______________

MARKET WRAP UP 10/25/10

Stocks continued their inconceivable march higher today, as the S&P 500 chopped around after a morning gap up to gain 0.21% to 1185. The 200 period weekly moving average, which I discussed in this earlier post, provided resistance during the morning thrust higher. I expect that reference point to continue to be a key level, given that the 200 period weekly was the scene of the top that we formed back in April of this year.

As far as the internals are concerned, breadth was fairly strong today, with the energy and materials complex leading, while financials continued to underperform. Across the daily charts of the leading indices and sectors, we printed what could be argued as a series of bearish shooting star candles. However, to presume a top remains a perilous task, given how potent the uptrend has been over the past several weeks. In order for those shooting star candles to prove true, the bears need to firmly take control of the initiative over the next few days.

Despite how overdue some may think the markets are for a correction, as I noted on Sunday evening, it is best to err on the side of the prevailing trend until further evidence of a change in market character is upon us.

______________

______________

______________

______________

______________

______________

Comments »

______________

MARKET WRAP UP 10/21/10

After a morning gap up to multi-month highs today, the S&P 500 sharply reversed to turn in the red before the bulls staged a final hour comeback, as we finished up 0.18% to 1180. Underneath the surface, many individual issues saw intense reversals as well. However, there was not nearly as much technical damage done as one would think. Across the leading indices and sectors, the short-term momentum higher is becoming increasingly turbulent. Nonetheless, we are simply going to need more evidence of the bears recapturing the initiative before a change in trend can be declared.

As an example, let us look at one of my positions, $SHLD. The stock was performing brilliantly this morning, breaking out of a tight price pattern. Along with the broad market, Sears reversed sharply as the day progressed, yet finished in the green. While today’s candle looks nasty on the daily chart, seen below, the stock really has done nothing “wrong” to force me to sell or turn bearish. Rather, it simply failed to hold its nice gains intraday.

______________

______________

Sears is far from a broken chart. Should the bears build on today’s reversal and push Sears, along with the broad market, down tomorrow, then that would be a reason to grow even more cautious. Until that happens, though, the prevailing trend remains higher, albeit with a choppy short-term picture.

______________

______________

______________

______________

______________

______________

Comments »

____________

MARKET WRAP UP 10/20/10

The film Memento (2000) centers around a man who suffers short-term memory loss, and must wake up every morning more or less starting from scratch in his quest to uncover the identity of the man who he thinks murdered his wife. With the stock market selling off aggressively yesterday, followed by today’s equally powerful move higher, one has to wonder whether Mr. Market is facing a similar predicament to Guy Pearce’s character in the film. Indeed, the past two days of market action have not been momentum trading at all, but rather “Memento trading” (or “memo,” for short), with yesterday’s concerns being thrown to the wind along with caution today.

Although it may not be very sexy, I believe that it was equally correct for swing traders to adopt a more neutral stance yesterday as it was to maintain it today. I continue to hold many bullish bets that I believe are sound setups, but I am more apt to now take a pass on upping my long exposure. Despite the S&P 500 closing up 1.05% to 1178, I will wait for the S&P and Nasdaq Composite Index, as their updated daily charts illustrate below, to recapture their respective support trendlines before allocating capital to the long side without reserve.

____________

____________

____________

____________

____________

____________

Comments »

_____________

MARKET WRAP UP 10/19/10

A confluence of several factors gave the bears an excuse for a much-anticipated sell-off today, after last evening’s post-earnings carnage. Breadth was as negative as we have seen in at least several weeks, and heavy selling indicated distribution in many areas of the market. With the S&P 500 closing down 1.59% to 1165, an abundance of rising 20 day moving averages are either currently being tested, or are on the verge of being so across the leading indices, sectors, and issues. Moving averages are useful not for automatically buying or selling a stock, but rather as reference points to gauge just how strong a trend of countertrend truly is.

Despite how bearish today looked and felt, the uptrend that began in equities in early September probably did not magically disappear in one trading session. Given how potent the trend higher has been, the dip-buyers will not go so quietly into the night even if we are, indeed, topping out here. As a swing trader seeking to profit from riding the prevailing trend, I am looking for the bulls to make their first stand in the 1150-1160 range. Today, the S&P made an intraday low of 1159, before closing several points higher. With the rising 20 day moving average at 1156, I expect that reference point to illuminate just how much underlying strength this uptrend really has.

In after-hours trading tonight, I see that $CREE and $ISRG are getting whacked in a similar “sell the news” reaction that we saw last evening in high momentum names that had seen extended runs into earnings. While those two names did not see the kind of moves into earnings that $AAPL, $VMW, and $IBM did, their selling is indicative of Mr. Market’s current mood. At the very least, he is looking to punish the latecomers to the long trade who pushed their luck into various earnings reports. Another day or two of selling should not only humble those traders who got ahead of themselves, but incidentally will also reward those market players with the discipline to wait for better entry points before becoming aggressive again.

_____________

_____________

_____________

_____________

_____________

_____________

Comments »

____________

MARKET WRAP UP 10/18/10

After drifting higher in a rather uninspired manner for most of the session, the S&P 500 staged a final hour rally to finish up 0.72% to 1184. Breadth was positive, as financials bounced back impressively from last week’s heavy selling. However, it was not a sea of green, as some areas of technology and consumer discretionary struggled. The day played out in way that market observers have become familiar with recently, as bears who sought to pounce on any sign of a rollover were deeply disappointed by a boring market that seems destined to squeeze higher.

Aside from the action that we saw during regular market hours, there appears to be some real excitement being generated this evening. $AAPL, $IBM and $VMW, among others, are selling off hard after reporting earnings. As you might expect, the serial top callers are out in full force declaring this the end of the rally. Seeing as all three of the aforementioned stocks were extended coming into their respective earnings reports, I am not surprised to see weakness in those names, Popular, high momentum issues often bake in impressive earnings long before the actual numbers are released. Thus, a “buy the rumor, sell the news” investor psychology is common with chic stocks, such as Apple.

Even if the potent selling in $AAPL, $IBM, and $VMW carries over into tomorrow, the bears have an awful lot of work ahead of them if they expect to reverse the uptrend that began in September. At various points throughout this rally, the broad indices have brilliantly absorbed heavy selling in the cloud-computing names, materials, and financials. While this time may be different, and the market could easily sell-off along with Apple, I am reluctant to go against the prevailing trend until I see some more hard evidence in the price action.

Eventually, this market will experience, at a minimum, a sharp 3-5% correction. While many charts appear extended, others are setting up impressively. Cherry-picking the frothy names and ignoring the ones that have formed sound bases is the sign not only of a serial top-caller, but also of a long-term money-loser. If you are wondering where the one-trick pony bears have gone since September, you should probably check the same caverns where the bulls were hiding in 2008.

Instead of choosing a gang and running for cover when the rival crew is in control, a better approach is to avoid that neighborhood altogether and focus on rigorous daily work, while respecting the prevailing trend, price action, and volume.

____________

____________

____________

____________

____________

____________

Comments »

____________

MARKET WRAP UP 10/14/10

After yesterday’s continuation higher, the bulls took a breather today as the S&P 500 finished down 0.36% to 1173. In what is becoming an increasingly common occurrence, the market gave the bears some hope in the middle of the day that we would see more of a prolonged sell-off. Instead, the bulls once again presented themselves in a meaningful way to scare off any serious sellers. The nature of a market trending higher is that we mostly see thrusts higher, followed by benign pauses. It is only when market players become so convinced and complacently assume stocks will obviously trade higher, that we see a correction.

After-hours, I see that $GOOG is up 9% on an earnings beat. Should those gains hold into tomorrow, I would expect to see the Nasdaq Composite Index have a solid day. As I noted last week, just because we are in earnings season it does not mean that the volatility will automatically take the market lower. In the short term, a huge move higher tomorrow may be a good time to lock in some profits for the sake of discipline.

With that said, I know why the caged bears are crying, and it is because they are fighting a potent trend that formed in early September. Roughly six weeks later, the bears are equally as inept at calling any type of top. Eventually, the tide will change and the market will likely see a 3-5% correction. However, whether that sell-off happens tomorrow, next week, or next month is anyone’s guess, regardless of how aghast the bears are with a market that seemingly defies gravity.

____________

____________

____________

____________

____________

____________

Comments »