___________________________

My working thesis, which I have written about here, here, and here, is that if the market can sustain a breakout here it will be led by more value-driven, “boring” type of plays such as what you find in the Dow Jones Industrial Average. As an exercise, I encourage you to compare the health of charts of prior high growth market leaders, such as AMZN CRM PCLN, versus current Dow components BA (Hat Tip to 12631 member “flicker”) HD WMT XOM, and many others. There is a stark difference, indeed. with the latter grossly outperforming the former. Therefore, the issue then becomes whether the Dow components can have a self-reflexive nature to the point where they pull the entire market higher with them, even if prior leaders are now laggards.

In that regard, what I wrote back on December 1st is worth repeating here:

Accordingly, I continue to probe the thesis that we could easily be facing a market filled with more subtleties. I doubt even if the bulls continue to gain footing here, that traders will simply be able to “buy the leaders” and head out to run some errands or go to lunch and magically get rich. Instead, I suspect more of a stock-picker, value-oriented market awaits. In other words, do not get too giddy if the broad market breaks out in the coming weeks, because this time around it probably means you are going to have to work harder than ever to outpace your competition.

 

Comments »

___________________________

It has been a while since we took a look at copper mining giant, Freeport McMoRan. As long-time readers of my work know, Freeport has been a useful “tell” for me in terms of the broad market direction over the past few years, although as 2011 progressed that tell has become increasingly murky. Back in January, I made this video for 12631 members making a fairly bold call that the monthly chart of FCX flashed an ominous “dark cloud cover” pattern. I extrapolated that Freeport had most likely topped out for the foreseeable further.

As it turns out, that marked a multi-quater top to the stock, as you can see on the weekly chart below. Consistent with Freeport being a good (but early) “tell,” it topped out several months in front of equities as a whole. Presently, Freeport is trying to stabilize after a steep decline. However, the risk of downside continuation remains high, given the apparent rising wedge nearing completion. As much as I want to have a reason to look for and play a major bottom in Freeport, I have little evidence to do so, yet.

You can also bet that bears are looking to crack $35 here, which should bring in more sellers as price breaks below this weekly rising wedge. I am not sticking a fork in Freeport McMoRan, but my risk/reward analysis has me waiting until the bulls can get this back above $40 before I become interested again on the long side, anytime soon. As far as being a tell, thus far all Freeport has done is confirm the S&P 500’s higher lows since early-October. In and of itself, though, that is not enough of a reason to declare a major bottom.

___________________________

Comments »

Click on 12631 to learn more about locking in our low rates before prices rise on January 1st, 2012.

http://www.youtube.com/watch?v=7WTsIggw6Hc&list=UU5b-F6jB8Qo178EXPwna1qw&index=1&feature=plcp

Produced & Edited by: @RaginCajun

Directed by: chessNwine

Comments »

_______________________

If you came into this week like I did, you were on watch for the bulls to take advantage of potential bullish setups. In and of itself, that was insufficient reason for me to automatically buy a boatload of stocks and gear up for a Christmas rally. Instead, I was looking to see if the market would actually prove itself first, before adopting any sort of aggression. Clearly, the sell-offs in the earlier part of this week negated that idea, so I was content ride the CRM short I had been already holding for 20 points (I am still short a 1/2 position).  Moreover, you can see the benefit of waiting for confirmation, in terms of mitigating risk in not trying to constantly get out in front of the market for a big move. It is very easy to talk the talk, but inside 12631 I must walk the walk as well. Unlike traders/bloggers/authors on other websites, I put it all on the line everyday, and market forces have dictated that there is more demand for me than you. And you know who you are.

As for the current market, you can see what happened on Wednesday and its aftermath below on the stretched out 10-minute chart of the SPY. Note how what amounts to 1225 on the S&P 500 is now resistance, and the market is teetering on breaking down from a bear flag this afternoon. Until price can recapture that level, I see little reason at this point to press any longs here, at least into the weekend. While I may miss out on yet another gap higher on Monday morning, I suspect that in order for the market to sustain an uptrend for longer than half of a day we need to see the constant gaps abate.

_______________________

Comments »

 

There is a real danger in this type of market environment for confirmation bias to overrun your trading discipline. As an example, we saw the transportation stocks outperform on Thursday, which many bulls would point to as a clear positive. At the same time, bears would argue that technology stocks lagged, and consumer discretionary was noticeably weak when compared to defensive sectors like healthcare and utilities. Seeing as the market has essentially flopped around sideways since crashing last summer, there really is “something for everyone” to interpret in their favor or bias, and yet there has been no major breakout nor breakdown that has held true.

Hence, I am focused on keeping things simple with this market and not being too convoluted in my approach. Over the past week or two, I have noted the potentially massive inverse head and shoulders bottoming formation in the IYR, ETF for the real estate sector. As you can see below, now looks to be as good an opportunity as the bulls will have to run this thing up to at least the neckline at $58. If it triggers through $55/$56, then great. If not, then it would not surprise me to just see more of the same type of trend less action indefinitely.

Also note plenty of REIT’s have similar attractive setups as well, basing just above their respective moving averages. To go with the analogy that I have been making on my video recaps recently, I view the stocks on my watchlist as ornaments on a Christmas tree, not to be taken down and played with unless I have two compelling reasons: 1) The individual setups actually trigger a breakout higher, and 2) The broad market cooperates with the idea of breakout plays working well for more than just a few hours or one trading session.

Members of The PPT and 12631 can click here for more potential long trading ideas in the real estate sector.

____________________________

____________________________

____________________________

 

Comments »

___________________________

This time of year features holiday parties on a nightly basis, whether it be family-related or through work. Traditionally, there is the “Santa Claus Rally” in the stock market, where even the most vicious of bears back off their shorts, in favor of sipping an eggnog Venti latte while standing behind hundreds of tourists from Iowa who fly into New York City to see “the tree” in Rockefeller Center.

This year, there seems to be a certain element of apathy with regard to the market, as plenty of traders have become understandably frustrated and demoralized with the grinding price action throughout 2011. Currently, there remain plenty of individual setups with the potential to become quality long swing trades. However, a setup is simply an ornament on my watchlist tree if it does not trigger in a cooperative market. Moreover, there continues to be troubling signs from the “leaders” since 2009, such as AMZN CRM PCLN.

You can see below that Amazon.com is a particularly troubling chart, seeing that it actually broke down from the bear flag that I had been highlighting over the past few weeks. Since 2009, the play had been to fade the breakdown, as they were usually traps to lure in overeager bears. Even if Amazon does not lose the key $180 level here, it is still far from a high probability long setup. Member “kelynntan” inside 12631 crushed this trade on the short side by owning puts. We are still short CRM, as well.

Hence, with the long/short strategy continuing to work, I am still neutral on the market with a slight bullish bias. If and when the S&P 500 rectifies the declining 200 day moving average with the rising 50 day moving average, I will change that posture.

___________________________

Comments »