Who’s Having Sex with Rexx?

I made this timestamped message for 12631 members inside The PPT service yesterday:

chessNwine

$REXX is an awesome setup. Coiled tightly on weekly timeframe too.

03:08:26pm EST on Wed, Sep 7, 2011

Today, REXX is breaking out in what appears to be a significant way. A big hat tip to 12631 member @TonyRago who noted the breakout in our chat room today. Now, you may think that you “missed the move,” but when you look at the weekly chart, this heavily shorted energy name looks to be just getting started. Keep it on your watch list going forward.

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Just as the market resisted the morning breakdown, it also faded the idea of another sustained move higher today. Thus, we are essentially reverting back to the flatline today. For daytraders, unless you have a specific game plan it is usually best not to trade much on a day like today. The daily candle on the S&P 500 is shaping up to be a doji, which simply means a day of indecision. The trading range today is also much tighter than what we have become accustomed to over the past few weeks, which means traders seeks big action in either direction are probably going to be disappointed for the remainder of the session.

As I noted earlier, the utilities are outperforming, which could mean that investors are seeking yield in other places besides government bonds. Finally, keep the gold miners on watch as they continue to outperform just about all other assets today.

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The downside was quickly rejected this morning, and the bulls are off and running now. My strategy for this market has been to methodically leg into more positions only as the market proves its worth. The psychologically important 1200 level was dealt with well this morning, and it is now bears holding heavy shorts who have to be a bit panicky at how quickly the shallow dip was bought. Thus, I am inclined to look for aggressive short squeeze plays.

The leaders today are technology, energy stocks, and even utilities are turning in a solid session thus far. The financials started off weak but are now trying to get caught up. It is also interesting to note that gold bullion and the miners are higher, as the metal itself had been a proxy of the fear trade throughout the summer. One gold miner that looks to be having a go at a clean breakout is BAA, a name that JakeGint has mentioned in the past here on iBankCoin. Keep an eye on it.

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Consider going long UNG (ETF for Natural Gas) before President Obama’s big jobs speech Thursday night. There is a decent chance he will talk up natural gas as a way to grow that industry and create more (cleaner energy) jobs. As you can see below, the chart has been destitute. Even if he does not mention it, hey, it is still a chart that has been left for dead for years on end and should entice contrarians to have a serious look at it.

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Direct Video Link Click Here

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The bears are objecting to this rally based on lack of volume. Over the past few months, they have indeed been correct in the sense that each rally has been a short-selling opportunity in the face of a light volume drift higher. The issue now is whether the intraday reversal yesterday and today’s follow-through mark some type of intermediate-term inflection point.

Since price is what matters most, the volume argument is one that only matters when it is convenient for either bulls or bears. In other words, you are better off focusing on the price action for one major reason, which I have consistently stated since I began writing under this tab–We remain in a secular bear market since the year 2000. Hence, volume is inevitably going to be light on many “up” days, as there remain an abundance of skeptics in light of the fact that we are not in a bonafide secular bull.

As I discussed earlier today, keep an eye on many inverted head and shoulders bottoming patterns on a variety of charts. To be sure, they need to confirm to the upside before the bulls can get too cocky. In particular, I am focused on the transportation stocks, which have been notable laggards for many months. A turnaround would be significant, in my view, and portend that the bears have gotten ahead of themselves for now.

If the trannies can confirm this bottoming pattern, I think it will speak more volumes about the market than volume. Looking for an upside breach above 4,700 on the Dow Jones Transportation Average (or above $86 on the IYT ETF) to confirm.

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