Monday, February 18, 2013

The Grind Continues...Market Outlook and Setups for the Week Ahead

The grind continues.   We saw a choppy and rather boring week last week on Wall Street, as the trend continues of very weak moves on the overall market with a slightly positive bias with a few individual stocks working underneath the surface of the market, but also many more frustrating traders with fakeouts and uninspired moves following breakouts.  This is the type of market we've seen pretty much all year and the numbers I talked about last week in regards to breadth and timing haven't changed. 

A market that grinds its way higher can be frustrating, but it is not necessarily a bad thing.  A year ago, we saw a market that grinded its way higher but I think it was a much different market than we are currently seeing.  If you look at the Nasdaq chart below, you see a market that moved up slowly and steadily, but compared to the 2013 market, the key work is "up".  The Nasdaq is 2012 went from a close of 2648 on the opening session to 2918 on February 15, a gain of nearly 300 points.  So far this year, the Nasdaq has gained 80 points, using the close on the opening session. 

Nasdaq 2012

I've mentioned breadth as being disappointing with this current market and a comparison to a year ago proves this.  Last year, we had many sessions with breakout numbers over 200 and even 300.  This year (not counting the opening session), our highest number has been 158.  By this time last year, we had eleven sessions over that mediocre number of 158.   I think this is the reason individual stocks have been frustrating and somewhat disappointing so far this year.  I was up about 20% in the first quarter of last year, and am currently looking at my account being down 6% this year.  Maybe that's just bad trading on my part, but I think it says a lot about the way individual stocks have acted as well.

2012 vs. 2013

During the past week, both the S&P and Nasdaq did very little other than chop around.  This can easily be seen on the five minutes charts below. 

S&P 500
Nasdaq

When looking at the daily charts, it's certainly possible that the Nasdaq is consolidating here for a big breakout that will lead to a powerful move higher.  Let's hope so.  The S&P meanwhile is above resistance but is doing very little.  Perhaps a meaningful pullback would set up a more exciting move higher but that doesn't appear to be in the cards at this point.


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

Going forward, I am going to sound like a broken record if you read my posts regularly but it does hold true.  My timing signal remains positive and as such, I will continue to lean to the long side.  It is not overwhelmingly positive so I am remaining conservative, but if stocks trigger, I will consider them.  In order for a pullback to really start, I think the 20 day EMA has to be taken out.  The 9 day EMA has been broken a few times but the market has been able to bounce back.  Perhaps a 20 day break will get the bears going.  A decent pullback might be a good thing here for the longer term.

Here are ten long setups for this week.  After being screwed with so many times this year on individual names, I am in a "take what you can get" mode on stocks so most of these setups are one or two days swing trades at most.  That's just the type of market we are in - I wish it was different but it's not.  If you're frustrated, don't be.  In my opinion (and of course I could be wrong), there are very few traders lighting it up out there, although very few will admit it.  If you can day-trade, it will help, but if you're like me and can't watch things all day, it remains a tough market to play. 

ALGN
 FIVE
 MPO
 ISRG
 YPF
 MX
 TA
 VRNT
 VHC
 UNXL
FB Short
All Charts from TC2000, Courtesy of Worden Brothers, Inc.

Good luck this week.  

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