Freeport at Last! Freeport at Last!

Last week, after several readers brought the concerning price action in Freeport McMoRan to my attention, I wrote a post offering my analysis as to why the 6% drop in $FCX was likely to be a false breakdown signal. Following the stock as closely as I do, the normally market leading stock seemed to be more interested in filling a technical gap more than in making grand prognostications.

Fast forward to today, and the stock is breaking out of a multi-week consolidation. Again, I am skeptical of the whole concept of an imminent market washout given how constructive $FCX‘s chart is. If the stock can get above $76.25, I would expect a quick run up to $78/$79.

I have also included a weekly chart of $CAT, another firm that is a highly economically sensitive and leveraged to the global economy. The weekly chart shows a healthy uptrend in tact since March of 2009. The hardcore bears can quote an awful lot of economic data these days but, given all of the bad headlines over the past few months, how can they rebut the lack of weakness in Caterpillar?

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[youtube:http://www.youtube.com/watch?v=kqqbNyYB0xg&feature=related 450 300]r
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MARKET WRAP UP 08/31/10

Stocks finished the summer months in a manner consistent with the kind of choppy trading that we have become accustomed to since April. With the S&P 500 closing up (barely) 0.04% to 1049, the 1040 zone remains the proverbial line in the sand. Bulls will argue that the past week of consolidation at that area has been a base to propel us higher, while bears will say that we are merely pausing before the next leg down to at least the July lows of 1010. Either way, the past few months of range bound trading have served a purpose–a chore, like doing dishes if you will–after the massive trend years we saw in 2008 and 2009.

Heading into September, the increase in traders returning to their desks should add volume to the market. At issue, of course, is in which direction we see that conviction. My working thesis for this year continues to be that of a market that wants to mean revert and stay within a broad trading range, The updated and annotated daily chart of the S&P 500, seen below, indicates that we are at the lower end of that range. Thus, I am positioned for the next move to be higher.

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The daily chart of the Nasdaq Composite Index also illustrates that we are at the lower end of the broad, multi-month trading range.

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Apart from the fact that we are holding 1040 on the S&P, I am seeing bullish MACD divergences across various sectors and indices, indicating waning bearish momentum on this leg down. Combine this with the negative, frustrated sentiment amongst traders, and you can see that my belief in a move higher from here is not based on a whim. Moreover, the fact that both $FCX and the $XLF (financials ETF) outperformed today leads me to believe that the bears may be running out of steam here.

I will leave you with an updated daily chart of the Russell 2000 small cap index. We can see the bullish MACD divergence rising to the surface as price retests the summer lows. The small caps, as volatile as they are, never breached their February lows. All things considered, one of the best known gauges of risk appetite is still making a broad series of higher lows, since March of 2009.

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This market is full of so much irony that only a Brooklyn hipster could love it. With major stocks like $GS and $INTC laughably unable to catch a bid for at least a dead cat bounce, we are once again set up for a “rally free or crash hard” scenario headed into September. The bears are pounding their chests, acting all 2008 and shit, as if Bernanke somehow forgot how to make it rain.

Pssssh.

IRONICALLY (channeling your inner hipster), the 1039/1040 level is still serving as a proverbial brick wall, despite the cocky and plentiful bears. With the 1040 level repeatedly holding, you would think that the bulls would be galvanized. IRONICALLY, they are impotent and in serious need of Cialis, or steroids, or both. Look, unless 1040 finally breaks, this market is a range bound chop fest.

For those of you calling for an imminent crash, I will leave you with two charts that make me doubt that scenario. If we are, indeed, on the cusp of a major crash, then why is the daily chart of $FCX as well as the weekly chart of $UNP in good shape?

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I made three trades so far today:

• I sold out of my final 1/4 of $ARUN.
• I sold out of my 1/2 position in $KOG.
• I sold out my 3/4 position in $LVS.

All trades are timestamped inside The PPT.

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TOTAL PORTFOLIO:

EQUITIES: 60%

• LONG: 60% ($NTCT $CCI $AAP $APKT $MELI $HMIN $RDWR $CMI)

CASH: 40%

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MARKET WRAP UP 08/30/10

After the sharp reversal and rally on Friday, stocks sold off steadily today. Volume was the lightest of the year, indicating the lack of interest in late summer trading with conviction. Despite the fact that the S&P 500 closed on the lows, down 1.47% to 1048, the price action today was confined within the parameters of Friday’s highs and lows. This type of price action creates an “inside day,” which signals indecision. Despite how painful today felt for many bulls. the fact that we are seeing indecision after the steep downtrend from 1130 over the past few weeks could be a sign of a change in the short term trend.

As the updated and annotated daily chart of the S&P 500 illustrates below, the 1040 level continues to be the line in the sand over which bulls and bears are battling.

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Looking across the other major indices and sectors, we saw inside days across the board. The case for many double bottoms continues, as the defined lines of support become more pointed by the day.

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Finally, let us take a look at the semis. Many traders have been concerned about the recent weakness in that area. The daily chart tells the story of a steep downtrend since late April. Now, however, the semis are at the bottom of the multi-month falling channel, and printed a hammer-type of candle on Friday. After today’s inside day, there remains a distinct possibility for a change in trend.

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…I am eating a sandwich. Today is an inside, doji day after Friday’s huge reversal rally. My opinion is that it is important to not be too dramatic in this situation. As ugly as the action feels, the broad market has not sustained any technical damage that has negated Friday’s rally.

In other words, chill out and come back tomorrow.

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[youtube:http://www.youtube.com/watch?v=5DFXRceCCuw 450 300]r

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