The Day that Was & The Week that Was

A lot to cover, a lot of thoughts on what has happened and many charts to review and show to you. And it can't be done all tonight. Watch over the weekend for an in depth analysis of what the low volume may be pointing towards for us and how we play this.

Earlier I gave you positions to take if you wanted to go long on a market advance and if you took them (once they triggered at the recommended buy points) then you got some winners. I wanted to provide you some trade ideas if you wanted to jump into this market. So you got some gains on those trade ideas. I on the other hand have remained cautious and am not convinced yet by this market movement. There is something not right with this action that does not warrant me to go long at this time.

Sure there are some very quick plays out there that if you were lucky you made some money. But is this a healthy market that is ready for normal swing trading? Not by any means. We'll go over this on Sunday.

Until then have a wonderful weekend..

Pre Market - August 24th 2007

"Don't fight the trend"

This is important to remember. The market is always right, even if we don't like it. When you look at an index chart and it is running into resistance don't take long side trades in the 'hope' that the market will rally. That is a 'bet', not a 'trade'.

Use the market strength to your advantage. So far volume has been bigger on downward moves than it has been on upward moves.

Durable goods numbers came in a few moments ago and they were stronger then expected. This is a double sided sword. On one side it provides a piece of information about the economy and gives the economy is falling folks a pause in their steps and usually this would be good for the markets. But on the other side it could give the Feds a reason to offset the Fed Funds rate cut. Actually the Durable goods numbers are not all that reliable as they keep revising them the next month. And the trend has been lately to revise downward. So I don't put much into the durable goods data.

The data that will have more of an impact this morning will be the new home sales at 10am. Looking at a mixed day with a higher probability of downward movement as we end the trading week and many will not want to leave money in the markets through the weekend.

The Day that Was - August 23rd 2007

The day that was ended up being the day that was not. Nothing happened today. The markets had no momentum to advance any further. A few times it made attempts to move through resistance but failed each time.

There is only so many times it can keep testing resistance before the buyers give up. Each time buyers tried to advance the markets there were sellers waiting to take their money and sell it back down. After a while buyers give up trying to put money in only to see it be taken away as soon as they buy.

The S&P ended the day today with a doji pattern which signals indecision in the market. When that pattern prints after an advance it is usually followed by a downward turn.

Yesterday I said that the markets were right up at resistance and that is why I did not take any long positions. Why take a long position right up at resistance when the chances of it being turned around were high. Risk vs reward is always important. Don't take a trade on a stock (or the index) is running right up to resistance, chances are that your buy will go no where and it stands the risk of being turned back down hard. Let the others in the markets make the push through resistance, retail money like you and me in the markets will not move resistance. Only institutional money and other large money movers can break resistance levels. Best for us to stand back and let them clear the path for us, then we follow.

I also stated last night that based on the charts that the resistance was significant and that the market was facing a key test. Today the market failed the test, it could not open the door and move through. Leaving the possibility of a downward move in the making.

We can't always predict with 100% accuracy which way the market will go all the time. But as traders we use what appears to be the most logical path based on the charts to our advantage. We base our risk to reward on the charts. If the downward path has less resistance then the upward path, and you want to go long on a stock then your reward potential is low and the risk for loss is high. So we wait for better odds. Simple as that. So while others are buying and selling every day trying to fight this market here , and losing more money than they are making we wait for the risk to reward potential to be in 'our' favor. Not the markets.

Tomorrow will be another day like today. At the moment the Asian markets are down. How this will propagate into our markets tomorrow remains to be seen. One chart I did check tonight was the 10 year T- note yield. And yet again the 'flight to safety' continues. More money flowing into bonds as they feel the risk to reward ration is better in bonds then in stocks at the moment.

This morning I posted good stock picks to go long on if the market rally upward with strong strength. And I also posted stocks that would be good shorts on a big market sell off. Those stock picks remain valid. But they can't be held as swings, they are only for the experienced day trader to utilize. Swing trading in earnest has not yet returned to a safety level in our favor. There are still signs of another leg lower in the market (even lower then what we have seen so far).

Have a great evening Rebels..

Pre Market - August 23rd 2007

The Bank of Japan did not raise their rates, left them unchanged. Good for us.

Futures were up good this morning but as the morning has been moving towards the open the futures have fallen a bit. Could today be the day of "sell the news" on advances in the market? Could be. Don't be surprised if you see a selling on advances today. There is a strong desire still to sell on upswings by those who want to get out. And we are at resistance levels so that will present some obstacles as well.

If you were still watching my recommended stocks in the weekly newsletter and you bought at the recommended price then you had an excellent entry on BRLC that I provided you the setup for. If you took the entry on BRLC from my newsletter your sitting on a good profit. Don't let it get away from you. Sell it if the market sells off.

See my previous post for ideas today depending on the movement of the market today, but don't base the first 30 minutes on the market direction. Wait until it settles and we get a better view of what the direction will be. I anticipate an early run and then a selling off towards the end of the day.

Trade ideas...

On a market pullback or selloff:

Short CROX, JRT, RIMM, BTH, BJ, VSEA, UA, X, CLF, BRP, CSH, ACH, ATI

Stocks that can move to the upside on market strength:

Long DWSN over $67.75, GLBL over $24.00, HOC over $60.00, MTW over $77.50, PRFT over $23.25, OMCL over $25.15, AXTI over $5.00

The Day that Was - August 22nd 2007

Today was mid term exam time. The major indices all had a test today and they all stopped right at the limit. The limit in this case is resistance. In any recovery there are incremental upward moves followed by another downward move. This sequence plays out until the market enters into an area which restores confidence and brings more money into the markets. The volume the past few days has still been uncomfortably light. Says that there is not much in the way of institutional money yet behind the moves. When the down volume is greater than the up volume you have to keep moving with caution.

In my nightly report I receive from John Murphy he provided a very interesting comparison of previous market 'corrections' vs the bear market that started in late 2000. That comparison was on the activity of the T-Note yields. We all know that bonds become a place of safety during turbulent times however the relationship of when we see the yields begin to rise vs the stock market was the interesting analysis he provided. We need to watch the 10 year T-note yield for signs of an increase in the flight to safety or a movement back into stocks. The recent few days of upward movement in the markets have not been matched with the same movement in the yields, actually the flight to bonds has increased while we have been moving up a bit this week on the stocks.


Buying stocks today would have been adding risk to a trade. When you enter any swing trade you have to say to yourself "is the risk vs reward" in my favor". With the indices getting closer to significant resistance levels then the answer is no. The risk is higher than the reward. If resistance is directly overhead then trying to buy a stock when the indices are running into a closed door is too risky and the chances of a loss are increased.


I did not enter any long positions today because the stock market was walking right up to the closed door with little power (volume). It was not worth the risk. The market we are in now there are some good day trades during this turbulent period but I'm about swing trading. And swing trading (even holding a stock overnight can be considered swing trading). But buy and sell on the same day is 'day trading'. And so far that has been the safest way to trade at the moment. But I don't want my readers and subscribers who may be just getting started in the markets to try and day trade. Day trading requires a lot of skill that comes from years of successful swing trading and such. You must also be able to be at your computer during the entire market to react in an instant. Trying to swing trade in this period is dangerous and puts at risk a significant amount of your portfolio if you try to take on too many positions and then there is another gap down reaction to news or other events.


Risk vs reward is always important and you should never lose sight of it when you make a trade. Ask yourself "is this a good time to take the trade?" , "Is the upward potential far greater than the downward potential?".. See what I mean.


Also, overnight tonight the Bank of Japan will be releasing their equivalent to our FOMC statement. So with news as significant as that hanging over the market today that is one more item in the "risk list" against us. Why take a trade when there could be a potential negative impact from the Asian markets overnight. Of course something good could come of that and then we will benefit from it. But can we say for sure that the news from Japan will be favorable to us? Of course we can't, that is why it is 'risk'. And lets leave risk to playing the slots in Vegas. In the stock market we can control our risk by knowing when to trade and when not to.

Charts:

Market Update

The markets made a run at resistance. But the door was too strong. The resistance held. Overnight tonight the Bank of Japan will release their statement (similar to our FOMC). The world is going to watch and see what they do and what they say. If they raise their interest rates then expect our market to fall hard tomorrow. This is just one more reason for not taking on new long positions today (this was in the weekly newsletter issued last Sunday). Too much risk associated with trying to go long when significant financial news is pending overnight.

We are going to pullback soon. Nothing goes straight up, regardless of what you think or how emotional you get when you see green on your screen don't get caught up in the excitement. That is how you lose the money. Over time you will see how this pays off by being disciplined and in control. No need to jump on something just because it is moving, a cliff could be right around the corner.

Today not the day for buying..

As I stated earlier the market would hit resistance. The market gaped at the open and since then it has been a gradual decline as the day has worn on. Buying any stocks today would just likely pullback and then you would be in the red. This is why I did not say that we should buy today.

When indices are hitting a significant resistance level that is NOT the time to buy. Any long positions while the index is at resistance is prone to fail

WWAT is trying to recover

See the chart here for details on WWAT.

Web Site was down do to server problems at Blogger

I was unable to post any updates as the blogger system went down.

The market open and very quickly reached resistance levels. So far there is no signs that it wants to push through it. We will trade sideways and I am seeing a sell off before the end of the day as being a possibility. Any news will change this, but if this is how the rest of the day goes with no news I may look for some short ideas in mid afternoon.

Pre Market - August 22nd 2007

There has so far been little news this morning. Nothing at least that could be considered significant market moving news.

At this time the US futures are up and what I see might happen today is there will be some early buying then more sideways trading action. Any market moving news will change this but without any big news today we are still at the mercy of support and resistance levels. On the S&P an important resistance level is 1455-1465 range. That is a very important price range and I expect that to be a significant resistance level

The Day that Was - August 21st 2007

There is not much more I can say about today then what was already said in my post after the market closed. We had low volume again today as large money movers were just not ready to commit to buying up equities. This lack of their buying power is keeping our markets in a state of flux. We have no clear direction while they wait (along with the rest of us) for what will happen next.

The "will they" or "won't they" speculations on what the FOMC will do next is controlling the market. The tension is so high that it can be played like a guitar string. It is important to keep emphasizing that the market conditions we are in now are not the run of the mill pullback. The dynamics of this decline are deep and varied. The implications of what may happen if these credit / financial problems persist is far reaching. When the economy is at stake, which it is here, the markets are walking on hot coals. We have people on both sides of the fence saying everything is fine with the economy and those on the other side saying that it is not fine. And stuck in the middle is the markets. And right now they don't have a clue where to go yet.

Good night Rebels.. See you in the morning.

Market Highlights

US Dollar

More of the Same...

Same as yesterday. Low volume movements in the markets. The volume today was even weaker than yesterday. When you have weaker volume this signals that we are hanging on by a thread. Trades are getting very difficult. Again, this is why I am not doing much buying. It is pointless to be trying to buy things that look to be "a good deal". Because trying to do that will lead you to losing money by trying to swing in this market. Yesterday I dipped my toes into one swing trade on a good sector and a good stock, but it got stopped out today. Nothing is immune to the wild fluctuations occurring in this market environment.

I have seen some newsletters from other sites and other blogs claiming that it is time to buy and load up on stocks. If you don't care about money management then fine, go right ahead. But by doing so your essentially placing yourself in a 5 lane highway at rush hour just asking to be taken out. If you value your life you would not go stand in the middle of the highway at rush hour. So why do the same thing with your money. This is NOT a normal market that you can simply look both ways and safely cross the street. We are far from a normal market and some well respected people are making a good case for why we could be in the beginning stages of a bear market.

There are still technical indications that the market could still drop hard again. It is currently hanging by a thread and the slightest bit of bad economic date will cut the thread and we will fall again. There is no confidence in equities and that is being seen in the lack of volume. That lack of confidence could result in the markets going either way. This market is being driven by events right now. And anyone that claims that "a bottom is in" and starts buying everything is foolish and is simply just being sucked into the emotions of the market. A well rounded, and disciplined trader never lets their emotions get in the way of trading. For if you ever find yourself getting mad at your computer screen while watching the markets then you have crossed the threshold and need to take a step back. Money management, common sense, discipline, and above all a level head will keep your money safe and at the same time able to pick the right stocks at the right time.

For those that write to me saying I should be buying more stocks here I can only say to you that when the markets tells me it is time then I will. I can't tell the markets what to do. Anyone who says that the market "did not play out the way it should have" are clearly on the wrong side of this game. The markets are always right, no matter what they do. We have to just wait until they are correct for us.

Never argue with the stock market, for if you do you will lose!

Market Update

The trading pits are chewing on the rumor that the FOMC will be cutting the Fed Funds rate very soon. There is speculation they will cut before the scheduled FOMC meeting with a surprise statement with a cut in the rate.

Pre Market - August 21st 2007

Going back to yesterday the biggest thing that stands out was actually the smallest thing that occurred. And that was the volume and the lack thereof. The markets were moving yesterday in slow motion with little conviction as shown by the low volume. Volume is always important in judging the health of any move be it a stock or a broad market index. The markets drifted yesterday on volume levels which were weak. This is why I was not buying much yesterday. With volume levels as they were yesterday it did not signal confidence in the markets.

The path of least resistance is always the direction you need to trade. As the present time the path of least resistance is still down. Don't rush your trades, there is no confirmation that a bottom has been established yet in this wild market. Only through a sequence of market moves (reaction to support and resistance levels, etc.) will the market show us its hand.

At 9am this morning Treasury Secretary Paulson will be starting to make the TV rounds. So watch out for a Government pep rally. You can bet that Paulson will make statements of how strong the economy is and that the current problems will all be worked out. I am always concerned when Government officials start showing up on the news show circuits. Remember the old expression "I'm from the Government and I'm here to help" ... LOL

Last night Capital One Financial (COF) announced that it was closing its retail mortgage business. This was another sign of the financial woes in the economy. But for investors of COF they view it as a short term positive because their closing of the mortgage business unit was like a trapped animal chewing off its own leg in order to free itself.

Watch how the markets react this morning to the retail earnings numbers that will be coming in this morning. There are some big retail outlets which will report this morning.

Remember to always look at the volume when trading. It is essential in knowing if a move is good or bad.

The Day that Was - August 20th 2007

Good evening Rebels...

Sorry I did not get the charts and summary up tonight. I will provide the market summary in the morning.

Market Update

Hello my fellow Rebels...

The market today was not all that great. Although we ended with the DOW in the green it was not healthy. I will do some charts tonight in the market summary. But just wanted to point out that we are still not out of the woods.

After the market closed there was some big news from Capital One Financial (COF) that they were closing down their wholesale mortgage business and will lay off 1,900 employees. Also CountryWide Mortgage is stating that they too will be laying off employees.

The volume today was very weak, another sign that is showing continued weakness in the markets.

Charts later..

TSL

I did grab 1/2 position in TSL at $ 47.09

See chart I posted earlier

Long term play.. ONT

I like the price level here for ON2 Technologies (ONT).

ONT moves wildly at times being a small cap as they are. But this price looks attractive for a long term play. Not adding this to my swing trade portfolio here. But for a multi month play I see this price as being good. Stop loss would be $1.55

LOW

I did try to grab a small short position in LOW but no shares were available at my broker... :(

I would not try it here now if you did not get in at the top I mentioned earlier. Unless it try to test it again. LOW is pulling back and and holding steady at the moment. The downside resistance is lower than a high side move. Follow the path of least resistance..

Lowe's (LOW)

Watching what is happening on LOW after they reported good earnings I am seeing a potential short opportunity. Buyers can't push it any higher so far.

On the 60 minute chart $28.75 is short term resistance. I might (emphasize the 'might') be inclined to short LOW if it touches the short term resistance and does not push through.

There are still stocks on the watch list..

In the news letter there are still some stocks which I have left 'in play' and are in the newsletter. If the market lifts then these are still stocks to watch. ALLI, BRLC, CCRN, and INTC

So far the market is not looking like anyone wants to jump in. The early morning advance was rapidly sold off. I don't like those kind of signs. It signals too many people still don't trust the markets..

Dipping toes in the waters

One stock that I will add to the list of watch list plays this morning is Trina Solar (TSL).

If TSL can move above last Thursday's drop point of $47 then I would be willing to dip my toes in this company. But only 1/2 position at first.

See chart for buy points and stop loss point.

In pre market TSL is gaping up on low volume. So I would wait a little while to see how it plays out first before jumping on board. The goal of this play is a swing trade with goal of 15% gain if the markets don't suffer any more seizures. No need to chase this if it runs. I would prefer no chasing in this market environment. (you should never chase a stock but even more so in this questionable market).

Pre Market - August 20th 2007

The Asian markets gained big mover overnight. Our futures have not reacted with as much vigor. The futures are mixed and pre market volume is low. I'm not seeing any confidence yet in the bulls, at least not here in the pre market.

Last week the Sentinel Group made a statement that they were facing troubles and faced issues with redemption requests from certain money market accounts. Over the weekend the Sentinel Group filed Chapter 11.

I'm not jumping in here yet on either side of the trade until I see more market action. So far I'm not very impressed with the futures. With the Asian markets up dramatically overnight one would think that the ripple would spread back over the ocean and raise our tide. However, futures are keeping their life jackets on still.

Weekly Newsletter now Available

The newsletter for August 19th 2007 is now online and available for download.

Download it HERE

Barron's Cover Page

Just something to read while you have your morning coffee...

Shorting Cramer article..