The Day (and week) that Was - July 28th 2007

The market got bad, then it got real bad. Sub prime problems have moved into the prime and corporate lending arena. A threat to prime lending would slow down large corporate buyouts as the necessary funding will become too expensive (and difficult) to obtain. The markets have been fueled over the last 18 months by the large M&A activity. A slow down of the M&A will only add to the already uneasy market. That is what happened Friday.

The growing fear is that the housing sector and financial sectors are no where near a bottom. And a failing housing sector is another indication of a slowing economy. I believe that the housing sector has a long way to go before it recovers. Today I asked around my town where I live to a few people selling their homes and have been on the market for many months. The reason that existing homes are selling so poorly is that the value that the sellers feel the home is worth is far above what buyers are offering. What could have sold for $300K a year ago is today getting offers of only $225K. And the sellers keep waiting for an offer that is closer to what they feel their home is worth. But the bigger problem is that as the economy weakens people will be offering even less. So home sales will continue to drop until a balance can be achieved between the sellers and buyers. When that happens home sales will begin to go up but the average home price will be lower, the lowering home prices will add to signs of a weakening economy. It becomes a domino effect. One other issue compounding this mess is that the problems with the sub prime (and now the prime) lending issues will put tighter restrictions on mortgage lenders and who they issue a mortgage to, further adding to the housing sector free fall.

All of this hit the market in a swift one/two punch this week. A wake up call if you will. The market was already on uneasy ground (remember I posted a yellow flag for the market a month ago- that was because I saw the markets losing their momentum) and this one/two punch sent the markets down for the count.

Can the markets get up before the count reaches 10? Can the markets be like Rocky Balboa and come back fighting hard in the last round and win? I wish it were that easy. The markets are indeed firmly in a transition stage. The big question is if the transition is into a mild pullback or into the next bear market.

On Friday morning President Bush made it a point to have a meeting with his financial advisers. In a video tape released by the White House the President could be seen sitting with his advisers and in the background were charts which predominantly showed graphs going upwards. As if to put on a show of how great everything is with the economy. In my often suspicious view of things (it is my nature to question things I am told) I see the the appearance of the President on Friday as a sign that things are worse then they want to admit. And you know what? The market felt the same way! After the President's remarks the market just got worse as the day went on. The smart money saw right through those charts behind the President and looked at the real market charts. And those charts are showing an economy that is turning sour. And that is why we saw the big sell off on Friday. Do I think a recession or a bear market is coming? I don't know yet, but the market is fearing it more and more. Remember it is fear and greed that moves the markets - nothing else.

Now for some more charts: (Click on the charts for a larger image)

The Dow Jones Industrial Average closed right at support. Any move below this key support level will take it down to the fib retracement at 13000. If that fails then we are likely to hit 12750.

Materials which have been been rock solid since 2005 has also come down to a support level. And a failure of that support takes it back down to the 35 region as shown on the chart. A bigger decline in the materials sector will weight heavily on the major indices and will add to the weight of pulling them down as well.

The NASDAQ has fallen below support and were likely to see 2460.

The S&P 500 has closed right at a support level. If the S&P can gain a little ground then it will hang around between 1461 and 1484 until the market decides which way will be the future course of events (bull or bear).

The VIX (volatility index) hit another 52wk high on Friday. Not good.

Now another chart of interest is the QID. The QID pays you when the broader market goes down. It is an ETF that can be traded just like a stock. What is of interest here is that the volume has been increasing since last March. Smart money has been slowly building up a position in these types of ETF's to get ready for a possible bearish winter coming. (Note: volume does not impact price on an ETF. It is solely a measure the shares being traded)

So what do we do? We play the charts. Just like I always do. When I see a chart that looks like a good play then I will play it. The plays are harder to find in this current market environment. But I will keep looking. There will always be something that goes up even if the broad market heads down. If you have a long term investment account (IRA, 401K, etc) you might consider hedging (Making an investment to reduce the risk of adverse price movements in an asset or assets) your account by adding a position in an ETF that shorts the market such as the QID I highlighted above. There are many others such as SH, SDS, TWM, SRS are just a few examples of ETF's that can be bought and sold just like a stock but they increase in price when the market they mirror goes down. By adding one or two of these types of investments to your long term portfolio hedges against the decline in your other stocks you hold for long term. If you want to learn more about these types of ETF's check out the company that issues them: Proshares

Monday we start a fresh week. We are likely to see a bounce in the broad markets with so many charts sitting right at support. This would not be unusual. What happens with these bounces will be the key into knowing where we are going. If any bounce continues to be sold off then the fear continues to be the dominating emotion driving the markets.

See you on Monday Rebels..

Updating Charts

Currently I am performing the analysis of the broad market charts. Check in tonight for my full analysis of where the market may be heading.

The Day that Was

Had some computer repairs to do tonight. I will post the full "Day that Was" on Saturday.

The market action in the last 30 minutes was very 'gloom and doom' appearing. The smart money sat back all day and just did nothing. They let some of the stocks work their way up a bit and then they swooped down and took all the gains away. There is some genuine fear in the markets now. Fear that is going beyond just a simple market correction. I will post the charts and give my full analysis tomorrow (Saturday).

Good night Rebels...

p.s.: Thank you for the many nice comments and the emails I have received regarding my analysis of the markets. If I can help someone from losing money in the markets then I did a good job. If I help someone make money in the markets then I did an even better job.

A bad ending...

We saw some buying attempts throughout the day but each time it was shot down. At the end of the day bears just took over and there were no bulls in sight. On the DOW we closed right at support. Talk about cutting it close. That is "too" close for comfort.

I guess the statement from President Bush and his economic advisers this morning did nothing to boost the market. In my view their appearance probably hurt it. Just the fact that they made the dramatic effort this morning to say how great everything is was enough for the big money folks to take away that things may be worse. Big money is smart, they can't be fooled.

A full analysis of the charts tonight.

Market Update

The bounce this morning has faded quick. May still see some buyers step in before the day ends to take home what they believe is some bargains.

Recall the charts I posted last night. Those support levels must hold!

A bounce back swing trade idea

Take a look at this chart. This is Abb Ltd. A Switzerland & Sweden based engineering company. Little exposure to the US markets.

If your daring and want a trade to take advantage of a possible bounce then ABB has a good risk to reward ratio because the stop loss is very clearly defined. The stop loss is the support line / 50 day moving average.

Trading anything today is risky. Especially with the European markets being down and the Asian stock were down big at the close this morning. But I may enter a small (1/2 normal swing trade funds) if the buy point is met.

Remember that any gains today could be quickly cashed in by others wanting to cash out. So ABB could start out well and then sharks waiting above will take the cash and run and bring it back down. That is the added risk with the market situation.

Live Chart

Pre Market - July 27th 2007

We had the GDP numbers a few minutes ago. Normally the numbers we got would move the market into the positive direction. But so far the futures are not reacting. Futures are down fairly large this morning.

At 9AM the US Government's financial team will be appearing on CNBC to answer questions and make some statements. Will they say anything to settle the market? In my opinion whenever the Government feels the need put their talking heads in front of a camera then things must be worse then they want us to know.. I am sure that President Bush's financial team will talk the talk and tell us how great everything is. For the small investor/trader community may be influenced by whatever they will say. However the big money (hedge funds,etc) know the real story. They read the charts and see what is happening. Charts are the x-ray into companies and the economy. I strongly believe that chart analysis is a "leading" indicator of events to come. So if the Government's talking heads talk up the economy take it with a bit of skepticism and believe your own analysis of the markets.

I think we will have some early buying today that will be followed by mid day selling and then the day will end with some last minute buying. That is how I see what may happen today. With the indices at a support region there will be the early buying from those playing the bounce. But there is still a lot of fear out there and any upward movement will be cashed in and send it back down. The end of the day will be key. If we end higher than where we open then we are on our way to a recovery (albeit short term). If we end lower than confidence will be lower going into next week.

I say short term recovery because we are back down inside the trading range we were in a couple weeks ago. Now that we are back "in the box" we are going to bounce around in there until something makes us break back up or fall out of the box and it gets worse.

The Day that Was - July 26th 2007

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!

Tonight I am not going to talk about individual stocks. Instead I am going to focus on some of the market sectors and the broad market health. Before I dig my teeth into that I will highlight the events of the day.

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.

The next chart is the Philadelphia Bank index ($BKX). It shows that this week we fell below a major trend line. Once a major trend line is broken we are in new territory whereas we are no longer in an uptrend. Now the index will trade sideways, fall more, or have trouble getting back above the trend line (remember that once support is broken that support line then becomes resistance).

The next chart is the Housing Index (a good index for all things housing, construction materials, etc). The chart ($HGX) shows a head and shoulders pattern. In technical analysis a Head and Shoulders pattern is the name given to a chart that exhibits three main events. A rally that peaks (left shoulder) and then another rally that is even higher (head) and then followed by another rally that is lower than the previous one (right shoulder). From those three events one can draw a neck line. When a stock or index fails the neck line the trend is taking a turn for the worse. This chart says we have larger troubles ahead in housing, construction materials, and in turn the mortgage business.

Next is the S & P 500 Large Cap Index ($SPX). On this chart notice how we have come to rest right on top of a very significant support region. This support must hold otherwise we will be in for an even bigger market meltdown.

Next chart is the NYSE Composite ($NYA). Same thing as with the S&P. The index has come to rest right on top of a significant support line. This must hold! Otherwise lookout below..

Next is the Volatility Index ($VIX). I present this chart in a new way tonight. I examine this chart in terms of when bull markets and bear markets have been in control. Remember the big market bubble that came crashing down in 2001 / 2002 (that was the big tech bubble burst). That was a bear market. Notice on the VIX chart the volatility in 2001, 2002, and 2003. See how high it was back in the bear market. Then at the end of 2003 and early 2004 we started a new bull market and the volatility declined all the way until 2005. Then the volatility started trading in a rectangle pattern up until now. But today the volatility broke above the pattern! Could it be that we are seeing the very early stages of a new bear market approaching? Wait until you see my next chart!

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!

Market Update

There is nothing at all escaping the blood bath today. Even Apple is falling back and losing it's ability to hold onto the gains it obtained last night in after hours.

Some key support levels have been broken to the downside and this had increased the selling as investors were watching the key levels to hold. When they failed they put on their parachutes and jumped.

Tonight I'll do a sector analysis and post my results here.

FEEC - Update

Even with the market in a near meltdown today my swing trade on FEEC has reached the next buy point. I'm adding the remaining 1/2 of my swing trade at $1.67.

The original entry price was $1.56.

I will use $1.60 as my stop loss for FEEC. In this market I will not risk any large loss.

The market meltdown today seems to be leaving the OTC stocks untouched.

Volatility Index $VIX

The volatility index is at the highest point for all of 2007.

Trading collars are now in effect at the NYSE

Housing, banking, brokers, construction suppliers all sinking hard this morning.

NHWK

I'm selling NightHawk Radiology (NHWK). It has gapped up on good earnings but it looks like it will fade with the rest of the market. Selling at $21.06

Durable Goods data

I said in my earlier post that construction problems were now spreading into the commercial sector. The durable goods data confirms this as capital expenditures has declined.

Keep your stops in place on any trades you have active. Remember, good traders and investors will always put a tourniquet on a loss. Never let a trade take you more than 8% in the red. 8% is the absolute maximum. Personally I try to limit my losses on a swing trade to no more than 4% (and sometimes even less depending on where support levels are).

Please.... never invest or trade on hope. That will erase your money. You invest and trade with a plan and that plan is to ALWAYS limit your losses. When a trade or investment does not work out you sell and move on. Don't keep holding it and think it will get better. What if it does not get better.. then you have an investment that starts out at a loss of say 10%... you say "no problem" it will turn around, then your down to a 25% loss. Now you say I can't sell here because it is too big of a loss to sell here. I'll just hold on and one day it will come back. Then your investment is down 50%. Never tell yourself I will hold and wait for a turnaround. Because you don't know if it will. Don't trade/invest on hope... Always have a plan and get out before your losses get bad. No matter how much you like a company or their products you never let that influence your investing smarts. If you go red you cut the loss and limit the risk to your capital.

So many investors fail because they fall in love with companies and think the companies will never do them wrong. Or they let their investment brokers tell them to keep holding on to a bad investment. Just like financial advisers were telling investors during the Enron collapse. Listen to your own logic and discipline, it is your money... not theirs.

Pre Market - July 26th 2007

Home builders taking us down hard this morning. More home builders have reported earnings this morning and the construction sector just keeps getting worse. Revenues from home and commercial construction companies just keeps showing more gloomy data on the sector. We all know that the home construction is weak but the earnings results are showing some erosion in the commercial markets as well. Housing, construction materials, banks, mortgage lenders all suffering big and looks like even more drops in these areas are yet to come.

Ford (F) released good results this morning but it is not enough to pick up the futures this morning.

Crude oil is heading back up again and we are now nearing $77. Exxon Mobil (XOM) just now released their numbers and they miss! An oil sector company missing their numbers is scary to me. The energy sector has been one of the sectors that has been keeping the market going up over the past year. If the oil sector losses it's strength (and no other sector steps in to take over the strength) then I'm afraid we could be heading into a full blown market correction.. or worse.

Yesterday I said that the trading activity represented "uncertainty". And that is why I said I would not be entering any new swing trades yet. When the market gives a technical indication of uncertainty it is too risky to take on a new swing trade. Today with the futures down over 100 we are in for a very volatile day. If we do not get a bounce today and close higher than where we open then we will be retracing back into the recent trading range on the major indices and that will add more fear to the markets. We are likely to have a rough day today. There must be strong strength today in at least one sector to keep us healthy.

See the DOW chart here for our support level.

At 8:30 durable goods data will be released. That will move the futures if the data is good. If it is bad then futures will tumble more.

WWAT - Update

Breaking news.. I just received notification from my SEC Form 4 filing service that another large insider purchase has just been declared.

10% owner of WWAT (Quercus Trust) has purchased another $2,390,000 worth of shares.

Another good sign for the current WWAT swing trade. Someone sure has a lot of confidence in WWAT going forward.

The Day that Was - July 25th 2007

Well.. what a day. In some ways the events of the market today made me think the whole market was in the old TV show "The Twilight Zone".

We started out in pre market with the futures up as was expected on a reaction bounce from yesterdays big down day which closed right at support on the DOW. So it was expected that we would have a reaction bounce. The question was would the bounce hold or would it fade and push us further down.

What we got was a day that went up well in the first hour and then it sold off quickly and took us into the red. Then we went back into the green to only be sold off again and end up in the red once again. By the end of the day the market made another try at going into the green and then as the day got close to the end the shorts started covering and we had a quick run up around 3pm. Which was also sold back down before the market closed. We did end the day in the green but it was not a healthy green in my view.

In the pre market we had good earnings from Boeing and that got the buying going early. Some even thought the comments from CountryWide Financial yesterday were "over done" and so the bargain hunting started. But each time the markets ran up there was someone waiting at the top to take their money and send it back down. That is what I did not like about today. Too many times the market would run up and then it would be cashed in an hour later and brought right back down. For me, today's trading action represents "uncertainty" for the rest of the week. If anything will help the market going forward is the good earnings that came in after the market closed.

And speaking of earnings. Apple... all I can say tonight is that out there in the world tonight there are people who were short on Apple who are feeling tonight they were ripped off, and there are people out there that were long on Apple and are thinking they got away with something.

When the numbers from Apple crossed the wires they showed very good earnings and revenues for the quarter, but then the next line said they were lowering guidance for Q4. And it was a large amount that they were lowering by. I was watching the trading activity in the after market on Apple. It looked like total confusion at first. I'm sure there were traders saying to themselves "was that good or was that bad". Then something happened (I don't know what) but a short squeeze was underway and bingo... Apple jumps up to almost $150 in after market. Personally I had no position in Apple (long or short) and I still don't. Normally when a company guides lower in a forward statement the stock will sell down. It is not "what have your done for me lately" that matters. It is "what are you going to do for me tomorrow" that is more important to the investor/trader community. So today's price movement was really strange. In reading some of the news wire comments crossing the screen tonight I find that even the analysts that cover Apple full time are somewhat confused. I don't think they know if they should upgrade it or downgrade it...

So that is the day. I sold my position in Western Digital (WDC) to lock in the gains and not risk it to a possible bad earnings which they are releasing tomorrow. (Today I mistakenly said earnings for WDC were today. I meant to say tomorrow after the close). And with the trading that was taking place today which was looking "unstable" I wanted to bank the profits today. WDC was a good swing trade and I will keep my eye on it for a future setup once the earnings are out of the way.

The swing trade on NightHawk Radiology (NHWK) I decided to keep through earnings as the first purchase price I made was close to support and the downside risk for an extreme loss was limited. So I decided to let NHWK ride. They released earnings and they raised their forward guidance so we should see NHWK trade tomorrow to the upside (as long as the overall market is healthy).

I was in the process of evaluating the downside risk in the GRP swing trade to determine if I wanted to sell all, part, or none at all going into earnings. But I did not have to make the choice because GRP had a big whipsaw at 10:45 and my trade hit the stop at $52.25 and closed. Because GRP never made it to the next buy point for adding the remainder 1/2 of the funds for this trade the loss was small as it was only on a 1/2 position size. I was disappointed in the whipsaw today but rules are rules and that is how we stay disciplined. If I get thrown from the horse I can just get back on again if it is still healthy. Because I still like GRP and I may re enter this as I see how it develops. I will post my intentions on GRP when I see what it does.

I have many charts on my wall with setups that I really find attractive. Yesterday put a big bruise in the middle of many of them. So I need to watch to see if the setups are now damaged or will recover and establish themselves again as valid setups.

I am watching carefully SCUR. When this makes the move over the trend line in the chart I will be initiating a swing trade on that one. They report earnings tomorrow so that will be a catalyst one way or another on the stock. More charts and setups to come as soon as I can say they are still healthy.

See you all in the morning. Good night fellow Rebels!

P.s.: Michael, you are so correct "have a plan and trade the plan". That is the only way to make money in the markets.

Apple - lowers forward guidance!

Tells of only 270K iPhones sold. And lowers earnings guidance for Q4

Will be interesting when trading resumes ..

It defies logic.. they guide significantly lower for Q4 but they trade higher.. Have I landed on Mars or what here??

Western digital (WDC)

I'm selling WDC here now at $22.81.

The market is once again in the red and I feel it is getting weaker as the day goes on. WDC reports earnings after the market closes and I have a gain on WDC and I want to bank it. Holding through earnings adds an element of risk that I usually do not like to take.

As you get to know my trading style more and more you will see why I generally sell before earnings. There could be a good earnings and the stock will go up afterwards, but it could also go down. I have a gain right now. And a gain is a winner. Selling to lock in the gain.

Early Market Gains fade to a loss

This is why I said last night I was not recommending taking on any new trades today. Had I entered a new swing trade this morning on what was looking like a bounce quickly faded back down to a loss. Today is not the kind of day for entering a new swing trade. Volatility is really up there again this morning and best to sit one out and just guard what trades are already open.

I will be selling WDC before the end of the day to avoid a potential loss when they report earnings. WDC could report good numbers but I am seeing way too much "sell the news" now with the market being questionable. People are taking the gains of a good earnings report and cashing out on the spike. WDC is a gain in the RebelTrader portfolio and I want to keep it that way. Can always come back in at a later date if it presents itself as another swing opportunity.

Market can't keep it up...

The opening gains this morning are fading fast. Initial reaction on a reaction? Just does not look good. Confidence in the broad markets remains weak.

I don't need to worry about GRP anymore. GRP hit my stop point and my trade closed automatically. So that takes care of that.

Grant Pridecco (GRP)

Current swing trade GRP is set to report earnings after the market closes today. Normally I would sell any swing trade before earnings are released to limit risk. I am currently calculating the downside risk if I were to hold through earnings. I am expecting GRP to report in line or better than expectations based on previous press releases and business updates from the company. And that the energy sector has been good over the previous few months and this should be reflected in this quarter.

Before the day is done I will post an update on my GRP position and if I will sell or hold before earnings.

Secure Computing (SCUR)

SCUR reports their earnings tomorrow. I am still liking the chart pattern setup. The stock is poised to break through a trend line and when it will signal a new trend. The stock is trading up a bit ahead of the earnings but I am going to wait until after earnings to see where it goes. Then I will look at a possible entry.

SCUR Live Chart

Web site updates

While the web site is being updated and worked on you might see some sections missing. This is only temporary and as the pieces come together I hope you will enjoy the results.

Pre Market - July 25th 2007

Good Morning Rebels...

Futures are up this morning as a reaction bounce from yesterdays huge selling event. The question is just how strong will the reaction be? Can it overcome the sentiment that the financial and housing sectors just seem to keep getting worse? Yesterdays reaction to the news of problems spreading into the prime lending arena is a signal in my view that the anxiety levels in the market is extremely high and if this financial and housing woes continue to get worse than the market is going to go past just the occasional panic attack and will develop into a full blown depression. We have to trade with caution...

At 10am we will have existing home sales data released. Watch for more volatility in the market today. And of course we have a big show today when Apple releases their earnings. I said last night that my view is a red apple will be the result. Don't go shorting Apple on my view of this. Apple is too risky to trade in either direction here. I would wait until after Apple releases their data before deciding if you want to own Apple for a long term trade. If you buy ahead of earnings you are gambling and I leave gambling for Vegas.

Please excuse the mess...

I'm trying to clean up here a bit and make the site easier to get around. Please pardon my construction debris while it is being worked on!

The site is OPEN during the construction period!

The Day that Was - July 24th 2007

Ouch... That is going to leave a mark!

I said this morning before the market opened that I was expecting a lot of companies to pullback today. I sure hit that one right on the nose.

We started out in pre market with some "not so great" earnings crossing the wires. Then AT&T reported theirs and I think most investors were just wanting to hear about how the iPhone was doing. What AT&T provided was not enough for the investor community to feel happy and AT&T gaped down at the open. But as the day went on they recovered some but at the end of the day they could not manage to close green (even though AT&T reported a good earnings quarter). Now the investors that were hanging on every word and figure from AT&T left them and went over to Apple and started cashing in their profits. They were fearful that the iPhone was not selling enough. Then a little while later financial analyst CIBC Securities released a statement about a study they just completed and found that store inventories of the iPhone were good (no one was sold out) and they observed customers passing by the iPhone. They summed up their analysis as the iPhone demand was "thin at best". Well that just pushed Apple over the edge and they fell throughout the day.

I expect to see some buying of Apple on Wednesday morning ahead of their earnings which will be after the market closes. I will have my popcorn ready because tomorrow will be one heck of a show to watch as Apple trades in the after market hours when the numbers are released. Will Apple be green or red this time tomorrow? Only Apple holds the answer to that question right now. My feeling is red. I think in Vegas right now they are placing odds on this very same question!

So, we started out the day with the Apple situation, then throw on top of that the bad earnings from Dupont and a big earnings miss from CountryWide Financial and the writing was on the wall that we were going to have a down day. But it only got more interesting when CountryWide held their conference call (which lasted almost 3 hours! That is NOT the norm). They indicated that they were seeing losses in the prime lending portion of their business. We all knew about the sub prime but this time a large mortgage lender was now saying they had troubles with the prime lending side. That was a nuclear bomb on the market, for months we have been hearing that the sub prime was "contained" or words similar to that. But now someone has come out and said the prime sector was being impacted now. I have been saying that we were not done hearing about this issue and that it would propagate into other areas.

And as if that was not enough the company said that the housing market was still weak and that they were seeing "home price depreciation at levels not seen since the Great Depression". It was as if someone yelled 'fire' in a crowded room, everybody started selling in a frenzy.

The financial sector I see continuing to fall over the next few weeks. There will be an occasional reaction bounce here and there but this is not over yet. This is why I have not been recommending any financial, banking, or mortgage sector stocks on RebelTraders. How far will this financial mess extend into other sectors remains to be seen. But I remain very cautious.

On the DOW chart we closed right at support. If the support level fails and we fall back down into the trading range we just broke out of a week or so ago then we have some initial signs of a bearish market coming. I said initial signs, not a confirmation. That would come if the DOW drops below 13250.

I expect to see a reaction bounce on the major indices tomorrow. And we may even close green tomorrow. But will it hold is the part that we will need more days to see. If we continue to fall tomorrow then that will likely amplify the bearish worry on the Street and take us down even faster.

I am not recommending any new long positions tonight, I will watch the trading closely before I attempt a new swing trade. Normally a pullback would be an opportunity to grab a quick swing trade as pullbacks are a normal process of any bull market. And good traders will always seize an opportunity for a quick kill when their prey is weak. But the ferocity of the selling today was concerning.

(Note: even on a pullback a good trader will wait for confirmation that a stock is starting to rebound before jumping on board, the expression: "Never catch a falling knife" means a trader should never buy something that is still going down. That is throwing money into a dark hole where you can't see the bottom)

I need to see where this is going before I would take on a new swing trade. Remember this: Smart traders know when to sit one out. One does not need to trade all the time.

Today I closed the ALGN swing trade when it was trading up on a pre earnings run. Always sell when possible into strength. If I had waited thinking I could get a better price I would have lost my gains as ALGN rolled over shortly after I sold and headed down. Selling into strength is a good habit to develop if your new to the markets. Never worry about squeezing every cent out of a trade. For if you do you will lose more in the long run than just those few extra cents.

Market Update

The intensity of the selling is huge here. Trading curbs have been put in place on the NYSE.

CountryWide (CFC) conference call

The company executives in speaking of the housing situation said the following:

They are "seeing home price depreciation at levels not seen since the Great Depression"

This what has the market selling even faster now and essentially has the mortgage industry on the brink of a collapse in the view of some on the Street.

Market Update

There is not much one can say. We are down and down pretty hard. Selling pressure has been getting higher as the day advances. The conference call with CountryWide Mortgage (CFC) is gloomy. They are saying how bad the housing situation is. And said that home prices are falling.

This is not something the market wanted to hear.

ALGN - UPDATE

ALGN reports earnings tomorrow morning before the market opens. Today ALGN is having a pre earnings run. I'm selling into the strength and capture the 7.5% gains. Closing ALGN at $26.87.

Don't want to expose the gains to a possible earnings release with bad news. Selling into strength is the best thing to do as a swing trader.

Housing & Financial/Mortgage hit hard

Seeing Mortgage, banks, and building materials being hit hard. The news from CountryWide (CFC) this morning sent a big message on the housing market and financial lending health.

BIG - UPDATE

BIG has hit the stop. This market pullback is nasty. BIG closed at $28.20

I was getting tired of waiting for BIG to make its move. So getting stopped out is not such a bad thing..

Apple now selling hard

Was holding $140 but that has failed and now down to $137.50

SONS - Update

Yesterday I said to watch SONS. The stock is setting itself up for a buy point crossing. I am cautious of entering any new positions today with the market volatility that I expect to be high today.

I expect to see a lot of companies pulling back today.

SONS live chart

Changes to the RebelTrader Site

Soon you will see the web site change to a 3 column style. This will allow me to shorten the length of the page and hopefully reduce the time needed to load my web site. It will also better able me to make it more organized.

This change is in the works.. I hope all will like it.

Pre Market - July 24th 2007

Good Morning Rebels,

The big news this morning is earnings. The biggest one that will impact the markets today is from CountryWide (CFC). They missed earnings and cut their forward guidance. CFC is in the mortgage business so this is one more knife in the back of the financial sector. I see mortgage lenders and big banks having a down day today.

AT&T (T) reported this morning and they beat estimates but in the view of the investors it was "not enough". AT&T is trading lower in pre market. It is my view that investors were looking for bigger iPhone talk in their earnings. I don't think AT&T gave the investment community a good feeling about how the iPhone is working out for them. And on that note, this morning CIBC analyst has conducted a study to analyze how the iPhone sales have been doing. Their findings were that most stores had a good inventory and the demand for the iPhone is in a significant decline. Their analysts visited Apple stores and observed that most visitors were not looking at the iPhone and the demand was "thin at best". This news is causing Apple (AAPL) to sell off this morning in pre market. I said last week that $140.00 may be the short term top for Apple, and I did say "$140 give or take a little". Apple traded up to $ 145 but could not hold it and closed down to $143.70. In pre market Apple is trading down to $140.22. Is this the end of the Apple iPhone hype? To some investors it is and is why we are seeing the pull back in pre market. With Apple releasing their earnings this week Apple will be one of the most volatile stocks on the day of their earnings. Grab some pop corn and watch the trading on Apple on that day.. it will be a wild show.

I will be closing the ALGN swing trade today. They release earnings tomorrow morning and I'm not risking the gains to a potential earnings miss.

Futures are down and I see a volatile trading day today.

The Day that Was - July 23rd 2007

The financial sector finally had some upward moves. That in addition to some good earnings pre market helped the market move into the green zone today. The DOW maintained the gain for most of the day however the S&P and the Nasdaq gave up some the of gains from the peak of the day around mid day. But at least it was an up day on all three of the major indices.

Also in the pre market was the news of the merger of Transocean (RIG) and Global SantaFe (GSF). A deal worth $53 Billion.

Today was just a taste of what is yet to come this week with many companies releasing their earnings. It will indeed be a busy week with companies reporting.

RebelTrader swing trades:

FEEC closed at $1.65, which is a gain of 5.7% from the entry price just this past Friday. When FEEC moves over $1.65 I will enter the second 1/2 of my swing trade.

WWAT continues to be a good mover. Closed today at $2.45 which is 33% up from my original entry point.

WDC closed up today at $22.89 and this swing trade stands at 12.3% gain from the original entry price.

NHWK closed up today at $21.36 and this swing trade is currently a 10.1% gain from the entry price.

I closed the AKS swing trade today because earnings are due tomorrow but the main reason is that there has been some recent earnings from other companies in this sector that had bearish outlook on the metals sector. I did not want to risk holding AKS through the earnings and possibly being exposed to bearish outlook from the company. AKS was closed at a break even (less than 1.0% gain).

The Rebeltrader portfolio continues to rack up good gains. Tomorrow I will continue to work on the new watch list items and more trade ideas.

"May the Bulls be with you" (yes, I'm a Star Wars fan!)

*** AKS - UPDATE

I'm closing the swing trade on AKS here now. Closing trade at $38.69. There is some bearish sentiment in the metals industry of late and AKS will provide their earnings release tomorrow. I don't want to risk a possible negative surprise from AKS should they have any bad news on the sector as a whole. They could release good earnings numbers but any comment on the sector being weak will send AKS down as well as other steel/metal sector stocks.

Closing AKS here is the smart thing to do. It would have been nice if it was able to have a good run up to this point but I'll take the small gain anytime as opposed to risking it to a loss should their earnings have anything negative in it.

Market Update

At lunch time the markets were in good shape. Even the financial sector was showing some signs of life!

The sectors doing poorly are housing, and Oil services/suppliers due to the drop in crude oil price today. Coal and Natural gas also down today.

Most of the other sectors are in the green at this time.

The big movers today in the Rebeltrader swing trades is WWAT, WDC, NHWK.

FEEC is pulling back on low volume so I have no worries about that. Does not need to jump up overnight (even though we would like all our plays to do that :)

I am patiently giving BIG some room to make a move. However if there is no significant movement by the middle of the week I will close the trade. Too many other moving stocks to play to just let this one sit and collect dust while it waits for the market to stop bouncing it around.

The Rebeltrader portfolio is making a nice gain today so far.

Update

RebelTrader plays WWAT,WDC,BIG,NHWK, AKS all trading up. I expect to see GRP trading up soon.

WWAT already working on new highs again. NHWK running up quickly again this morning. Some good gains for the RebelTrader portfolio again.

Watch SONS

Last week I highlighted SONS as a stock which had trading activity which I liked. This morning an insider purchase was filed with the SEC. Trustee Senate Limited (10% owner) reported they purchased $3,130,186 worth of stock recently.

I would keep an eye on SONS for a move over the buy points I highlight in the chart.

Next earnings is early August (company has not announced schedule yet)

A new week and a big week...

This week we have numerous companies reporting earnings. This week will be driven by earnings and forward guidance expectations that the companies tell the market.

This morning we already have earnings from Merch & Schering-Plough. Both released good numbers and we will see a boost in the drug manufacturers sector today. Some of the big companies (or ones that will be watched closely) reporting this week are AXP, STLD, TXN, T, CFC, DD, LLY, JBLU, KMB, LMT, MCD, NOC, ROH, UPS, AMZN, BA, COP, GLW, HMC, BUD, AAPL, ESRX, BMY, DOW, XOM, F, ICE, DECK, ESLR, MCK, BHI, CVX. This list is of course only a small sampling of the companies reporting this week, but these companies I list here are ones that will have an impact on the market and/or sector they are in.

Early this morning RIG & GSF announced that they will merge. The off shore oil drillers should move in sympathy today. Over the weekend Investors Business Daily provided a boost to the RebelTrader play on GRP. GRP is still a good swing trade and I'm looking for some good moves in the coming days.

RebelTrader play BIG is getting old. If there is not a bounce in the retail sector soon I may close out BIG because it has been stalled too long. And stalled money makes no money. So we need to move it along. Does no good to have it sit in a sector that is flat lined at the moment. This week will determine the course of action for BIG.

I have a new watch list coming with many new stocks to watch. I want to present you with one here this morning. This one stood out because it shows a divergence of price vs technical indicators. A divergence is a powerful leading indication of what is to come. When you look at a stock chart and see the price dropping but technical indicators are going the other way that is a 'divergence'. And it can signal a pending change in the works. Acme Packet (APKT) is one of those types of charts. APKT went public last year and like many IPO's they sell off to the level that the 'market' thinks they are worth. And in many cases the sell off is over done and it results in a period of settlement. In the settlement period the sellers and buyers reach an agreement on what the price should be. On the APKT chart you will see 3 point where the price hit a point and each time buyers would not allow it to go any lower. This happened 3 times at the same price point. This is significant in itself. But more important is the divergence in the technical indicators. Examine the MACD, RSI, and the CMF. Notice how they have been trending upward while the price was working downward. What this shows is that the market is starting to change it's mind on APKT (in the case of the CMF indicator, even before the bottom was reached). When ever you come to a chart where you see a divergence of price vs indicators take notice! Something is in the making.

On the APKT chart you will see a white line plotted on the chart with the price. That is the "On Balance Volume [OBV]" The OBV is an indication of volume flowing in or out of a stock based on volume and price advance or decline. When you see OBV diverge away from the stock price it shows a change in the stock price will follow in time. As one of the technical analysis instructors pointed out a person can think of the OBV as a magnet. The stock price will generally be attracted to move in the direction of the OBV.

How would I play APKT. I drew two green lines on the chart. I will enter a 1/2 position on the move over the first line. Then the stock may accumulate a bit then when it moves over the second green line I will enter the remaining 1/2. APKT has a low short interest of about 9%. Which is an indication that most short sellers have cashed out because they see the same technical indicators that I am seeing. The chances of the stock going up is much greater than it going down any more.

Futures are up at the moment. Get set for a big week with lots of news crossing the wires as companies release earnings.