Weekly/After Stock Market Review Archives

Weekly Market Review – Multi Year Highs in Sight, Proceed With Caution

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With economic data of last week showing signs of a soft landing, the market continued to march higher, albeit in unmeaniful holiday trading.  With trading volume levels returning to normal levels later this week, we should begin to see signs of the market showing its hand.  I continue to believe that the market has come too far, too fast, with little institutional support behind the move in the past couple months. 

With resistance at multi year highs in both the S&P (1326.70) and Dow (11670.19) as well as the 200 day moving average for the Nasdaq (about 2230) on the horizon, it’s important to proceed with caution on the long side.  There is some room to run to the upside before meeting those levels, but once those levels are reached I’ll be playing the market as if that is the end of road.  Essentially, I’m forcing the market to prove me wrong by breaking out to new multi year highs in the Dow and S&P and above the 200 day moving average for the Nasdaq WITH BIG VOLUME.  Only then will I get aggressive on the long side.

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** Model Portfolio Update **

With another week of light trading, there were few transactions in the Model Portfolio.  In fact, just one one new long position was initiated and no positions were closed.  After pulling back last week, the Model Portfolio had another winning week with a nice 1.7% gain.  The year to date performance continues to stay well ahead of the major indices with a 16% gain and 8 of the 10 open positions remain profitable.    Current allocation is about 17% short, 50% long and 33% cash.

** Best/Worst Performers **

– Top 10 Performing Industries For the Week –

1. Catalog & Mail Order                     10.30%
2. General Entertainment                    8.40%
3. Silver                                               7.60%
4. Building Materials Wholesale           7.10%
5. Manufactured Housing                    6.70%
6. Major Airlines                                   6.55%
7. Semicondutor – Memory                   6.40%
8. Internet Service Providers                6.20%
9. Data Storage Devices                      6.05%
10. Diagnostic Substances                  6.05%

– Top 10 Worst Performing Industries For the Week –

1. Oil & Gas Refining & Marketing        -3.05%
2. Shipping                                           -2.80%
3. Oil & Gas Equipment & Services      -2.25%
4. Major Integrated Oil & Gas                -1.90%
5. Independent Oil & Gas                      -1.15%
6. Banks – Southeast                              -.85%
7. Nonmetallic Mineral & Mining               -.70%
8. Marketing Services                             -.35%
9. Pollution & Treatment Controls            -.25%
10. Jewelry Stores                                 -.15%

– Top 5 Best Performing ETFs For the Week –
 
1. HLDRS Internet Infrastructure (IIH)       6.20%
2. HLDRS Internet (HH)                             5.90%
3. Ishares Silver (SLV)                             4.35%
4. Ishares Brazil (EWZ)                            4.15%
5. Chile Fund (CH)                                     4.05%

– Worst 5 Performing ETF’s –

1. Powershares Dynamic Energy (PXE) -3.25%
2. SPDR Select Energy (XLE)                  -2.95%
3. Templeton Russia & E. Europe (TRF)  -2.95%
4. Ishares US Energy (IYE)                     -2.85%
5. Ishares Global Energy (IXC)                -2.30%

**  IPO’s Worth Watching for This Week **

1. New Oriental Education & Technology Group (EDU): a Bejing provider of education programs, services, and products, primarily of English and other foreign language training and testing preparation courses.  The company offers these programs to over 872K students in 25 schools, 111 learning centers and 13 bookstores.  Trading set to start on Thursday

** Upcoming Economic Reports (9/4/06- 9/8/06) **

Monday:        Market Closed
Tuesday:       Retail Sales, Job Cut Announcement
Wednesday:  Productivity & Costs, ISM Non Manufacturing, Beige Book, Petroleum Status,
                       Mortgage Apps
Thursday:      Money Supply, Wholesale Trade, Public Debt, Jobless Claims
Friday:           Consumer Credit

Mail Bag

It’s Not A Bad Idea to Master the Basics First

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Question:

I have a general question for you.  I am currently a student of Investools. I addition to trading various stocks options, I also want to focus on short term trades on the OEX and SPX (about 1-5 day period per trade).  Do you think that the timing system you use could be used in this arena especially the OEX? Do you think we could come up with various indicators to fine tune the entry and exits for this index using your site? 

 A little about whom I am so you know who you are emailing.  I am a pediatrician by training but currently at home raising my children.   I was introduced to trading about a year ago.  Until then I was financially illiterate, as many doctors are. I am a very quick learner and have accumulated so much knowledge this year that sometimes it astounds me how much life has changed.. I have three passions, and they are what I am wholly committed to.  These are my family, trading and eventually making a real positive change in this world.  Not only do I love to trade but also I see this as a means to give me the financial freedom to help a lot of people around the world and here who were in similar and worse situations that I have been in. 

I could totally relate to your introduction to the web site and will whole-heartedly join again.  Please let me know what you think about the OEX.  I know the warnings about options trading out there but I also know that anything is possible with the willingness to do whatever it takes. 

My Response:

Trading options can be much more lucrative, but of course comes much greater risk.  I personally don’t trade options, but rather choose to use margin in order to leverage and increase my potential reward.  I want to keep it as simple as possible at all times.  Believe me, you can make a substantial amount of money not messing with options and just leveraging with margin at the right times.  Unless you are highly experienced in reading charts, I would absolutely avoid short term trading of options.
Here are my thoughts on the path to learning trading:
 
1. Learn and experience consistent success buying and selling stocks using the weekly, daily and intraday charts
2.  Once you have had success making money on the long side, begin to develop a short strategy in order to profit in a declining market as well (it actually takes some time and a shift in mind set to always be thinking about both sides of the market).  While looking for characteristics that are the opposite of long positions (such as big sell volume, taking out support levels/turning away from resistance), it will take some time to locate and initiate good shorts
3.  Begin to leverage with margin when the time is right
4. Increase profit potential with highly leveraged day trades
5. Begin exploring the use of options
 
Anu, if you really want to trade options out of the gate please paper trade for at least several months.. although paper trading does NOT give you an accurate feel for the emotions of fear and greed that come into play when trading with real money.
 
Thanks for sharing a bit about you.. I wish more members would take the time to do that!  Raising children is a tough job, but you’re in an enviable position of being able to watch the market at certain times of the day.  You can have success while trading and having a full time job, but its certainly better to be able to dedicate your time to the market from 6AM to 1PM.  Your long term goals are admirable and I will do everything I can to help you reach those goals.  Just one I ask: please be patient 🙂  I see to many people thinking they can get rich in a year.  Sure its very possible to in a roaring market to double your money in just a couple months, but there times like right now where you need to be especially patient.
 
I look forward to working with you and hearing about your progression.  I have a few members here who have been with me since day 1 and are experiencing consistent success after several years of trying to make it work.  One member was about to give up trading for good (at his wife’s and probably accountants’ advice) before becoming a member.  Last I heard he was setting personal records and making consistent money!

Member Response:

I look forward to a very long and prosperous journey together.  I think one of the key ingredients for success is surrounding oneself with quality people. I am glad to have you on this path. 

Investools is an expensive course.  However over the last 10 months I have learned and grown more then the monetary commitment I made.  Yes, options comes with many risks and rewards.  The key here is to immerse in the study.  I usually get up around 4-5 am and read and study before the markets open and during the day.  Once my children and husband are asleep I spend another 3 hours or so learning.   I have paper traded and continue to do so.  However, as you said the real challenge of a great trader is to be able to conquer oneself.  I think that is harder to do in the paper account as you can always press the reset button.  I have and continue to trade real money with the up most confidence that with time and effort we can arrive at a system that fits my personality and is profitable.  When I first started trading, the first two months I had about a 20% return a month.  However, after the May 10 Bernake meeting, the markets have been a lot harder to decipher and I have lost significantly.  I am however not daunted although I must admit there were several of those “What in the world am I doing” moments”. 

As far as the experience at Investools, it has really been incredible.  Although I must say you get out only what you put in.  I also find that in the world of trading as in medicine there seems to be a degree of competition between traders that results in a lack of “full disclosure” about techniques.  I love technical trading and am in the process of reviewing the various indicators i.e. MACD/ Stochastics, moving averages and such to see which combination works best to give reliable signals for the indexes especially the OEX and SPX.  You know, perhaps part of the love is that technical trading is so intellectually stimulating and challenging. 

I will look carefully at your recommendations. I still shake my head at amazement that you would take the time to be so through with someone you don’t really know yet.  The ideas of support and resistance, breakouts with volume, support bounce trades and price pattern recognition and candlestick formations are only some of the things I am learning.  When I look at the charts you present there seems to be a lot of similarities what you are looking for to enter a trade.  I would love to discuss these with you as the journey proceeds. 

 And, yes I will be patient. I look forward to keeping up this dialogue.   

Mail Bag

I’m Overwhelmed With All the Information

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Comment:

I’m not sure the service is for me.. it looks very good but I’m overwhelmed by all the information.

My Response:

I know what you mean about information overload – it’s the main reason for creating this site.  The success of my members is extremely important to me.  This system is something I’ve been working on for two year and it’s made to highlight the best opportunities very quickly.  I too was tired of looking through newspapers, reading discussion boards, looking at various newsletters, etc. and then deciding which stocks I would focus on first.  It’s extremely time consuming and dramatically decreases your success rate.  IN this business organization is VERY important.  I realize that there is lots of information provided at first glance, but by focusing on the first page or two of just a couple screens, you can come up with the best opportunities the market has to offer with about 15 min of work every few days or so.  Compare that to all the hassle and hours of time spent putting together your own watchlists.
 
Weekly/After Stock Market Review Archives

Weekly Market Review – Be Prepared for a Ride

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With traders getting in end of summer vacations and no major economic events on the calendar, it was one of the quietest weeks of the year.  While next week provides a look at consumer confidence and the FOMC minutes on Tuesday and the GDP number on Wednesday, I’d expect more of the same until normal trading begins again after the Labor Day weekend.. then the fun begins.  This lull provides an opportunity to get those watchlists in order and prepare.. prepare for what will most likely be a major move in the last few months of the year.  The market remains very difficult to read, so in what direction is anybody’s guess, but the health of the market has improved of late and I’m just a bit biased toward the bullish side.  The reason for this is the emergence of tech over the past couple weeks and the ability of the market to hold recent gains this week despite more negative news in the housing market as well as the Iran situation.
The best course of action is to allocate a significant portion to cash and be prepared on both sides.  Remember, the market has a tendency to lull you to sleep before big moves.  Get ready.

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I’m releasing a new Stock Watch report to premium members in the next few minutes – and no you won’t find my two highest rated breakout stocks in the IBD 100 this weekend.  These big potential breakouts are flying under the radar providing a much greater success rate – don’t miss it!

Get this report with your *free* 30 day premium membership.. just sign in to your profile page and sign up in seconds.  Tate, I look forward to scoring big profits with you in the next 30 days.

Join me and other premium members by signing up from here:
http://www.selfinvestors.com/amember/member.php

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** Model Portfolio Update **

With the market half asleep this week and pulling back a bit, the Model Porfolio did the same.. off 1% for the week.  Just one new transaction, a small $10K silver play on the long side was made.  The year to date performance continues to stay well ahead of the major indices with a 14.3% gain.  I anticipate another fairly quiet week ahead and will most likely ride with current positions until normal trading volumes resume after the Labor Day holiday.  Current allocation is about 17% short, 40% long and 43% cash.

** Best/Worst Performers **

– Top 10 Performing Industries For the Week –

1. Broadcasting – Radio                      5.70%
2. Home Health Care                           4.28%
3. Personal Computers                        3.24%
4. Semiconductor – Memory Chips      3.10%
5. Drug Delivery                                   3.02%
6. Shipping                                            2.50%
7. Lumber/Wood Production                 2.45%
8. REIT – Residential                              2.05%
9. Processed & Packaged Goods         2.00%
10. Farm Products                                1.95%

– Top 10 Worst Performing Industries For the Week –

1. Home Furnishing Stores                  -8.00%
2. Apparel Stores                                -5.20%
3. Long Distance Carriers                   -4.95%
4. Electronic Stores                            -4.80%
5. Gaming Activities                            -4.00%
6. Metal Fabrication                             -3.92%
7. Wholesale Other                             -3.85%
8. Sporting Goods Stores                   -3.80%
9. Home Furnishing & Fixtures            -3.70%
10. Trucking                                         -3.67%

– Top 5 Best Performing ETFs For the Week –
 
1. PowerShares Dynamic Energy (PXE) 2.10%
2. HLDRS Pharmaceutical (PPH)              1.25%
3. SPDR Select Health Care (XLV)           1.00%
4. Templeton Russia & E. Europe (TRF)     .92%
5. Ishares Biotech (IBB)                             .85%

– Worst 5 Performing ETF’s –

1. Turkish Invest Fd (TKF)                     -6.00%
2. Ishares Brazil (EWZ)                         -4.20%
3. PowerShares Dynamic Retail (PM     -3.55%
4. Ishares Latin America (ILF)               -3.10%
5. Chile Fund (CH)                                 -2.60%

**  There are no IPO’s worth watching again this week – the IPO market should pick up again after Labor Day**

** Upcoming Economic Reports (8/28/06- 9/1/06) **

Monday:        No Events
Tuesday:       Consumer Confidence, FOMC Minutes
Wednesday:  GDP (prelim), Petroleum Status, Mortgage Apps
Thursday:      Money Supply, Factory Orders, Personal Income, Jobless Claims, Chicago PMI
Friday:           ISM Manufacturing, Construction Spending, Employment Situation, New Motor
                      Vehicle Sales, Consumer Sentiment (Final)

** Latest Blog Entries – In Case You Missed Them!**

– SelfInvestors Blog –

1. Thirsty For Profits? Go Get Some Water – Powershares Water Resources ETF http://investing.typepad.com/tradingstocks/2006/08/thirsty_for_pro.html

ETF Movers

Thirsty For Profits? Go Get Some Water – Powershares Water Resources ETF (PHO)

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With World Water Week in Stockholm, Sweden upon us, it’s no wonder there are many news stories cropping up detailing the looming water crisis around the world.

It was reported in a recent Reuters news story that a third of the world is facing water shortages because of poor management of water resources  and soaring usage driven mainly by agriculture.

Said Frank Rijsberman, the Director of the International Water Management Institute, “Without improvements in water productivity … the consequences of this will be even more widespread water scarcity and rapidly increasing water prices.” He went on to say, “The water is there, the rainfall is there, but the infrastructure isn’t there.”

The BBC reports that the world’s supply of fresh water is running out.  Already, one in five people have no access to safe drinking water…..

Please see the entire post at the the neglected ETF Central portal (someday I hope to post there more frequently.. someday 🙂

Weekly/After Stock Market Review Archives

Weekly Market Review – Out of Commodities & Into Tech

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The market has a way of pulling off surprises and a surprise is exactly what we got last week as inflation came in much cooler than expected which contributed to 5 straight days of market gains.  Taking a look back, two big themes come to mind.  First and foremost has been the lack of buy volume during the 2 days of big rallies.. it’s something I mentioned on a few occassions in the MidDay Market Updates last week.  It looks like institutions are being very cautious here and rightly so.  One good economic number doesn’t make a trend and by jumping in prematurely can be a recipe for disaster (remember, institutions can’t unload positions quickly like the small investor).  The second big theme of the week was the shift of money from commodities to tech.  Many tech companies began to emerge from the dead last week and may prove to be the backbone of any new rally.  Pay close attention to technology shares in the coming weeks.  It’s still too early to start seeing a barrage of high quality tech breakouts, but in a few weeks this may be where the big money is made.  As far as economic numbers go, it’s going to be a light week but Iran’s formal response to the nuclear incentives package may be a market mover on Tuesday.  I’d expect to see the market digest recent gains and possibly retrace the entire move.  Look for decreasing selling volume on down days as a sign that the market continues to get more bullish.

** Model Portfolio Update **

With an inflation data induced rally last week, I quickly shifted from a short dominated portfolio to a long dominated portfolio within a couple days.  Despite leaning the wrong way, it was once again a profitable week for the Model Portfolio with a gain of .8%, bringing the year to date performance to 15.3%.  Five short positions were covered that collectively provided a small gain for the portfolio – UARM (+6%), PETS (+2%), BTU (+1%), SEE (-1%) and PENN (-2%).  Two long positions that were initiated during the week were immediately closed.  One in SHOO, due to a sharp reversal for 1% gain, the other in KDN due to a lack of buy volume for a 2% gain.  Four additional long positions were initated during the week which I continue to hold.  One new short position was added as well.  All new positions are currently profitable.  Currently, the portfolio allocation is roughly 15% short, 40% long and 45% cash. 
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Want to take your membership to the next level?  Premium members who have been following along with buy and sell alerts in the Model Portfolio are smashing average returns with a 14.5% YTD performance.  In addition to alerting you to the best opportunities on the long side, short opportunities are used to make money during a downturn.  That’s just one of many premium features….

Would you like a database of stocks all ranked according to fundamentals and technicals, complete with pivot points, earnings date, % change from breakout and moving averages, future earnings estimates and relative strength rating?  How about Stock Watch reports highlighting long and short opportunities for the coming week?

Try it out for yourself for 30 days!  Sign in to your account here: http://www.selfinvestors.com/amember/member.php and take advantage of the no risk trial.

______________________

** Best/Worst Performers **

– Top 10 Performing Industries For the Week –

1. Internet Service Providers            10.00%
2. Internet Software & Services        9.25%
3. Processing Systems & Products    9.20%
4. Comuter Based Systems                8.50%
5. Semiconductor – Integrated Circuit  8.20%
6. Semiconductor – Specialized           8.20%
7. Communication Equipment               8.00%
8. Residential Construction                  8.00%
9. Semiconductor – Memory Chips       7.80%
10. Publishing – Periodicals               7.80%

– Top 10 Worst Performing Industries For the Week –

1. Personal Products                         -.90%
2. Hospitals                                        -.75%
3. Drug Stores                                    -.05%
4. Food – Major Diversified                 -.05%
5. Independent Oil & Gas                     .00%
6. Processed & Packaged Good          .05%
7. REIT – Office                                    .10%
8. Publishing – Books                           .10%
9. Oil & Gas Pipelines                           .20%
10. Gas Utilities                                    .30%

– Top 5 Best Performing ETFs For the Week –
 
1. HLDRS Internet Infracture (IIH)          9.50%
2. Ishares Networking (IGN)                  9.15%
3. HLDRS Internet (HHH)                        8.75%
4. HLDRS Broadband (BDH)                  8.75%
5. India Fund (IFN)                                  7.60%

– Worst 5 Performing ETF’s –

1.streetTracks Gold (GLD)                   -1.95%
2. DB Commodity Index (DBC)              -1.95%
3. Ishares Gold (IAU)                            -1.90%
4. Central Fund of Canada (CEF)           -.70%
5. Central Europe & Russia Fund (CEE) -.15%

**  There are no IPO’s worth watching for the coming week **

** Upcoming Economic Reports (8/14/06- 8/18/06) **

Monday:        No Events
Tuesday:       Retail Chain Store Sales, Retail Sales Index
Wednesday:  Existing Home Sales, Petroleum Status
                       Mortgage Applications
Thursday:      Money Supply, New Housing Sales, Durable Goods Orders, Jobless Claims
Friday:           No Events

** Latest Blog Entries – In Case You Missed Them!**

– SelfInvestors Blog –

1. Breakout Stock Highlights (BITS, DRIV, NITE, ORCL) (Aug 18)
http://investing.typepad.com/tradingstocks/2006/08/breakout_highli_1.html

2. S&P Joins Nasdaq With Breakout (Aug 17)
http://investing.typepad.com/tradingstocks/2006/08/sp_joins_nasdaq.html

3. Nasdaq Clears Key Resistance, Volume a Bit Tepid (Aug 16)
http://investing.typepad.com/tradingstocks/2006/08/nasdaq_clears_k.html

4. MarketSnapshot & MidDay Updates (Today the Rally is Muted) (Aug 15)
http://investing.typepad.com/tradingstocks/2006/08/marketsnapshot_.html

Stocks

Breakout Highlights – Bitstream (BITS), Digital River (DRIV), Knight Capital (NITE), Oracle (ORCL)

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With the rising market has come a slew of quality breakouts.  It’s been a loooonnnggg week so I’m going to be brief here and just throw up the charts of a couple of my favorites right now.  Remember to avoid chasing any positions at this point.. the market needs to digest recent gains and many of these opportunities will most likely pull back a bit offering a better entry point.

As always, you may see the full list of high quality stocks (total rank 50/60 and above) that have
broken out in the past couple weeks.

State of the Stock Market

S&P Joins Nasdaq With a Breakout

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Two days ago the Nasdaq broke out of its downward trend as money begin to flow into technology names once again.  Yesterday, the S&P followed the Nasdaq lead and joined the ranks of breakout indices as traders once again cheered inflation data.. at least temporarily.  It’s important to remember that inflation is still out of the range of the Fed confort level with a year over year increase of 2.75% so some tightening may still be needed.  Outside of that, the tone of the health of the market has certainly changed in the last 2 days to a more bullish tone. 

While I began to shift more from the short side to the long side on Tuesday and will now buy on weakness rather than sell and/short into strength,  I’m not willing to call this a raging bull just yet.. not even close.  This market is going to have to prove itself at least once or twice more.  The market has posted 2 straight days of higher volume than the day before, which technically indicates institutions are beginning to put some money to work, but clearly they aren’t jumping in with both feet just yet.  There is some caution there.  Let’s not forget that short covering no doubt played a role in the recent rally.

The S&P broke above the 1290 level I discussed yesterday morning and held there, preserving the breakout move.  However, volume was just OK for a breakout move like this.  I’d like to see more of a convincing spike to accompany it.

The Nasdaq showed greater strength than both the Dow and S&P as money began to flow into technology names, particularly the semis.  With the break above the downward trend line, we now turn our attention to new support which is provided by the 50 day moving average around 2100.

The Dow has some work to do before I’m willing to call it a breakout.   I want to see it convincingly take out the August highs with big volume.  Volume actually came in below average yesterday.  Not what you want to see with a big price move. 

So the bottom line is that the market has shifted to a more bullish tone in the past 2 days, but volume remains a bit tepid.  While the recent breaks above resistance in the both the Dow and Nasdaq indicate that long positions become more favorable, I wouldn’t be chasing positions up here.  The market has come a bit too far too fast and we need some healthy consolidation from here.  I’d like to see the gains of the past couple days wiped away with decreasing volume.. that would provide further evidence of a strengthening bull and a great opportunity to put more money to work on the long side.

State of the Stock Market

Nasdaq Clears Key Resistance, Volume A Bit Tepid

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Following a surprising cooling in inflation, at least temporarily (let’s remember that one month of data doesn’t make a trend), the market got a nice pop yesterday.  While volume came in higher than the day before, indicating accumulation, it was not all that impressive considering the price move.  I want to see another day of higher volume than the day before (and this time above the 50 day average) to indicate more institutions putting money to work.  The Nasdaq cleared two key resistance levels yesterday (the downward trend line and the 50 day moving average).. no doubt this is a very important move.  Now let’s see if this old resistance level can hold as new support.  Both the S&P and Dow remain in striking distance of a breakout move.  The market is getting another pop this morning as traders like the CPI data indicating a pause in the escalating inflation.  I certainly won’t be chasing this move at the open.  Let’s see if it can hold in the first hour, then we might have a chance at a real breakout today. 

The level on the S&P I’m watching today is 1290.  If the S&P can move above this level with volume higher than the day before and hold there, that would be a very bullish move and force me to move more cash into the long side.

What I’m looking for in the Dow today is a strong move and hold above 10344 with volume higher than yesterday above the 50 day average.

ETF, IPO & Breakout Stocks Analysis, Tracking & Research