Market Update

So far so good.

I do see profit taking on advances. Every now and then my screen goes completely red with down ticks after a run up. There is still those that want out.

Will have to see who wins out that battle near the end of the day.

I established my swing trade positions in ENG and EXLS this morning and will post the updates soon. The only thing I don't like here is that EXLS quickly reached the buy point ahead of their earnings which will be tonight. Normally I would not want to be in a position when the company is going to release earnings. I like to keep risk to a minimum. But in the case of EXLS I am going to bite the bullet and let my position stand going into earnings. I have a full position as of this morning. And I got in higher than my readers did who got in early. If you got in early your already up real nice. Sell 1/2 of your position before the market closes. Then let the other 1/2 ride through the earnings tonight. This way you will reduce your exposure to any bad news.

Other swing trade ideas that although are not in the current watch list (but still on my stockcharts.com charts page for watching) are making great moves. Starting this Sunday all previous watch list plays will be included in the newsletter, not only the new ones. There will be a section for new additions to the watch list, and a section for continued watching.

Stocks from the previous watch list:

GNLG- looking good
NVEC - is getting close to a buy
APKT- looking good
ABCO- has blasted off

My watch list charts and index charts are at:

http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID2147404

Please be sure to vote for my charts if you like my work I do here. Vote once a day if you can. You vote by going to the link I just posted above a scroll down to the bottom of the page and click on the button "vote"

The Day that Was - August 7th 2007

Hello my fellow Rebels!

A very quiet morning while everyone was waiting for Santa Clause (Ben Bernanke) to come and bring gifts to the markets. But instead of gifts he gave us a get well card instead. Tonight there are more opinions of what the FOMC statement will do for the markets than there are shares in a cheap pink sheet stock that has been diluted to death.. LOL

The initial reaction was a quick sell off on rather heavy volume. The major indices hit an intraday support level and then bounced. The bounce was shorts covering and some new money coming in. The new money I suspect is people hedging that we have now seen the bottom. Will they be right? Or will they be part of the sellers adding to more down volume if the markets digests the news for a while and decides they don't like it. Time is now a factor in where we are going. All over the world tonight hedge funds, institutional money, and other very large market movers are planning their plays. Will they pile on the shorts on advances or will they buy on dips? I wish I could tell you what they are going to do. What I can say is that it will likely be a battle for a while. Until the major indices can make a substantial move (with very heavy volume) above resistance levels then we still have a market that is unsure of itself.

One thing I observed today while watching the SPY (S&P 500 SPDR) was that the volume during the initial sell off was heavy, then the bounce was lower volume. and that volume got weaker up to the close. That showed a lack of conviction on the buyers to jump in. Will the buyers think about it overnight and jump in tomorrow or will they still sit and wait? Tune in tomorrow for the answer..

I view the FOMC statement as weak. While they did acknowledge there is a problem with the credit situation they did not provide an answer of what they would do to address it if it gets worse. I would like to have see more wording addressing a possible weak economy instead of still talking about inflation. I am still bearish on the financial sectors. After the FOMC statement was released I took a position in SKF (SKF is an ETF that is a 2x short of the DJ Financial Index). Did I do the right thing? I believe there is still more bad news coming in the financial circles and the financial sector has not seen bottom yet. If I am wrong then I will exit the trade and take my lumps. But just like any swing trade I will keep my loss to a minimum. My entry on this trade was not part of the RebelTrader tracked portfolio. I just wanted to pass along what I was doing in my other trading account. The position in SKF that I took is more of a hedge against a market change. If the market drops hard again then the SKF will pay very well. And this would soften losses from other trades that are on the long side of the markets.

It is my opinion that consumer spending will continue to weaken as the housing and credit crunch get worse. If people can't get credit, or they are paying higher and higher rates for their money, and they can't sell their homes because the value has dropped too much, and if new home buyers can't get credit to purchase a new home then this will a trickle down to the consumer spending. People will cut off spending on high ticket luxury items. No big TV's, no fancy iPhones, no shopping for clothes at the high end clothing shops. Trickle down economics is a real thing. It starts with the big stuff (housing) and is felt later in other sectors. When it comes to consumer spending we have already been seeing a downtrend of discretionary spending. and if the credit crisis gets worse then discretionary spending will also accelerate downwards. It becomes a situation that gets worse and worse until someone (FOMC) comes to the rescue to control the bleeding.

Keep in mind that politics also plays a part in what happens in the markets. The Republican party (Bush administration) would like to make everybody believe the economy is wonderful and doing great. Elections are coming down the road. The last thing they want to do now is acknowledge there are problems brewing in the economy. I strongly believe the Bush administration would like to just keep making everybody think that the economy is just peachy keen and will let the next administration deal with it. So it comes down to a race. Will the economy get worse before elections or will they have to acknowledge in stronger terms that people may be losing their homes and home builders can't sell new homes because buyers can't get low interest rate loans? It is a game of poker.. who will fold their cards first? Think about it.

Two of my watch list stocks hit their buy points today. See the two charts shown here. ENG and EXLS both became "in play" today. If you were watching it and took the recommended entry then that is fine. Your still safe because with every trade there is always an exit in clear view in case the market turns out the lights on the whole neighborhood. I myself did not enter these swing trades today because I was too concerned about what the FOMC reaction would do. But I will enter them tomorrow if they are still within the buy point. If they should continue running up I will not chase it. Instead I will maintain my observations on them for you but for me it will be a missed opportunity. Never "chase" a stock to get in. chasing a stock is like chasing a train going down the tracks because you just missed it. But you never know, as soon as you jump on the train may stop once your on it. For all of your trading throughout life, if a trade gets away from you don't worry about it, another train will come along later. If I get an entry on ENG and EXLS it may turn out that you got a better entry price than I will so your gains will be higher than mine. My swing trade portfolio performance will always be based on the price I get in at. So with these trades my gains will be less than yours if the market strength builds (or at least holds).

I have some market index and sector charts tonight. Take a look and see the notes I wrote on each. This will give you a feeling for what I'm looking at. After the market closed today there was news of another mortgage company going under. AEGIS Mortgage suspended its operations. Don't know how this will be perceived in the market tomorrow.

Cisco (CSCO) had super earnings after the close today and this will be a good psychological boost to the tech sector. If you see CSCO having trouble keeping the gains from their great quarter then view this as fear growing in the markets and people still wanting to get out.

Have a great night Rebels!

Pre FOMC announcement

In case your wondering what I am doing before the FOMC meeting I am setting myself up to short the financial sector by actually buying (long) symbol SKF. Symbol SKF when bought like a stock will increase 2x in price if the financial sectors go down. The moment I have a handle on how the market is viewing the FOMC statement and if it looks like the markets don't like it one bit then I'll buy SKF for a swing trade to take advantage of a possible sell off in the financial sectors again.

If on the other hand the FOMC comes out with something that surprises the markets and gives it a huge boost then I will buy UYG. Same as SKF however UYG pays 2x gains for the rise in the financial sectors.

RebelTrader swing trade ENG made it to the buy point this morning but with the pending FOMC statement I did not enter yet. I will wait until after to gauge that one. If you bought in already then don't worry about it. You followed the directions and that is fine. I'm just waiting for the smoke to clear from the FOMC before getting to busy with the "buy" button.

Pre Market - August 7th 2007

The only thing everyone is thinking about today is the FOMC meeting and what they decide to say and/or do. At 2:15pm the markets will go to a 5 alarm fire. Will it be a sell off or a buying frenzy will not be known until we see the FOMC statement.

RebelTrader watch list news:

ENG reported earnings this morning and the news was good. ENG reported Q2 earnings of $0.15 per share which is 2 cents better than expected. Revenues rose 19.3% year over year. ENG is on my watch list as the technicals were showing a good play in the making. Watch to see if the buy point is reached today and if so I will be adding ENG to a swing trade slot. IF your new to RebelTraders you must keep in mind that you never put all your capital into any one trade. You divide your capital into pieces and use only one piece on each trade. This limits your downside risk and the purpose is to preserve capital. A successful trader controls risk first, makes money second. See this previous post for guidelines on portfolio management. Click HERE.

RebelTrader swing trade watch list play EXLS is also looking good and is still setting up for a move.

Pre market futures is jumping around from positive to negative. Not really worth putting much faith in the futures here. Will be a slow day until the FOMC announcement.

Pre Market - August 6th 2007

As was expected American Home Mortgage (AHM) filed for bankruptcy this morning. No surprise here. With all the job cuts and bad news coming from AHM it was only a matter of time before they filed the legal paperwork for bankruptcy.

Over night the Asian markets were down huge. But before the end of the day in Asia they closed up from the lows. They still closed in the red but not as bad as it was at one point during their trading day.

US Futures were up earlier this morning as shorts in the markets started doing some covering in anticipation of any bounce in the markets. But during the past 1/2 hour the futures have been dropping. Will there be a bounce today? Following any huge sell off there is more chance of a bounce than not. It is a matter of large money moving into and out of short positions that mostly starts a bounce. But for the bounce to hold there has to be more than just short covering. There has to be substantial buying on the long side. Today will be a very strange trading day. I say that because I anticipate a large amount of continued fear in the markets along with risk takers doing some buying before the FOMC meeting tomorrow. A lot of speculation and taking any position (long or short) here before the FED meeting will be akin to dropping some quarters into a slot machine. There is no way to predict the reaction of the markets tomorrow. There are some well respected financial analysts who say that even if the FOMC cut the rate the bounce in the markets would be short lived and we will still end the year down. I feel that the financial situation has not been fully exposed yet. There is more to come and I anticipate that the unemployment rate report for next month will more accurately reflect the decline in the housing sector as builders have been cutting back in their work force. This will likely be reflected in the next jobs data next month. That kind of news would pull more money out of the stock market and into bonds and other perceived "safer" investments.

Fundamentally nothing has changed this morning from Friday's bloodletting sell off. So any advance today could be met again with those still wanting to cash out on any advances. If the markets close up today it will be a signal of huge bets being placed ahead of tomorrows FOMC announcement. I don't see any substantial buying today before the meeting.

Trading in this market is still highly risky. I do have stocks I want to watch but I any trade I take will be done with caution.

Stocks in the current newsletter are:

• Allion Healthcare (ALLI)
• Blue Dolphin Energy (BDCO)
• ENGlobal Corp (ENG)
• ExlService Holdings (EXLS)
• Layne Christensen Co (LAYN)
• NVE Corp (NVEC)
• Sun Cal Energy (SCEY)
• Syntax-Brillian Corp (BRLC)

For details on each item in the watch list download the weekly newsletter here

Do you like the work I do here at RebelTraders? If you do please vote for my charts on the stockcharts web site. Go to this link by clicking here. Scroll down to the bottom of that web page and click on the box "Vote Best Chart List"