Quote of the Day
In every work of genius we recognize our own rejected thoughts; they come back to us with a certain alienated majesty.
Ralph Waldo Emerson (1803 - 1882)
Market Outlook Since the big rally of April Fools Day, we have been saying that this market has been at a crossroads, a decision point if you will. We had held that days gains fairly well, especially given a whole lot of bad news and the fact that all rallies in the past few months had sold off in a big way following any big rallies. However we had very little follow through, and a number of valid resistance points above to get through before making any real headway. It appears that on Friday a decision was made.
We thought that Thursday's action may have given us a hint, albeit a small one, that this market wanted to go up and give those resistance levels another try. We gained more than we had on any day since 4/1, and on bigger volume to boot. However, we had poor earnings from GE that sent the market into panic selling mode right from the start, then poor Michigan sentiment numbers to continue the push down. Apparently that was just about all the bad news this market could take.
Our basic feeling is that we took a turn for the worse on Friday. We had been saying for the last five sideways days that the market will soon pick a direction, and watching todays action it is hard to believe that that direction is anything but down. That said, we are not ruling out a bounce off these support levels and back up to the recently discussed resistance above.
All of our market averages had breaks of a number of support levels on Friday. It is hard not to think that we retrace at the very least to back where we ended the month of March, if not down to the 2008 lows and beyond. But, this market has been doing a very good job lately of keeping us on our toes, and acting slightly less than rationally, so we are going to play it safe and be prepared for anything. We are already locked into nice profits on a number of our end of day portfolio stocks, and we are tightening up covers and stops on positions to both sides in order to lock in more profits. We are now 50/50 long to short, and will be triggering more short positions than long for Monday.
In terms of support for the major market indexes, here is what we are seeing:
DJ-30: We have the low of the April 1st rally at 12,266, followed by some price support around 12,150, and then a pretty clear shot down to the double bottom formed by the January and the March lows.
Nasdaq Composite: Price support at 2270 or so, and then solid price support at about 2205.
S & P 500: Price support at 1325, and then the double bottom 2008 lows at about 1265.
Russell 2000: We have a little price resistance in the 675-680 range, and then the double bottom in the 645-650 area.
In terms of commodities, gold was up slightly and silver stayed pretty much flat, both took nice swings up & down, but both were fairly small compared to the swings they have been taking. We are looking for a consolidation in both, followed by more up moves in the not too far future. Oil gained over 3% on the week, but is now forming a double top with the March highs just over $110 a barrel. We are looking for a slight pullback here, probably to the 105-107 area, and then a retest of prior highs.
The dollar stayed pretty flat for the week, although it did dip down to retest double bottom support at $71.25 or so. We are expecting a slight consolidation around that area, and then will probably crack through support to new lows.
As always we have posted a number of long and short possibilities for tomorrows trading action on our website, and we will be in the chat room at http://www.greenroomstocks.com during trading hours for up to the minute market commentary and stock analysis. After a great month of March, here are our end of day portfolios closed trades:
Total trades closed: 23 Winners: 15 - Average gain per winning trade: 10.54% (Largest % gains, BLOG- 41%, TARR - 35%, NCC short - 31%) Losers: 8 - Average loss per losing trade: 7.96% (Largest % losses, URZ, 13.7%, HMIN - 10.5%, TSRA 7.8%) Monthly total - 4.1% gain, 49.2% annualized gain. A couple of stocks to watch for the week, on the long side and short:
Time Warner Cable (TWC) looks like it has retraced and consolidated very nicely following the recent 3 day move and looks to have found some support at its 50 day moving average. We have a nice volume pattern on the daily chart as well as positive up turns in RSI and stochastics, and a bullish adx cross. The last 20 minutes or so of trading on Friday saw some heavy selling, and it may see more Monday morning if the market opens badly, but certainly worthy of keeping in a watchlist for a move back up.
STXS had a bad day on Friday, dropping 11% and through support after being very overbought. We're getting very bearish readings on all secondary indicators shown on this chart, and a bunch more on charts not shown. We may see some support at the 50 day moving average just under$6, but if we can break down through there we should have a good shot at retesting that $3.50-$4 range that it bottomed at in March.
Last week I was looking for a little more bullish follow through from the great rally we'd been tracking since the fed had cut interest rates. We saw some bullish follow through on Thursday but it didn't go very far after bell weather AA reported poor earnings and quickly retreated further after GE's earnings. This is causing a correction to retest lower confluences’. Since the Markets fell back into their respective ranges, it's a trader's market again until after tax season officially ends. If you look at your charts you'll see that the markets were able to turn up higher after April 15th. If they can't turn after that date then this tells me the markets are pricing in a deeper recession.
On Friday I warned that there was a falter in the bullish momentum and the Bear's were out in force. From the sell off pressure we witnessed we were able to trade to the downside. Since it was a below average volume sell off, I feel that it won't take much for the bull's to turn it back up. I'll be monitoring the earnings of the bell weathers to see if they'll be subpar and whether this will cause more downward correction.
If you shorted and held though the weekend stay short for a couple of more days but look for a bullish attempt to bring it back up around midweek.
Since we saw the markets stall and retreat on GE and AA's earnings keep monitoring the earnings reports of the Dow and Nasdaq 100 components. Coming from the bottom we're still in a short term bullish uptrend. It's because of this I'm a bear for the first part of the week and issuing a caution on the greenroom's long picks and a green light on their bearish picks but be ready for an short term oversold bounce toward the end of the week.
From the economic standpoint we the Dollar retreating again possible a sign the our economy is faltering further. We'll continue to monitor the economic data and indicators which will give us clues hinting at more corrections.
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Have a great week, happy trading!
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