Friday, May 15, 2009

SPY talk

In retrospect, it would have been too cute for 88.5 to hold -- we broke it, hit the 20 SMA and bounced. Unless we get new "green shoots" data in the following weeks then the next logical place for SPY is the 50 SMA around 83 zone.

SPY 88.5

Three touches now on this level. How cool is that?


Update: We jinxed it -- SPY now under minor support intraday. Close today will be significant.

Thursday, May 14, 2009

So far So good

As we wrote last night in our newsletter we were looking for a bounce on the commodities today. So far so good -- however, now the big test comes as whether the bounce finds continuation back to the highs or whether it simply sets up new shorts (today's lows).








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Wednesday, May 13, 2009

Day of Opportunity

These are all the stocks that triggered our numbers today from last night's newsletter:

Let's start with the two longs that went over our spots:

POT 103.


MOS 48.


JOYG 28 short.

BUCY 24 short.



BRCM 21 short.


ATI 36 short.



SPG 49 short.


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Monday, May 11, 2009

Bucket of Cold Water on the XLF

We have great respect for Meredith Whitney. She saw the cracks in the house of cards before the crisis, then before the latest bank earnings came out she said she wouldn't be short the financials (because of the Government intervention) and now after the rally she says she wouldn't own them. As good as it gets for an analyst.

If you haven't already seen this then sit down for the next 10 minutes and soak it all in:













Intraday Updates

Thus far today the bulls have done a very good job of holding support. These are intraday updates of the daily charts -- look how well support held this morning. If the sell-off is to gain any traction then the bears have to push through the following support levels:

XLB 26 area held. If that goes later in the day, watch for a dive to 25.


The 20 SMA held on the QQQQ; the Nasdaq was the weakest index last week, and now is the first one to bounce.




KOL bounced near support (and 200 MA)in the 21.4 area.


Perfect example of one of our favorite commodity plays, BTU, bouncing on previous minor support of 31.

XME bounced on 35 support.



Watch those levels -- if they go and selling accelerates then it's likely this is not just a 1 day pull-back.

Sunday, May 10, 2009

Market Talk

With the exception of the Nasdaq weakness (as we discussed on Friday) the bulls are still in control; however, this could change soon.

XLF long to the 200 SMA, after that we'll be looking for reversal shorts.


Commercial Real Estate looks like it has one more pop left but will offer an excellent shorting opportunity at the 200 SMA. Unless IYR shows very clear relative weakness, stay long until 40. Ideally we run for a day, and then gap-up to 40 -- that would be a very nice risk/reward spot short on 40 resistance.



If you're leaning bearish then hope for quick max pain; the longer we base under resistance the more chance that the break-out will be successful. This is the reason we're hoping for a very big run or gap-up to resistance as the urge to take profits will be very strong compared to a slow grind up and base at resistance (which would increase the success rate of any break-out). So if you're a bear, hope for a big 2 day rally!

Friday, May 08, 2009

We've been writing about this trend-line on the QQQQ for a while now in the newsletter. Note today that the QQQQ is in a peculiar spot: in a little box under the trend-line but bouncing for the second day in a row on the 200 SMA.

On the upside it still has room to 36 until next major resistance and on the down-side, selling might pick-up on any hard break of the 200 SMA or break of the 2 day low around 33.85. Our thoughts are that sentiment is still very bullish and any significant selling in tech (for example a move to 32) would be a good buying opportunity.


Thursday, May 07, 2009

Resting spot







Tuesday, May 05, 2009

Bull litmus test

Tomorrow should be interesting as news has come out tonight that BAC will need 34 Billion in capital as per government stress tests.

We're surprised at the news (as is the market with futures down 1.2% as we write this post) as we assumed the stress test had the bars set very low, since after all, it was created by the government.

Tomorrow should test the bull's resolve; we'll be watching for down-side momentum, volume, and how broad the potential pull-back will be. We'll also be focusing on possible divergences between financials and commodities.

If we sell-off hard tomorrow (and more importantly Thursday when the details and not just the headline leaks come out), and on good volume, then most likely it will be a start of at least an intermediate pull-back. If the market pulls back only with mild losses, or no losses, or even gains (!) then chances are that the S&P will be going to 1000 with ease.

Update: it seems that the BAC news has now been interpreted differently (not a big surprise since we would have been shocked to see these quasi tests actually produce bad news) and futures rallied on better than expected economic news.

We'll see how they close them -- any mild pull-back this week would be bullish to base under resistance, especially in the QQQQ and IWM.

Saturday, May 02, 2009

Our thoughts

If we extrapolate from Friday's action then we would be long USO OIH XME MOO as money rotates into the new leadership of commodities. Of course reacting strongly from a few days of market action is not always the wisest thing to do; however, if we get continuation this week of the alleged new trend, then there's a good chance that this is for real. What we're looking for is for money to flow out of REITS and financials and into commodities. The wild card of course is the release of the stress test on Thursday.

If you see the trend continuing and want a pair trade then go short IYR XLF, and go long USO OIH XME MOO. Our feeling is that the aforementioned commodity ETFs will not only outperform the financials and REITs but also the small-caps (IWM), the Nasdaq (QQQQ) and the S&P 500 (SPY).

Hopefully we'll find out this week whether Friday was an anomaly or the start of a new trend. Stay tuned.

HCPG

Sector D: Steel and Iron

The best two charts we could find from this sector are AKS and RIO.

We had AKS at 12.5 in our newsletter Wednesday night -- it still looks good.



RIO over the 200 SMA and looks great until at least 20.

Sector C: Crude Oil and Oil Services

We're move ambivalent about the Oil sector because of the lack of volume accompanying the recent break-out. If volume comes in, we'll change our stance, but until then we'd rather trade this sector with a bit more caution.

The two ETF's we like to use when focusing on crude and oil companies are USO and OIH. The other popular one, XLE, is also a good trading vehicle but the daily on OIH is much cleaner than in XLE.

We had USO long on the trend-line break of 29 in our newsletter on Friday. We still like it but want confirmation as the volume on the break was questionable.




OIH same story -- price looks good and it wouldn't surprise us if OIH rallied 10 points within 10 days but it needs to confirm as volume on Friday was weak.



SU looks good to go for run to 30.


Lots of clean air for COG as it sits above its 200 SMA.

EOG could be in for a good move through 67.

Sector B: Metals and Minerals

The ETF we like to trade in this sector is XME which looks set to go to the 200SMA and resistance around 38. Looks great.


Here are our favorite trading stocks within the sector:

MEE might need a few days to consolidate the Wednesday earning's move but it looks good to go for at least another 6 points. If you're a swing trader look to buy dips on this stock.

Huge volume break-out move on JRCC on Friday -- a bit of digestion under the 200 SMA would be excellent for this runner.



We had CNX in our newsletter with 33 alert for Friday. Stock looks good to 38.


We had BTU long alert for Friday at 27.5. The stock blew through our spot and now is basing under 30. Looks good to go for another 4 points.


This sector looks even better than the Ag-Chem in that a) it has less congestion (compare to MON) and b) has more up-side potential in that resistance is further away.

Sector A: Ag-Chems

Over the weekend we're going to be posting up charts of some sectors that could show some decent trading opportunities come next week. Let's start with the Ag-Chem sector:


There's no ETF we love for this sector (not liquid enough) but MOO seems to be the best of the bunch.

Clear break-out on increased volume (not difficult though as stock normally trades thin so a bit of day-trader attention would get the volume spike) but has 200 SMA to deal with relatively soon.


Angle of ascent is a big part of the way we trade. Note the increased angles of ascent in AGU (versus the more flat nature of S&P 500 in April versus March). This means that there could be fast up-move coming in the stock. Possible top? Maybe, but before then there should be an excellent long opportunity, at least to the October gap area.


CF is the leader of the group; excellent price action but possibly needs a bit of rest ahead of the 200SMA (at least that is what would happen in a rational market :-)


MON messier than the rest but important enough to be mentioned -- could easily run to 88, especially if it rests for one day.

POT looking good under 92.



Stay Tuned for this evening's post, Sector B: Metals

Friday, May 01, 2009

Commodity Rip

We'll have to see how they close them but commodites are on fire with more break-outs in the sector that we've seen in a while -- and note divergence with financials (XLF) and commercial real estate (IYR) asleep, and treasuries bleeding. Obviously, this is an inflation trade and it will be interesting to see how long it lasts. Ride the trend in the commodities -- here are some charts.

Metals:



Oil Service:


Crude:


And the poor Treasuries:


Gold lagging -- let's see if they catch up.


Update: today was one of the clearest change of leadership days we have seen in a long time. One day a trend does not make -- however, if we get continuation on Monday then it's a good bet we're going to get a very good run in the commodities with money flowing from the REITS and financials into metals, ags, coal, and oil.

Today's triggers

Here are all the triggers from last night's newsletter (BTU 27.5 long, CNX 33 long, FLR 37 short, USO trend-line long over 29). Arrows are places we will offer explanations on the why and where of entry (will be included on this weekend's newsletter).








These are day-trade entries but often our subscribers swing-trade many of our trigger spots. We ourselves are primarily day-traders and look for 1-4% moves with stops around 0.3%-0.5%.