Monday, October 26, 2009

Weekly Watchlist 10/26

As the week gets under way the market has already dumped after a nice little bull trap this morning. I think last week's negative action after positive earnings reports was the red flag to lighten up on your longs and even nibble on some shorts. 1100 SPX proved to be a wall each time we tested it and other indices like the RUT and IYT signaled bearish divergences as the SPX tagged new highs.

I think this sets us up for a retest of the 50ema on the SPX which stands at 1046. There is also a downside gap on the ES at roughly 1054 and another one at 1037. Short term the dollar is rallying and that is guiding the market down and commodities are getting the hammer for now. If the SPX loses the 50ema we could see further pressure down to 1020. This looks like it could be the 5-10% pullback that most have been awaiting for awhile.


Longs>> CHS, RL, UUP
Shorts>> X, CHA, LMT,  NAV, MET, TM, ZION

Tuesday, October 20, 2009

EUR/USD Testing Uptrend

Note: I could not get a post out Sunday night so I am doing a bit of an update here.

The market saw a nice rally Monday and opened up nicely today after very positive earnings for AAPL, CAT and others. We are seeing some weakness mainly due to the pullback in energy names as a result of the bounce in the dollar today. The EUR/USD has some good support here between 1.485 and 1.49 as the chart shows a nice uptrend line on the 60min chart going back to early September.

I would expect the SPX to hold the 1080 support zone which was previous resistance until it broke out last week. If it breaks then we will re-evaluate. But for now this is a pullback in a bull market. Say it slowly to yourself :)

Overall, I like the patterns still on the daily charts of oil and commodity stocks. We still have a lot of data and earnings here in the next few days so it will be volatile. Just know that the market will try to shake out the most people before it makes a move. New highs vs new lows are still increasing each week which is not a sign of a topping market. Before this market topped out in 07-08 we saw consecutive weeks of decreasing internals. Just be nimble and trade around core positions that you believe in until earnings wind down because it will be choppy and wild for now.

Wednesday, October 14, 2009

Back To The...Dow 10k

The market is making new highs as the Dow tagged 10k and the SPX closed at 1092. The critical area to watch into the weekend will be 1076-1080 on the cash as that is now support. If we can hold above that level and close on a weekly basis I think the market is then poised to blast off into the 1120-1150 zone we have been targeting for a little while now. There is a chance to see a blowoff top type of event where those who have not gotten in to this market finally "panic" and buy it for fear of missing out on the upside. Funny how just a year ago everyone was fearful of the endless selling. Fear is the one emotion that drives all. Greed is simply fear of missing out on further gains.

The euro broke out of 1.485 level that I had been talking of and the dollar index is making new lows under 76 as commodities in turn, get bid up aggressively. Oil now looks like it is breaking out and should see 80 dollars shortly. Eventually I would not be surprised to see crude up between 85-90 by the end of year. So I guess fill up your tanks now. And buy oil service stocks of course. Copper also is making a push towards $3/lb which is the top part of a sideways channel that has been in place since early summer. If copper breaks out the market could be telling us the fear of inflation is back or the economic growth is returning. Or both.

Still plenty of earnings to come this week and next that should guide the market in the short term. Overall, I remain a bull until I am not one. Which just means the market will tell you when it exhausts itself of buying. A high volume capitulation of euphoria has not occurred yet and I think you should remain bullish until that momo dies off.

Monday, October 12, 2009

Weekly Watchlist 10/12

As this week gets rolling we have Columbus Day on monday which will give us a thin low volume trade as bond markets are closed. Never short a dull market is my rule for these days. Plus we are in a confirmed bull trend. As the markets ended last week near highs of Sept. they will likely take out the highs this week; but will they hold these new lofty levels? You can easily see a bearish reversal or a bull trap occur but I tend to think we eventually still go to 1120 in the SPX. This is the 50% retracement of the entire move down from Oct 07.

The earnings reports this week start off with INTC and JPM and then conclude with GS, GOOG, GE, C, BAC and others. It looks like the market is just waiting for these catalysts to perhaps make the next leg higher. On the other side we have the Euro testing recent highs above 1.48 and the direction of the dollar is still guiding this market in the short term. If the Euro breaks 1.485 and closes we have a move up to 1.51 possibly coming.

Upside potential is all about a close above 1080 in the SPX. Downside support remains and even if we see pullbacks you can see they are controlled selling and dip buyers step in.

The Watchlist:


Shorts>> TOL, PENN, LMT

Wednesday, October 7, 2009

Panic Buying?

This market caught a bid early this week as I anticipated and the commodity rally is the focal point of this recent move up. You cannot deny the dip buying we see each time we pullback in this market. the SPX closed above last thursday's down candle today and I believe we are setup to rally further into the weekend. The futures are already up big overnight off some dollar tankage and commodity strength. The banks are recovering nicely from last week as well and GS is leading the way as it should making new highs before it reports earnings next week. On top of this we have tech ripping and AAPL, GOOG, and AMZN are my favs.

The selloff last week from 1080 to 1020 has a fib extension of 127% up at 1097 and the 161% is 1118. I think these are very logical targets to expect in the coming weeks. The euro looks ready to take out the recent highs and this dollar weakness will fuel this move up in the commodities markets. Gold over 1050 and copper challenging 3 is a bullish sign.

Earnings are just around the corner and it could be the catalyst to propel this market into the 1100 area imo. You gotta believe that there could be a panic buying event to the upside since most guys wanted more of a 10% pullback to get into this market and they have not gotten it. The chase for performance is frustrating and they have little choice not to get in soon. Be warned. Trade safe.

Monday, October 5, 2009

Weekly Watchlist 10/5

Going into this week the market should try to find support in this 1015-1025 area on the SPX. I think a small early week bounce could be seen or we could just consolidate around here. I do still think there is a shot they push this market down to 980-1000 in the coming weeks. If that happens I think the buyers will step in. For this week the currencies will tell the story as they often do. Not much data out this week but the first batch of earnings are out.

There are plenty of charts out there that offer some bullish setups this week and then some that look more bearish. The pullback that we had last week was just that. A pullback. The weekly charts were so overextended that they deserved a breather. For now we are seeing some controlled selling in select sectors. I do not see any reason to become a top calling bear and overly concerned about the downside. Until we have a key level like 980 broken to the downside or the 20ema crosses under the 50ema on the daily then you should not fall in love with the downside.

The watchlist:

Longs>> COP, CHKP, DF, CL, NTY

Shorts>> ANF, MCO, MHP, DSX, HES