Archive | February, 2009

Wk8: Market Recap

23 Feb

While the media focuses on the Dow, a more accurate gauge of market action is the S/P due to the fact that it is a barometer which contains 500 stocks versus the 30 in the Dow. We have to remember that the market prices in the emotions of traders and investors because it is in essence a balance of greed and fear.

Gold continued its bull run touching $1000 an ounce on the London board. Any pullback into the 90 dollar support range should be buyable. Oil has slowly made its way back up into the 40s so keep an eye on the Oil Services Sector (OSX).
One benefit that economic conditions like this have are the instilling of better business practice, spending habits, and ethical decision making by the people who make the mistakes that got us here. In the years to come we should be able to look back and see the power of free market capitalism as the economy finds its way towards equilibrium.

Wk9: Market Forecast

23 Feb

Get out your long playbook.
When everyone thinks sell, it’s time to buy!

The market prices in the FUTURE speculation of the economy so we believe that any sign of a positive 2010 or 2011 will produce a huge rally over the months to come.

In the week ahead make note of these important economic announcements.
· Thurs: Durable Goods 8:30 ET
· Fri: GDP 8:30 ET

We also have Consumer Confidence on Tuesday, Existing Home Sales Wednesday, New Home Sales Thursday, and Consumer Sentiment Friday.

While we are primarily short term swing traders, it is important to keep in mind the bigger picture. We are at a major support level across the indices. This could be an extremely low risk entry point for the stronger companies across the market.

Looking at some of the majors in the NASDAQ 100, AAPL, AMZN, FSLR, GOOG, and RIMM, 4/5 were up on Friday and big money is stepping in giving them some lift. While we can’t call the bottom before it occurs, historically this is an area where a bottom has occurred, so we are looking for signs of accumulation by big money at these levels.

A rally is evident. However there will be pullbacks and bear moves along the way. Stick to YOUR trading beliefs and trade YOUR plan, there will always be another trade out there so keep your risk managed today so you can trade tomorrow.

Wk9: Stocks to Watch

23 Feb

All of them. Especially the strong ones.
Here are a few that stand out…
Long: ALXN, AMZN, CHE, GILD, HANS, IPI, MOS, NITE, POT, SLGN
Short: FE, KR, MMS, PLCE
If we get a rally, you can expect the weakest sectors, financials, materials, and transports to get the biggest lift. Whereas the current leaders, healthcare, telecom, and utilities may not see as large of a rally at these levels.

Black Friday 2?

20 Feb

Taking a look at the S/P and Dow, we are at, and coming into a major support level. The Dow, closing at the lowest level since 1997, has the potential to break down into “open space” meaning the next support level is not clear.
The S/P is not far behind, just off it’s November 08 lows which coincide with the lows of 2002/03. If we see a break of the S/P 740 or the Dow 7450 we could be in for some serious panic selling. Be prepared for extreme volatility, and as we stated before, a potential surprise rally which could come at any time.

The largest bull moves happen in the context of a bear market.

Gaps, the EUR/USD, and DOW Correlation

19 Feb

With recent US and global economic new heavily influencing the market, we have seen morning gaps off the open. One indication on which way these gaps will play out is to look at the EUR/USD, as it trades 24-hrs a day.We recently saw a triangle breakdown in the EUR/USD. Measuring the high/low points of the EUR/USD triangle we get a target of 1.22. The Dow is sitting right at its support level of 7500 and any break lower may induce panic selling.

If a panic sell does come in, often times it is followed by extreme volatility and a surprise rally so be cautious and pay attention to the VIX. Of course, we also should be prepared for a bounce at these levels in case more global economic news acts as a catalyst.If we do see a retest back up to the of the triangle in the Euro, the Dow is likely to retest its old broken support around 7800 as new resistance, this would give us a great opportunity to get short if prices roll over at this level.

While we cannot predict what will happen in the markets, planning scenarios can give us great opportunities for higher probability trades. Good luck!

First 15-Min. Rule

17 Feb

One of our rules we use is to NEVER trade the first 15-minutes of the market. This is because many times noise and false moves take place in this time.

For open positions, if a stock gaps down below the established stop, wait for the first 15-min bar to fully form, and then place a stop underneath the low of that bar. More often than not the stock will gap below your hard stop then rally in the first 15 minutes.

The only exception for this rule is when taking profits. Profits can be taken at ANY time during market hours and override any rule.

Wk7: Market Recap

17 Feb

In week 7 we saw more sideways action with candles lining up same sized bodies on the weekly chart of the S/P. Once again the mixed internals confirm this. Gold is moving once again so keep that on your radar in weeks to come.
The VIX is still in its triangle formation on the dailies, holding in the 40s. Oil continues to decline, ranging in the mid to upper 30s. It’s the speeches given by political and corporate officials have had a really touchy effect on the market. Often times what is said is more important than the actual number released. Keep that in mind when trading around economic news and announcements, pay especially close attention to what is said by president Obama and his staff.

Wk8: Market Forecast

17 Feb

OPTIONS EXPIRY WEEK!

In the week ahead make note of these important economic announcements.
· Weds: Housing Starts 8:30 ET
· Thurs: Industrial Production 9:15 ET
· Thurs: Producer Price Index 8:30 ET
· Thurs: Jobless Claims 8:30 ET
· Fri: Consumer Price Index 8:30 ET

If you look at the Dow versus the NASDAQ, you can see the divergence in strength. The NASDAQ is showing to be the strongest out of all the indices, putting in higher highs and higher lows, while the Dow struggles to hold at the bottom of its sideways channel.

Look for the NASDAQ to break below it’s up channel and the Dow to break down from its sideways channel to get bearish. Be prepared for false breaks intraday as we are still moving sideways on the weeklies.