Sunday, August 26, 2012

Stock Market Video - "Cautious, But Still Bullish Overall" - 8/26/12

Hi, traders - here's a video looking at the week ahead.   Although we had a nasty reversal on Tuesday, the market has held up relatively well since then and the action as of now strikes as needed consolidation.  It's possible we break down further and if that happens, my outlook will change.  For now, however, I am cautiously bullish and I discuss why in the video.  I also discuss some setups to watch in the week ahead.

Thursday, August 23, 2012

Needed Pullback or Start of Something Worse???

So are we simply seeing a needed pullback here or is something bigger developing?  It's probably too early to tell, but here is what we know.  The Nasdaq is still holding its nine day moving average.   Both the Russell and S&P broke their nine days today but did hold their twenty day moving averages.   We're a bit oversold here and being down three days in a row, we may see a bounce soon before any more selling comes into the market.   For what its worth, I am mainly in cash here (took one long today) but since I see some decent setups once again going into tomorrow, I am willing to take a few as they trigger.  Now if we break down further tomorrow, especially through the moving averages mentioned above, things will change completely in my opinion.   For now, we're having a needed pullback that may end up being a buying opportunity.   That's about all we can tell for now. 

Charts from TC2000, Courtesy of Worden Brothers, Inc.

Tuesday, August 21, 2012

Short-Term Caution But Longer-Term Simply Uncertain

Not a great day today on Wall Street as things started very strong with many stocks breaking out and acting well.   That all ended around 11:00 with all indices giving back all of their gains and more to finish lower for the session.   The two biggest worries traders should have after today's action is what the S&P (the leading index) and AAPL (the leading stock) did.  Both set new yearly highs but could not hold them, leading to the big reversals.   That's not what you want to see.

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

I am back to about 80% cash right now and my only position is a small one in TZA going into tomorrow.  Days like today (which can easily occur in lower volume markets like the one we've seen most of this summer) are why I have been very short-term oriented in my trading the past few weeks.  I have had some good luck the past three days, but today is at the very least a reminder that stocks and the market do not go up forever.  When things get too easy (and for me at least, everything seemed to be working the past two days), it is often a warning sign that tough times are ahead. 

I hope today was not a top and to be honest, I don't think it was.  We could sell off a bit tomorrow, but then reverse back late in the session or on Thursday and resume the uptrend.  We could just chop around up here for a week or so (not necessarily a bad thing).   Significant tops usually take time so I think we need to see more signals before inferring that today was a big deal.  Short-term, I think it is wise to be cautious but longer-term, I am pretty neutral and will just let the market tell me what it wants to do.   I expected to see much more damage done to stocks today when I went through my scans, but that wasn't the case.  Actually, I have a list of about 15 stocks that look decent going into tomorrow on the long side, which surprised me.  I am not going to be very aggressive tomorrow if any of them trigger, but if today was a shot across the bow by the bears, I think I would have seen much more damage. 

Basically, keep your mind open here.  Could we put a significant top right now?  Sure we could, but if that's the case, I think we will get more signals to tell us, likely soon.  To be safe, I am forming a list of stocks that look like potential big-time shorts if we start a meaningful correction anytime soon.  I always like to be prepared, even if those ideas never get used, which is likely.

"Four Horsemen" of Potential Shorts If We Top Here - Still A Big "If"
Charts from TC2000, Courtesy of Worden Brothers, Inc.

In the meantime, I'll keep taking longs as they trigger because that's what has worked over the past month or so (although I will be more selective for the next few days).   One bad session doesn't change everything.   If we so see more selling the rest of this week, however, I would then start looking at those shorts or inverse ETFs.   It should be an interesting three days.   If today leads to no further selling, the squeeze higher is going to continue, likely in an even stronger manner.   If the bulls don't give support tomorrow or Thursday however, then the low-volume summer rally could disintegrate quite quickly.   Keep your mind and options open here.   Good luck.

Sunday, August 19, 2012

Stock Market Outlook for Week Ahead - Melt-Ups Can Continue Longer Than You Think - 8/19/12

We saw another nice day on Friday on Wall Street as the late summer melt-up continues.  I was finally able to catch some breakouts (KORS, FRAN) and although I sold them for quick gains, my account is back to where it started going into the summer, up about 16% for the year.  That in and of itself is a plus for me as this has been a difficult, grinding market for the past two and a half months.   If you haven't made much progress money-wise, don't feel like you're alone, although I am seeing individual stocks starting to act a little better so there have been some opportunities over the past few days.  Hopefully that continues.

When you look at the major indices, you see a market that is a little extended here but it may not matter.   This is the kind of market in which a sharp pullback can come at any time without warning because volume has not been strong on this move higher over the past two weeks.  It's been the definition of a "melt-up" and without volume supporting it, price can fall fast. 

That's not to say it will however.  The thing about a "melt-up" is that shorts start piling on as prices rise because they see no volume, and those shorts are what end up stretching the "melt-up" phase out longer than most expect.   I think that's what evident on the charts below - shorts aren't working because there hasn't been any selling, so shorts cover, pushing the market higher and bringing in new shorts to pile on, repeating the process.  It can and very well may continue to happen.

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

I am going with that outlook right now - this move can continue and I will play it long if it does.  At the same time, however, I am also taking my profits quickly as I don't want to get caught holding the bag.  I see this still as more of a day-trading type market and not a swing-trading one.  If I see more consistent volume on both the major indices and on breakouts, then I may change my outlook and be willing to hold gainers as they pullback a bit.  Right now I am not willing to do that.  One thing I am not even thinking about here is shorting this move - not until my overbought get really, really stretched and we're simply  not there yet.   Stay with what is somewhat working and for now that is being long. 

Going through my scans this weekend, here are some of the charts that stood out to me.  Don't know if they will work like they did Friday, but I think it's worth taking a chance on any that trigger.  Just make sure to use stops as you normally would and also check earnings dates to make sure there are no conflicts.   Good luck next week.

Trigger on Breaks of Trendlines
Triggers on Breakouts to New Highs
Flag Type Patterns - Trigger Over Trendlines
Charts from TC2000, Courtesy of Worden Brothers, Inc.

Wednesday, August 15, 2012

More Charts Setting Up, But Does It Matter Without Any Volume?

Much like Monday night, I see many charts setting up here once again (some the same ones).   However, if a chart sets up in a market that is asleep, does it matter?  That's the question I keep asking myself here.  Volume continues to be non-existent and that is making swing trading very difficult here.   I tried a few of the charts I posted on Tuesday but failed on all three with small losses.   I hope that I have better luck tomorrow if some of the names below trigger, but I don't have my hopes up.  We are still in the summer doldrums and until traders come back from vacation and volume picks up, it is going to be hard in my opinion to get much going via a big push from the bulls.   Although it is a frustrating period, you always want to be prepared, so the charts below give you some ideas going forward.

Charts from TC2000, Courtesy of Worden Brothers, Inc.

Please check earnings dates on these names before considering any for positions.

Monday, August 13, 2012

Top Ten Setups (Plus a Bonus) for the Rest of the Week

We saw another good day today on Wall Street in that the market bounced back strongly from early selling and kept the bullish flag pattern in tact on the S&P and Nasdaq.  The Russell sold off harder than the others but also bounced back very strongly, holding its nine and twenty day moving averages.  This past week has certainly been different from what we've seen for most of this summer when any strength lasting a week or so was met with selling that lasted about the same length of time.  Hopefully that's a good sign - hopefully this is a healthy pause before higher prices ensue. 

My only concern here is that it is very difficult to have any strong convictions in a market as thin as this one.   Volume was putrid today (which is fine for a consolidation day) but if you see the market breakout of this little range on very low volume as well, you have to pause a bit.  It is just hard to read things without strong volume.  Many times over the past week or so I have looked at my quote screen in the middle of the day and wondered if the market was closed because nothing was happening.  I wonder if this rest is what it should be (a lack of sellers) or simply a lack of traders period in these summer doldrums.  

Either way, I have to go with what the indexes are showing me and right now things look quite bullish.  Below are ten setups (plus one more bonus) that I will be watching this week.   Explanations are on the charts.  
Charts from TC2000, Courtesy of Worden Brothers, Inc.

Good luck the rest of the week.  

Thursday, August 2, 2012

Eight Charts Holding Up Well For Friday

Haven't made any trades this week after getting whipsawed on a few Monday, but I saw some nice possible long setups tonight in my scans.   Going into the week, I fully expected a pullback and that's what we've seen.   Will the bulls step up (and soon) is now the question of the day.  I wish I knew the answer, but the Fed and ECB news seems to be out of the way for the time being at least although there is the jobs number to deal with as well tomorrow.   All in all, the pullback hasn't been too sharp in my opinion considering the news flow, at least compared to the other ones we've seen throughout the summer.   If the bulls can hold their ground tomorrow and get things going somehow, I will be very interested in playing the names below.   100% cash for now but watching things closely.

Charts from TC2000, Courtesy of Worden Brothers, Inc.