Sunday, November 2, 2008

This Week's Trade

There should be no shortage of news this week with a Presidential election on tap, the ECB and other world central banks expected to cut interest rates, a crucial jobs report and who knows what else. The market starts off with a rather constructive week just completed. Looking at the chart Friday was the first consecutive daily close above the downtrending 20 day moving average since late August! Not that it means a whole lot since it was on relatively average volume and choppy trade but hey its something. The 20 day ma now sits around 945 and I believe this area will be a key pivot point for the markets in the coming week. If we can hold above this area then we got a decent shot at rallying further. Underneath 945ish and its a different story.

Now it will be interesting to see how the market trades after the election we have on Tuesday. Not saying someone has been propping up this market but it is fascinating how the market seemed to calm down (relatively speaking) during the week before the election. It does look like the VIX has been in a topping pattern since it made its high of 89 six sessions ago. The VIX was finally able to close a week below the 20 day ma and 60 level as well. This is a very good thing for the equity markets as it shows that fear is subsiding. If we can see the VIX come back down a bit further into the 40 area then I would be much more willing to go long volatility and buy options as I still think volatility will remain high, but more subdued, going into year end. The market definitely looks a lot more bullish than it has in awhile imo. This can set us up for a continued little rally here to play with the upside in our trading. The main obstacle technically speaking will be the 1000-1020 resistance area on the SPX.

Economic data coming out this week includes Monday's Construction Spending, and ISM Index. Tuesday features Factory orders in the morning, then Auto Sales being released at random times throughout the day (always hate this release because its mid-day and you really gotta be aware of this if your trading). Wednesday is ADP employment and ISM services. Thursday watch for initial claims. Finally Friday we have the Oct. jobs report which is sure to be horrific, and some Pending Home Sales.

Earnings are again in focus this week with tons of companies reporting. The only one I care about is CSCO on Wed after the bell. Cisco Systems usually is one of the most anticipated names at earnings time just because the demand they see from customers can foretell so much about the strength and growth of the economy. Not expecting anything great out of the numbers but since expectations are crazy low, you could get a surprise pop in the stock after this on Thursday.

Overall I am cautiously bullish on the market this week if we can hold the previously mentioned 945 level. The bottom line is we have resistance galore to fight thru so each up day should be taken with a grain of salt because we still are in a nasty bear market and thus, DO NOT FALL IN LOVE WITH THE UPSIDE. With that said, there's nothing wrong with scalping the upside if thats where the market tells you it wants to explore.

As for individual names, I would have to say AAPL has held up rather well lately and seems to be the first name to move when we rally. After its earnings gap up a few weeks back, it very calmly came back down and filled the gap and made a beautiful higher low at 90 before busting out over 100 last week. If you can get a pullback in AAPL to around that support of 100ish then its a buy imo. I can see AAPL trading to 125 in a hurry if this market allows. Trade safe this week and obey those stops.

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