The Insightful Trader

Market Commentary

Misdirection

by on Apr.28, 2009, under Market Commentary

Ok, I admit it. I don’t have a clue what’s going on at the moment in the market. Two days in a row now, we’ve been down strongly overnite and during the pre-market, but within 30 minutes of the market open, it’s like it never happened. Typically, we’d get some bounce from the pre-market selling, and then we’d see some downward pressure come back into the market. Hasn’t even been close. Though we ended slightly down on the day, this market is not in any hurry to roll over. Buyers seem to be lurking behind every corner.

Even though the market seems locked in a narrow 25 point trading range, there have been some nice moves for intraday traders in certain stocks. BIDU had wild day and DNDN had some extreme trades that brought out the exchange to review before saying trades were legit. Nothing like a 50% drop in a few minutes. Should be active  tonight if they get reopened. In after hours here PNRA getting hit for having expected earnings which weren’t bad, but disappointing enough for it to be down about 10% as I write. Of course it’s had a spectacular run since November. For other non news stocks we’ve had just enough to pullback to relieve most the overbought indicators on the indices in general.

Techs, which have been the flavor of the day lately, had a pullback today led by BRCM and MSFT. Ag stocks were basically flat while solar and energy stocks were down slightly. The financial stocks were down slightly with the BKX down about 3%. In other markets, gold got smacked for about $14 or 1.5% to close at 894ish, it too in the middle of its recent trading range, while silver got hit for nearly 4%. The dollar continued showing some strength.

Now seems to be a good time to keep your head down unless you’re extremely nimble, until we see some direction. nasi-28apr09

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Hard to Keep a Bull Down

by on Apr.24, 2009, under Market Commentary

After suggesting a couple of weeks ago that I foresaw the 875 level as a possible bounce level, we hit 875.63 before backing off the past few days. However, we haven’t had much of a pullback as the market ramped the last 30 minutes yesterday into the close.

Amazon reported better than expected, may be time to take  some profits if you haven’t already done so, for those of you who followe us into that trade. MSFT was about inline. Techs continue to lead this market with some amazing moves in the sector the past week.

In other fronts, the dollar got beat up pretty good during the night, while gold hit the 911 range overnite. Gold will be coming to it’s resistance level here shortly. I took a small position in GLD yesterday thinking that we may have seen the bottom. If we break the 870ish level from which we made a double bottom last week, then I’m gone.

Where do we go from here? Our intermediate rally is getting a little long in the teeth and we’re probably due for some pullback. The question is, have we already seen it with the 50 point pullback we had earlier in the week, before we push further. In my humble opinion, earnings have held up a little better than I anticipated,  though admittedly many companies are simply beating the revision, the absolute numbers still not that bad in some sectors. Forget the banks, they’re all manipulating and no one including themselves, know what they’re really worth. As you can see from the chart, some key levels to watch both upward and downward. We have a potential H&S formation forming on the SPX here that bears watching. A break below the mid 820 level sets us up for a potential pullback to 780ish range.

spx-60min-23apr09

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Pullback Time?

by on Apr.15, 2009, under Market Commentary

After rallying an additional 80 points the past week or so, the market finally gave up up some serious gains today. It peaked right in the middle of it’s resistance area at 864. Financials were the big losers today led to the downside by GS which gave up nearly 15 points despite doing a good job of beating its numbers.

Most of the major indexes dropped considerably, with Dow giving up 1.7%, the SPX -2%, and the Russell 2000 slightly over 3%. The SOX held up relatively well dropping only a slight .24%. Think this may change based on INTC’s release after hours tonight. Though the earnings were okay after heavy revisions down, the outlook was not pretty and INTC was down about .50 in after hours trading. This could weigh on the sector in tomorrows trading.

As stated earlier, financials, after being the leaders in the recent up move, took a pounding, coming in for some serious profit taking. It’s notable that SKF was up almost 10% today and FAZ nearly 20%. In other markets oil was slightly lower, as were the precious metals while the dollar was mixed, though it seems to be rallying some here overnite. Don’t forget we have the Beige Book release tomorrow after lunch. Usually good for some fireworks.

Where do we go from here. I think we’re in for a small pullback and have drawn some natural support levels seen on the chart below. I ‘ve also included the most recent video from Market Club which shows possible fibonacci retracement levels. If you noticed the VIX today, was down slightly, even as market dropped. Hmmmmspx-60min-14mar09

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Positions in stocks mentioned – long FAZ, SKF

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4th Week in a Row

by on Apr.03, 2009, under Market Commentary

The market recorded another up week this week, marking its 4th in a row. After a strong sell-off Monday to pull back to the S&P 780 level, we now stand at the 840 level with another positive week behind us. Of course this just puts us back to where we were in mid February, but it’s a welcome relief.

Today was one of the choppiest days we’ve had in awhile, rallying into the close to finish up only +39 on the Dow. Techs, other than MSFT, were leaders, led by RIMM which reported much better than anticipated after the close Thursday and managed to hold it’s after market gain today to finish up over 10 points for the day. KLAC, GOOG,IBM and NSM did their share too. The SMH closed at 20 even, up over 20% the past 3 weeks. The Q’s finished at their highest level since the end of October.

Other stocks of note today were AMZN, which broke above some horizontal resistance in the 77 range and closed over 78, not that far from its high of the past year. When everything else is still trying to regain lost ground, AMZN is now up over 100% from it’s low at 35 in November. The financials had another good day, especially in the last few minutes when JPM surged over a point in the last 30 minutes of the day. The exchange stocks did well today with CME and NDAQ  doing well. GS surged another 5 points+. 

Ag stocks were up slightly today, while solar was pretty much a mixed bag even though energy stocks had a good day led by the oil service sector. OIH gained 3.72. Real estate stocks did well as witnessed by the nearly 10% move in IYR, the DJ Real Estate Index. The weak group today were the metals as gold and silver both continued their drop. Gold was off another 12.90 to close under $900 at 896. The result was continued pullback in the precious metal stocks. The dollar made an important breakout above the 100 range against the yen today and was basically flat against the Euro.

So where do we go from here? It’s starting to look a little toppy short term, but not extremely so. Everyone is talking about the 850 level being an important resistance point, but I feel we could push higher than that to maybe the 875ish range before we hit too much resistance. With the incredible move we’ve already had, it’s hard to get excited about chasing anything here, but as we know the market can keep climbing on weak volume. There doesn’t seem to be much selling coming into any pullbacks. Everyone is giddy over the Feds recent moves and the worldwide monetary expansionist policies. Even a terrible jobs number was met with the refrain that the worse is over. All I can say is keep tight stops but don’t get caught trying to pick the top either.

spx-02mar09

 spx-15min-02mar09

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Sitting on the Sidelines May Be Getting Dangerous

by on Mar.26, 2009, under Market Commentary

Another great day. Both the Dow and the S&P were up over 2% again today after staging a vicious late day rally yesterday. The Dow gained another 175 points and the S&P another 18 to close at 832.86 The market gapped up this am, pulled back some at 10:30 and then proceeded to steadily climb the balance of the day with the exception of a rather weak try by the bears to take over in the early afternoon, which was quickly squashed. Metals were flat for the day, the dollar rebounded some and oil closed at $54.

So is it end of the quarter window dressing, short covering, funds worried about missing the boat; we’re not sure, but we’re loving the result. There are a lot of stocks that are up over 50% in the past three weeks and I think a lot of money managers are starting to feel the heat. Even though common sense and experience, not to mention longer term technical indicators all show that we’re in the middle of a bear market rally, if you’re sitting on millions and/or billions of dollars in cash, ie T-bills, you’ve got to be getting pretty nervous here. The higher we go, the more the pressure builds. Here we are now up for the year and if you’re sitting in cash, not a good report to send to your shareholders and clients in a few days. So despite the fact that we’ve got some serious resistance coming up here shortly at the 840 level, I think we could still feel some upward pressure till the end of the month.

Today was tech day in the market. Techs were on fire. INTC was up 6%, KLAC was up 6%, CSCO was up nearly 5% and even MSFT which has been trading pretty weak lately,  was up $.95. Solar stocks had an outstanding day also, with FSLR up over 20 points at one time though only finishing up 16 for a 12%+ move today. LDK was up 32%, TSL up 40%, JASO up 42% and SOLF up 42%. AG stocks had a good day also with most the majors being up about 6%. The financials finally took a little breather and were basically flat on the day. Oils had a pretty good day with the refiners, TSO and VLO , leading the way, while the oil service sector was flat and the coal stocks were up 3-4% on average. 

The general feeling has been to not chase this rally and wait for a pullback, but what if we don’t get one, or was the early afternoon selloff yesterday it?  Though not inclined to chase any stocks here, this sector rotation we’re seeing is a positive factor. As you can see from the chart below, we’ve got resistance  overhead that may cause us a stumble and we may have to take a breather day, but this market continues to feel pretty darn strong at this point despite being over-bought on some of the short term indicators.

spx-60min-26mar09

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Taking a Breather

by on Mar.24, 2009, under Market Commentary

The market took a small breather today after it’s incredible day yesterday, which was to be expected. Surprisingly, most the day the market acted exceptionally well until some late selling about 2:45 hit us. Overall the market was down 2% on the S&P and 1.5% on the Dow, which dropped 115 points.

Tech stocks were slightly weaker than most today with MSFT, KLAC and BRCM all dropping 2.5% to 4%. AG stocks were mixed with relatively small moves, as were the solar plays. Energy stocks, including the services, were mostly down on the day by a couple of percent. Precious metals started the day off weak and stayed that way all day with gold down about $25 on the day thought the gold stocks actually held up pretty well. The financials, the hot group the past week or so held up and in fact were doing well, until the final 2 hours when they came under some serious selling pressure. JPM seemed to be one of the the biggest losers dropping 2.46 while the BKX dropped 7.5%.

The dollar rallied some  starting it’s climb early this morning and was strong throughout the day, pushing the Euro back down to the 134.50 range. Big gainers today included SKF for obvious reasons and BIDU continued it’s upward move on some upgrades, though it too succumbed to some profit taking late. CME was the big loser today, dropping 27 points to basically give up everything it gained yesterday.

We’re in a pullback here. From the way the market acted most the day, not sure its going to be a big one. It seemed that every time we started to retreat today, more buyers came in. There were not a lot of good short opportunities today until the very end. Market just feels like it wants to go up, but as you can see from the chart below, we could easily pull back to the trendline, which isn’t that far away. I think most professionals seem to not be so intent on shorting here, as just waiting to buy until we get a pullback.

spx-60min-23mar09

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Dollar Plunges – Gold Screams Higher on Fed Move

by on Mar.19, 2009, under Market Commentary

The dollar made one of its largest one day drops ever as gold, on the verge of breaking near term support earlier in the day, rebounded over $35 on the Fed’s surprise move yesterday. The Fed’s move to throw another $750 billion into the mortgage market, as well as to announce they were definitely going to be purchasing treasuries, after jaw-boning about it for months had some serious implications in the markets.

The Fed, in effect, is saying that they’re not worried about inflation at this point, if ever, and that lower rates are here to stay for awhile. The dollar propmptly dropped nearly 500 points against the Euro almost ieurusd-30min-18mar09mmediately (see chart).

 

 Gold meanwhile ,which was down nearly 4% prior to the announcement was almost 3% HIGHER after and silver, which had been down 5%, ended up approxiately 1% higher. So some absolutely huge moves in the currency and precious metals market. Pity the traders that took late lunches yesterday because the reaction was swift and deadly if you were on the wrong side of some of those markets. Seems there is some concern amongst the Fed that perhaps things weren’t recovering or looking good enough for the end of the year. Perhaps we should have done a better job of interpeting Bernacke’s comments on his TV interview when he said he saw the economy recovering by year end. He forgot to mention that he was planning on bringing a loaded gun to the meeting that the rest of us didn’t know about.

The stock market response was rather muted compared to the other markets. After being down initially in the am after a spectacular day prior, they gradually climbed the rest of the day heading into the release. Once the release was made, we had 3 violent moves, first up, then down as profit taking ensued, and then back up to close +90 on the Dow. Once again the financials were huge winners and why not. The Fed is giving them a license to print money, and that may be the main tactic here, to let them earn their way out of trouble, much like what happened in the South American debacle in the 80’s. Many of the financials, including the XLF were up in excess of 10% after the announcement. Hell, even AIG was up 40% and C closed up .69 which is a lot on a $3 stock and FRE and FNM were two of the biggest gainers percentage wise, both up about 80% on the day. GS, which had been langusihing all day, spiked up nearly $6 to close at its highest level since October. Of course the big losers on the day were SKF and FAZ which both got hit for about 20% of their value.

In other market news, the techs were again strong with IBM’s announcement of interest in acquiring JAVA, which was up in excess of 50% as a result. The SMH had another good day as did BRCM, INTC and KLAC. Oil and drilling stocks continue strong as oil is close to taking out resistance at the $50 level. FSLR had a glowing day, up nearly 10 points for awhile before succumbing to some late profit taking and PBR, one of my favorites, continues to climb, up nearly 100% now since its low in late November.

Now the fun part begins. As I stated a wek or so ago, the 800 level on the S&P is our first real resistance level, and its notable that we hit an intraday high yesterday at 803 before closing at 794. The short term bulls definitely have the bit in their teeth, I thought Cramer was going to have the big one he was so enthusiastic about the Fed’s moves. So it’s going to be real interesting to see what happens the next few days. This low 800 level is pretty formidable resistance and I expect we may get a slight pullback to gather some re-inforcements before we can storm over it. But in a rapidly becoming government controlled market, who knows, we may gap right over, but I think not. I’m still bullish for the short term, but as I’ve said several times, it’s not going to be a smooth ride.

spx-daily-18mar09

 PS: An updated currency chart from early this am and gold chart:

euro-updated-19mar

gold-19mar09

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Market Sputters

by on Mar.16, 2009, under Market Commentary

The market made a choppy but steady climb today until about 1:30 when it peaked at the 775 range on the S&P, while the DOW was up 150+ points at that point. It was too much too fast, and serious profit taking set in for the last couple of hours of the day. Techs were a drain on the market all day with AAPL and the Q’s selling off from the start aided by a downgrade on SNDK,  as well as weakness in INTC and MSFT, before attempting a noon recovery which just got them back to end before the late afternoon slam.

The Ag stocks had a good day led by MON +3.62 and energy stocks did as well, up soundly across the board as oil was up slightly.  Opposite of Friday, the solar stocks wanted to sell all day with FSLR getting whacked for about 6 points in the after-market as I write this. The morning move up was once again led by the financials until the pm selloff, when they rolled over hard, led by the remaining brokers, GS and MS. Percentage wise C and FNM were both up about 30%, but are still penny stocks. There were some great afternoon short trades if you were nimble. Precious metals were slightly lower on the day. The net result was the SPX down a couple of points and the DOW down 7.

After hours AA cut its dividend to $.03 from $.17 and announced a large stock offering, which  dropped it about a point so that could cause us some additional weakness in the morning hours. Permabear N. Rubini called the recent move up a ‘dead cat bounce’. As I stated in the weekend report, we were getting over-bought in the short term despite being extremely oversold on the weekly and monthly charts. I took my own advice and sold most my longs in the move up this morning and in fact put on a small short position with some Q puts.

We need to see the S&P not break too far below the 740 level, but as shown, we have some horizontal support at the 730 level with even more  at the 710 area with our original up trend line. As you can see on the chart, the steep move up was unsustainable for much longer, just too steep. As we approach these support areas I’ll be watching the market closely to see if we can initiate some long positions again.

spx-15min-15mar09

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A Needed Day

by on Mar.15, 2009, under Market Commentary

We had a needed day Friday. Some expected selling  thru the morning,  and then a nice steady build throughout the rest of the day. A lot more of a mixed market today however as tech was mixed though the semis did ok, MSFT was still a drag. Financials were mixed with the brokers acting well but most everything else pretty mixed, a few up and a few down. Oils and coal stocks pulled back slightly overall, while precious metal stocks were all slightly up.

You would have thought the weakness in the other energy stocks would have transferred to the solar stocks as usual, but instead most had a decent day led by FSLR which finished the day up about 3points to cap a spectacular, nearly 25point move, this week. The Ag stocks were slightly down on the day. So a very mixed bag today but not bad for a Friday the 13th.

I’m still optimistic for the next few months as were way oversold on a historic basis and of course all the pundits who last week were calling for new bottoms much lower are all bullish now. However, realize that I look for this to be a choppy ride with some backing and filling along the way. We’re still in a major, perhaps long term down trend and until proven otherwise, this is a bear market rally. As promised, here is a one year daily chart with the fib lines drawn in going all the way back to the high in Oct 2007. 

I realize its hard to see this big of a time frame on such a small chart so here are the key levels. Our first major resistance is going to come here shortly, at the 800 level as we have both horizontal and a down trend line in that area. The first fib resistance comes in around the 880ish area, and then after that the 38% fib comes in around 1015. At some point before then we’re going to run into the critical 200ma before we hit there. So for the relative near term, getting back over the 800 level will be enough, though I have a sneaky suspicion it may take us a couple of tries if it can even do it but let’s hope. Even a few good months would perhaps help the psyche of the country.

 Hard to believe its been 18 months already since the market started rolling over. Of course the problem is that 80% of the selloff has come in the past 9 months. The continued worldwide slowdown doesn’t portend well for companies earnings this year and their is much debate over what the real P/E of the S&P is and will be this year, not to mention where real bottoms are made. All I can tell you is watch the charts, unlike companies or CEOs they don’t lie.

spx-daily-13mar09

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Another Impressive Day

by on Mar.12, 2009, under Market Commentary

After taking a breather yesterday, the market resumed it’s upward bounce in impressive fashion today. The market opened  with a 6-7 point pullback the first 15min, but from then on it was onward and upward the remainder of the the day so that by 10:30 we were right in the middle of a resistance zone in the 735 area. Pulling back slightly to catch it’s breath, by noon we were in a steady uptrend which gained momentum throughout the rest of the day. The net result was a DOW that closed up an additional 3.5% and a S&P that was up slightly over 4%. This was despite MSFT which didn’t participate at all, though once again the techs and semis were strong across the board.

Oil prices moved higher, above $47, as did gold, while the dollar showed a little weakness. The oil stocks did not really participate today until after lunch and then made a nice catchup move this PM. AG stocks failed to participate at all, trading pretty much mixed throughout the session. Financial Stocks were once again the shining stars today with many, such as COF, JPM and BAC up over 15% today and the BKX being up over 11%. Brokers were also strong. The result is that some of the financials are up 30% the past three days. GE, now considered a hybrid, was up  over 10% again today. Everyone’s favorite 2-1 financial trader SKF dropped a whopping 30 points today so that in 10 days its had a perfect round trip from the 140 range, up to 265ish and back down to 140ish again. Breath taking for those on both sides of the trade.

skf-15min-11mar09

So where do we go from here. I’ve taken the liberty of drawing in some near term resistance levels in the SPX 60min chart below. Despite over a 500 point move in the DOW the past 3 days, we’re still only barely 1/2 way recovered from our breakdown at the 800 level just a few weeks ago. So even though I’ve been eagerly awaiting this bear market bounce, I think we’ll have some backing and filling as we make our way upward. How far can we go? The pundits are calling anywhere from the 800 level to 900 and even a 1000 on the S&P. We’ll look at some fibonacci levels later, but for now I took a few of my long positions off the table and lightened up a little on some of the others, notably AMZN and the Q’s. I’m still long some XLF calls and some AXP from the 10 area.

spx-60min-11mar09

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