Weekly Outlook 2/15

Going into a shortened options expy week the SPX sits at 1075 and looks like it has a bit more room on the upside before any selling pressure settles in. The 21 day and 50 day ema's are above here and sit at 1089 and 1097 respectively. I think we have a decent shot of at least trying to tag that lower zone this week. If we fail early this week then the market will trade sharply lower to the 1060 mark into expiration friday where there is tons of put open interest at the 106 strike in SPY. Alternatively, options expy may simply allow stocks to grind up slowly into resistance without a reversal coming until after friday.

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

Weekly Outlook 2/8

Last week unfolded just as expected as we got a head fake early on that stalled perfectly in the 1100 area on the SPX. Stocks then completely collapsed into the end of the week before reversing in the last two hours of the day on Friday with capitulatory type volume. In fact Friday volume on the SPY was the highest since last March when we bottomed. The volatility on Friday was truly spectacular. While the huge deficits and failing bond auction's in Europe are a real problem and have only just begun to show us pain; I think the reversal on Friday is a short term signal to play the long side side this week.

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

Weekly Outlook 2/1

Last week was another very poor week of price action as I thought we could see. The markets continue to be rattled by political risk, dollar strength, and overall bad reaction's to positive earnings. We have had roughly a 6.5% decline in the SPX and I do believe we could see that 10% correction into Feb. which should take us somewhere in the neighborhood of the 200 day ema on the SPX which sits at about 1044. However, not before some kind of bounce takes place early this week which I think could retrace back to the 1090s or even 1100 to head fake some people.

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

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

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

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.

Long>> AKS, CAT, PH, AMZN, NVLS, CVS

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