Stock Market Viewpoint

Stock Market Viewpoint
Reading the Tea Leaves...

Friday, July 30, 2010

The dreaded 108...

The Nasdaq tanked this morning with a 22 point gap down but within minutes the time and sales log shows that mega block trades on the SPY and QQQQ were pumped into the market rapid fire by the bailout team pulling us back up to flat. The rest of the day the market was really choppy. While this choppiness is more intense than usual, it is characteristic of the indexes to do this when they are near the great 108 EMA. Why this support/resistance line is so important is that it is considered the dividing line between bull territory and bear territory on any stock or Index. Wall Street considers the short term to be 6 mos. and the 108 EMA is considered neutrality or equilibrium, when you are looking at 6 month chart of daily trading. So if a stock or index is above the 108 it is in bullish territory and should go up but if it is below then it is considered to be in bearish territory and should go down. Thus we have this great line in the sand in which both bulls and bears fight for and defend at all costs.
On the Nasdaq the 108 EMA passes thru at 2264. Yesterday afternoon it crossed above this line twice but came back down below it into the bell then we had the nasty gap down this morning. Throughout the day today they worked it back up and at 2:05pm they launched a run up to the 2264 number but were stopped cold right at it and sold back down to 2254 close.
Once we are 50 points either above or below the 108 EMA trading will smooth out and things will be more stable. When we are within that 50 point area on each side of the 108, it is the official battleground area and the indexes really get knocked around until one side wins and we are clear of the battleground area to the upside for a rally or downside for a sell down. Neither side can afford to lose the 108 fight.
What causes new rallies and new sell offs is that when the price does get 50 points away from the 108 line above or below, the opposing side concedes they've lost it and change their trading positions to that of the winning side and all of a sudden the market is all bulls or all bears and it charges in which ever direction got the victory.
The bulls we be in position to begin working a new daily bars 5-10 bounce on Monday, which if the bears can't break it down, would easily get the indexs above the battleground area for a clear victory and next leg up. Let's just say the bears have another plan for next week.
The trading is still too choppy for taking any new long positons, but if the daily 5-10 bounce successfully completes it set up by Tues or Wed, then trading will improve quickly for the rest of next week. If being the key word, but I am still in the bullish camp.


Friday Pre-market futures...

The Friday pre-market futures are looking downward. I sold all 3 of yesterdays buys to get out of the way of the selling that is coming this morning. At 7:23 a.m. I exited BYD at 8.53, MBI at 8.72 and CIGX at 2.01 through e.c.n.s The next short term trendline support is the lower channel line of the secondary ascension channel which passes through at 2197 on the Nasdaq.


Thursday, July 29, 2010

Who was at the wheel...?

With today's opening bell we saw Wall Street do exactly what it was signalling yesterday afternoon, they reversed the downtrend and bounced the market up at the 108 EMA. The Nasdaq had a nice 15 point gap up at the open. At first glance everything appeared fine and we were off to the races. One problem, they gapped the market up with a market wide lift rather than a big cap lift. There is a night and day difference as to what happens after each of these two.

In a "big cap lift" gap up they all focus in on the 15 biggest capitalized stocks on the exchanges and bump them up considerably and all the rest of the thousands of stocks can be left to sit where they are at. This allows for the indexes to gap up substantially because they are market cap weighted. The 15 biggest companies are so big in market cap that when they move in unison they control the indexes no matter what is going on with all the other smaller stocks. A big cap lift is expensive to do though, there has been speculation on how much it costs to big cap gap the market. The estimates range from $50m to as high as $200m but the results are worth it because when they raise the price substantially on just the 15 biggest stocks the advance decline ratio hardly moves at all from the negative 3000 buy area because very few stocks are advancing leaving the number low with plenty of room to rally up all day long and maybe into the following day.

In a "market wide lift" (the cheap alternative, because it is quite easy for them to bump up the price any stock just a little without spending any money) they lift all stocks just a little bit to do the work of gapping up the indexes. The problem is that this also causes the advance decline net ratio to jump up to net positive 3000, the sell area. All professional traders know the play is to short big at the open when the advance decline jumps from the -2500 buy area up to the plus 3000 sell area in an instant at the open, leaving the breadth of stocks with nowhere to go but down. Also, they know to not even think about shorting a big cap lift gap up because they know they will get crushed because the market continues climbing after the gap throughout the day and possibly into the next day.

This raises the question...who was at the wheel this morning? Before Geithner's team took over the responsiblity of monitoring and helping the markets when it had to be done, you could always count on getting a big cap lift gap when we were at a critical pivot point. Since then, this will be the third time that they had a colossal error in judgement as to whether they really needed to spend the money to do a big cap lift. They paid dearly today for that error.

Today absolutely had to be a big cap lift gap up. Instead they did a market wide lift gap up causing the advance decline to be postive 3672 with the opening of the market, a shorters dream. The bears came into the market and kept coming. They quickly drove the indexes back down thru the 108 EMA causing a flood of selling programs to kick in. It took them until lunch to stop the selloff. The market sold so hard during the first 2.5 hours that the advance decline went from overbought back down to negative 2624, the buy area. The entire round trip in a period of 2.5 hours instead of the typical 2.5 days. While they spent the rest of the afternoon pumping with huge block buys, they only salvaged it slightly. We are back on shaky ground now. I'm sure even the huge short biased hedgefunds were scratching their heads over such an incredible gift for the bears.

Seems to me there are only 2 possible scenarios behind this, either Geithner is delegating key responsibilities too low on the chain or we are starting to see the effects of the government admittedly having to pull in the reins on bailout spending. I'm not sure which is more unnerving to the bulls but it is what it is.

On the 3 stocks I bought premarket, all three were high enough quality setups to weather today's market fiasco. MBI is up 1%, BYD is up a fraction of a percent, and CIGX is up 4%. On MBI and BYD the damage was substantial to their charts though and I'm going to have to seriously consider whether or not to exit them in premarket. CIGX is a special stock and I feel like it has a good chance of continuing up.

As for tomorrow's market outlook, the Dow's chart is fairly salvagable. The Nasdaq's 2 day chart is broken but it's weekly bar's chart shows today's intraday bottom was a perfect touchdown to both the weekly 5 EMA and the weekly 10 MA. On any other day that would be really bullish, but after today's bailout miscue this feels like a wait and see what the new day brings situation.



I bought back 3 stocks from last week at 7:27 a.m. premarket ECN trading:
MBI - 8.63
BYD - 8.51
CIGX - 1.92


Wednesday, July 28, 2010

The great 108...

Today all the major indexes pulled back substantially with the Nasdaq down 24. There is a lot of pessimism in the financial media this evening that this could be the start of a multi-day selloff. Anytime the market is selling, how much it has sold, how fast it has sold, and how long it has sold are pretty much irrevelant. What is key is to check the intraday bottom point on each and every day of the selling to see if the intraday bounce happened at any of the very important moving average support levels. While Wall Street media and trading tutorials promote the 75 day, 100 day, 150 day, & 200 day simple moving averages, wall street keeps one moving average pretty much for their own purpose and that is the 108 exponential moving average. Large computer buy and sell programs are built around this support/resistance moving average line. Back on 7/8/09 the 108 springboarded the second big leg of the recovery rally that began in March 2009. On 2/11/10 it springboard launched the third leg up of the recovery rally. On 5/6/10 at 1:33pm CST we crossed down thru it on heavy volume and massive computer programs kicked in and caused the 1 hour flash crash that made headlines. On 6/1/10 it became impenetrable resistance for an up move. On 7/14/10 it became impenetrable resistance for an up move. Last Friday, 7/23/10, we successfully crossed and closed above it. At 2:07pm today we set back down on the 108 EMA and bounced up quickly producing an intraday 30min bar chart hammer reversal candle.
This 108 EMA bounce happened on the S&P 500 index, the Nasdaq composite index, the Nasdaq 100 index, QQQQ Nasdaq tracking ETF, the SPY S&P500 tracking ETF, and the QLD Nasdaq tracking ETF, all at precisely the same moment. In the 12 yrs I've been charting, I've never seen the 108 EMA mentioned in any media, any stock market training books, nor any advanced technical analysis manuals whatsoever. What I have seen through trial and error over the years that this is the most used bounce point by Wall Street and it usually catches the short sellers off guard resulting in a squeeze that turns the market back up. The synchronized timing of this event today on all the indexes tells me that their intention is to stop this sell off before it gains anymore steam starting tomorrow morning.
The really big hedge funds are short side biased and know that the 108 e.m.a. is the key number and have been hurt badly with last weeks short crusher rally. Tomorrow morning is D-day for them. They will be slamming the first ticks with massive short selling to try to keep the market sell off continuing down. Wall street is planning just the opposite. I know that I am going out on a limb on this one, with only one day of real pullback having taken place, but I am looking for wall street to win and pull the rabbit out of the hat tomorrow.


Tuesday, July 27, 2010

Declining volume pullback due

I have been charting 12 years and I have never seen a four day up move with declining daily volume on all four days manage to avoid the pullback drop on the fifth. There can always be a first time but the odds say we are at a ctitical point right here. They have forced this market up relentlessly the past week and by doing this they have created a very narrow ascension channel. Normal ascension channels have bigger oscillations through the move creating a taller channel that allows modest pullbacks that simply fall back down to the support of the lower channel line.

The channel they have traded us up in for a week is pencil narrow. While these narrow channels make for powerful, fast rallies that get the attention of the average investor, when day 5 comes and the pullback is upon us, the first little down move, such as todays small nasdaq down move, leaves us hanging on to the lower channel line for dear life. If it slips through the lower line tomorrow morning the shorts will come back in with a vengence and panic could set in. If it doesn't we are entering propped up market territory.

Don't get me wrong a pullback here is healthy and is actually needed for the market to continue on with additional up waves. It's just that wall street has painted itself into a corner by not allowing decent size down oscillations for the past week.
While I am not in any swing trades tonight, I am still in the six short term investing symbols. This goes against every fiber in my body, but I am going to force myself to stay in them, but on paper only. Keeping their ongoing net percentages posted at the lower right will document the investing side of this rally from the first tick and I will stay marked in them no matter what until if and when I call a new down leg beginning in the market.

It will be good for anyone weighing swing trading versus short term investing to watch what happens to these gains in even a modest pullback. The reality is that even short term investing has gone the way of the dinosaurs. I only swing trade and day trade. Buy and hold is dead money. The Dow is at the same place it was at 10 years ago, while inflation has driven the cost of living dramatically higher during these same years.

No need to look for any new trades tonight, its time to sit on the sidelines and watch for a day maybe two.


It happens....

A quick note before I leave my office. I did not get a fill on any of the three new limit orders that went active at 7:00 a.m. This mornings pre-market trading was very thin and the price jumped right over my buy price and continued higher to a gap up open at 8:30 on all three.
I have a policy of never re-entering a new buy order higher up if a stock gapped open higher causing my order not to get filled. This typically kills it momentum and intraday shorters jump on it quickly. Granted, after drifting down from the gap up, it may turn back and go higher again. But 75% of the time the stock will not trade like it could have if they had not gapped it up, so my disclipine is to forget about it even if it takes off strong after the gap up has drifted back down. This is a game about knowing the percentages on every possible situation and having the disclipine to stick to those numbers. While you may miss out on a few good runs, sticking to your own percentage based trading rules will sooner or later keep you from getting hurt really bad in a trade.


Late Monday night scan....

Or make that early Tues morning technically. I am setting up three limit buy orders, to go active at 7:00 a.m. Tues when the premarket trading opens. All 3 will be set to trigger just a little above Mondays cloing price. They are:
GS closed Monday at 148.20, limit order set at 148.26
OIH closed Monday at 105.80, limit order set at 105.86
SHLD closed Monday at 70.26, limit order set at 70.31


Monday, July 26, 2010

A good day in the market...

Today was indeed a good day in the market. I closed out the 5 open swing trades - MBI, PMI, RDN, BYD, & CIGX - and moved them down to the closed trades section. The four limit buy orders I mentioned over the weekend went active this morning and executed in early trading and are updated this evening. I am stil holding the SSO & QLD from 7/20. I was expecting and hoping for a slight pullback this afternoon but instead the advance decline climbed even higher closing at the plus 3823 (seriously overbought level). The SPY ETF (S&P500 tracking stock) the single biggest collector of money moving into the stock market is of some concern as its daily volumne has stair stepped down for the third day in a row. Anytime the price of an instrument is climbing but the volume is descending across the same daily bars, a bearish divergence is taking place and a serious pullback is usually approaching. The market can remain short term overbought for longer than reason says it should. When I scan for new swing trade entry points tonight I will have to raise the bar on what I consider high quality setups. My trading rule is not to open any new trades when the advance decline ratio is so seriously overbought. I also have to take into consideration that a lot of people are just now realizing the market is moving up and there will be a lot of people chasing it. If I find a stock with an extremely high quality setup, I will post it later this evening. Sometimes I have the opportunity to stop by my office during market hours to check on the trades. If I open or close trades intraday, I will post them at that time. If anyone would like an email update anytime I do that, just let me know.


Another intraday look...

Had to stop by my office for lunch, checked the trades again - CIGX limit buy order 1.90 executed shortly after the open. It moved up too far too fast so I manually sold out at 2.16 for 13% profit intraday on huge volume. Decided to sell BYD because it is up against serious resistance line and today's volume wasn't great, manually out at 8.94 for 8% profit for 2 days.

As I mentioned over the weekend, I am looking for some sort of pullback in market this afternoon and I don't want to let any of the CIGX come back against me but I do think it will continue going higher after the pullback so I am re-entering a new stop limit buy order for 2.26 so that when it does begin its next push upward I will automatically be put back in it. Also, I manually exited RDN at 9.37 for 5% profit for 2 days.


Sold two....

While I have been returning calls from my office this morning, I checked the trades and decided to take profits on a couple. I sold MBI at $8.62 - 8% in 1 day. I also sold PMI at $3.91 - 11% in 1 day.


Saturday, July 24, 2010

Weekend update...

In the short term investment section, I'm adding a limit buy order on FAS the 3x leveraged longside financial ETF. I don't like its technical analysis setup where it is but it's obvious that they are trying to force this one up even though the chart is somewhat broken.

In the swing trade section, I'm going ahead into GOOG late. I could kick myself for missing its early entry point that I mentioned I missed on Tuesday but since then, some stronger technical signals have developed that leads me to go ahead and place a limit order at 491.00 just above where its at now.


Friday, July 23, 2010

Full steam ahead...

You can put me down in the bullish column now. We got the 5 MA itself crossing the 50 MA today, Wall Street's confirmation signal that the rally is on. Today's trading action is exceptional for one particular reason, as I mentioned last night the advance/decline was at plus 4856 and we needed to have a pullback to either zero or closer to negative 3000, the beginning point for the next oscillation up. Normally it takes 1-2 days to go from overbought numbers to oversold numbers but as the market opened today it was at the negative 2500 with just a minor pullback in the indexes that just lasted the first 30 minutes. Then at 9am the advance / decline started a new up oscillation & charged up all day. This doesn't just happen. Wall Street is bent on not letting the shorts get back control of the market. The best thing about it was that in pulling so many thousands of stocks back down just a little, the big caps that really move the indexes hardly had to pull back any and in a period of minutes we went through what was normally a 2 day sell cycle and the indexes only went negative for less than 30 minutes. Now we are already well up in the next oscillation. This only happens when institutions are going in big and fast on everything.

I'm listing an update on the current trades. Of the 5 limit buy orders I mentioned last night and entered premarket this morning, 4 triggered and executed within 1st hour of trading.

Trade duration 3 days:
SSO - in at 35.06 - current 36.80 (+5%)
QLD - in at 55.57 - current 58.57 (+5%)

Trade duration 1 day:
MBI - in at 8.00 - current 8.49 (+6%)
PMI - in at 3.51 - current 3.85 (+10%)
RDN - in at 8.94 - current 9.09 (+1%)
BYD - in at 8.26 - current 8.44 (+2%)

CIGX - still has not reached 1.90 buy trigger price

I'm going to spend a lot of time this weekend looking for the second wave of runners which will kick off their run when the advance/decline gets back down in the negative 25000 - 3000 range (it closed tonight at postitive 3874 which means that sometime Monday, maybe afternoon, we should get our next pullback but don't count on a just a 30min pullback, each down oscillation will typically be longer than the previous one throughout the rally).


Thursday, July 22, 2010

Late night scan...

I've been scanning a lot of stocks late here tonight. Looking for the first type of stocks they run at the beginning of every new leg up in the market and which are the ones with deep monthly bar or weekly bars charts OBV divergences. I found five that qualified:

........Thursday's close........Limit Buy order placed at


By doing this if on Friday the stock trades just a little above Thursday's close, the buy order will be executed automatically and I will be in the stock.


We got our short squeeze...

...they were signaling in the last hour yesterday. The fact that the entire movement from the short squeeze held and did not pull back 30 or 40% at the bell is very bullish. The daily 5/21 on the indexes are looking fairly good now. We just barely crossed over the 50 moving average on most indexes decent volume. We are not out of the woods yet though, just having the price cross above the 50 moving average is bullish but Wall Street keeps a last minute bailout and abort trigger set where they don't commit to a move until the 5 moving average crosses above the 50 moving average which normally follows 1-2 days behind the price crossover. What Wall Street does is that they watch the volume level that the price crossover attracts from the masses of traders; if it's not high enough they will abort when the 5 EMA touches the 50. If their consensus is that there are not enough people willing to play the rally, they don't want to have to sponsor the rally on their own so that the instant that their computer systems detect the 5 EMA touching the 50, they dump their positions and go short huge and the average investor is stuck holding the bag. If they do like the amount of buying volume the price crossing the 50 attracts then when the 5 EMA crosses a couple of days later, they go in huge on everything and the rally takes off. So right now we are going to have a couple of days to see if they allow the 5 EMA to cross over and go big or they abandon the plan.

While penny stocks are only for seasoned traders, I will periodically mention a nice setup for those who like to use a few dollars of their account for a real gamble. The symbol is CIGX, back in March I emailed it to a couple of my followers at 1.05 and it went to 2.80 on big volume. It has now setup again on multiple technical signals. I don't expect as big a percent move this time, I believe the 3.00 level will prove to be resistance again, it looks to go from 1.87 to 3 for a 50% gain. Once again, purely small change gambling money on this one.

Overall, so far so good on the market move but we are due for at least a small pullback tomorrow because the advance/decline number on all US stocks closed today at 4856 which is as high as it ever gets. Under bullish conditions it will normally fall back to 0.0 level or if the pullback is pretty good sized it will go down to negative 3000 which is the buy level for the next oscillation up.

Still holding QLD & SSO. On another subject, the VIX - volatility index has recently completed a nearly perfect descending triangle visible on the weekly bars chart. If this triangle breaks downward which is the direction most likely, it will cause a nice rally that will go for a while. Bear in mind that right now it is right at its point where it becomes a very powerful and fast market changer. Being a descending triangle instead of symmetric, it has an 80% chance of breaking downward and the market rallying up. Many traders will be watching this closely in the next few days.


Wednesday, July 21, 2010

Did you have to say that??

Today's market started out with a nice little gap up then consolidated sideways into an intraday bullish ascending triangle, ready to climb further, then shortly after 1pm Bernanke said the words that no trader ever thought they would hear come out of a Fed Chairman's mouth "there is an unusually uncertain economic outlook". Within minutes the entire US Stock Market tanked more than 1%. The bulls were looking for "continuing to improve" wording in Bernanke's speech to Congress but got a slap in the face instead. This was very out of character for Bernanke, over the last few Fed speeches he has adopted Greenspan's classic ambiguity to be sure he never spooked the markets. My take on it is that Bernanke is preparing us for the idea that another bailout of some sort may be needed.

Timing is everything and today was a very bad day to have Bernanke scaring everyone. Nonetheless, the daily 5/10 & 5/21 setups weren't damaged that bad and can still be twisted back into shape if they bring the market back tomorrow with a decent day up. On the intraday charts they are signaling that that it is exactly their intention. From 145pm to 3pm today they crafted a nice ascending triangle on the 15min bars chart on all the indexes and they began a nice 5/50 retest setup on the 30min bars chart of all the indexes. Wall Street is signaling that they still want the market higher and now they are likely to have enough fresh new shorters in the market to enable them to short squeeze the market up tomorrow. I am still holding the SSO & QLD even though I took a 1 1/2% loss today because I know they have to keep this market moving up. If they can't keep it going it will turn down quickly and sell for months and there will be plenty of money to be made riding it down thru the three shorting ETFs and thru buying Puts.

I expect Bernanke will be getting calls tonight asking "did you have to say that??"

Tuesday, July 20, 2010

That should do it...

Well I hope everyone didn't mind a side of market smackdown with their coffee this morning. Several big names released earnings yesterday and the top line revenue took a serious fall on just about everyone. The theme across the board was to lower guidance heading into the next quarter. They decided to oblige us with a very controlled gap down to shake out all the week hands in the market. Shortly after the open it was obvious that the On Balance Volume was climing when the market had just dropped down considerably, it's classic robbing mom and pop investor shares and then take off with the market routine that Wall Street is so loathed for. Anytime there is such a serious OBV divergence on the 30min chart intraday, you can pretty much count on the market climbing all day long and it did causing the 5 EMA to turn back up so quickly that it is beginning a ramp retest that actually looks pretty nice and the 5/21 is pancaked up nicely right below the 50 which is typically a strong propellant to the up side.

Today's success in making the turn is occuring on the 106 support resistance line on the SPY ETF which has been used multiple times in the past few years, mid Nov 2003, AUG 2004, & FEB 2010 and three times during May 2010 which means it's really a pretty strong support level. Today's move also breaks us out of the downtrend line that began on April 26 of this year. Also, this morning's low was a perfect touch down to the 38% Fibonacci level measuring up from the Jun 21 to Jul 1st decline. While we did break out of the mother downhill channel from the past 4 months, there is still a smaller channel within it that we will need to break out of tomorrow morning. While all the traders are no doubt happy with the Daily 5/10 & 5/21 as they morphed into nice setups today, we still have the issue of the monthly 5 is skimming slightly below the 10 now not on top of it.

As far as the breadth of the market, the advance decline chart is starting to get up into the rafters on an intraweek basis but if the market follows thru on good volume tomorrow it will stay up there for a few days and not come back down to the bottom until the rally pulls back. The biggest test if this rally is for real will be if we can cross the 50 day moving average tomorrow on good volume which is just above where we are at right now.

I talk about the SPY alot even though it is not one of my 10 favorite trading symbols. The reason is that when WallStreet is going long hundreds of millions of dollars per hour, the SPY is the only vehicle liquid enough for them to get into with such large amounts. Watching the block trades on the SPY really gives you a feel on what the big firms are doing. It's not a leveraged ETF like the SSO is 2x leveraged, QLD is also 2x leveraged and the FAS is 3x leveraged. Anyone wanting to trade a massive amount of money in a lower risk/reward ETF, you can get in and out of the SPY easily no matter how deep your pockets are.

While I was out today, my system triggered my standard limit/buy order when we passed yesterday's high at 35.06 on the SSO. On the QLD my limit/buy order triggered as we passed its high yesterday at 55.57. I'm refraining from entering the FAS for a day or two. I won't set a buy/limit order on it until the next 5/10 or 5/21 retest starts curving up (While the SSO & QLD did curve up, the FAS punctured to the southside and it will take a few days to recover from that).

I'm not trading AAPL even though it is climbing with a broken down 5/10 & 5/21, it is not going to look appealing until a daily 13/43 starts to form and it looks like it might in a few days.

GOOG gave an intraday start signal at noon today but I didn't have a buy limit order on it so I missed it ($475 was the entry point for those who caught it intraday).

AMZN is lagging behind the other three. I am going ahead and placing a limit/buy on it at 120.87 which is once again just above yesterday's high.

RIMM's daily setup is actually the best of the four but I am just now putting a limit/buy on it tonight even though its daily chart setup has started quite nicely and it surpassed yesterday's high quickly today. It has the issue remaining that it needs to go about another .50 higher to break out of its 4 month down channel. By the way, RIMM has a really nice tight OBV divergence on its weekly chart coming across from its July 6 lows. If this diversion gains steam it might have the best run of the four. Since it broke yesterday's high without breaking out of its down channel, I have decided to put a limit/buy at 56.30. One could argue that it is a late entry but with its nice weekly OBV divergence, I don't think the dollars missed on the front end will be that high of a percentage of the total move if the market starts gaining steam here.

These trades that triggered an entry still feel fairly high risk but unfortunately, the entire market is pretty high risk right now and the only real money that will be made will be those that catch the start of a market short squeeze - that takes off so fast that the late entries lose out on too much up front. As always I have all triggered trades protected with a 4% trailing stop.

Overall, this market is walking on thin ice more so than I have seen it in the past 12 years. Anyone entering a trade without stop loss protection is asking for trouble. There are always opportunities for money to be made no matter how schizophrenic the market is. My 4% trailing stops should be tighter but I've learned that in recent months the stocks get knocked around so much intraday that it's easy to get stopped out of a move just from intraday oscillations and then miss out on the into the bell ramp up.

It's going to get really interesting because the technical analysis is really trying to sell the idea of a rally up from here but all the economic reports, earnings, unemployment numbers, etc. say this market should be in a steep nosedive...we will see...

Monday, July 19, 2010

They are trying to turn it...

I would first like to mention the bull and bear pressures of the market as of this past Friday.

On the S&P 500 index: the bearish case first- the critical monthly bars 5/10 test started to barely slip through late Friday afternoon. On the weekly chart and the daily chart both, the 50 started to turn the 5 EMA down causing it to fall down from the upper line of the descending channel Friday. This put us at an extremely dangerous pivot point on the indexes.

On the bullish side, Friday's selloff did not damage the 13/43 setup on the quarterly bar chart and also the weekly bar chart. Also we are still within updraft range of the daily 324 EMA. Friday's close left the only chance of preventing a new down leg in the market to be if the powers that be can drag the market up steadily all day today to produce the key Daily bar 5/10/21 retest, the building block of turning the market back up.

Today while it was really choppy they did manage to show the start of the 5/10 daily but the 5/21 is going to need 2-3 days of steady upward movement before any of the professional traders will buy into it. Today's rally was on low volume which tells us that there is much doubt as to whether there will be follow thru to the upside.

On the SSO (S&P 500 2x leverage trading ETF) today's volume was only 14.6m versus its average daily volume of 23.1m. If this is the beginning of a true upside turnaround, the SSO volume would have to get above average really quickly or the upward movement will just attract new shorts into the market. On the options side of the SSO, the first out of the money call, the August $35, has gained considerable open interest on the call side today. Tonight's closing numbers show 3,990 calls versus 1,770 puts which means the options players think they smell a short squeeze coming.

All of the intraday start signals that professionals use were setup quite nicely in the last hour of today's trading but most traders seem to be in the "show me" state of mind and will probably feel like it would be safer to get in a little late than catch the first ticks and run the risk of being sideswiped by bad economic news coming across the newswires in the morning. This week could easily have a good deal of bad economic numbers show up.

While my main three bullish ETFs: SSO, QLD, and FAS - all three printed nice bullish reversal hammers on the daily candles, I feel like it's too risky of an entry point until the average daily volume starts confirming the upward move if it does indeed get going. Right now all the market indexes are very vulnerable at this point.

My main three bearish ETFs: SDS, QUID, & FAZ - did not gain much open interest in their calls which is bullish on the market.

On my favorite four big cap stocks: AAPL GOOG AMZN RIMM - AAPL has no "technical" reason to turn up right here but if the markets rally, its somewhat broken daily chart will be forgiven because it's such a trader favorite. GOOG started the day trying to set up a Day 5/21 but in the last 30min before the bell there was a minor intraday breakdown so we will see. AMZN is actually positioned the best both midterm and short-term and it is also working the Daily 5/10/21 retest up thru the 50. RIMM has been a nearly perfect 30 degree down channel for the past 3 months & this stock loves to run on down channel breakouts as it will attempt to do in the next couple of days if the market turns. It also is set up the best on intraday signals & Friday's selloff did not lower the On Balance Volume any which will give it minor upward push OBV divergence. Also on RIMM, I'm sure all traders have been watching that huge symmetric triangle that is has nearly come to a point on the quarterly bars chart.

This week the markets are at as big of a pivot point as they were back in Aug '08 but one has to believe that they know they cannot let this market fall at this juncture, it would be a severe blow to the very delicate economic situation we are in right now.

My feelings at this point are that they will manage to turn the market up but there will be some bull/bear fist fights during the next couple of weeks. Hold your breath that we don't get any really bad economic news this week that could easily pull the rug on this upturn attempt.

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