Wk6: Market Recap

Week 6 was quite bullish. We put in a higher low on the major indices and the NASDAQ broke to a higher high. The S/P, Dow and Russell are close behind sitting right at the previous swing high. We saw a divergence on the NASDAQ internals on Wednesday, again not something you see too often. This is a sign that a tug of war still remains between the bulls and bears, even as we move higher.

The Basic Material sector performance has been strong lately. Good old Potash (POT) and Mosaic (MOS) broke out on strong volume with Intrepid Potash (IPI) close behind. The VIX has held in the mid 40s and Gold and Oil remained flat on the week.

Wk7: Market Forecast

We are at a pivotal point here in week 7. While the last two trading sessions have been quite bullish, we are not rushing to go all out long. Watch for the S/P, Dow, and Russell to break their previous swing highs. Sideways action would be a sign of upside to come because it means the bulls are holding prices at these levels, however we remain cautious for short sellers will want to try and push prices lower at this resistance level.
· Weds: International Trade 8:30 ET
· Thurs: Retail Sales 8:30 ET

Thursday we have Jobless Claims and Friday Consumer Sentiment. The S/P $877.86 level is the previous high so watch this AREA for market direction.

Wk7: Stocks to Watch

If you’re still looking to catch a move in the Basic Materials Sector look to stocks like IPI and BBG as they are the lagers of the group. ALWAYS make sure to manage your risk. PNRA is forming a nice triangle, watch for a move higher or a continued breakdown on stronger volume.

MMC, KBW and ROG are candidates for bounces of resistance here and we are keeping our eye on FLIR as it has had a nice move down with earnings continuing the trend. Here are a few more stocks to watch…

CECO (long)
Ascending Tri
Entry: $22.52
Stop: $21.12
Target: $24
Option Play: Feb 22.5 Calls
Comments: We are making our way closer to options expiry so make sure to watch out for theta and consider March options for stocks with longer time horizons for their price targets.
MYGN (long)
Bull Flag
Entry: $84-85
Stop: $80 area
Target: $86-87, $90
Option Play: Feb or Mar 85 Calls (not much vol. on Mar)
Comments: We are keeping a loose stop on MYGN because the pole of the flag is so long. Many times after a few days sideways the stick will put in a hammer with a long shadow so we want to make sure not to be stopped out on a day such as this.
COCO (long)
Bull Flag
Entry: $21.39
Stop: $20.14 or under breakout bar
Target: $86-87, $90
Option Play: Feb or Mar 20 Calls
SJT (short)
Bear Flag (and other patterns)
Entry: $18.45
Stop: $19.69
Target: $17.50
Option Play: None, short the stock
COST (short)
Descending Triangle
Entry: $43.90
Stop: $45.68
Target: $42.50
Option Play: Feb or Mar 45 Puts

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Articles and Posts - Each Sunday a Market Recap, Market Forecast, and Stocks to Watch are posted. The Market Recap summarizes the previous week’s action, while the Forecast and Stocks to Watch talk about the week to come. Throughout the week updates will be posted with anything from market news to watchlist and position updates, so keep an eye out for these.

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Diverging Indices = Higher?

As we take a look at the top line figures (S/P, DOW, NASDAQ) we see an interesting divergence. Let’s examine the price action and the Stochastic Indicator. All charts are daily candlesticks.

The S/P is forming symmetrical triangle with a Stochastic turning higher. Volume has decreased over the past week and the apex of the triangle is tightening.
The Dow is creating a descending triangle, in the context of a sideways market, and its Stochastic is forming a triangle with a lower high which is turning higher, forming a higher low.
The NASDAQ on the other hand has put in a higher low on the dailies and is about to break out to make a new high, forming a small up channel. The NASDAQ has been the strongest index over the past few weeks and we see a small increase in volume these past few days as it makes its way higher.
For the rest of the week and week to come, look to the NASDAQ to lead the market higher with confirming triangle breaks on the S/P and Dow. However, If we break lower, expect a quick, violent, and emotional move back to last November’s S/P 750 level.

Wk6: Watchlist Update

While there still aren't any phenomenal setups out there, keep these on your radar for the next few days.

Long: Buy over Monday's High (Stop under the low):

• ATHN, AVA, HANS, MMS

Short: Watch for breakdowns in:

• EMN, MMC, SIGI, SINA, SIVB, WAT

Wait for a small bounce in FDX, LNN, SJT to go short. A great way to keep positions managed in this market climate is to have a basket of longs and shorts. This way, if we move sideways or continue up, down every other day you have a hedge against your position.

Jan09 Recap

2009 has been one of the worst starts in stock market history. We are still chopping around down near the old 2002/2003 lows and should continue the process during the months to come. We see a bearish engulfment candle on the SPY monthly with no sign of bulls stepping in.

Wk5: Market Recap

As many of us have learned the hard way, the markets will act on their own accord and many times it seems without reason. As we continue to see sideways action across the major indices, the short term 2-5 day swing trades have been the most profitable over the first month of 2009.

We made an attempted rally last week which only made it to the 50% Fibonacci retracement level (using the highs from January 09). Looking at the markets from the psychological side, many headlines, news reviews, and magazines speak of a gloomy 2009. Consumers are fearful, while the contrarian is preparing for a bounce. We see a hammer on the VIX however, following two inverted hammers this creates opposing tales, meaning indecision and once again confirming the sideways movement. The strength in the Financials (XLF) was quickly given back, filling the gap up from Wednesday.
On a broader note, we have seen an increasing divergence in the short term interest rate versus long term paper, that being, the 25 basis point short term interest rate versus the long term 10, 20 and 30 year treasury bonds. This is one of the largest divergences in history and should be taken note of.

Wk6: Market Forecast

In the week ahead, watch for a retest of the S/P $800 level. We made an attempted rally last week which only made it to the 50% Fibonacci retracement level (using the highs from January 09). Major economic data for the week is as follows…
· Mon: Personal Income and Outlays 8:30 ET
· Mon: ISM Manufacturing Index 10:00 ET
· Fri: Employment Situation 8:30 ET

Along with these reports we have Pending Home Sales on Tuesday, Jobless Claims and Natural Gas Report Thursday. While the market doesn’t always pay as much attention to these numbers, they can still have an effect on the market. Keep an eye on Gold tracked by GLD, any pullback should be buyable as it makes its way back to $100.

If you “Always Expect the Unexpected,” then nothing should ever come as a surprise.

Wk6: Stocks to Watch

Week 5 was a great week for our watchlist. We had a big streak of winners those of which were MYGN, GILD, PALM, CTX, and ERTS. As we move into week 6, look for updates in future posts as we would like to wait for Monday's price action to signal a direction.