Painting the Facebook Self-Portrait

As I write this, the market is trying to stage a bit of a bounce off the lows. While it is true that a few leaders may already be short-term oversold, I am seeing more dip-buying than shorts pressing, perhaps indicative of complacent.

Another setup I see is what we have with Facebook. Here is a clear market leader which has weakened of late, down big today, and trying to avoid a gap-fill lower (lower light blue line on daily chart).

Whether these types of gap-fills materialize soon will determine the difference between another contained, buyable pullback versus a steeper correction.

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As I write this, the market is trying to stage a bit of a bounce off the lows. While it is true that a few leaders may already be short-term oversold, I am seeing more dip-buying than shorts pressing, perhaps indicative of complacent.

Another setup I see is what we have with Facebook. Here is a clear market leader which has weakened of late, down big today, and trying to avoid a gap-fill lower (lower light blue line on daily chart).

Whether these types of gap-fills materialize soon will determine the difference between another contained, buyable pullback versus a steeper correction.

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Courtesy of The PPT algorithm, here are the most current top five readings from my “12631 RELATIVE STRENGTH” custom-made screen, identifying which stocks are exuding some of the best performances to the market at-large at any given moment.

I look for stocks whose Daily PPT Hybrid Score surges, while the Weekly Hybrid has been negative over the past week. This can often yield stocks which are emerging from consolidations.

Members can click here to view and save the screen.

Sorted for at least 500,000 shares of daily average volume to ensure liquidity.

Please click on image to enlarge.

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The Silence of the Lambs (1991)
Hannibal Lecter: First principles, Clarice. Simplicity. Read Marcus Aurelius. Of each particular thing ask: what is it in itself? What is its nature? What does he do, this man you seek?

We have kept things simple and stayed disciplined with the precious metals and miners’ trade inside 12631.

The silver ETF weakness back below its $19.70 primary breakout level, even a bit before it plowed down through that level, was our cue to back off the long side and let the potential for a higher low set itself up.

Indeed, that silver weakness seems to have been a burden on the rest of the complex, despite how resilient gold has been.

On the gold ETF daily, first below, note a check-back to its declining 200-day moving average (yellow line) after an overshoot. This is a critical juncture now, and I would consider getting back on the long side if silver cooperates and gold holds this 200-day test.

Still, observing the miners today you get the feeling some more time may be needed before another entry is appropriate.

My sense is that the entire space is still in the bottoming process, which as we know includes tons of whippy, churning and frustrating action in between the energetic trading points.

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We have another broad market bounce going this morning. But, once again, it is not particularly impressive underneath the surface. New IPO KING is sluggish, while marquee leader FB is down 2% after another big acquisition.

Perhaps of most significance to me right now is the price action in the small caps, seen on their 30-minute ETF chart, below.

If this diamond consolidation falls below $116 it would indicate the potential for a major breakdown (on this timeframe)

Divergences abound, still. And the race between AA CAT IBM JNJ strength versus the weaker, leading parts of the market should be resolved soon.

I am staying mostly flat until I see the situation clear up a bit.

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The following is just a small excerpt from my latest Weekly Strategy Session (please click on that hyperlink for details about trying it out). which I published for members and 12631 subscribers this past Sunday. 

First, last weekend’s top idea of shorting the biotechs continues to play out, with the BIS ETF (ultra-short the sector) being a relatively thin but viable way to play the thesis. Recall that the key components of the bear biotech thesis were not only the daily chart under heavy distribution, first below, but also the abnormally-steep monthly chart, second below.

Since both of those elements continue to be met, I am going stick with the idea even with the sharp sell-off on Friday (traders should be inclined to “trade around” instruments like BIS for the sake of discipline and locking in profits along the way).

However, there is another idea which may be even more ripe headed into this week, seen after the biotech charts.

The top idea this week is…

Please click here to continue reading

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