Market Consolidating Recent Gains

Its a short holiday low volume week but I wanted to do a short post on this market going into Friday. We have had a great rally up in the last week and with the gap up today it was a nice time to dump longs and wait for a pull back. I think we are flagging out on the daily for a larger move up towards 1130 next week. Options expy for Sept comes next week and could be setting us up for a nice move as any remaining shorts will be forced to cover above 1106. The launching pad needs to be set first and a proper 2-3 pullback to 1080 would be nice but if we only get to 1090-1093 then watch the price action for reversals to get long.

EUR needs to hold 1.2650 in the short term but looks vulnerable there. Yen needs to weaken a bit more for risk appetite to be fully on. Copper is holding up fantastic and dips should be bought there. Oil is a bit less certain but as long as it holds 70 the market wont mind. Gold double top looks legit for short term and pull back to 1220 is likely before any major breakout. Also the bond market is pulling in nicely increasing the appetite for risk so this tells me cash will be put into stocks.

Quarter-end is coming in just a few weeks as well so do not underestimate the power of money managers chasing winners to try to eek out some gains in this crazy choppy 3rd quarter the markets have seen.

I believe you need to buy dips for now into options expy next friday and actually think the market can stay bid and grind higher into October 1.

Lots of leading momo tech stocks are holding up great in the last few days. A list of these I like on the long side is below.

Buy the dips>> AMZN, NFLX, BIDU, TSL, SWKS, CMI, APA, COP, GS, SAN, SHOO, WYNN, CXO, SPG, GMCR, FFIV, AKAM, RVBD, VMW, CRM, FCX, CLF, AGU

Weekly Outlook 8/30

Last week the market had an ugly week and ended Friday with a little relief rally courtesy of the Bernanke speech. All the market really did Friday was rally up to the downtrend line near 1070. This week we have tons of data to digest and it starts Tuesday night with China PMI, then Wed ISM and ADP, claims on Thurs and finally the jobs report on Friday. I dont see any of these reports being good but its all about how the market trades into and after the news that counts. My thought is that above 1070 there is a chance that enough shorts cover to push this thing up to the 1080s but I would be surprised to see much more than this. I do think that if we rally into the jobs number then it could be the best shorting opportunity of the year as these markets are so ready to give up the ghost and roll over towards 980. There are very few weekly charts out there that make me bullish longer term.

I was reading the AAII sentiment survey over the weekend and everybody seems to think its giving bullish signals. I dont. First off, yes the % of bulls is lowest since March 09 at 21% bulls. BUT, the amount of bears is only 49%, versus 70% bears in March 09. Not enough fear I say. This is a different market and most people have given up and are either neutral or agnostic and totally apathetic towards the market since they have lost so much money in the last 3 years.

Currencies- EUR is still looking heavy breaking 1.27 this morning and this is a huge level going forward. The JPY got weaker since rumors of BoJ intervention came into markets but it has rolled back down from 86 to 84.5 this morning. It does not matter what the BoJ does or says, the yen WILL get stronger and thats just how markets work. They rule and will ultimately go wherever they want. JPY next stop is likely 83. Risk crosses like EUR/JPY and AUD/JPY are still weak besides the relief rallies that eventually fail. The bottom line is risk appetite is not on the table yet.

Commodities- Oil bounced off 70 last week and tested 75 before pulling back a bit today. I am bearish of oil and think it gradually heads lower from here. Copper remains bullish and it is about the only thing economically that looks strong. The copper move is impressive but it seems like the market is not following copper as much as it used to. Gold and silver look bullish but need some rest and should consolidate into next week before testing the highs of the year. The grains are the most bullish charts out there right now and remain in buy the dip mode.

Buy the dips>> ARUN, PCLN, EGO, SLW, UXG, AMZN, RVBD, FFIV

Sell the rips>> WLT, AAPL, INTC, MELI, GS, BAC, X, ISRG

Weekly Outlook 8/23

It's make it or break it week in the market and I think they will break it. Meaning that we go lower. Any bounce Monday back up into the 1080s is a fantastic selling opportunity. If we take out the 1060 lows from Friday I think its a solid reason to think we head back to the July lows of 1010 and blow right thru them with conviction to test the 979 area. That is a fibonacci target I have for the next leg lower based on the July rally. The market would have to get up and close above the 1100 level for me to change my bearish bias. 

This week the econ data is quiet in the early part but everyone will be focusing on the GDP report released Friday. The following week is a bigger data release week as ISM, jobs report, and China PMI all come out ahead of Labor Day weekend.  This is going to be an interesting last two weeks of summer as many people in finance are on vacation and volume is light. I dont expect any of this econ data to be good or bullish so it could be the catalysts for the next leg lower getting under way.

Sentiment got a bit more bullish on the AAII survey with 36% bulls and 31% bears. This survey has converged and even though its not tilted too much to a contrarian signal it is interesting that sentiment is overall mixed to slightly more bullish than it was in early summer even as the market had chopped sideways for 3 months.

Currencies- The EUR has broken its uptrend and looks very weak now breaking 1.27 this morning. I think this is just the start of the next leg down in the EUR and rally up in the DXY that should last for the next month or two at least. EUR could easily see 1.25 this week and eventually back to 1.22 in the coming weeks. The AUD is leading the stock market and looks weak for now as it pressures commodities lower. JPY is looking bullish as it just flags out and that could take USD/JPY to new lows in the coming weeks. Short foreign currencies into rips is the trade for now.

Commodities- Oil looks terrible since breaking its uptrend last week and is now down 10 bucks in two weeks. I think any bounce here is a short this week as crude looks like it wants 66. Copper is the only thing holding up the market for now I think as it flags out above support. 321 is the level to watch on copper on the downside. Gold is in no man's land but if it trades sideways and consolidates this week that would be the most bullish thing for that chart.

Buy the dips>> CRM, VMW, RNOW, GMCR, BTU, HOGS, JOBS, NTES, EDU, MCD, CMG

Sell the rips>> FCX, ISRG, RIMM, AAPL, GOOG, OIH, FXE, MA, QQQQ

Weekly Outlook 8/16

Last week's selloff after the Fed statement was a game changer and I think that this market needs to prove itself back above some key resistance levels before I get bullish. I have been playing the trading range of the summer from both sides but I do have an overall bearish view for the markets into the end of the year and 2011. Long term I am int he double dip camp and I think its foolish to think the economy will recover beyond where it already has. Tops are processes and not events like bottoms usually are. So with that said I think we have been forming a long term top this past 6 months and the path of least resistance is down as long as we stay below the highs of 1131, which I am thinking are legit highs at this point for the short and medium term.

Early this week could be quiet and that might give the market a weak bounce back to the 1090-1100 level but that will be a chance to short into it and buy puts as I think we test 1060 this week as that is roughly the 50% retrace of the July rally up. If that is broken then 1040 and then 1010 is very likely to come calling fast.

The thing to remember is that last week the selloff really took some indicators like the McClellan to decent lower levels which doesnt mean they cant go lower--infact I think they will--but the downside in the short term is limited and the best place to get short is on that potential bounce to the 8ema or 1090s in the SPX.

Patterns like the one present in the SPX where a market rallies up off new lows like it did in July only to fail at resistance and quickly retrace are not patterns that usually hold up on the next test of support. So I think upon the next move lower into the July lows they will breakdown and the real selling will only be getting started in the medium term as a 979 first target is on the table going into the next month imo. Write it down. That is a 127.2% fib extension of the July rally.

This is probably also a very good time to get to cash in your 401k or longer term retirement investments as I believe the highs are in for the year and a bear market is on the horizon. I will write more about this in the coming days and weeks.

Currencies- The EUR/USD is now back to leading the stock market as it broke its uptrend last week and sold off violently after the Fed statement put a bid into the dollar index and bonds and gold. The EUR is headed lower and 1.25 is a good first target going forward. AUD/USD is testing the 50 day at 0.89 and could bounce short term back to the 0.91 but looks like it could chop a bit this week near these levels.

Commodities- Crude had a big reversal down last week and looks bearish again as the low 80s are too tough to crack. There is really no reason oil should be this high to begin with so I wouldnt be surprised if it came back to the high 60s on the next selloff in the market. Longer term H&S possibly setting up on crude. Copper still looks decent above 3.15 and is just consolidating its recent huge advance higher. Gold is key this week as it needs to close above 1225 to look bullish to me and if it doesnt then a break below 1195 would be troublesome to the bulls. Grains sitll look like the strongest market out there with corn and wheat leading the way.

Buy the dips>> AMZN, BIDU, LVS, NFLX, PRGO, POT, AGU, PPO, MELI, GMCR

Sell the rips>> AAPL, LULU, BAC, MGM, KLAC, GOOG, PBR, HES

Weekly Outlook 8/9

This week it is all about that 1131 resistance level on the SPX and I do expect the bulls to run past it and then we have a clear shot at seeing 1161 as a pretty easy target to get out of longs. Options expy for August is in 2 weeks and I expect the bullish momentum to stay here into that date. Last week the Friday reversal was very impressive as the SPX tested the 200 day at 1115 and buyers stepped up into the weekend. Textbook. I have no reason to be looking for swing shorts until we lose that low from Friday or more likely the 1093 level that supported us two weeks back.

The sentiment in this market is still decidedly bearish as the most recent AAII sentiment survey returned just 30% bulls. The lowest bullish reading since July 1 when we were--you guessed it-- AT THE DEAD LOWS of 1010 SPX. I think this is easily the most bullish data I have seen since the market rally started. To say that we have rallied up over 100 SPX points in one month and this survey still shows only 30% bulls says that there is plenty of room to rally on the upside. This is a buy the dips market and until that changes then why should you?

FOMC meeting on Tuesday should make for quiet trading ahead of that but afterwards it could be the catalyst to spark some more buying especially if the Fed hints at more stimulus coming to a zip code near you.

Currencies- EUR/USD just keeps trucking and I think the 4 hour chart looks bullish for a potential move up to 1.35 as that is the 50% retrace of the entire selloff. But first it could easily pullback after the run its had. GBP has had a huge move up lately and nearing the 1.60 level of resistance could stall it out and at least give it some consolidation. USD/JPY is the story out there as it is making 15 year lows near 85. The weekly and monthly charts here show breakdowns and that could go to 80 in the coming months. Watch out for the Japanese to intervene however as a stronger yen only hurts their exports.

Commodities- Bonds are important to watch here as the 10 yr just keeps making new highs and yields are now at 2.82%. This is not what the stock bulls want to see and if this keeps trending then the stock market will correct lower so you want to be aware of the bonds. Crude and copper are consolidating above recent key levels. They are a bit extended and could easily pullback if the dollar starts to bounce like it seems to want to. Gold is interesting here as it has bounced off recent lows and is catching some resistance up over 1210. If this fails to get back over 1215 and actually slides under 1195 you could have a continuation selloff in gold that might be fast and furious.

Buy the dips>> AAPL, AMZN, BIDU, NFLX, SHOO, MELI, FFIV, EMC, DECK, GMCR, CMI

Sell the rips>> GOLD, RIMM, WDC, CME, ICE, JCP

Weekly Outlook 8/2

I was a bit busy today so I could not post at the usual morning time.

I have been calling for this market to rally higher into August since the early July reversal down at 1040 and it has developed a very bullish pattern as the SPX has put in a couple decent higher lows as it rips the shorts heads off on rallies. Last week I was buying tech stocks like BIDU, CREE, AAPL plus others like GS, SPY and FCX and I think I had just about the most messages ever from amateurs on Twitter telling me the market is going to crash and I am crazy. I knew the market was not going lower, especially after I called the late week pullback to 1090 and it held as a dip buying opportunity. This said the bears could not get enough ammo on the downside and subsequently failed to sell the market down. Whenever I see this amount of bearishness in the public I take a contrarian view and look away. This simple look at sentiment told me what most traders were looking for and if they were wrong--as the crowd normally is--then they would have to cover their shorts and that the rally is not over. For this reason, among others, I felt great going into the weekend the most long I have been in months. It sure did pay off Monday.

As for the rest of the week I do think we should test and attack the 1130 level just overhead as that is the June high and the market is looking like it wants to get above there before any pullback. I do still think we rally into August options expy which is the 21st of this month. After that we will have to check to see how sentiment is and assuming we do grind up for the nest few weeks then I think a logical target to see on the SPX is 1160 which is the site of a unfilled gap from May.

Longer term view I have is that after summer into September we do see more selling pressure and perhaps we could be topping out for the year on this next high, wherever it may end up being. I see a gradual selloff taking shape into the fall that could see us breaking to new lows on the year. We shall see.

Currencies- EUR is making new highs at 1.3195 as the dollar index has been cliff diving. EUR seems like it wants to test 1.33 before retreating.The /dx has basically went down in a straight line from 88 to 81. This is probably going to catch support between 80-81 and see a relief rally back to 83's I would think. The foreign currencies have been on fire with AUD/USD leading the way hitting 0.9145 this morning. It does seem like it wants to challenge 0.93 eventually but a pullback to 0.905 wouldnt shock me first. GBP/USD hit 1.59 today and looks so stretched I'd hesitate to buy but instead look for retracements back to 1.56 soon. USD/JPY still weak down at 86.50 and looks to break lower to new multi-year lows.

Commodities- Copper has led this rally for the last two weeks as it was 3.00 just 10 days ago and today has hit 3.39. Crude oil finally busted that 80 level this morning and looks strong on the daily charts here as long as 79-80 holds as support going forward. Gold rebounded slightly last week back into the 1180s and could be rangebound here unless it gets above 1205 or back below 1170.


Buy the dips>> FCX, BIDU, CREE, CLF, OIH, WLL, DECK, VMW, FLS, CMI, CTSH, CRM, FFIV, GS


Sell the rips>> RIMM, GOLD, MA, ZMH

Weekly Outlook 7/26

Stocks are coming off about the best week in months as Friday the SPX closed at 1102 and solidified a positive week of price action capped off with the stress test results squeezing more shorts as the bears failed to push the market back lower. The bad data has simply been priced in at this point and with a nice higher low in place I think a decent base is being made here with crucial support down at 1093 ish. I have a bullish bias for the remainder of the month and into August. I think intermediate term we can grind up all the way into Labor Day in the first week of September. In the short term everything looks good but too good. I think we can easily test 1130 this week which is the high from June. But at some point this week I expect a pullback to the 1090s which will be a buy.

Like we said last week copper and bonds are the key to this market and copper broke out and gave a strong buy signal early last week before stocks made there move higher. Bonds are now giving sell signals on my charts and with a close on friday below the low of the high bar of the TLT and /ZB bond futures we can see an allocation shift from bonds into equities furthering the risk asset rally into August.

Internals have been stronger lately and the advancers/decliners ratio will be key to watch this week if we expect any kind of pullback. I also watch the $NYMO McClellan and that is up at +80 which is getting pretty stretched into overbought territory. The higher this thing goes the better the odds of a market pullback coming so with it so high its hard to get extremely bullish short term but realize that any 1-2 day dips are buys.

Currencies- EUR/USD looks bullish again as it tries to break 1.30. If it does I think 1.3125 is logical first target. GBP/USD is back to its April highs at 1.55 and should at least stall here for a bit. It has had such a strong run off the 1.4226 low. AUD/USD is ripping higher again as it broke resistance last week and now is challenging 0.9030. This was the signal last week for commodities and AUD remains in a strong trend on the 4 hour chart this week. USD/JPY is hanging under 87 as the yen is still holding tough and everything here still looks like its going below 86. EUR/JPY looks bullish as it tries to break 114 to the upside. Has a nice long inverted H&S setup on the 4 hr chart.

Commodities- Oil is hanging in the high 70s and feels like it wants to break out above 80 but is def taking its time.  Copper has continued to rally after breaking out last week and is now up at 3.23. A full 50% retracement of the correction from April. The easy money here has been made and should probably pullback between here and 3.30. Gold is struggling to fall below that 1180 level and if it is going to correct further towards to 1150 then it needs to break support here in the next day or two. Or else it can pop a bit maybe back to 1215. Bonds are looking bearish as they broke down with the stock rally last week and continue to look heavy breaking trendlines. I think t-bonds are going down to at least 125.

Buy the dips>> BIDU, AAPL, CREE, FCX, X, VMW, MELI, AKAM, HMIN, NENG, SHOO, CXO, RMBS, SKS

Sell the rips>> TLT, GLD