and a little easier to trade.  I somehow doubt it, but it is what it is.  Adjust as best you can and hope for some luck.  Take care.

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