One key component to pin pointing market tops and bottoms is the market reaction to news.  It’s something I’ve discussed quite a few times here in the past few years and with this V shaped market rally continuing into the stratosphere, it’s worth keeping an eye on to help determine when this rally might roll over for more than a few percentage points.  Certainly, there have been a few technical indications that the rally is cracking in the foundation, but the house that the bulls built remains standing for now with Dow 9000 and S&P 1000 in the cross hairs.  I mentioned last week that the inability of the bears to take control for than a day or two with buyers stepping in each time at key levels increasing the likelihood of an upside breakout out of consolidation.  On Monday, we got the confirmation of Friday’s strange end of day breakout, so the next leg up is in process.

Continue reading Market Sells The Green Shoot, But S&P 1000 Still In Sight →

Once again the bears can’t take the bull (er, I mean ball) and score.  There have been several indications over the past few weeks that this rally is on the verge of falling apart and each time the market is one move away from a key breakdown, buyers step in and push this market higher.  Frankly, I’m baffled at the way the buying has taken place particularly over the past week and ESPECIALLY in the last 15 minutes on Friday.  Window dressing? Perhaps.  Goverment intervention/manipulation? Perhaps.  Whatever it was, it wasn’t natural which was the capper on a week of mighty strange trading action (the sustained rally after the consumer confidence number was also a head scratcher).  The thin, volatile market where choppiness and unnatural trading prevail, prompted me to move more to the cash side, until a firm break out (with volume) out of the consolidation appears.  With Friday’s move and the overall resiliency of the market, it appears the odds are increasing of an upside breakout move, but let’s put an asterisk next to that Friday move and await more confirmation.  It should be noted that technically, the Nasdaq broke out at the end of the day Friday but the S&P and Dow remain below the 200 day moving averages.  So, while the Nasdaq remains relatively in the free and clear up here, the S&P and Dow still face significant hurdles.  Suffice it to say, it’s going to set up one wild week of trading.  In my opinion, where the market finishes the end of next week will determine the direction for the next several weeks.  Be ready on either side at this point or better yet, go enjoy warmer days and longer nights while this bull/bear battle play out at key resistance.  Let’s take a look at the charts..

Continue reading Bears Can’t Confirm Double Top, Is Another Rally Imminent? →

You can’t help but marvel at the resiliency of this market following the sharp V shaped recovery in the indices over the past 2 months.  Even during the first down week across the market, the pull back was fairly orderly, with a late day recovery on Friday keeping some key short term support intact (the 20 day moving averages of the S&P and Dow).  Then, right out of the gates this week we get a 3% rally, erasing much of last week’s pull back.  The action has prompted some analysts to compare the move to the 2003 rally which kicked off a 5 year bull market.  I think it’s way too soon to be making those kinds of comparisons but I have to admit that I’m not nearly as confident that this market will come close to re-testing the March lows as I was just a few weeks ago.  There are now several levels of considerable support that would need to breached to test those levels again.  In the shorter term, I remain considerably bearish and still think that at the very least this market needs to spend some time sideways before a meaningful rally above the 200 day moving averages can take place.  Let’s take a look at the charts.

Continue reading Resiliency Remains As Market Works Off Overbought Conditions →

Week after week, it’s the same story.. market continues to push forward as the rally continues to show it’s beginning to crack with subtle clues. Although on Thursday the market revealed the most glaring indication yet that this rally will soon take a breather.  The Nasdaq hit its 200 day moving average right around 1750 and ultimately turned tail and reversed to the downside with heavier volume than the day before.  That is a failure at a major resistance level in a bear market.  I don’t think I need to say anymore .. but I will.  1750 also happens to be another major source of resistance of the 2004 low.  I know, some of you might be saying (especially if your Larry Kudlow) that the great banking crisis is over, possibly even an aberration.  Less than two months ago, the world was coming to an end and now all of sudden we’re out of the woods and into a bull market, heading to 10,000.  Ok, I know most of my readers don’t believe that but CNBC would certainly have you believe it.  I like to think that we’re somewhere in the middle. Yes, we quite possibly averted a major disaster in the economy, but I also don’t think you get a V shaped recovery in an economy that takes a mammoth hit to the jaw. 

Continue reading Rally Continues To Tire As Nasdaq Hits 200 Day Moving Average →

This week, I’ll keep it VERY brief with a short analysis of the charts.  As I mentioned in last week’s report, the market has shown signs of cracking up here, but going into next week bulls remain in control.  Just when it appears the market may follow through to the downside, buyers step into support this market. I thought there was a very good chance that traders would “sell the news” following the release of the stress test parameters but the market held in quite well all the way into the close.  The level I’ll be watching closely next week is that 875 level in the S&P which is an area of failure 3 times now.  Getting through there would be very bullish and signal a move to the 900 level.

The Nasdaq remains the most bullish of the major indices and continues to trade above that double bottom base breakout level around 1665.  I’ll be watching 1700 as potential resistance but that is really just minor psychological resistance.  It really looks like the Nasdaq wants to test that next major level of resistance around the 200 day moving average and November high around 1780 – 1800.  If we do hit that level, it would be a beauty of a spot to short this market with some aggression.

The laggard is the Dow and it continues to have trouble with that downward trend line off  the Nov, Jan and April highs.  It hit that line again on Friday  before pulling back.

To sum up, this market has certainly shown some signs of weakening, but considering the strength of tech right now I believe there is a 50/50 chance of vaulting another 5% or so before a more pronounced correction can begin.  Get those watch lists of short opportunities together now so you’ll be ready! 

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::: Best/Worst Performers :::

– Top 10 Performing Industries For the Week –

1. Textile Manufacturing: 22.45%
2. Resorts & Casinos: 17.80%
3. REIT – Hotel Motel: 16.95%
4. Silver: 13.60%
5. Paper & Paper Products:  12.35%
6. Office Supplies: 11.15%
7. Gold: 10.95%
8. Lumber & Wood Production: 10.60%
9. Hospitals: 10.00%
10. Small Tools & Accessories: 9.85%

– Top 10 Worst Performing Industries For the Week –

1. Research Services: -11.30%
2. Diagnostic Substances: -10.10%
3. Music & Video Stores: -9.60%
4. Farm Products: -8.75%
5. Surety & Title Insurance: -8.00%
6. Banks – Midwest: -6.75%
7. Copper: -6.40%
8. Banks – SE: -6.25%
9. Broadcasting Radio: -6.00%
10. Education & Training Services: -5.35%

– Top 5 Best Performing ETFs For the Week –
(excluding leveraged ETFs)

1. Market Vectors Gold Miners (GDX) 11.90%
2. iShares Silver (SLV) 8.50%
3. Claymore Global Timber (CUT) 8.25%
4. Central Fund of Canada (CEF) 7.70%
5. Market Vectors Nuclear Energy (NLR) 6.75%

– Worst 5 Performing ETF’s –

1. Herzfeld Caribbean Basin (CUBA) -16.05%
2. US Nat Gas (UNG) -12.80%
3. SPDR Series Trust (KBE) -7.55%
4. PowerShares Base Metals (DBB) -6.40%
5. SPDR Regional Banking (KRE) -4.95%

::: Upcoming Economic Reports (4/27/2009- 5/1/2009) :::

Monday:        None
Tuesday:       Consumer Confidence, Case/Shiller Home Price Index
Wednesday:  FOMC Rate Decision, GDP, Crude Inventories
Thursday:      Personal Income/Spending, Initial Claims, Chicago PMI
Friday:           Factory Orders, ISM Index, Auto/Truck Sales

::: Earnings I’m Watching This Week :::

Monday: Baidu.com (BIDU), BE Aerospace (BEAV), Compass Minerals (CMP), Grand Canyon Education (LOPE), Smith Intl (SII), Southwestern Energy (SWN), Tyler Technologies (TYL),

Tuesday: Amedisys (AMED),Deutsche Bank (DB), eHealth (EHTH), FPL Group (FPL), Icon (ICLR), Jacobs Engineering (JEC), Mead Johnson Nutrition (MJN), OptionsXpress (OXPS), Sociedad Quimica (SQM), Stericycle (SRCL), Vision China Media (VISN),

Wednesday: Akeena Solar (AKNS), China Offshore (CEO), First Solar (FSLR), Green Mountain Coffee (GMCR), Itron (ITRI), Rubicon (RBCN), Tetra Tech (TTEK), Trinity Industries (TRN), Visa (V),

Thursday: Athena Health (ATHN), Capella Education (CPLA), Compellant Technologies (CML), Comscore (SCOR),  Corinthian Colleges (COCO), Evergreen Solar (ESLR), Forrester Research (FORR), Genoptix (GXDX), Neutral Tandem (TNDM), SourceFire (FIRE), Strayer Education (STRA), TeleCommunication Systems (TSYS)

Friday: Flir Systems (FLIR), Mastercard (MA)

With the Nasdaq hitting key resistance around the Jan highs in the past few days, cracks appeared in the massive March/April rally today with the first day of distribution in nearly a month.  The “sell the news” move in Goldman (GS) today and likely Intel (INTC) tomorrow is telling.  One day of higher volume selling won’t derail this rally and bulls remain in control for now, but as I mentioned in my report to members last night, the long side is increasingly becoming a dangerous place to play. 

Here’s a look at the daily chart of the Nasdaq with 3 things standing out to me – the test of resistance at the Jan highs, the sharp V shaped bear market rally off the March lows and the overbought conditions as revealed by stochastics.  It all adds up to fertile ground for shorting opportunities!

Continue reading 1st Day of Distribution In a Month, Rally Shows Cracks →

What week.  With the Fed throwing an unexpected hail mary pass at the credit crisis, the indices did indeed surge right into major resistance levels with a quick 20% move similar to what we say last October and November. 

An email I sent out to members on Thursday night sums up my thoughts for the week, so I’ll just post that…

“In my last email to you on Monday the market had just put in a high volume reversal day to the downside with significant volume.  It appeared this market needed to pull back a bit before making a serious run at the major resistance levels I’ve been talking about (Dow 7500, Nasdaq 1500 and S&P 800).  Ah, but the bulls still had some serious fight left in them.  The very next day, some morning weakness gave way to a flurry of late day buying and the indices took out the highs of the previous day.  Immediately taking out the highs of a high volume reversal day the very next day is a rare event and it signaled significant strength to this rally, setting the stage for a run into major resistance levels with little pause.  Admittedly I was caught of guard a bit so didn’t capitalize as well as I had hoped to on Tuesday and Wednesday.. such is trading.  You play the odds when they’re in your favor and accept the fact that perfection is far from possible. 

So what now?  Well, let’s start by muting those so called pros on CNBC waving the pom poms urging you to get into this market right now.  Yes, it’s possible the low of early March was “the” bottom but that won’t be revealed until well after the fact.  Let’s keep in mind that the market vaulted 20% in little more than one week, running smack into major resistance levels AND this is still a bear market.  Chasing this rally up here is a mistake.  Fearing missing a rally is just about as detrimental to your financial well being as panicking at bottoms, so the financial surgeon general says “you have been warned.” 

Continue reading Gold & Silver Breakout As Indices Retreat From Resistance →

With each passing day, as the market plunges further into the abyss taking out critical long support levels along the way, questions surrounding Obama’s policies and whether he and his administration are to blame for the continuing losses dominate the blogs, the financial shows and even the nightly news.  I chimed in on this a little bit last week alluding to the fact that traders are making bets on socialism following the passage of the stimulus package and bloated, big government budget & tax proposals.  With the increasing skepticism that this administration can get this economy moving in the right direction along with the potential collapses in Citigroup, AIG, GM and BofA it’s no wonder the Nasdaq has joined the Dow and S&P500 in taking out the November lows. 

The buy surge in the last 30 minutes of trading Friday provides some glimmer of hope that perhaps we are closing in on a relief rally, but as you’ll see in the charts below there is still considerable downside risk with lots of overhead resistance to work through.

Continue reading Nasdaq Takes Its Turn In Taking Out November Lows, The Relief Rally Is Near →

Indices Confirm Bearish Triangle Patterns But Prepare For Short Covering Rally

In my last weekly report I continued to highlight the impending collapse of the indices as they negotiated the last levels of support of their bearish descending triangles, commenting:

“The S&P continues to manage to hold up at support at the bottom of the triangle as well, but there is absolutely no more room to run to the downside.  It has to get going and get going quickly to avoid a melt down here.  Notice the failure at the 50 day moving average in blue for the 2nd time in a month.  This indicates that the likelihood of a break down from here outweighs the possibility of a break out to the upside.  Be extremely careful here and maintain capital preservation mode until the S&P can convincingly breakout above major resistance levels.” ……

Continue reading Obama’s Foreclosure Bailout Fails To Impress Market →