Sunday, February 10, 2013

A Look Back and A Look Ahead - Your Game Plan for the Week

Last week brought some choppy trade to Wall Street, as stocks gapped down and up at various points before breaking higher on Friday to new highs in the S&P and (almost) new highs on the Nasdaq.  When trading gets volatile and choppy like we saw this week, it sometimes is the market's way of giving a warning sign.  It may not mean anything but the week ahead should give us a much better idea.

The Nasdaq put in a nice session on Friday if you ignore that volume was lighter than the previous two days.   That is a bit weird considering the gap took us above a little consolidation area of the past week or two and also put the Nasdaq near new yearly highs.  If this can clear the 3196 level, it would be big, but at the same time a fakeout followed by a reversal wouldn't surprise me as I continue to see a lot of individual stocks do the same thing.


The S&P meanwhile did move to new highs on Friday but that move was a bit underwhelming when you look at volume being lower and the move just barely clearing a week-long consolidation.

S&P 500

My market timing numbers remain positive overall but the past two weeks, they have been lagging slightly where they were in early January and I actually got a cash signal after Monday's action.  One main reason for this is because we simply have not had a lot of powerful breakouts (or breakdowns for that matter) during this move.   It has been much more of a grind, both on the overall market and individual stocks.

Looking at these numbers, you can see that since the opening session of the year, there has not been even one session where 4% breakouts or breakdowns topped the 200 number.   The market really hasn't even come close to that number.  That illustrates that the "grind" in individual names and the overall market that I just discussed.  This has not been an easy "rally" as many stocks have given false signals and the breakouts that have occurred have been very hit and miss in terms of follow-through.

As long as my timing score remains overall positive, I will continue to focus on that side of the market.  I got finally got lucky with an earnings play on Thursday, getting into LNKD in the IRAs, but even those plays have been hit and miss.  LNKD and NFLX have been great examples of how earnings plays and gap-up should act, but I've seen just as many this earnings season that have gapped up and given everything back the same day.   

Potential long setups for the week are shown below along with the notes I made in TC2000.

One observation I made this week is that I am starting to see more stocks look like potential short setups than at any point in a long while.  A lot of these names are big, well-known stocks that acted well in 2011 or even recently and are now looking much more bearish.  I am not looking to short these names - just sharing an observation and thinking about how this may relate to the overall market.

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

Good luck in the upcoming week.  Still lots of earnings reports coming out so pay attention to any names you may look at and know their earnings dates.  Take care.

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