Monday, January 25, 2010

Weekly Outlook 1/25

Going into the meat of earnings season this week as a ton of big companies report. Also we have a FOMC meeting that should get the market moving even more on Wed. Last week Obama threw plenty of fuel on the fire with talks of bank regulation so it will be interesting how much more of this talk and threat we see. In addition to Obama we saw generally lackluster earnings results and China news took the steam out of commodities.

I am thinking that what we saw last week is a mild correction that was overdue for us to see. I think we can ultimately correct 8-10% from the high. Short term this week indicators are already oversold so I think we have a chance at seeing a weak bounce back into mid week that could be a nice shorting opportunity because I do think we see 1070 as a next leg down.

The currencies had a bearish week as the dollar rallied into Friday where it finally pulled back a bit and the euro found support near 1.4050. It does look like to me that the euro is still going lower and could see 1.39 quickly.

The other big story was the move int he VIX. Up from 18 to 28 in three days. Wowza. That was a quick swing from complacency to fear. People were obviously unhedged last week and rushed for put protection when the market started to tumble. Friday's VIX move was even more fierce and I think was a bit overdone and should come in a bit early this week even with a flat market.

Overall, its tough to make much of a good watchlist with these current market conditions but I would be more of the opinion that you want to be shorting rallies for the next few weeks until the market tells you that its recent swoon is reversing back higher on the daily charts.

Buy the dips>> DECK, MGM, EOG

Sell the rips>> GS, FCX, AMZN, HES

Tuesday, January 19, 2010

Weekly Outlook 1/19

Going into this shortened week the market tumbled a bit on Friday before recovering at the end of the day. It will be interesting to see how earnings affect this market in the coming weeks but I tend to think we are too optimistic ahead of earnings and we should come back to retest the 50 ema on the SPX which is near 1110. I would be surprised if we break out to new highs without trouble. This market has gone straight up in January and needs some rest imo.

Volatility is so low that we could easily just chop around and form another range to mark time instead of the sharp correction most fear when markets become overbought. In strong bull markets you can just as easily see a time correction that takes prices back to an average instead of a price correction that happens faster.

Either way I think it would be prudent to watch tech earnings this week and continue to watch the banks to see if those two sectors can get anything going higher. Energy is the wild card and appears to be pulling back since oil hit new highs last week right before the US Crop report signaled more supply of grains planted. The commodities should stay under pressure for now I believe as the charts were also over extended.

Currencies are in their own world right now as it relates to the stock market and it looks like the euro is about to make a fresh break lower to new recent lows under 1.43. I think we could see the euro head back to 1.38 on this selloff from the daily. Watch to see how the commodity currencies do in repsonse.

Buy the dips>> SHLD, AAPL, GS, CVS, LVS

Sell the rips>> POT

Sunday, January 10, 2010

Weekly Outlook 1/11

The SPX closed last week at new highs 1144. Nothing has stopped this market in awhile and while you gotta be conservative in expecting some kind of pullback soon there is no point in actually shorting it because its "overbought". That's just a word. Looks like it could be another gap up and run Monday as the commodities are pushing the futures tonight.Why try to stop this freight train? I say next stop is likely the 1168 area. But I see more of a slow grind up and a continued bleed lower in the VIX and volatility overall.

The move in crude oil has been powerful and appears to be led by the comeback in the Aussie and Canadian dollars going higher. Everytime it looks like the commodity trade may be topped out it surges so its anyone's guess what stops that train. Gold, silver, and copper are also on fire once again as the dollar takes a break and retraces a good part of the recent rally it has had since bottoming out in early Dec. I think this is a corrective move in the Euro back up before it resumes the new larger trend lower towards the 1.38 level eventually. Also the 10 yr T-note is near 3.8% as bond prices have been falling since Nov. These yields are nearing the 09 highs and once they break 4% get ready for a big move up in yields and headlines all over the media. It will be interesting to see how equities react to this if and when it happens.

This week is already Jan options expy as its a short cycle this month. Earnings season starts this week as well although the meat of reports isn't for a few more weeks. Even so, with this we could get a bit more movement this week in the markets.


Sunday, January 3, 2010

Weekly Outlook 1/4

As we start 2010 I wanted to say Happy New Year and let's all break through resistance in our own lives in 2010 doing whatever it may be!

As for markets I gotta say I'm lookin into the crystal vase and seeing some good chance we see a 5-10% correction here in January. Sentiment has gotten a bit too complacent the last week and we are overbought in just about any way you look at the short term. The McClellan paints the clearest picture to me and says we should see at least a test of the 1080 support level in the SPX going forward. At that point I would start to look at longs and bear traps.

Longer term in 2010 I still think we go higher and eventually see the SPX at 1250. The weekly and monthly charts still look good but short term we are due to see some selling pressure. It's always good to try to let the first few days of the year play out and not get too aggressive. We could see at least a small bounce early in the week before a pullback so be prepared for that. 1120 should prove tough resistance on any retest this week.

Should be interesting to see if oil can get thru that 80 mark and hold. I doubt it. So if we do start to rollover than the energy sector could present some nice opportunities to buy puts. On the other side, the banks (GS specifically) look strong and ready to grind up.

Buy the dips>> GS, LAZ, RYL, ARRS

Sell the rips>> JAS, DO, FDO, GLD