And what a day is was indeed... I have some very interesting market analysis tonight. Be sure to check out all of the charts in this post!
In the pre market we had earnings from more home builders and as expected the results were terrible. Perhaps even worse than some were expecting. But one thing that stood out was that the housing problems appears to be spreading into the commercial construction now. This was further reinforced when the Durable Goods data was released this morning. It was showing capital expenditures had declined whereas business spending was concerned.
Then we also had today the growing fear that the sub prime (and now the prime) lending issues could erode some of the big M & A activity. Large company buyouts, mergers, etc. would be impacted by more problems in the lending sector. And today a lot of companies that are already in a takeover (but not yet finalized) pulled back some as investors were growing fearful that the money needed to make the acquisition may not be there now. This may be more fear than reality but it is still worth mentioning as it is important. Once private equity and/or other companies can't secure the assets they need to do take overs, mergers, and acquisitions then the bull market will then be running on only 3 legs.
These events sent the market into an outright selling frenzy. At the end of the day all three of the major indices recovered some but in my view this was not all bargain hunters stepping in to start buying. It was a lot of shorts covering at the end of the day to take their profits. When the major indicators today showed the panic selling was underway hedge funds and other very large money movers started shorting just about anything with downside room. And these hedge funds that shorted large amounts of money today made a good deal of cash today when in the last hour they started covering and banking their profits. Remember that on just about any down day that at 3pm you will see a bounce. The last hour is when shorts start covering and bargain hunters come in for the kill. Today I feel it was more short covering than bargain hunters.
So that is what got the selling started. Early in the morning RebelTrader swing trade NightHawk Radiology (NHWK) gaped up at the open (last night they released good earnings) but I quickly saw what was looking like heavy profit taking and the price was going to fall through the floor. So I sold my entire NHWK position. That swing trade provided me a 5% gain today. Later I added to my position on FEEC when it broke above the next buy point. Because of the market conditions today I raised my stop level to $1.60 so that if FEEC fell back too much I would exit the trade at break even. And that is what happened. FEEC is still good, I will re-enter when the time is right.
That leaves only one currently open swing trade and that is WWAT. And that is sitting today at a 16% gain.
Ok, now I'm going to move on to some in depth analysis of the market in general. Some of the things I'm going to say in the next few paragraphs may be a surprise. What I mean by that is some of my analysis goes against some of the talking heads on TV. But I call them like I see them and I feel we still have trouble ahead of us. There are some significant resistance levels that need to be overcome in order for me to believe that the tech sector is 'hot' as some are saying. I'll start off with that. The chart shown here is the "SOX" as we call it. It is the Semiconductor Index. Look at the chart and observe that currently we are right up against a resistance level. If the overall market continues to be weak then this resistance level will be strong and the index will turn around (and the tech stocks with it). If however the index is able to "break through" the resistance then I will be bullish on tech. But until it does tech remains questionable and I will trade it with extra caution.
This chart is the NYSE index of new highs - new lows ($NYHL). Look at this chart carefully. I have indicated where the bear market was and the current bull market is. But what I want you to notice is the blue trend line drawn above the new highs. See how over the past 3 years the trend has been declining. This tells me the economy is declining and taking companies with it as reflected in the decline of new highs over the past 3 years. Some interesting things to ponder.
Now I am not saying that we are on the verge of an outright bear market. But I am saying that we are at a difficult time and finding good swing trades will be tough. But I will do my best to find them for you. There is always money to be made... finding the right plays at the right time is what I am here to help teach you how to do.
Good night Rebels!
7 Comments:
Great charts !!
I'm glad I found your web site. Thank you for the great work. I check your site many times a day.
M_H
Excellent charts.
Chuck,
Great stuff!
Daniel
Chuck, Thanks for analysing the market conditions for us. I check on your site a few times a day to see what your comments will be. Always in good detail. Hope your training will help me make better trades.
Michael
you have some of the best charts on the net. I like your analysis of the new highs/new lows chart. Nobody has done that before. It says a lot, thank you
one of your subscribers: Craig
Good work...
Awesome site
You really know your stuff..
Keep up the good work.
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