Why is Sentiment Seemingly So Mixed?

If anything, the market has become a little more clear and yet also a little more bizarre since my 6/10/10 post about Indecision. By that I mean there has been a clear trend established in the upward direction for the broad indices, all breaking their 200SMA and moving through and toward their 100 and 50SMAs shown in the charts below.







But bizarre as well, as highlighted in the chart of the Q's. During this recent uptrend volume has continued to wane. What is up with that? A stringent technician would interpret this as a sign of a weak rally and look to fade it. Rising prices on low volume leads to a rollover. But looking closer, many stocks and sectors that fell in the downturn have not only based but started moving higher as well. Does this mean we are out of the woods? Some examples:







I also find names that fell, never rallied and seem ready to lose there support again.





So what to make of this? We are not in a trending stock market at the moment but rather in a market of stocks that are behaving how they want when they want outside of the broad indices. This is why there are so many traders that are bullish AND so many traders that are bearish. But this is the market we have. So what do you do about this?

Research. Whether you trade technicals or fundamentals do your research and determine which stocks you like and which you do not. It is not enough at this point to look at a sector and play the historical leaders just because they have been leaders. And as always be nimble. Today's winners could be tomorrow's losers. Be prepared, don't hope or guess, and (especially now) do not blindly follow any recommendation you see or hear without researching it yourself.

Trade'm well tomorrow.

TRADE IDEA: Look at Whirlpool, WHR, on today's break out of a symmetrical triangle. Started lower broke out, retested the trend and held. And read the last paragraph above ;-)

The Problem with the SEC Single Stock Circuit Breakers

A departure from the charts tonight as I rant against "more stupid government financial regulation supposedly to protect the little guy but instead will work against them."

The new SEC Circuit Breaker Rules require that a stock be stopped for 5 minutes if that stock has moved in price more than 10% in the preceding 5 minutes. This rule applies only to stocks in the S&P 500, during a trial period until December 10. It specifically does not apply to the ETF's that include these securities. I have been stating over the weekend that should these circuit breakers kick in, there will be a further advantage to the big investment banks and HFT's over us little guys. Let me use Citigroup, Ticker C, to illustrate my point. C is in the S&P 500, but it is also in the Dow Jones Industrial Average of 30 stocks. Note that there is an ETF based on the Dow 30, the DIA. C closed at 3.88 today so a 10% move would equal 39 cents.

Suppose at 10:30 tomorrow Moody's downgrades a bunch of South American sovereign debt unexpectedly and it is learned that C is a large owner. The stock price falls 40c in one minute. C is now halted for at least 5 minutes, but the DIA continues to trade lower pricing in a 60c move for C. Large investment bank's and HFT's (who are now busy programming their trading systems to look for these types of swings) have their systems sell the DIA as C hits the 10% limit and simultaneously buy all of the Dow 30 except C. They have now created a synthetic short position in C, so they continue to capture the downside. They can unwind their trade as soon as the synthetic C stops falling, to capturing the additional implied move down at anytime, or if it keeps falling when the stock reopens down 60c and capture the 20c additional down move. Us little guys, without the ability to simultaneously trade 30 stocks are left to ride the exposure down and hope for the best.

I used this example because it was simple to illustrate but think for a while and you can easily apply this to other scenarios: 11:00 Leak that Surgeon General is issuing a statement that Aluminum causes cancer (AA/DIA), 11:30 Chinese Government declares war by knocking out Verizon land and cell networks, (VZ/DIA). You get the picture, I am not really getting very creative here. Think about it.

I thought the SEC was supposed to protect investors.

Now back to the charts.

Top 10 Ideas For the Week of June 14, 2010

The weeks just keep getting more interesting. This week there were not so many ideas to choose from. Here are 6 short ideas, 2 long ideas, and 2 could go either way, in no particular order. Keep in mind the market appears that to be at key resistance/support levels (except Nasdaq, see earlier post). Be attentive and ready for anything.

1. Chipotle Mexican Grille - CMG



Marching to 156.07 a retest of December 2007 All Time High (ATH), with support from a tightening 50SMA.

2. Sears Holdings - SHLD



Needs to get through 76.80 on the downside for a run to 70, 83.27 is resistance above.

3. Whole Foods Markets - WFMI



Diamond Top? 30 coming on a break below 37, with stops at 34.50, 31.7 along the way.

4. Whirlpool - WHR



Prepping for another move. A break out higher has a target of 123, lower has the target at 67.

5. Dendreon - DNDN



Holding the 100SMA but looking like a bear flag with declining volume. The target on break of the 100SMA is 32.33.

6. Express Scripts - ESRX



Above 53 can run but watch the shooting star Friday, it is a bearish sign and could push to bottom of channel.

7. RINO International - RINO



In a descending triangle, if gets under 11.19 it likely sees 8.25.

8. Apple - AAPL



A symetrical triangle is forming with a congestion area inside between 250-255. Breaking the trend (either way) sees 270 as resistance or 230 as support.

9. Mastercard - MA



Current level tentatively supports long positions to 215. Above that looks good to be all in to 232. Support below is at 195.

10. Goldman Sachs - GS



Next support is at 127 then 119.48.

BONUS IDEA: Callon Petroleum - CPE



Breaking above a symetrical triangle. Looks good for a run if can clear 50SMA at 6.02, target 7.25.

Some of these may take a while to reach their target, specially WFMI and AAPL. Trade'm well this week.

Crossroads, Uncertainty, Indecision ........ Not the QQQQs

Last week I put up a posting about the how the chop in the market was nothing for an investor, position trader or possibly even swing traders to participate in. A few days on and some nice time outside with the family and I am coming to another view on the Nasdaq. Although the S&P 500 and Russell 2000 are at key R/S or in a range (see charts for SPY and IWM on chart.ly), the Nasdaq looks decidedly weak. Let me illustrate with a few charts of the PowerShares QQQ Trust, ticker: QQQQ.



First look at the monthly chart. This has clearly fallen below the up trend line from the March 2009 lows, and a double top. Monthly volume on the chart is for the first ten days so I extrapolated it out for the month. Would be over 2 billion shares again at this pace, a solid level comparable to May.

Next the weekly chart



This also shows a fall below the up trend line. Fall was started with a long candle with increased volume. Now the weekly chart looks to be flagging before another move. Typically you would expect it to be down as a continuation. There is a bit of a conundrum in this chart though as the 50 week SMA has give support recently and is rising, but the other SMAs are flat and 20wk SMA proving resistance above. The MACD indicator is also signalling a downward trend.

Now on to the daily



Here there is clearly a descending triangle with descending trend line on volume as well. The SMAs are rolling over and converging, probably near 45 in a few weeks. RSI is leveling near but below 50 and the MACD is indifferent. This feels ready to fall.

The final bit of evidence for me is that the market leaders in this sector: Apple (Ticker: AAPL), Amazon (Ticker: AMZN), and Google (Ticker: GOOG) are are looking weaker.

This could all still blow up in my face of course, if the market decides it is time for a test of the 50SMA at 47.52, I am not counting on it but will be hedged against it.

What the F@$k is Going On?

After seeing the market become schizophrenic the last few days I wanted to put out some quick thoughts. I have been seeing a lot of charts where there is a strong bounce off of support, even with follow through, at the same time that the 20 and 50SMAs are crossing down through the 100 and 200 SMAs. I picked the first one I saw tonight Peabody Energy (Ticker: BTU) to illustrate what I see. Here is a kind of busy 2 year chart.



There are 2 sets of Fibonacci lines. The purple ones are from the July 2008 highs to the November/December 2008 lows. The blue ones are from that Nov/Dec 08 low to the January 2010 highs. Note first that this high was a 50% retracement of the purple range, so the blue lines create a further granularity underneath the purple lines. What to make of this? the 20 and 50SMA cross throughs are bearish signals. Many traders would go short based just on them happening. And you can see the initial 20/100 and 200SMA crosses did send stock price lower. Now the 50 crossing the 200 is signaling another leg down. But the 20SMA is sitting right there as support as well as the Fibonacci level. From the perspective of the Fibonacci levels BTU has regained 38.28 Fib level and looking to head to the gathering of of moving averages.

Here is a shorter timeframe to expand the recent action



Here you can see the added feature that there was a breakout of a small symetrical triangle adding fuel to the long case.

So what to make of this? Total confusion? - maybe. But I think that it is a reflection of the action in the broader market. Volatility is elevated creating broader ranges. Stocks are at or near critical support and resistance levels, so snapping through one has traders piling in or out. My conclusion: Outside of saying we are in a range, there is general uncertainty in this market. Adding the elevated level of volatility it is a market for brokers collecting commissions, and very nimble traders, day traders and some swing traders, not investors or, position traders. Those with more than a 5 hour horizon should be watching to see when this rollercoaster stops.

Trade for tomorrow:

Long Forrest Oil Corp, FST,


Clear air to 45 from here. support at 30.25 - 30.80, Thanks to @mikewill17 (twitter id) for asking about it.

Trad'em well.

Top Ten Ideas for Week of 6/7/2010

After a very interesting week here are my top ten ideas for the coming week. 6 short ideas and 4 long in no particular order. Keep in mind the market trend is lower, so longs are counter trend, be careful.

1. Genzyme - GENZ



Failure at 47.50 - 48 sees next support at 45 then 40.50 from 2004 (6 years ago - is that still valid?)

2. SL Green Realty - SLG



Going to test the 100SMA and dotted trendline, failure there sees 49.30.

3. Buffalo Wild Wings - BWLD



Going to test 35.26, failure there sees 30.90, 37.31 is resistance.

4. Chipolte Mexican Grill - CMG



Strong, if holds 142 area should see 156.

5. Electronic Arts - ERTS



A break below the 15.80 support would give a target of 10.80ish, woah!

6. Flowserve Corp - FLS



Cracking 38.2% Fibonacci retracement level, look for 80.79 next.

7. United States Natural Gas - UNG



Love this. Big break out on volume and followed next day with bigger volume. 9.35 coming.

8. United States Steel - X



Broken, 33.50 coming, get short.

9. SanDisk - SNDK



Like a salmon swimming upstream. New highs coming if holds 44.70ish.

10. VMware - VMW



Next key level is 72.87 to the upside, good support Friday.

BONUS IDEA

Priceline.com - PCLN



Inverted hammer says support will hold near 180. If not then look for 157.50, resistance above is at 190.

Inter-Market Connectivity

posted Thursday night:

Looks to me like everything converging on tomorrow. $USDX, $GC_F, $CL_F, $SPX, all right at key levels. Will NFP be the fuel or the fade? 7:27 PM Jun 3rd via StockTwits Desktop

Two things to note initially, first each of these broad market indicators had moved to key short term support and resistance levels on Thursday's close. The dollar index bouncing at 87.40 area, Gold between the 50 SMA and 1227 Fibonacci level, Oil at 74.50 and the SPX at convergence of 20 and 200SMAs. Coincidence? Second, look at the 20/50/100/200 SMAs. All rising for the dollar index and gold, and all falling for crude and the SPX. So at key levels and SMAs showing a bias. Hmmmm. Third, as the catalyst hit they all moved with a singular economic reaction, in the direction of that trend, gold and the dollar rose, and stocks and oil sank. Should you expect this? Yes!

All Markets Are Connected

This blog is about Technical Analysis but even a chartist can benefit from understanding how different markets interact. To me the key is the stronger dollar.



Friday's move indicates that the dollar is heading higher, at least to 89.02 a 100% retrace of the down move from the March 2009 highs to December lows. The break out of the ascending triangle, bounded by the 20day SMA would give a target of about 90. The flying dollar gave a boost to Gold which had retested 1200 earlier,



roaring back $20, putting the recent highs back in sight. It also reversed the up move for Crude Oil (West Texas Intermediate) dropping it nearly $4 from the high of the day back towards the 71.20 support.



Most importantly for this crowd, it drove the SPX down all day until it hit key support between 1057 and 1075.



Understanding and watching this interaction can often give clues as to the direction of the market you are trading before the impact is felt. So keep watching the the broader market for clues and absorb the impact to your world.