Saturday, June 16, 2012

Stock Market Video - Setups for the Week Ahead - "Cautiously Bullish"

After four days of trading best described as awful, filled with whipsaws, reversals, and rumor-induced spikes out of nowhere, I was not very optimistic heading into Friday's options expiration session.  Not in a bullish-bearish way mind you - I just didn't expect the market to act well for either the bulls or the bears.  I expected more whipsaws and reversals, maybe even more than the previous four days, especially with the big Greece vote looming on Sunday.   Boy was I wrong.

This is usually how it works on Wall Street - confuse the most people as possible.   Friday's action started slow but the market actually put in a great session.  The S&P broke above and cleared with ease an inverse head and shoulders pattern and both the Nasdaq and Russell 2000 made major progress in doing the same next week.  In addition, many individual names acted very well and triggered potential buys. A really nice day overall indeed.  Volume was heavier but that was likely due to options expiration.

Nasdaq
Russell 2000
 S&P 500
Charts from TC2000, Courtesy of Worden Brothers, Inc.

I am kicking myself for not watching things that much Friday, but honestly looking back, it was the kind of day that was actually very difficult to buy from my perspective.   It was a super smooth move up with very few consolidations and pullbacks, particularly on individual setups.   Given the week we had already experienced, it was very difficult to chase moves intraday given how many whipsaws we saw throughout the week, but that's exactly what you had to do if you wanted in today.   Certainly tough to do and it's the reason I am in cash here.   Not that that's the right play, but it is what it is for me.

The big question for me from here is whether this is a huge bull trap.   Everyone sees the inverse head and shoulders pattern.  Everyone is now expecting central banks around the world to come again and "save the day" for the market with more "liquidity".   Is this too obvious right now?  Is a breakout above the key levels above just going to be sold into, screwing all of those who got in late?   I think it's a possibility.   I mentioned on Twitter today that I could see the market gapping up 2% or so on Monday and then immediately selling off from there, much like we saw this past Monday.

The video below shares some of the setups I am going to watch early next week on the long side.  There were already some names that triggered on Friday that I missed or just sat there and watched them go without me (PVA, MGAM,YELP, VNTV, POST) but there are still a good amount that look like they could go too.  This is reason to be bullish on this market as well.  Again, let's just hope this all isn't a big bull trap.


Finally, for those of you that are TC2000 users (and especially for those that are not because you don't know what you're missing), Worden is running a sale until next Tuesday on its Platinum service where you can get four months free for a year's subscription and ten months free for a two year subscription.  A great deal on a great service.  If you are new to Worden, they do offer free 14-day trial periods in which you can try out the service.   More information can be found here

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