Sunday, April 15, 2012

Stock Market Outlook for Week Ahead - "Bears in Control for Now, Cash is King"

Sorry for the lack of posts the past week or so - I have had to deal with some fix-it issues around the house due to a small sewage backup (fun stuff) and haven't been trading much over that time.   To be honest, however, a lot of my lack of trading has been dictated by this market.  My signals turned bearish two Fridays ago and this past Monday and the market is certainly in a mini-correction (at best).  I was somewhat bullish Tuesday afternoon simply because the market was at very extreme oversold levels and I expected a very sharp bounce.   I guess we did get that bounce, but it ended right at short-term resistance and saw no follow-through Friday which is extremely bearish in my opinion.

The charts of the major indices all look awful.  When a market rallies right up to resistance and then rolls over like it did on Friday, it is usually telling you it wants to go lower.   Perhaps the bulls will right the ship here and bounce us back up and this uptrend will resume, but it seems to me like a LOT of people are just assuming this will happen.   I don't know myself.   I sort of think based on this recent action that this correction could last longer than most think.   I am not saying we'll be down the rest of the year or anything, but maybe we'll see a 7-10% correction here instead of the 2-4% that most are seeing.  

It's also not good to see the number one leading stock in the world breaking down on heavier volume.  AAPL is now below its twenty day moving average for the first time this year and didn't bounce at all with the market on Wednesday and Thursday which is worrisome.

AAPL - Finally Correcting?

I think cash is a very good option here and until Friday when I saw some interesting charts and my buy stops were hit on them (not good for me however), I was in cash pretty much all last week.   I am posting a few charts that are holding up best here and that I will be watching, but as of now, I think I will wait for Thursday's highs to be taken out before getting long again.  If the bulls can do that and overtake their short-term moving averages, then I think we can consider them back in control.   There aren't very many charts I am interested in on the long side anyway, so it may take a few weeks of backing and filling for charts to setups.


Here are some shorts as I do think there is a very good chance we see lower prices this week, although it's not a given.   Shorts are always harder to play than longs so I am hoping the bulls can regain their mojo soon.   I just have my doubts.  The charts below are all recent IPOs (which in general have been very weak recently) and are below their short-term moving averages and forming bear flags.  These are volatile but can fall quickly if the market sells off further.  A few other names to watch are GRMN, MELI, CHS, and EXPR.

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

The market rarely goes straight up or straight down, and we have yet to have much sideways chop so far this year, so be alert that that's what we could be in store for here.   Unless you're running a hedge fund or something, remember that you don't have to trade at all times.  Cash is a position and it may be the best position here until the bulls reestablish control.   Oh yeah - we also have tons of big earnings reports to deal with over the next few weeks, which will make things even more difficult to predict.  Good luck next week.

Sunday, April 1, 2012

"Bullish Until Proven Otherwise" - Outlook for the Week Ahead and Eleven Setups To Watch

Hi traders - here's my outlook for the week ahead.  Hopefully you caught some winners this week - two stocks I highlighted both Sunday and Monday of last week were EPAM and TNP and both acted great this week.  Unfortunately, I missed both as EPAM gapped up on earnings and TNP because it did not have much volume on its original "breakout" Tuesday so I passed.  Not a great decision there on my part. 

I am not a raging bull here, but I am certainly leaning that way because my signals remain mostly bullish and the three main indices have held their individual levels of support pretty well so far.  The Nasdaq remains above its nine day EMA, the S&P above its twenty day EMA, and the Russell 2000 remains above its fifty day moving average.   If any of these break, then my opinion will change.   We are also a little oversold after last week so a bounce is probably due.   We have had some distribution days thrown into the mix over the past few weeks so that is something to watch.   If we see more of those, then it will be time to reassess as well.

I have three long positions on right now as I caught some bad luck with INVN on Friday when it was downgraded.   I finished the quarter up 21%, which is disappointing for me to be honest because there were so many opportunities out there that I missed.   A big part of that is working full-time and not being able to follow early movers and instead having to try to guess on stocks with buy stops or catch breakouts late and risk getting whipsawed.   If I am up 21% for each of the next three quarters, I will be happy because I highly doubt this market will give us as many opportunities for the entire rest of this year as it has so far, but there will be some so you always want to be ready.  For now, however, I expect more from myself.

Here are a few names that I will be watching this week.  Volume may be very light during the latter part of the week due to the holiday so be aware - a lot of weird things can happen on those low volume days.  Good luck this week. 
All Charts from TC2000, Courtesy of Worden Brothers, Inc.