SPY Talk

Clear range is setting up in the market with support at around 88 (875 on the S&P) -- if that goes then watch for a move to the 50SMA-- and major resistance on the SPY at 93-94 (and 200 SMA). Within that range we have now a c lear minor resistance at 90; a high-volume close above 90 could rally us back to resistance zone in a hurry.

No predictions as to which direction this small range (88-90) will break but we'd prefer a move down to the 50SMA to give this potential March bottom a broader base and more backing and filling.



Point A is the trend-line that we broke and keep visiting from the other side. Point B is support, and Point C is resistance.

Get your lawn chair out

We're stuck in this range in the SPY with the floor being 88 support, and the ceiling previous highs and 200 SMA around 93-94. Until that is resolved, be prepared for choppy, trend-less action.

Day Traders get their day

It's not 1 PM yet so too early to call it but thus far it looks like a reversal day. Consolidation near resistance is actually good for the bullish case -- as long as the pull-back doesn't gain momentum towards 88. Let's see how it looks at 4 PM.



These are ALL the stocks that triggered from last night's newsletter, losers and winners.


ACI 18 worked well if you were fast.


CLF 25.


CNX 40.5


GNK 21


JRCC 24


MEE 21.4


Best set-up of the day goes to base and break 1 point under daily spot on MON (91 base and break under 92 daily spot).


NEM 44.75


PCU 20


TBSI 10.5 didn't work. We don't like trading sub-$20 stocks and regret putting this one on the letter.


VMW 29 excellent set-up for a big size/close stop trade (as opposed to wider stop/fewer shares trades we recommend on commodities).

Suspense Continues

SPY testing the other side of the trend-line and looks like it wants up for a visit to the 200 SMA. We're neutral now, bullish on a close above (92), and bearish on a break of 88. Four point range.

Monday morning green shoots

The market gapped up today (complete reversal from futures being down almost 1% last night) on upgrade on BAC, an uptick in "homebuilder sentiment," good news from home improvement stock, LOW, and a 17% rally with love from India.

We would have much preferred a visit to the 50SMA but the bulls went with the news and didn't relinquish an inch to the bears all day long.

It's hazy out there and we're sticking to pure day-trading as we can't see a clear direction on the SPY. On one hand it looks like we're going to go visit the 200 SMA and resistance at 94, but on the other hand volume was light and this one-day bounce will need continuation before it can be believed. Much too blurry for our taste (and the few number of set-ups we have for tomorrow reflects this).

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.

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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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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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.

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!

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.

Resting spot

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.

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.