Thursday, March 31, 2011

State of the Stock Market - 3/31/11 - "Very Cautious Entering a New Quarter"

I discussed yesterday how a big clue for me whether this market wants to rally for a longer period of time is the behavior of the breakouts we saw yesterday.   Here's how they look.

FARO
HERO
PTIE
PUDA
RAX
TDSC
Charts from Telechart, Courtesy of Worden Brothers, Inc.

Overall, they don't look too bad, although it's my luck that I entered the two that look the worst.  I did sell two more positions today (REE flat and MOTR for a 1.97% loss) because I really don't want to be heavily long going into the jobs number tomorrow along with the start of a new month (and perhaps an end to the end of quarter window dressing).   Both the Russell and Nasdaq have now been up 9 out of the last 11 sessions and we have had a streak of now 11 sessions with positive breadth.  Typically when that number gets up around 10-12, we see a shakeout with individual stocks getting hit harder than the overall indices.   It doesn't have to happen, but I am kind of expecting one.


I maintain a bullish outlook overall until the market tells me different, and continue to hold my two long positions started yesterday.  However, I went into today's session with a lengthy watchlist and expected to put some money to work, but I wasn't that impressed with the intraday action of those stocks on my watchlist.  Basically, I just don't see much reward for starting new long positions here and will wait to do so.  Be careful right now.  A pullback into the 2745 area for the Nasdaq and 1310 area for the S&P is where I would look to reload, and if we get that over the course of three or four days, it would likely set up some VERY nice charts.   We'll see if we're that lucky.   Good luck Friday.

Wednesday, March 30, 2011

State of the Stock Market - 3/30/11 - "Watch the Breakouts"

Another good session today on Wall Street, as stocks started the day slightly higher, gave very little back in the first hour, and then rallied through the morning.   The afternoon was a little slower with the S&P pulling back slightly off its highs and the Nasdaq moving basically sideways until a slight drop at the end of trading.   Overall, it was another day of gains and volume looks like it should come in heavier than yesterday, although it is still not above average, which remains a concern.  

Technically, the leading index right now is the Russell 2000, which broke to new highs for the year today, and I always do like to see small caps lead the market.   The S&P closed right below some key resistance today around 1332, and the Nasdaq could soon meet some important resistance as well around 2800.   The market is a bit extended and another up session here without some rest may have me taking some profits on positions.   However, since some major resistance has been cleared over the past week, any pullback seen should be buying opportunities as long as they are not severe with heavy volume.   Watch 1285 and 2740 as key levels for the S&P and Nasdaq respectively.

Nasdaq
 Russell 2000
 S&P 500

I did enter two more positions today, although one was actually entered after-hours last night.   Both of these names were shared in yesterday's video along with a few other movers like ANN and SHFL.  I was also stopped out of one of my entries from yesterday (ROYL at $5.11 for a 2.6% loss).   I was hoping to catch some lightning in a bottle with that one but it just couldn't recapture that strong momentum, at least not yet.  

 Charts from Telechart, Courtesy of Worden Brothers, Inc.

I do see maybe a little fatigue in some momentum names today (REDF, MCP) as I go through my scans, and perhaps that is a bit worrisome in the short term, but I also see a lot of nice breakouts (RAX, TDSC, PTIE, FARO, HERO, PUDA).   I think I am going to judge the health of this market over the next few days in large part by how these breakouts act.   It's been somewhat of a bumpy ride up to this point for the market as a whole, with volume lagging so much and some iffy breadth numbers, but we're finally seeing nice charts move higher.   As long as they don't give these gains back, then the market remains a buy. 

Good luck Thursday - in the short-term, I may hold back a bit on entering new positions as I already have four long plays and the market could use a little rest, but things look good overall.  

Tuesday, March 29, 2011

Stock Market Video - Long Setups for Wednesday, March 30, 2011

Here are some setups to watch on the long side right now...

State of the Stock Market - 3/29/11 - "Nice Day for the Bulls"

After two straight sessions where stocks closed at their lows for the day right near their 50 day moving averages, today was shaping up as a key day for the near-term direction of the stock market.   Indeed there was some key action today, and based on that intraday action, the bulls should feel good about themselves and also their control of this market. 

Stocks did see some early follow-through to yesterday's late selling, with the S&P testing its 50 day moving average and the Nasdaq coming close to a key level around 2715 where the 9 and 20 day moving averages were converging.   Those very brief tests passed, and from there stocks took off, with a sharp climb in the morning followed by a more slow and steady climb in the afternoon to finish at their highs for the session.   Volume was not super heavy and that's really the only complain a bull can have today.   Hopefully we do see it pick up soon.

Technically, it looks like mini-bull flags have been formed on both the S&P and Nasdaq, and the fact that support was tested briefly today and held was very impressive.   It's very possible we see new highs within the next few weeks, as hard as that may be to believe.  The lows of today do become key levels now in my opinion - if we get below those levels, then watch yourself on the long side, but as of now, the bulls seem to be back in charge of things.  
Nasdaq


I did enter three long positions today and will look for others as we go forward here.   My entries were not perfect on these positions as working full-time makes tracking every little market move extremely difficult, but I am hopeful these setups can get moving.   There were a lot of nice movers today and from what I can tell by a quick look through my scans, there are no shortage of long ideas out there. 

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

Listen, I really have no clue why the market is rallying here.   I am as puzzled by it as the next guy when you consider we have pricey oil, conflict in seemingly all the Middle East countries, and a massive natural disaster in play right now.   It makes no sense, but as a trader you have to follow what the market is doing, not what you think it should be doing.  As of now, the bulls look like they are back in control and because of that, you should be looking for long setups.  I said going into this week that a little rest would be good, and I guess yesterday and early today was enough for this market to re-energize itself.   Lows of today are very important, but as long as those hold, things are looking up.   Good luck Wednesday.

Monday, March 28, 2011

Stock Market Video - Quick Look at Some Short Candidates - 3/28/11

Here's a quick look at some shorts worth watching right now IF the market breaks the 2715 level on the Nasdaq.   If the next few days are quiet, then it's no big deal, but a large down session could push this market back down and into further correction in my opinion.   Always be prepared.

State of the Stock Market - 3/28/11 - "Boring is Good"

We saw a slight pullback today on Wall Street, which is not a bad thing at all if you're a bull.   Stocks started the day up very slightly but faded into the close.  Trade was slow however and boring days like this are perfect for a market that was overbought.  Volume was ridiculously low - by far the lowest levels of the year from what I can see on the Nasdaq although I don't have the final totals. 

For me, as long as the Nasdaq holds the 2715 area, I have to lean to the bullish side and will look for setups there.   There were a few stocks I have on my watchlist that look very tired after today, but most held up well.   A few more days of pullback, as long as it is calm, will be a very good thing for the possibility of this rally turning into something more. 

Now, to be fair, all of the short setups I shared in this weekend's video still look very viable as well after today, so I am keeping my eye on those too.  It would take a heavy volume selloff of significance (over 1% at least) to have me jump back on the bears' wagon, but if that's what the market tells me to do, I'm not going to fight it.  As I discussed in this weekend's video, there were lots of things wrong with the recent bounce so higher prices are in no way a given the next few weeks.

Keep your options open right now - I must respect the buy signal flashed last week along with the price move on the markets recently, but I am treading lightly at this point (still 100% in cash).   The market is still overbought and needs a little rest.   If we get one or two more days like today, then Thursday or Friday could be the time I start putting money to work as setups reemerge.   Take care and good luck Tuesday.

Saturday, March 26, 2011

Stock Market Video - Technical Outlook for Week of March 28, 2011 - 3/26/11

Hi, traders.   We obviously saw a big bounce this week on Wall Street but that bounce came with many question marks, at least for me.   In this week's video, I first go over my overall market outlook, and then discuss both long and short setups that need to be on your watchlist this week.   I am very cautiously bullish but don't plan on entering any stocks until the markets consolidate a bit here. 

I meant to include these charts in the video but frankly forgot to do so.   These are a few of the indicators I use with Telechart.   They are courtesy of Pradeep Bonde at Stockbee - I have simply tweaked them a bit and piggybacked off his ideas.   They do show some of the question marks that need to be considered (in my opinion) about this current bounce.

Buying/Selling Pressure
  
Breadth Ratio

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

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


Friday, March 25, 2011

State of the Stock Market - 3/25/11 - "Lots of Questions"

The title says a lot today - this market (for me at least) has a lot of question marks.   We saw a slightly positive session today on Wall Street, but after starting the day flat and then climbing to nice gains by midday, the major indices gave almost all of those gains back by the close.   The Nasdaq was able to clear its 50 day moving average today on the morning run, but will end up closing right at it.   Volume was lower today - it has decreased every up day for the past seven sessions (not counting last Friday's options expiration session).

Although I thought of buying a few things both yesterday and today, I couldn't seem to pull the trigger and remain in cash.   There have been stocks working on an individual basis the past two days (COOL, SGI, IMAX, VIVO, SRZ, KNOT, RNOW) but I have a problem buying stocks if the market is extended and if the market has lots of question marks about it.   It is a weakness I have as a trader and something I need to work through, but it took control the past two sessions.

The move up this week has been fast and furious, but under the surface it has been much less impressive.   We still have not seen a major breadth thrust for the past week, and in my opinion, none of this week's sessions would classify as a follow-through day.   I personally think it is a very "iffy" time to be getting aggressively long here. 

I'll repeat what I said yesterday - I am not shorting this bounce and will look for longs until thing change, but I am also not in a rush.  Ideally, the market would pullback a bit next week and allow some of the recent movers from this week to set up in brief consolidation patterns from which they can move higher.   We'll see if that happens.   Take care, enjoy the weekend, and I'll be back at some point with the video. 

Thursday, March 24, 2011

State of the Stock Market - 3/24/11 - "Short Squeeze Continues"

We had another up day today on Wall Street, as stocks gapped up a bit, pulled back, but then started rallying and kept rallying for most of the rest of the session.  The Nasdaq outperformed today with a gain of 1.4%, while the S&P and Russell posted gains less than 1%.   Volume looks like it will come in heavier on the Nasdaq (but still below the 50 day average) and lighter on the S&P.

Technically, the Nasdaq cleared some important resistance today and is now just below the last levels of resistance near the 50 day moving average.  The market is now somewhat overbought however and this rally has come on below average volume so tomorrow will be interesting.   The S&P cleared its 50 day moving average today but has a possible downtrend line to deal with next.   Today might be considered a follow-through day by some for the Nasdaq but the percentage gain was not that high at 1.4% (especially when you consider the S&P and Russell were both under 1%).

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

I'll be honest - I really don't know what to think right now about this market.   Are we starting another "bull market" run like we saw in 2009 and 2010, where volume patterns were all wrong and headlines were all bad, but stocks kept going up anyway.   Is this simply a fake out to screw over shorts before the market falls hard again?  It's a very hard call to make, because the move of the past week and a half has been impressive only on a price basis (yes, I know this is obviously the most important) and individual stocks are now extended.   There are some stocks that have held up well through this correction (and I showed some of those last night) but it's not like there are tons of fundamentally-sound stocks setting up in pretty bases to choose from as this point.

Personally, I think we're seeing a short squeeze here.   A lot of people probably got aggressively short on the Japan news along with the toppy action of the general market and are now being forced to cover.   That doesn't however mean this squeeze will end anytime soon.   Most of this bull market from '09 until now was on the backs of shorts coming in when the market looked weak and getting shredded (along with free money from the government).   There is a lot wrong with this two-week move but it can keep going a lot longer than you think, with or without blemishes. 

My current outlook is this - do not short until the market confirms this was nothing but a bounce and instead play individual longs as you see fit.   My main signal went to a buy today, but the other signals remain bearish.   Just because it is a "buy" signal doesn't mean you run out and buy anything you see.   Just be selective and patient - that's what I am going to try to do right now.  I passed on entering any longs today but will continue to look for them as we go forward.  Hopefully you were able to catch some from the video (COOL was up 28% and SIMG was up 8%).

Good luck Friday - ideally, the market would rest here for about two or three session, which would allow some of the movers from the past two days like REDF and MCP to form little flags that could be bought.   We all know, however, how often the market gives us what we want.   Take care. 

Wednesday, March 23, 2011

Stock Market Video - Stocks Holding Up Well During This Correction - 3/23/11

Here's the stocks to watch in case the bulls do take back control of this market.   No way of knowing if they will, but you always want to be prepared.

Trying the Chart.ly screencast - let me know if you prefer one to the other....

State of the Stock Market - 3/22/11 - "Back to Neutral"

We had a volatile session today on Wall Street, as the market sold off for the first hour or so of trading before finding a bottom and grinding higher for the rest of the session.   The Nasdaq was able to clear Monday's highs briefly but a late pullback kept them below those levels on a closing basis.   Volume was below-average but at least heavier than Tuesday's levels, although considering Tuesday was the lowest volume day of the year, that wasn't real hard to do.

Technically, the markets are in quite the interesting position here.   I said yesterday that the action was bullish Tuesday, but with so much resistance above, I was still bearish overall.   I thought my outlook was correct this morning as the market saw more selling, but the bounce was impressive.   It was not impressive enough, of course, to take us through that resistance that still lies ahead.   I am more bullish than I was at the beginning of the week, but overall I would say I am neutral.  There is still some work to do for the bulls before I would advise getting aggressively long.

Nasdaq
Russell 2000

I did make one trade last night after-hours, entering REDF at $6.65.   Due to the volatility of today's session, I ended up being stopped out this morning at $6.58 for a 1.5% loss.   It started the day very well but there was a shake out early and I was part of it.   I was also stopped out of my QID position near the end of trading today at $53.98 for a 1.08% loss.   I tightened my stops as the market moved lower this morning and it ended up getting hit.   I still do have my BGZ position but that's it right now. 

I'll try to do a quick video tonight with stocks that have held up well through this correction, because if the bulls are about to take back control of this market, those are the stocks you should be watching.  Very few moved today, but maybe they're waiting for a bigger overall market breakout.   
FCX
Charts from Telechart, Courtesy of Worden Brothers, Inc.

Overall, I would remain open to anything at this juncture.   There is still resistance ahead so it's not a given we are starting a new rally here, but the past two sessions have been positive for the bulls.   As I always say, be prepared.   Good luck Thursday.

Tuesday, March 22, 2011

State of the Stock Market - 3/21/11 - "Boring, But Bullish Overall"

Today was kind of a wash on Wall Street.    The market was lower but after being up a large amount yesterday, it was good to see the bulls not give that much back in terms of losses.    There was obviously no follow-through for the bulls today, but the market was slightly overbought coming into the session, so I don’t think that is a big deal.    A few more days like today (relatively quiet trade) would be very good for the bulls and would make me reassess my current bearish stance.  Quiet, low volume days are typically bullish after big, one-day moves.
Nasdaq 2 Week Chart

I made two trades today, entering QID and BGZ at the open.  I said I did enter QID yesterday, but ThinkorSwim was having some major issues throughout yesterday’s session and my order from yesterday was not placed in my account until this morning.    Both of these trades are obviously bearish in nature, as I still believe the burden of proof now lies with the bulls after the past two or three weeks of selling.    If I am wrong, I’ll get out as I always do with small losses and get ready to go long.   

Overall, not much changed today.   I will use yesterday’s highs as a key level in terms of measuring the bulls strength here – if they can get above those highs, then they are back in the game.    It would be better for them to rest a bit first, but we’ll see what happens.   A break of 2680 could be a key move for the bears.  Overall, the signals remain bearish so cash or selectively shorting remain the strategies I am using for the time being.   Good luck Wednesday.

Monday, March 21, 2011

State of the Stock Market - 3/21/11 - "Bear Market Bounce or Follow-Through Day??"

We finally saw a bounce that stuck today on Wall Street, as stocks gapped up on positive international news and rallied hard from there for the first half hour or so of trading.  From there, however, they simply moved sideways or slightly lower and did very little for the rest of the session.   The major indices did finish with large gains across the board, but volume looks like it will be below average.

Technically, today could perhaps classify as an IBD-type follow-through day, but the big problem is volume.   Due to options expiration, it is unfair to compare today's volume to Friday's inflated levels, but it is fair to compare them to Thursday's levels as well as the 50 day moving average.  In both respects, today's volume appears lacking.   You really want an overwhelming feeling of buying pressure on these follow-through days, and given the market rallied for the first half hour and then just leveled off, along with the lighter volume, doesn't give me that impression. 
Nasdaq
S&P 500

I made one trade today, entering QID early in the session.  I may very well take a loss in this as I am completely aware the market can keep rallying from here, but I think it is worth the risk (and my losses will be relatively small anyway).   The market has moved from deeply oversold to now a bit overbought and I think there is more risk chasing longs here than getting short.  I still see more short setups out there than long setups, and with the damage done over the past two weeks, I'll take my chances on that side for now (albeit in small doses until we do get some downside confirmation). 

The only ETFs that really went above key levels today are the OIH and XLE.  The rest still look bearish overall and have lots of resistance above to deal with over the next few days. 
XLE
OIH
 Retail
Semis
 Materials
Financials
All Charts from Telechart, Courtesy of Worden Brothers, Inc.

If today was the start of a bullish move higher, there will be plenty of time to get in as setups emerge.  As it is, there were only 189 breakouts today and that is not a very impressive number. Most of the data out there still points to a bearish market, so I would remain in cash until we see further evidence from the bulls that they are once again strong.   Perhaps that will come tomorrow - if we see more gains on Tuesday, I will definitely reassess my position. 

If the bulls aren't back in control, we'll look back and likely see today as a very good shorting opportunity.   Too early to tell for sure which one it is - pay attention over the next few days and we should get some clarity.  I lean toward this bounce soon petering out, but I've been wrong many times before.  Good luck Tuesday.

Saturday, March 19, 2011

Stock Market Video - Technical Outlook for Week of March 21, 2011

Hi, traders - here's the outlook for the upcoming week.   Certainly there are a lot of bearish signs out there and the action intraday this week was very unimpressive, so further correction is probably what we should expect from here.   I discuss these things in the video along with some setups to watch.

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

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

Friday, March 18, 2011

State of the Market - 3/18/11 - "Another Umimpressive Session"

We saw a "bounce" today on Wall Street, but much like yesterday, it was a very weak one with stocks closing at their lows for the session.   The day started with a gap up, but the S&P and Nasdaq both did nothing but drift lower from there and both ended up with only small gains.  The Dow has acted better than the other two main indices the past two sessions, but it was rejected at its 9 day moving average today as well.  Volume looks like it will be lighter.  

All in all, it was a very poor session given that supposedly good news preceded the opening bell via the G7 intervention and the Libya cease-fire.   When a market that is deeply oversold can't hold onto a rally when "good" news comes out, it tells you a lot about the current state of affairs.

I go into this weekend 100% in cash as I don't see any reason to put positions on before the weekend, but I am looking closely for shorts and will likely start seeing some good setups this weekend in my scans.   I mentioned 2680 yesterday as a "gift" if we get there, but the action the past two days has been so weak that 2680 might be a pipe dream.   It's going to take a major, major effort from the bulls to get the market over that level, and even if it for some reason happens, there is still a lot of resistance above that as well.

This all paints a picture of a market that is in a correction, one that looks like it wants to continue for the foreseeable future.   Hopefully you have been disciplined and stayed out of this market, as it is not smart to be buying these dips at this point.   Since we did technically rally the past two sessions, there may be some opportunities to get involved on the short side soon, and I will share those if I have time this weekend.   Enjoy the break and take care.

Thursday, March 17, 2011

State of the Stock Market - 3/17/11 - "Unimpressive"

It's halftime of the basketball game (very unimpressive start for my Pitt Panthers by the way) so this post will be short.   We did see a long overdue bounce today on Wall Street, but it was far from impressive.   Stocks gapped up, immediately pulled back, and then tried to rally to new highs.   When they couldn't do so, they started rolling over a bit in the afternoon and finished at their lows for the session, albeit still with gains.  Volume was a good bit lower than yesterday. The action was very weak and paint a picture of a market full of very weak bulls.   If this is the best they can do after the beating given the past week, it is not a good sign.   

I remain in cash but am looking for shorts to setup over the next few sessions.   A move up into the 2680 area on the Nasdaq may be a gift as there is heavy, heavy resistance there.  I don't think it's time to jump on anything yet as we still could see further bounce, but the market is definitely weak right now and the fact that we didn't see a sharp rally today tells you a lot.
Nasdaq
Charts from Telechart, Courtesy of Worden Brothers, Inc.

Things can always change and if they do, I'll let you know, but for now, start getting your short watchlists ready and maybe by next week some opportunities will emerge.  Good luck Friday.

Wednesday, March 16, 2011

State of the Stock Market - 3/15/11 - "Worse Than I Expected"

We saw a nasty session today on Wall Street, as stocks started the day with the feeblest of bounce attempts and soon rolled over.   A little before 11:00, the Nasdaq fell almost 40 points in about 15 minutes on some bad news from Japan, and that shock move kind of set the stage for the rest of the day.   Stocks quickly rolled over again, bounced weakly through lunch, and then fell hard once again in the early afternoon, breaking yesterday's morning lows.   There was a bounce back but that rolled over somewhat as well during the final hour of trading, and stocks closed with large losses once again.   Volume was very heavy as well.  It was quite the negative session given the reversal shown yesterday.

Coming into today's session, I have to admit that I expected a little bounce off of yesterday's action.   I didn't know if it would amount to anything, but I thought the market might be up for a few days before weakening as it approached resistance.   The swiftness of today's selling and how Tuesday's bounce was given completely back and more is a very, very bad omen for this market going forward.   For a while, I expected any pullback we saw to be relatively minor (maybe 8-10%) and that stocks would eventually right themselves.   After today, I am changing those expectations. 

Based on today's action, we seem to be looking at a correction that could last a while.  My signals have been on a sell since 3/10 (actually it was 3/7 but I didn't act on it until 3/10) and it's time to completely respect those signals and not try to guess something different. We are very stretched to the downside and any good news that might come out of Japan will likely cause a big short-squeeze, but I would now look at any bounces we get as shorting opportunities rather than buying opportunities for the forseeable future.   The overhead resistance continues to build and it is going to take a lot of work for this market to get on stable enough footing that I can trust going long in any sort of aggressive manner. 
Nasdaq
 XLE
 XLF
Charts from Telechart, Courtesy of Worden Brothers, Inc.

When the market is ready to end this correction and start rallying again, it will give us plenty of signals.  We'll see some strong sessions with lots of positive breakouts.   We'll see volume come in on the upside rather than just on the downside.   We'll see the moving averages flatten or reverse back up.  Until those things happen however, defense remains the name of the game.  

Although I almost put some QID back on mid-day, I made no moves today and remain totally in cash.   That's still probably the best place to be as a swing trader right now and I am perfectly content.    It's too late to short (wait for a bounce) but trying to catch these falling knives is very dangerous - just ask those dip buyers from yesterday.  

My last long position was closed on February 28.   I hope you've heeded the warning signs this market has flashed for the past month or so and have not been damaged by the selling of the past few sessions.   My main motto as a trader is "Do No Harm" and there was certainly a lot of opportunity to do harm the past week or so.   Right now, sit back, let the Japan situation resolve itself a bit, and come back in when the market is presenting good opportunities.   There are very few at this point for swing traders.   Good luck Thursday.

Tuesday, March 15, 2011

State of the Stock Market - 3/15/11 - "Perhaps a Short-Term Bottom, But It's Not A Given"

We saw a crazy, news-driven session today on Wall Street, as stocks were hammered at the open due to the Japanese (and other foreign) markets getting pummeled overnight.   The opening gap did prove to be the low for the session, as from there stocks rallied steadily throughout the rest of the session, taking back a large chunk of the early losses.   Volume was heavier as expected and it is possible a short-term bottom was put in today as a lot of complacency was driven out of the market with the gap down.   However, a bottom is certainly not a given, and I would tread lightly on both sides of this market for the time being.

Technically, there were lots of reversal bars printed today on both the indices and individual charts.   However, we are in a very news-driven environment right now and in this type of market, technicals and charts don't always matter that much.   If further bad news comes out tomorrow, the market could give back the bounce it had off of today's lows in a few hours.   You just don't know.   Since we are in at least a short-term downtrend, caution remains warranted on the long side.   Although the market may bounce further, until resistance is cleared via the short-term moving averages, I would be hesitant to get aggressively long at this point.   Keep things small and short.

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

As I posted on Twitter this morning, I closed both of my short positions this morning (QID at $56.31 for a 4.7% gain and SDS at $23.10 for a 5.3% gain) as it seemed like a good time to cover.   The gains were not that large, but they were both large positions so I will take the gains and am happy.   Perhaps I should have held for larger gains, but when shorting, it is better to take gains when you have them and move on.   Big gap downs are almost always great times to cover your shorts.  You rarely see gains of 20-30% when shorting - they are typically more like 5-10%.   I also felt that with all of the news affecting this market, cash was the best place to be overall.

For the rest of this week, I will continue to keep my options open overall.  I do see a few long plays that continue to hold up well (BOOM, SFLY, CVV, CPWM, RAX) and perhaps I may try one or two of those over the next day or so, but only in smaller positions.  One thing I know I won't be doing this week is shorting (unless the market bounces further and then fails at resistance).   It's too late to short at this point.

FCX - Perhaps a Good Sign??

Overall, caution is still key here.   We are (and I can't emphasize this enough) in a VERY heavy news-driven market and although the market is always unpredictable, these type of markets are even more unpredictable.   As an end-of-the-day trader, it is hard to be aggressive with positions with so much uncertainty and instability in the world right now, so I am fine with cash right now.   If I make any trades, they will be small.

Let's all hope that the issues Japan is facing now improve quickly, not for the market's sake, but for their sake.   If things do settle down, however, I wouldn't be surprised to see this market bounce back.   Rather than guess when it will happen, I'll just wait for it, that's all.  Good luck Wednesday.


Monday, March 14, 2011

State of the Stock Market - 3/14/11 - "Waiting Mode"

We saw basically the opposite of what we saw Friday today on Wall Street, as stocks were down but not by that much and volume wasn't very heavy.   The action was bullish in that stocks did break (on the S&P) or test (on the Nasdaq) their February lows and did finish off of them.   For the market to not fall off of a cliff here given all that has happened in the world over the past week is a good sign.  That being said, I don't see any signals that it is the time to get aggressively long either.  This dip (unlike others) wasn't aggressively bought (at least not yet) and that is very important.  Caution remains warranted.

Technically, I discussed my outlook in the weekend video and nothing really changed today.   I am still in my SDS and QID positions and will let those go until the market gets above its 50 day moving average.   The 2750 number is becoming a key level to watch on the Nasdaq as there are several areas of resistance there and a move above it would certainly be meaningful.  If we see that move, I will readjust my outlook, sell my two inverse positions, and once again look for longs.   Until it happens, however, I continue to believe last Thursday was an important session and it is going to be harder for stocks to just bounce right back like they have so many times before.   We shall see.

Nasdaq

Charts as a whole remain mixed.   Two sectors I would worry about based on their charts are semis and basic materials.   Both continue to look bearish and the setups at this juncture do not look good for the overall market (particularly the Nasdaq in the case of SMH).  These areas need to show some strength and quickly in order for the bulls to take back control of the overall market. 

Semis
Basic Materials
All Charts from Telechart, Courtesy of Worden Brothers, Inc.


Basically, we're kind of in "waiting mode".  We haven't seen much if any negative follow-through to Thursday's gap down, but with so much resistance above, it's hard to get very bullish about the current market.  Cash remains a good option here, and if you want to short, I would stick to ETFs instead of individual stocks.   Watch the key levels shown about and let the market tell you what it wants you to do.   Good luck Tuesday.


Saturday, March 12, 2011

Stock Market Video - Technical Outlook for St. Patrick's Week - 3/12/11

Hi, traders.   Thursday certainly brought a key technical breakdown into this market and from what I see, it looks like the market does want to pullback further from here.   That doesn't mean it has to, and if it gets above a key level I will reassess, but for now, caution is very much warranted.   I discuss these things in the video and look at the signals that are telling us that the market wants to correct. 

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

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

Friday, March 11, 2011

State of the Stock Market - 3/11/11 - "Good and Bad"

We had a good and bad day today on Wall Street depending on how you look at things.   It was good to see the market bounce and not see any immediate follow-through from yesterday's major technical damage.   This is especially true when you consider the awful news coming from Japan with the earthquake last night.   The setup was there for the bears to take this market even lower, and they couldn't do do, at least not yet.   That is a positive.

On the other hand, the bounce we saw wasn't that impressive overall.  As has been the recent trend, volume was much lower today than yesterday's totals, and although the S&P got back above its 50 day moving average, it remains below its short-term moving averages.   The Nasdaq remains well-below its 50 day moving average.   Based on the action, I don't get the sense that today was an important reversal day because there didn't seem to be too much panic this morning, but I could be wrong.   We were quite oversold short-term going into today's session, so a bounce was not that surprising. 

I remain in my two short positions and will see what Monday brings before doing anything else.  I am perfectly aware that this market may run higher from here and kill shorts once again (just because it has so many other times before) but I have to go with what I see for the time being.   If the market does decide to rally, I'll take a small loss, step out of the way, and reassess - no big deal. 

Have a great weekend - if you're looking for something to do, check out the new TC2000 app for Android that was released today.   Jeff at TheStockBandit.com tweeted about this earlier today and after downloading the app and checking it out briefly, I am very impressed.   Those of you that are Telechart users should definitely check it out, and those of you that aren't, it is one more reason to look into the software.   Take care.



Thursday, March 10, 2011

Proof

I believe I have acquired my very first email stalker/harasser/annoyance.   If anyone else has doubts about my trading and that I do actually do what I discuss here, this is for you.   I told you earlier today I entered SDS and QID.  


I am working on taking care of this annoyance but it is amazing to me how some people can criticize anonymously and seem to get a kick out of it.   I guess that's one small reason the world is how it is right now.  

State of the Stock Market - 3/10/11 - "The Wait is Over"

Over the past two weeks, the stock market has been chopping back and forth in a manic way trying to find some direction.   Along with almost every other trader, I've been waiting patiently for the market to give us a sign as to where it wants to head next.   It sure looks like we got that sign today.   The stock market put in a major gap lower this morning (below key support) and unlike previous selloffs, dip buyers were really nowhere to be found.   The market spent most of the rest of the session moving sideways but did end up closing near its lows.   Volume was heavier, adding yet another distribution day to the total.  

There have been many more bearish signs over the past month than bullish signs, but I (and I don't think I am the only one) have sort of become trained to question those signs because very often they didn't matter over the past two year run.   We saw many heavier volume selloffs and weaker volume rallies, but none led to major tops being put in except last May.   Today however seems to make it clear that this market has been topping over the past few weeks and wants to head lower.   The charts I show below are hard to argue with.
 SP-500
 Nasdaq

 Russell 2000
XLB
XLE
 Charts from Telechart, Courtesy of Worden Brothers, Inc.

I've been preaching that cash is the best option for a while now and hopefully you were not hurt with today's gap down.   I did enter two short positions today at the open (SDS and QID) and will let those ride until the market closes above its 50 day moving average.   That support was tested so many times recently that there is a very good chance it becomes resistance now that the markets are below them.   For the time being, I am staying out of individual stocks on the short-side and will stick with the indices. 

Overall, today was certainly a shot across the bow by the bears and unless the bulls take charge immediately and push stocks back above their 50 day moving averages, I have to believe the top is in.   I have no way of knowing if this will be a significant top or just an intermediate-term pullback, but you must protect yourself either way.   Good luck Friday.

Wednesday, March 9, 2011

State of the Stock Market - 3/9/11 - "Broken Record"

Absolutely nothing changed today on Wall Street - stocks jostled around in very choppy fashion but went absolutely nowhere overall.  We remain in a range and swing trading is difficult if not impossible in this environment.   I remain in cash and am perfectly content waiting for this market to decide what it wants to do next.

I have no idea what that "decision" from the market will be or when it will come, but the range today was a little tighter than it has been recently so perhaps a conclusion to this awful choppiness will be upon us sooner rather than later.   There are more bearish signs out there than bullish, as stocks continue to fall on heavier volume and rise on lighter volume, but we've seen this many times since 2008 and it hasn't necessarily mattered.

I do expect a big move one way or the other out of this consolidation, simply because this choppy range has had a lot of emotion involved in it.   Bulls and bears have really be fighting it out and when one side finally takes charge, I think the other side will be too tired and worn down to do a whole lot about it.

Do your work and be ready, but remain patient.   There is nothing to do yet and trying to guess where we are going to be tomorrow is simply that - a guess.  Take care. 

Tuesday, March 8, 2011

State of the Stock Market - 3/8/11 - "Let Me Repeat...Stay Away!"

This tweet I sent this afternoon should pretty much sum things up....


I honestly don't have much else to say.  We could go either way from here but aren't going anywhere at the current time.  I'll do my regular work and try to be ready for when the market decides to get out of this range, but in the meantime, cash is the best position for a swing trader to have.   I am very happy being 100% in cash.   Take care.


Monday, March 7, 2011

State of the Stock Market - 3/7/11 - "Stay Away"

The title says it all.   The stock market remains a mess and today was a prime example of that, as stocks fell sharply throughout the morning hours, but took back a large portion of their losses by the end of the session and finished off of support and in the middle of their intraday range.   The 50 day moving average was broken early on the Nasdaq, but by the end of trading, that support had held...barely.   Overall it was a real mess and a day that I am not sad that I missed.
 S&P 500
Nasdaq
Charts from Telechart, Courtesy of Worden Brothers, Inc.

I went into the day with the mindset that there was no point in making trades until the close anyway so I really didn't follow the market too closely.   I checked my twitter feed occasionally and saw a lot of bearish talk early and a lot of "bounce" talk late.   I think the majority of traders are rather confused right now and I can't blame them.   There have been so many reversals recently and so little follow-through that predicting what to expect the next session has simply become a shot in the dark.

What makes this market extra difficult right now is there is still a lot of "headline" risk out there.   Earnings season is pretty much over so there is little catalyst in that regard to push stocks up or down.   Oil and the Libya situation seem to be the story and if you somehow know when that will be resolved and how it will end up, then please change your name to Nostradamus and get it over with. 

Oil has had a major run over the past week and is very extended.   You don't think that it will have a mini-crash if we wake up tomorrow and find out that Gaddafi is dead??   You don't think shorts will have their faces ripped off in the short-term if this happens??  This is what most people seem to think will happen, but the when is the hard part. This is one reason that shorting is really not that attractive to me here - it think there is more risk to it (than normal) and less possible reward (than normal).

On the other hand, what happens if the idiot over there somehow destroys a major oil field overnight?   Oil spikes even further and we get perhaps a really, REALLY bad selloff and all the dip buyers get slaughtered.   Not very fun.

I don't know - from where I sit, this just doesn't seem to be a time where making big, aggressive moves is very smart.   I told someone in an email today that there are ALWAYS opportunities in the market, but there are not always GOOD opportunities in the market.   It took me a while to learn that but I think that's where we're at right now. 

I may end up missing a big move up or down the rest of this week, but I would rather be a little late on a move than be chopped to bits by this current market, so I am fine with it.   If the Nasdaq closes below its 50 day, I may start nibbling at shorts.  If we get above 2800 there, maybe I'll start looking at longs.   In the meantime, we're going nowhere and because of that, cash in my opinion is your best friend right now, perhaps until the headline risk dissipates.   Good luck Tuesday and please be careful out there.