Monday, February 22, 2010
Some bullish technical signals do argue for more upside including the 8/21 ema crossover to the upside on the SPX. Also last wee the MACD had a buy signal but is still in negative territory. The stochastics and RSI have risne nicely into or close to overbought zones as of Friday. These are just indicators that confirm price action and that is why I like to keep an eye on them but the pattern of price trends and volume is what I listen to the most. Regardless, I do believe we are sorta in "no man's land" here as we are closer to resistance than support and most stocks I watch are overextended in the short term.
Currencies- The Euro tried to bounce off 1.36 last week but ultimately just grinded lower most of the week before popping back a bit on friday. As oversold as the Euro continues to be, it is just showing such strong weakness that I would remain a seller of rallies in this currency. The dollar index looks like it has room up to the resistance of near 82.
Commodities- Last week I said I thought the commodities were overbought. Well now they are even more overbought. The move in crude oil surprised me as I thought it would not clear 75 but it did infact hit 80. I still think oil should rollover and fail in the this area and if it does it has potential to show a head and shoulders pattern on the daily. Copper has recovered sharply off the 2.81 low and is still in the midst of a topping pattern so be cautious there. I believe gold and silver still look decent and gold held up well last week after the dollar strength and discount rate being hiked. Gold has moved off the 1060 support quickly so could be in for some sideways action this week but of course we have lots of Fed speak so be nimble.
Overall I am expecting the market to retrace some of the recent gains this week and I would rather be nibbling on shorts and selling longs in aniticipation of some selling pressure returning to the markets.
Buy the dips>> UAUA, CAKE, TOL, OSK, HAS, MGM
Sell the rips>> FCX, APA, FWLT
Monday, February 15, 2010
My overall intermediate outlook on stocks is that we attempt to fill the gap on the SPY up near 110 before rolling over and making new lows into early March where we bottom out and begin the next (and probably final) leg of the bull market into May-June, which may or may not be able to break the January highs before it fails.
Currencies- The Euro actually looks like it is trying to catch some support near the 1.36 level and it could just consolidate to form a bear flag at this area. There is no doubt that everything is being influenced by the movements in the EUR/USD and that should continue. Short term it looks like the dollar wants to retrace a bit and at the same time the Aussie and Canadian dollars could have a bit more upside this week that should keep a bid under commodities.
Commodities- The metals have bounced nicely since they dumped hard a few weeks ago. Gold actually looks stronger to me on the chart than copper does. Copper looks broken and retraced sharply off the 2.80 level back to 3.14 which is just beneath the 50 day ema on the futures and the sight of heavy resistance. I would be a seller of rallies in copper and a buyer of dips in gold as it has come back to some nice support to try to find a base. Crude oil looks bearish on the daily as well with the bounce back off 69.5 last week coming back up to the critical 75 level where we have a confluence of moving averages acting as resistance. This is because crude has spent a lot of the last 6 months in a trading range between about 68-82. With copper breaking down I think crude will be the next to follow so I am cautious on oil here and would rather be a seller of rips.
Overall, sentiment in the markets is at a bit of a middle ground since the Euro panic of a week ago. I would expect the SPX to chop around and grind for a little while this week before attempting to fill that gap overhead as mentioned and create a possible bull trap.
Buy the dips>> CY, SPG, M, COST, SHLD, F
Sell the rips>> HBC, HES, MRO, FWLT
Monday, February 8, 2010
We bounced perfectly off the 200 day ema on the SPX near 1046 and closed up at 1066. Of course the 1080 level is huge resistance I think we at least test that this week if not try to fill the gap left from last week up near 1100 ish. However, I do have some suspect feelings about any reversal I see on a Friday. That's because they are rare. It did feel like a short term low being put in but what really matters is the confirmation day on Monday. We need to see Monday close above Friday's close for the reversal to matter to me.
The sovereign debt issues in Europe are just beginning to show its face globally and if you add China to the mix we could be staring a much larger Dubai situation in the face in the next 6-12 months. All I am saying is that the warning signs are here and it reminds us that we are still in bad shape globally. The Obama administration put a bandaid on it last year and now are boasting of the "improvement" in the economy we have seen. When in fact they are doing everything they should not be and more due to their poor understanding of how markets function. Anywho that's a discussion for a different day.
Sentiment is quickly bearish once again after being extremely bullish in early January. The American Association of Individual Investors weekly survey showed that less than 30% of those surveyed describe themselves as bullish on the market. This is the first time since November 2009 that the percentage of bulls fell below 30%. The percentage that describe themselves as bearish rose to 43%, also the highest since November 2009.
The dollar rally has been a big part of why stocks are fallen recently as the Euro specifically gets crushed. With the dollar index clearing 80 last week and the Euro hitting the 1.3550 area I think you get some kind of retracement near this level. This is one of the main reasons commodities are gotten slaughtered as well.
Last week we saw a complete liquidation of copper, gold, and crude oil. In that order. The did slightly rebound on Friday by end of day and you may see a similar retracement here as it seems lots of weak hands got taken out violently.
Bottom line, expect some kind of retracement rally in stocks this week but watch the 1080 level for the first sign of resistance and then 1100-1105 if this thing really gets going higher. On the flip side, if we get rejected and lose 1050 then the selling could get hardcore.
Buy the dips>> AMZN, RYL, EL, EAT, GLD
Sell the rips>> LFC, MRO, YUM, BCS, FCX
Monday, February 1, 2010
The dollar was strong and I think will test the 80 mark later this week and that should provide some mental resistance if nothing else. The Euro reached the 1.39 target I had for the last several weeks and continued a bit lower under that friday. It, like the stock market is stretched to the downside a bit much and could snapback quickly from these levels.
Commodities got killed last week as copper and oil took it on the chin. Crude is now down over 10 bucks from the highs just a few weeks back and copper is down 16% from the highs. No doubt alot is on the back of the strong dollar but also the scare that China might be slowing down its buying of commodities. Whether that's true or not does not matter. The price action is what matters and right now its downright bearish.
Overall I would not get excited about rallies in this market until we can see the market prove itself above 1120 for example. Instead use rallies to sell your longs or even go short on your swing trades. I really think a test of the 200 day ema is where you want to anticipate a more broad based bounce.
Buy the dips>> RYL, GNW, DPZ, VLO, SII,
Sell the rips>> AAPL, TSM, GT, STP, LMT