Friday, June 04, 2010

Market Thoughts

We haven't updated the blog for a couple of weeks because, well, we haven't had anything to talk about.  We've closed the day in cash every day now for weeks as we feel there is no edge currently in swing trading.    Even for day-trades we're finding slim pickings and are spending most of our time on the side-lines.  Boring, but part of the game.  We'll trade whenever we see a good risk-reward trade, be it once every two days or ten times a day.   As simple as that.

Here are some thoughts on the market:

Coal, steel, metals and miners, Ag-Chem all look horrible.  Drillers are broken but the action is better than before as the group is trying to stabilize. The strongest sectors within the commodities are natural gas stocks and gold.

Financials, transportation, and farming/diversified machinery look awful.    Basically "world growth" stocks are saying "no growth".

GS action is similar to the driller action -- chart is broken but one gets the feeling that whoever wanted to sell has already sold.  Stock is not rallying but isn't going down either.   We'll have our eye on the stock next week to see if this changes.

The only stocks that are still holding are the darling momentum group, the AAPLs and VMWs of the world.   They are the last pillar standing -- when this group starts bleeding we'll know that traders are finally feeling some real panic.    We're so used to the cowboy commodity stocks go down 8% in a clip -- that doesn't even make us blink anymore.  But we're still not there for the MoMo group.  Before we dip our toes into the bloody waters of panic we'd like to see traders finally give up their AAPL shares.

If market rallies and we switch to buying strength then our favorite set-up is AAPL.  Stock is setting up a very nice base near 265-266 -- it could be 2 days from now or 2 months but eventually we will get a nice break-out through that area.    Two conditions that have to be met before we buy the breakout:  relative strength (stock has to be leading the market up) and volume.

Crude closed over 71 -- watch that symbolic 6 handle and then 65-67 level for tells of panic.

Copper closed near that important 280 mark.  It's been leading the way down, at least partially on the prospect of China slowing down.  Copper will not act alone -- if the fears prove to be true look for many other sectors to follow copper down.   Our number one reason, technically, why we remain on the bear camp is the price-action of copper.