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MARKET WRAP UP 08/19/10

With the Philly Fed seeing its worst reading in over year, combined with weekly unemployment claims moving back up to 500,000, the market had every excuse it needed to sell-off this morning. And sell-off it did. Just as the New York lunch hour approached, the S&P 500 hit its lowest level of the day, at 1070. For the remainder of the session, the market attempted to put in some type of bottom, as the S&P finished down 1.69% to close at 1075. As we have seen for many months now, volume ticked up on the heavy selling, and breadth was unflattering. All in all, today marked a sound thrashing by the bears.

Nonetheless, from a technical perspective all that has really happened is that we have retraced the move we made from this past Monday. The S&P, along with many other key indices and sectors, did not break below those Monday lows. As you may recall, earlier this week I talked about the idea of how the bulls needed to present themselves to defend the key multi-month support levels. Well, we are right back to that scenario. The bulls absolutely must defend these current levels, in order to avoid a major breakdown.

You might notice on my updated and annotated daily chart of the S&P 500, seen below, that I tightened the channel lines for the multi-month broad channel. I think the new channel reflects just how tight of a range we truly have been navigating these past three months. Note that any attempted break from the channel, in either direction, has been aggressively faded.

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Updating the daily charts of some other key indices and sectors, the predominant theme is that, despite today’s vicious selling, we are either slightly above or directly pinned to Monday’s key multi-month support levels.

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With options expirations tomorrow, we can expect to see more whipsaws from this market. With that said, the multi-month support levels that I outlined above are of the utmost importance. A major breach of them tomorrow will likely beget even more selling. Similarly, if the bulls can hold these levels, yet again, then the stage will be set for a run to the very top of the trading range. While I know that sounds like “we can go up, or we can go down,” that is simply the nature of a multi-month, indecisive stock market that has been trading in a tight range.

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[youtube:http://www.youtube.com/watch?v=P4TbrgIdm0E 450 300]

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MARKET WRAP UP 08/18/10

In front of some key economic data tomorrow, the market nudged slightly higher today. Both the morning gap down and the early afternoon bull run were faded, as traders sought to avoid making bold bets in front of tomorrow’s headlines. With the S&P 500 closing up 0.15% to finish at 1094, the 1100 level remains a key battleground area since the bears gapped us down and held below it last week. Volume was lethargic, while breadth was unimpressive, with energy the clear laggard.

As you can see in the updated and annotated daily chart of the S&P 500 below, the area just above our current price is proving to be a real test of mettle for both bulls and bears.

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The Nasdaq Composite Index held support on Monday, but is already up against some tough resistance in the form of the 50 day moving average (see chart below).

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Let’s take a look at black gold for a moment. The monthly chart may very well be a good illustration for how 2010 is starting to shape up. After the euphoric bull run and subsequent crash in 2008 and the first half of 2009, the past fourteen months have more or less rendered crude oil to be dead money. The pink line in the chart below is drawn from highs of June 2009.

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Finally, I urge you to hone in on the financials. While their ETF has held on to the key $14 level, we have yet to see any inspired buying. Should the bulls manage a breakthrough and rip this higher, I expect the broad market to surge through that key 1100 level, dragging many bears with it.

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UPDATE: Much props to our resident King of the Peanut Gallery (KoPG), Turd, for telling everyone to take the day off earlier today. Agree or disagree with his views, no one can deny that Turd has confidence in his bold calls. Well done!

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[youtube:http://www.youtube.com/watch?v=CIRazQMIS-Q&feature=fvst 450 300]

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MARKET WRAP UP 08/17/10

During my wrap up last evening, I discussed the prevailing emotion in traders as being one of disinterest and/or frustration with the current market. After last Wednesday’s swoon, we experienced three doji days of amorphouse price action. Just as many traders were doubting the ability of the bulls to rally (and the bears to take us lower), citing excuses such as, “things just do not feel right to me,” and “this market is broken and cannot rally,” I noted that a more objective look at the daily charts of the leading indices and sectors pointed to key support levels holding. With paralyzing emotion often signaling some type of a bottom, the S&P 500 rallied 1.22% to close at 1092. Breadth was strong, while volume continued to reflect light summer trading.

As the updated and annotated daily chart of the S&P 500 illustrates below, we have held support exactly where the bulls needed to. The fact that we held above the late July lows is a good sign that the multi-month inverted head and shoulders bottoming pattern may be more legitimate than the head and shoulders topping pattern. Either way, a short term higher low was made. The bulls have now regained the short tern initiative after the past three days of indecision. However, as evidenced by some selling we saw into the closing bell today, this rally will be a true test of mettle for the bulls. In the face of profit-taking, they must provide an underlying bid to the market.

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Despite their victory today, the bulls have a good deal of overhead supply to contend with in the coming days, should they attempt a winning streak. Similarly, the technology bulls also held support on the Nasdaq Composite Index, and I had been noting during the past few days that it was imperative for them to do so.

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Updating some other key sectors and indices, the prevailing theme is that of the bulls holding support exactly where they needed to.

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Looking ahead, the bulls are likely to push us higher in the coming days. However, I would be surprised if we see more moves like we did today. I am looking for more of a grind higher during the rest of this week. Depending on how charts begin to take shape, combined with the signals of The PPT, I may start to scale out of some longs. For now, though, I will give the bulls a chance to take my holdings higher.

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TOTAL PORTFOLIO:

EQUITIES: 58%

• LONG: 58% ($NOG $LVS $MELI $LCAPA $BZ $HMIN $ISLN $RDWR $CMI)

OTHER INSTRUMENTS: 8%

• $TBT

CASH: 34%

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[youtube:http://www.youtube.com/watch?v=5qz94yveXgQ&feature=related 450 300] ___________

MARKET WRAP UP 08/16/10

Despite widespread talk in the media over the weekend about the dreaded “Hindenburg Omen,” the market put in a rather unimpressive session today for both bulls and bears. With the S&P 500 closing up by 0.01% to finish at 1079, we have now put in a third straight doji day of indecision after last Wednesday’s bloodbath. To further support the idea of indecision, volume was weak, while breadth was mixed.

This type of market action frustrates the majority of traders, including bulls looking for an immediate rip higher, as well as bears looking for continued downside. The prevailing emotion tends to be one of disinterest and apathy, as the concept of the summer doldrums reinforces itself. Despite the temptation to dismiss this price action as random, manipulated summer shenanigans, I see a rhyme to the market’s reason when I look across the daily charts of the major indices and sectors.

As the updated and annotated daily chart of the S&P 500 illustrates below, the recent pullback has not held only above the key late July support zone, but has also helped to develop the possible multi-month inverted head and shoulders bottoming formation.

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Turning to other key indices and sectors, the prevailing theme I see is that the fight is on between bulls and bears at key support levels.
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With The PPT, as historically precise as it has been, indicating a rally is imminent, combined with a skeptical, uneasy sentiment amongst traders, I expect the current support levels to hold in the short term. Accordingly, my portfolio is as aggressively long as it has been in months. While I am far from being all-in long, I am still putting enough risk in play to sufficiently back up my analysis.

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TOTAL PORTFOLIO:

EQUITIES: 52%

• LONG: 52% ($LVS $MELI $LCAPA $BZ $OVTI $ISLN $RDWR $CMI)

OTHER INSTRUMENTS: 8%

• $TBT

CASH: 40%

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MARKET WRAP UP 08/12/10

After yesterday’s bloodbath, today featured another win for the bears, albeit a muted one. With the S&P 500 closing down 0.54% to 1083, we are now back below the 50 day moving average, as that reference point served as resistance today. Above all else, however, today marked an indecisive doji day–a pause, if you will. I expect tomorrow to be a big move, and based on The PPT and its breathtaking historical accuracy, there is a good chance that move will be higher.

If we do, indeed, see a sharp gap higher tomorrow, the S&P could be looking at a three day bullish reversal pattern, known as an abandoned baby or morning star doji. These types of reversal patterns are rare, yet also highly reliable when they do occur. Of course, this is all theoretical at this point. Presuming a reversal is always a dangerous game to play with Mr. Market. However, it is something to keep in mind, should we rally.

As the updated and annotated daily chart of the S&P 500 illustrates below, after yesterday’s big marubozu candle down, today was a much more benign selloff.

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Updating some key daily charts of the major indices and sectors, the Dow Jones Transportation Average printed a bullish reversal hammer candlestick today. As always with hammers, we will need to see confirmation to the upside before we get cocky.

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Continuing with an ongoing theme, the Nasdaq Composite and Russell 2000 (small caps) are relative underperformers, while the emerging markets ETF is by far the best major chart that I see.

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The financials held in tough today, and the bulls defended the $14 level with vigor.

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As for my portfolio, I added more to $ISLN, and bought $LCAPA today. I like both charts, as they have been outperformers since April. If the market bounces back here, I want to be in the leaders who are “flying the friendly skies,” above all of their major moving averages.

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TOTAL PORTFOLIO

EQUITIES: 40%

• LONG: 40% ($LCAPA $BZ $OVTI $ISLN $RDWR $CMI)

OTHER INSTRUMENTS: 8%

• $TBT

CASH: 52%

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MARKET WRAP UP 08/10/10

To almost no one’s surprise, “Fed Day” comprised of some nasty intraday swings, yet did very little in terms of clarifying the next big market move. Despite the morning selloff down to 1111, the S&P 500 managed a post-Fed announcement rally to finish down 0.60% to 1121. More importantly, the pattern of higher highs and higher lows since July 1st remains in tact, despite the choppy price action. However, breadth was weak, as healthcare and consumer staples were the only major sectors in the green, indicating the overall lack of willingness of traders to aggressively trade the Fed Day with conviction. Volume was also predictably heavier than yesterday, as the news driven day was the genesis for the wild price swings.

With eight closes in the red over the past eleven trading sessions, the broad market indecision continues. One would think that the bears should have been able to at least break and hold below 1100, given all of the red days of late. However, the bulls have proved resilient, as evidenced by the still intact uptrend on the updated and annotated daily chart of the S&P 500, seen below.

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Updating a few of my broad market “tells,” I see some more consolidation before $GS, $FCX and $IBM can move higher.

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The summer doldrums have no shame this year. Eventually, we will get a market that is more fun and easier to trade. Until that happens, equities remain stuck in the middle with you.

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

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(Warning–Violent)

[youtube:http://www.youtube.com/watch?v=LLTqecGbdCc&feature=related 450 300]

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