Beware of the Dubya Bottom

_________

The 1040 level on the S&P 500 is being tested so many times, you would think it was in training to be a pilot. Thus far, today is proving to be a transfer of power. The bears had been getting progressively more fatigued throughout the recent selloff, and the bulls had been reduced to whimpering in the corner. Since the market is always a “what have you done for me lately?” kind of place, the issue is where we go from here.

Looking at an updated, intraday 15 minute chart of the $SPY (S&P ETF), we have a nice “W” pattern taking shape, and the distinct possibility of an imminent gap fill just above. I would consider this to be the most probable scenario going forward in the immediate future.

________

Comments »

__________

MARKET WRAP UP 08/26/10

Stocks closed near the lows of the day, as traders braced for more economic data that will be released tomorrow. With the S&P 500 finishing down 0.77% to 1047, yesterday’s lows were not violated. Nonetheless, the level of frustration was as pronounced as I have seen since at least July 1st of this year. The decreasing ranks of bulls are in a state of deep dejection, as each intraday bounce fails miserably. Conversely, the bear team is seeing an influx of new members by the hour, as the late summer selling reinforces itself.

Seeing that I am still convinced that we are in an oscillating market, instead of a trending one, I maintain my belief that now is much more of a buying opportunity for the short term, than a selling one. With poor economic data lining up with lousy technicals and notably weak sentiment, I am comfortable dusting off my contrarian hat and putting it on. As bearish as today seemed, we still held above yesterday’s key lows, as the updated and annotated daily chart of the S&P 500 illustrates below.

___________

___________

Updating the charts of some important indices and sectors, the trannies finished in the green today. Further, the small cap bulls held right where they needed to.

___________

___________

___________

___________

___________

Going back to my main point, this is not a case of me being a stubborn bull. Rather, it is more of a situation where I disagree with many traders who have proclaimed that we are in a fresh new trending market. For the past three months, Mr. Market has punished  both aggressive bulls at the top of the trading range (1100-1130) and bloodthirsty bears at the bottom of the range (1040-1010).

In my view, the trading range continues.

___________

[youtube:http://www.youtube.com/watch?v=oOuW9odA9hA 450 300]r

Comments »

I bought a full position in $CCI into the bell. The chart below should speak for itself in terms of bullish volume supporting solid price action.

_______

Comments »

___________

If you agree with my view that we will see a relief rally from now until at least Labor Day (it is September 6th this year), then the price action and prevailing sentiment today is fine. As opposed to early last week, when an exuberant but brief bounce led to the next leg down, the action these past two days has been much more consistent with a bottom. We are seeing tons of frustration by traders who had hoped for an immediate move higher. Similarly, bears who had hoped to short the next leg down are failing to see it materialize.

With all of that said, stocks are slightly drifting into the red. The old Wall Street axiom, “Never short a boring market,” rings true because they usually resolve higher. For the past two days, we have seen an increasingly boring market. The more traders I see become exasperated with this price action, the more confident I am in my thesis for a rally.

I also made two trades today:

• I bought 1/4 more of $APKT. I now have a 3/4 position in the name.
• I took 1/2 off of $ARUN in front of their earnings tonight.

____________

TOTAL PORTFOLIO:

EQUITIES: 64%

• LONG: 64% ($SYNA $AAP $ARUN $APKT $KOG $LVS $MELI $HMIN $RDWR $CMI)

CASH: 36%

Comments »

__________

MARKET WRAP UP 08/25/10

After yet another weak open, stocks recovered nicely to finish in the green, as the S&P 500 closed up 0.33% to 1055. Across many indices, sectors and individual issues, we saw a variety of bullish reversal candles being printed today. As always, follow through to the upside will be key for the purposes of confirmation. With that said, the updated and annotated daily chart of the S&P 500, seen below, tells the story of 1040 holding as a crucial support level once again, during the morning gap down.

__________

__________

Updating some key indices and sectors, despite the fact that the weak Nasdaq Composite, Russell 2000, and financial sector ETF broke support at what could have been a potential inverted head and shoulders formation, they printed nice candles today just above their early July lows to present the case for a double bottom. The trannies and emerging markets are in relatively better shape than the other charts here.

__________

__________

__________

___________

___________

____________

Finally, with all of the talk about how terrible housing is, let us take a look at $LEN. The daily chart, seen below, is a pretty good example of how the market is a discounting mechanism. We can see the steep downtrend since late April. However, within the past two days, there has been the strongest buying volume in months, as the stock looks to have hammered out a bottom and followed through to the upside today. With everyone supremely confident that housing is indicating a double dip/depression, if you had put on some short positions yesterday after that terrible housing data, you got burned.

Nonetheless, it is important to remember that housing could STILL be leading us into a depression. It is the timing of the trade that is important. Based on the chart below, you should ask yourself, is right here, right now, the time to short the homies? Or, better yet, is now the time to give the bulls some room to breathe before trying to short again, given that the past four months have discounted an awful lot of bad news?

____________

Comments »

__________

Into the bell, I bought a 3/4 position in $AAP, one of the best performing stocks, and best looking charts, since late April.

All trades are timestamped inside The PPT.

__________

TOTAL PORTFOLIO:

EQUITIES: 66%

• LONG: 66% ($SYNA $AAP $ARUN $APKT $KOG $LVS $MELI $HMIN $RDWR $CMI)

CASH: 34%

Comments »