Weekly Outlook 3/15

The market had a pretty flat week as it got up to the 1150 resistance and looked like it struggled a bit on Friday as it opened at the highs and sold off. This week we should see a pullback off this obvious resistance and it could get back to 1120-1125. This is a very tricky market at this point because we are up almost 2 weeks in a row with out any interruption. That is very rare. You gotta think the rubber band is stretched too far. While I do think this could be a significant interim top going into the spring I can still see this market pushing up thru 1150 for another leg higher. But for the next few weeks I anticipate a pullback consolidation at the very least. If we lose 1120ish then the selling should intensify. There are still unfilled gaps in the ES down below at 1105ish.

This week we have some catalysts that could pick up the volatility. Fed day is tuesday and that is sure to get the markets moving. In the past fed days have marked tops and bottoms and I wouldn't be surprised to see the same short term reaction. Quad witching option expiration week is also here and that adds to market volatility as well. I think this is a very important week to watch transpire. For swing traders it makes sense to lighten up or sell longs up here and wait for a pullback to come and see if it holds.

Sentiment has picked up to the bullish side now as the AAII weekly survey showed 45% bulls, up from just 35% a week ago. Historically this is getting up into an overly optimistic level. Not extreme yet by any means but it could point to the recent rally being long in the tooth and overdone as these numbers are meant to be interpreted on a contrarian mindset.

Currencies- EUR/USD popped a bit on friday as stops got ran above the 1.37 level. It moved to nearly 1.38 overnight which is a 100 pip move. This week I think the euro can tag higher levels perhaps into the 1.39-1.40 area if it sustains some buying pressure above that recent consolidation. GBP/USD is forming a similar pattern to the euro just sitting between 1.49-1.52. Look for the top of this range to fail early this week and consolidate lower. USD/JPY is ready to make a move off the 90.5 level. If the recent trend continues you could see 92 in this pair this week. The commodity currencies look overdone to the upside as the Aussie challenged 0.92 friday and the USD/CAD made new lows last week near 1.0150. The move in the candadian dollar has been impressive but could use a breather this week. Does this mean commodities are showing a sell signal?

Commodities- Crude oil has put in a nice double top off the 83 level as it reversed hard on friday and closed lower. This morning it is already 2% lower and looks like it may bring the rest of the commodities lower as well. Interesting thing here is to see if it just the standard 2-4 day pullback or something more. It does seem to me like we could see oil test 78 and if it breaks that then the low 70s will be back. The metals also look a bit heavy and copper is double topping here too. Same thing applied to copper as oil. Gold is holding 1100 barely and looks like it might lose it this week. Below that level and you might see gold retest the 1060s perhaps.

Buy the dips>> GE, CIEN, MCD

Sell the rips>> BTU, RIG, BBL, HBC, KLAC

Weekly Outlook 3/8

Last week the market reacted positive to the jobs report to end the week on the highs near 1138 on the SPX. The action impressed me as I had been thinking all week we were going to retrace if not rollover but the sentiment out there continued to be overly pessimistic and in the short term that's all the market needed for fuel to edge higher. With the market this close to the Jan highs I would think they get tested this week or that would be too easy maybe? It is definitely not the time to be starting long positions and I think we are very likely to get some sort of pullback this week as there are several gaps down below here, namely the one near 1105. All gaps get filled on the ES. Of course the momentum may still remain to the upside but I just doubt we make to new highs without some sort of double top at first and then consolidation. Markets usually don't usually don't break out right after running for 4 weeks straight.

Another interesting thing about the 2010 price action I noticed is that the correction in late Jan took only 13 days while the move back up we have seen so far has been 20 days. We are nearing twice the "TIME" it took to correct and we still have not tested or broken the 2010 highs. When it comes to time cycle analysis it is usually is saying that the the trend that takes twice as long is the struggling trend. Nevertheless the market has held in there so it should be interesting to see how it acts in the next few weeks going into March option expy.

Econ data this week is light with the highlights being at the end of the week with usual jobless claims and business inventories. There will also be a few treasury auctions this week for 3-yr, 10-yr, and 30-yr notes.

Currencies- The Euro has been consolidating in a sideways pattern between 1.345 and 1.37. It does look like it could make an attempt to pop up out of the channel and test as high as the 50 day ema near 1.39 but the odds are that the trend down will resume and make new lows in the near future. The dollar index has looked a bit tired lately and is always just the opposite of the Euro. When I look at the dollar I see more of a bull flag consolidation rather than a topping pattern. For that reason I tend to think the dollar heads higher and could see 82 soon. The GBP/USD is still weak and rallies should be sold in this pair. The commodity currencies including the AUD/USD have been strong lately but look to be losing some momo this week and that could be an early sign to watch for a pullback in the energy and metals futures. Especially if the Aussie breaks below the 0.90 level.

Commodities- Oil has held up strong and could either be at the top of the long term channel we have seen or it could be getting ready to breakout of the low 80s and head towards 90. I kinda doubt it will break out right now but I have been wrong on oil lately so go figure. Copper does continue to look toppy to me and 3.45-3.50 is monster long term resistance. Gold had a nice week last week and could go higher as long as it holds 1120. I tend to think gold will be in a sideways pattern for the next several months. Finally, the grains had a ugly week and it looks like wheat, beans, and even corn are headed lower as the charts in these names look very vulnerable.

Buy the dips>> RIMM, RYL, V, AKAM, MGM

Sell the rips>> FCX, RL, RIG, WFR, DSX

Weekly Outlook 3/1

The first week of March is here and historically the markets see important lows made in the month of March. Will we retrace down to make that sort of low? That is the question. I still believe you should be cautious as there is very little upside potential imo. Banks have still been weak and even this morning are mixed or even selling off on a strong gap up. I think any sustainable rally needs the financials to be participating. The technicals do look very confusing on the major indices as I was checking out the charts yesterday. The larger formations in the Nasdaq and SPX are showing some head and shoulder patterns while the short term move has the potential to pop out of a bull flag and test the 1120 area, which remains very heavy resistance.

Data will drive the price action this week as we have manufacturing stats coming out as well as the all important jobs report on Friday.  Fed Beige Book is due out Wednesday and several central banks have interest rate decisions including the ECB, BoE, and BoC which will make it an active week for those respective currencies around the globe.

Currencies- The dollar looks like it still wants to push higher a bit more as the Euro just simply can't get anything going. There is alot more consensus building that the Euro is going to parity with the dollar in the long term and you know that consensus thinking is never something you want to be a part of unless you are in high school. The Euro has good support at the 1.35 level but if that breaks we should see 1.3250 fairly quickly. The GBP is getting whacked sunday night into monday and could be a leading indicator for the EUR going forward.

Commodities- Crude looks to test the 80 level again early this week but will it fail again? The more a level is tested the higher the odds are that it is broken. But oil still looks awfully toppy to me up here and I would expect a rejection at 80 again and a return to the mid to low 70s in the coming week or two. Copper gapped up 6% on sunday night after the Chile earthquake but is giving up much of its gains this morning as I type. Copper is definitely overextended up here and stocks like FCX have not came back as aggressively as the commodity itself and so that tells me to be cautious. Gold also is interesting because above 1120 or so it looks bullish technically speaking but a close under 1090 and its a clear sell signal.

Overall this week I am feeling very mixed on the indices as some are looking toppy and some are still showing some resiliency. I do think we should see a sharp move with conviction by the end of this week and that move should guide us for the next few weeks on a directional bias. I am leaning lower as long as we cannot clear the 1120s on the SPX.

Buy the dips>> RIMM, BIDU, EK, EOG, EAT, INCY

Sell the rips>> FCX, GOOG, HES, PDE, GS

Weekly Outlook 2/22

Going into this week the market is trying to build on a third straight week of rallying. The 1110 SPX level is an important mark to watch as it represents the 61.8% fib retracement of the correction from the January highs. The RUT is already surpassing this mark and looking stronger than the other indices. We have seen the SPX rise in 6 of the last 8 days and this move from the Feb 5th low has lasted 9 trading days. If this is a counter trend move in a new bear trend then it should not last further than 12 trading days. It should be telling this week whether we continue up and retest the January highs or fail up here and roll back over. I tend to still side with the latter and do expect a pullback starting this week.

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

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