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MARKET WRAP UP 11/12/10

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MARKET WRAP UP 11/11/10

In a case of deep irony on this Veterans Day holiday that is as American as apple pie and reality television shows, the price action today helped to form what could be seen as a set of bull flags across the leading indices, sectors, as well in many key individual issues. Sticking with the theme that I have been discussing since last Friday, Mr. Market continues to digest the glorious feast that he enjoyed last week. At the same time, he has resisted the idea of becoming ill from gluttony. Instead, he has downed some sambuca and taken a long walk. With the S&P 500 holding an intraday low of 1204 for the second day in a row, the bulls were able to close the session down a respectable 0.42% to 1213.

Once again, the bears were unable to puncture through some key support levels that were tested, whether it be the transportation or financial stocks. Moreover, the industrial/energy/material complex shrugged off a stronger U.S. Dollar to move higher. As I have been discussing, the idea of a stronger Dollar automatically leading equities and commodities lower may be a little too obvious to work this time around. Beyond that, countless technology names refused to let the CSCO sell-off rub off on them. Finally, leading stocks, such as AAPL AMZN BIDU CRM GOOG NFLX RIG, all had orderly, constructive days.

After nearly a full week of sideways action, all potential bull flags should be monitored closely for any upside breakouts, presumably leading the next charge higher.

NOTE: See you guys at iBankCoin’s Three Year Anniversary tomorrow, as well as at the 12631 launch inside The PPT.

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MARKET WRAP UP 11/10/10

After the rich meal and flowing wine enjoyed by the bulls last week, there were two main scenarios that I thought would play out coming into this week. The first scenario was a situation where Mr. Market’s digestive system rejected the food, causing him to suffer from nausea and become ill (a violent reversal, negating all of last week’s rally). The other possibility was that Mr. Market would have a glass or two of a fine digestif, such as sambuca, and then take a stroll for a while before coming back to the table to eat more. Based on the price action that we have seen since Friday, the latter scenario appears to be taking hold.

That is, we have now seen several days of benign consolidation by the broad market, albeit with some bouts of sharp profit-taking here and there. Nonetheless, the high momentum market leading names are sitting with uptrends firmly intact, with bears unable to use their claws to make much of a puncture wound. With the S&P 500 closing up 0.44% to 1218, stocks bounced impressively off of an intraday low of 1204. The fact that the S&P closed on the highs has got to give a good boost of confidence to bulls who had stepped in to buy the dip. In fact, one of the hallmarks of a sustained uptrend is the high level of confidence that the dip-buyers have. Of course, dip-buying will eventually fail, but trends also continue much longer than most market players deem possible.

In the after-hours trading, I see that CSCO is taking a beating on the back of lowering their guidance. Whether or not this serves as a catalyst/excuse for more selling in the broad market remains to be seen. For the past several years, I have viewed CSCO as a stodgy, old tech firm that was never a market leader in terms of price action, although many macroeconomic investors key off of them. We also have the Veteran’s Day holiday tomorrow, so I would expect trading to be a bit slow. However, that would fit neatly into the theme of this week, which is basically a healthy digestion of last week’s breakout to 52 week highs.

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NOTE: I will continue to post broad market commentary even after the launch of the 12631 service this Friday. If you would like to learn more about 12631, click on this link here (the service is only available to members of The PPT). Also, feel free to ask any questions.

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MARKET WRAP UP 11/09/10

Stocks continued to see bouts of profit-taking today in the wake of last week’s powerful breakout to fresh 52 week highs. With the S&P 500 finishing down 0.81% to 1213, the trading session was far from a bloodbath, but it was a party foul after the recent string of festivities that the bulls have enjoyed. Moreover, a fair amount of action junkies got caught with their hands in the momentum cookie jar on the long side. In particular, many of the precious metals and miners saw some nasty intraday reversals, after enjoying some impressive gains over the past few weeks. While one day does not a trend make, today’s action is enough reason to not initiate any fresh longs in the precious metals and their respective miners for a few days, at least until the dust settles.

Beyond the metals, the charts of the market leaders remain in good shape. As I have been saying for the past 100 points or so on the S&P, it is best to err on the side of the prevailing trend, despite how scary any one given day may appear. While we could easily see a few more days like today, that is precisely the reason why I did not proffer my weekly trading setups on Sunday. One can still be bullish within the context of an uptrend without always being heavily invested on the long side. Before you scroll down to my annotated daily charts of the major indices and sectors, take a look at some of these market leaders and decide for yourself if they are truly displaying any signs technically which would indicate a top, rather than a mere bullish continuation pattern.

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MARKET WRAP UP 11/08/10

Stocks digested last week’s impressive gains today, as the S&P 500 finished down 0.21% to 1223. Volume was light on the leading indices and sectors, which is exactly what bulls want to see after the uptick in buying that accompanied last week’s move to fresh 52 week highs. As I noted last evening, a few more days of this type of price action would do wonders for helping charts reset to provide highly attractive entry points for long swing trades. Although many stocks rested today, there were still some hot areas of momentum, namely in the small-cap China space. Moreover, the leading names are showing no real signs of topping, including $AAPL, $BIDU, $GOOG, $NFLX, just to name a few. In fact, they appear to be preparing for a move higher into the end of 2010.

After the strong rally since September, one of the toughest tasks for many market players is resisting the urge to call a major market top. Indeed, many cannot help themselves, and often end up supplying part of the jet fuel to catapult stocks even higher, via shorting prematurely and getting squeezed. While there is nothing wrong with raising some cash when the market gets too frothy in the short-term, baselessly declaring a major inflection point upon us is more likely to be the bane than a boon for swing traders. The bears must meet a certain burden of proof in order to illustrate that we are nearing a top and, as you might imagine, a mere hunch will not suffice.

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MARKET WRAP UP 11/04/10

The recent three week string of doji, indecisive candles resolved to the upside today, as the S&P 500 finished up 1.93% to 1221, marking fresh 52 week highs. Breadth and volume were both strong, as the morning gap higher undoubtedly caught bears and underinvested bulls by surprise, forcing many of them to throw in the towel and chase stocks higher. In addition to the industrial/materials/energy complex leading the way higher, financials actually broke out of their long, multi-quarter trading range today. Whether that breakout holds remains to be seen, but here again we see another part of the market where bears were caught leaning the wrong way.

Days like today illustrate the significance of both identifying and respecting a trending market. A key part of the respect that a trend commands is resisting the urge to declare that a major inflection point is upon us. As an example, despite how impressive some of the bottom calls that Doug Kass made in 2009 and earlier this year were, if you had followed him and gone “all-in short” over the past few days, you would be licking some deep wounds right now. The idea is not to taunt Mr. Kass for an errant call, but rather to emphasize that Mr. Market has a knack for making a fool out of everyone. However, there are ways to minimize the amount of times that you get caught leaning in the wrong direction. One way is to admit that, while we are in an uptrend, being either long or in cash are the only two viable options for anything more than a day trade, and vice versa for downtrends.

Nonetheless, as I noted early today, the S&P breached its upper Bollinger Band. In and of itself, that is not enough evidence to call a top. However, I believe it to be a sufficient reason to postpone and new purchases on the long side until we see how price reacts to this development. With the jobs number set to be released tomorrow, the few remaining bears will be looking for that now elusive “sell the news” reaction. Should we gap higher once gain tomorrow, I believe it would then be correct to start aggressively locking in profits, which would likely coincide with capitulating bears and underinvested bulls reaching a crescendo.

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