Sunday, September 30, 2012

Tough Market to Call Here

Like my title states, I think we're in a market that is tough to call going forward.   Ever since the market broke impressively to new highs on September 13 on the QE3 news, the market has acted weird.   We saw a perfect consolidation period for the week following the QE3 news, but on September 21 (options expiration), the market gapped up and sold off from the open that day and has been very weak since then.   The market put in two distribution days last week on both the Nasdaq and S&P and got rejected by the nine day exponential moving average on both of those indices on Thursday and Friday.   In no way was anything we saw last week what I would call "bullish", especially considering Thursday's bounce was immediately sold the next session. 

 S&P 500

My breadth signal turned back to a "sell" on Friday and certainly the price action is worrisome here.   On the flip side, I see some very smart traders on my Twitter stream whose opinion I respect remaining bullish going forward due to the QE3 effects as well as the Presidential election.  Do you really think this administration will let the market start falling off as we head into what could potentially be the final few months of their reign?   I also still am seeing a good amount of nice charts and there was not the damage that I would expect to see on individual names given the distribution we saw last week.  My overall watchlist has certainly narrowed, but not to a level that suggests we are entering a big correction period. 

These conflicting signals is what makes this market hard to call in my opinion at this juncture.   I am actually long three positions here but the stops are pretty tight and I would put my overall outlook as "neutral".   If the Nasdaq and S&P can clear their Thursday highs, I would then feel much better about the strength of the bulls going forward.   On the other hand, if Wednesday's lows are broken, then the possibility of an intermediate-term top being put in last week is very strong.   That's how I am looking at things going forward and until one of those levels is broken, I see myself remaining "neutral".

Here's some charts that I will be watching early this week and will be interested in if the bulls can finally get going.   My current positions are included as well.

All Charts from TC2000, Courtesy of Worden Brothers.

Others that may work next week are MDAS, RPRX, GILD, SMBL, and GIII.   Let's see what the bulls can do.   If the market breaks down, I will quickly be in cash and sitting on my hands while things work themselves out.    Good luck next week.

Performance update - My main account was up 13.3% in the third quarter, putting me up 25.9% for the year so far.   I was hoping to be up around 50% at least for the year, but that may be too ambitious a goal as of now.   If we can get a big rally going into the end of the year, however, it is possible so I will do my best to hit that.   All of my trades (good and bad) are listed here.

Wednesday, September 19, 2012

Market Consolidating Perfectly - Time for Bulls to Take Charge

So far so good for the action following last week's big breakout move for the stock market.  Stocks were certainly extended after Thursday's and Friday's session, but stocks have given very little back the past three days and "perfect" is probably an applicable description of how this consolidation has played out.  Even the volume patterns have been good, with volume coming in lower on Monday and a little heavier today.   The Nasdaq as well as the other indices are all forming beautiful bull flags on their daily charts.   These patterns as of now point to much higher prices ahead.  

Nasdaq - Looking Good

Now it's time for the bulls to step up again.  Although it would not kill this rally for the market to put in a few more days of slow, listless trade, I think it would also send a signal that perhaps this rally does not have the power behind that it seemed like it might last week.  I am sure I am not the only one that was hoping for a monster rally into the end of the year following the breakout we had last week and if that's going to happen, the consoldiation periods should be very brief.  Ideally, we'll see quick consolidations like we just experienced followed by sharp moves up.   That's the "ideal" situation, however, and we all know how often that does (or doesn't) occur on Wall Street.  

I am fully long as of now and am trying to be more patient with positions here.   I will still take some profits on stocks that are extended, but am also holding a few names through pullbacks just in case they turn into something much bigger.   I continue to see quite a few nice charts out there, and although I may not be playing many new ones (unless I get stopped on current positions), I figured I would share some for the rest of this week.   Hope they help you out. 

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

Saturday, September 8, 2012

Stock Market Outlook - "Ride the Wave as Far as It Goes" - 9/8/12

If you haven't made any money over the past two weeks, you need to reassess your trading strategies.  Personally, my account is up about 15% from where it was a month or so ago.   That's not because I am some "master trader" or anything.  We are simply (finally) seeing a market where individual stocks have acted much better.   I know many bloggers will brag about how many "winners" they posted on their website or Twitter or Stock Twits right now, but the reality is that it's been a "shooting fish in a barrell" type market at least this past week and in some cases going back to two weeks ago.  There have been tons of setups (I've shared many of them) and most of them have worked well.   I am hopeful that this action can continue because this type of market is really where you can grow your account quickly.  Unfortunately, these periods usually only come a few times per year so you must take advantage of them when you can.  

In terms of where the market is right now, a little rest/consolidation would not be a bad thing at all - it would actually be beneficial here in my opinion.   That doesn't mean that it will happen.  The S&P closed at new highs for 2012 on Friday, but is a little extended and could use a slight rest.   However, an underwhelming jobs number on Friday following a huge day Thursday looked like a recipe for profit-taking and it didn't happen.  A squeeze could continue.   The 1425 area now becomes a key level of support for the S&P.

The Nasdaq finished flat on Friday, but again given the circumstances, I thought it was a very bullish day.   It felt consolidation-like in nature and I actually continued to see many stocks act well under the surface.   Since we are right at new highs for 2012 here, a pause could make sense.  I'll keep watching the nine day EMA like I always do as a key level of short-term support - even if we pullback here, things will be fine as long as the nine day holds.  

I am currently holding three longs into next week and am gradually moving to more of a swing-trading mindset now from my day-trading mindsight of this summer.  (All of my trades can be found here - updated daily).   That strategy was out of necessity - the summer was so choppy that you had to take gains when you had them.   I now see stocks acting much better - smoother might be a good term - so I am willing to hold them longer.   I wish I did this earlier as I look back on my trades and see a few stocks that I sold too early (RPRX from the high $9s sticks out).   That's all part of trading however.  You realize early in this game that you are never going to be perfect and learn to just accept it.   We do now however seem to be in a better market so it might be worth holding things a bit longer as long as stocks keep acting well.

Although I would like to see the market rest a bit, there were still a few stocks in my scans yesterday that have yet to breakout.   I'll take them if they trigger, but I also realize that since they haven't moved yet, there is more of a risk of them reversing.   If it happens, I'll just get out and move on.

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

I have a few others on my watchlist for Monday (SRPT, GWRE, YELP, CBM, RDEN, MM) but they are more volatile or thinner so I am just kind of watching them and will go by gut feel if that makes sense.  Overall, this appears to be a much healthier market than we've seen for most of the year and as long as it continues to act like this, money can easily be made on the long side.   I do know September is traditionally a very bearish month so if we see heavy selling or those short-term moving averages break, my outlook will change.  Going forward, however, ride the wave as far as it will go.   Good luck next week.

Sunday, September 2, 2012

Stock Market Video - "Almost Too Many Nice Charts Out There" - 9/3/12

Hi, traders - here's a video full of charts for the week ahead.   With the passing of Labor Day, summer is officially over and let me say what most traders are thinking - thank goodness!   It was a difficult summer filled with low volume and choppy conditions, but we should see some volume come back into the market now and that will hopefully make things a bit easier.

I am leaning bullish here for several reasons that I discuss in the video.  I have had some good success over the past two weeks after spinning my wheels for most of the summer, and although a good part of that success is probably luck, I am hoping that at least part of it is because individual stocks are acting better.  I've seen breakouts work much better the past two weeks.  I've seen less stocks give back all of their intraday gains in the final hour of trading.  Things still aren't perfect, but they have seemed to have improved a bit from where I sit.   We'll see over the next few weeks if this is just a figment of my imagination or something real. 

I am also leaning bullish because I saw a TON of nice charts this weekend - so many that I had a very difficult time narrowing my main buy list down (and it is actually still too big as it is as you'll see in the video).  I am totally aware that sometimes when you see too many good charts it is a warning sign from a contrarian perspective.  I do discuss the key market levels in the video that I will be watching going forward, but overall the market is acting well and with the number of charts setting up, I am hopeful the market can really get going here into the end of the year.  If it has other plans, I'll do what I always do - move to cash and wait.  We shall see I guess what the outcome will be.

As always, if you have any questions or comments about the video or the charts you see, please email me or leave a comment on the blog.  Take care and enjoy your Labor Day.