Why today’s Gap up is significant

Of course, all gaps are significant, and we have had a few recently.  Analyzing the weekly and hourly charts shows some interesting characteristics of this move.

I’ve mentioned a few times that in the short term, if the SPY can get over the 121 level, it would signal a new uptrend and new highs.  It looks like that’s exactly what happened.

The market has moved comfortably over 121, the 23MA has crossed over the 50MA on the hourly, and the next key resistance short term is at 124.

More importantly, in my opinion, is the weekly chart:

The pullback of the previous couple weeks brought the SPY back to the 200MA of the weekly, and the strong move last week bounced it off that level on strong volume.  This is a key area here for couple different reasons.  Not only is the 200MA in this area, but the 61.8% Fib retracement level of the high 2007 to low 2009 bear market is around 123, and the market had struggled with this area earlier this year.

This gap up (should it hold) will put some distance between the SPY and these key resistance areas (which will now become support).  I believe this uptrend will continue unless some unforeseen events occur and drop the market back below these levels in the near term.

In any event, ignore the noise, and follow the charts.  There are lots of opportunities out there.

Trade well.

Favorite setups from ST50 for week of 11/8 and other picks

I hope everyone is having a great weekend.  Last week the market reacted very positively to all the news events, from the election results, to the Fed to the NFP.  Some major resistance areas were cleared on the SPY and as the chart below shows, the next major resistance area is 126-127.

Most impressively, and importantly, the financials came life and broke out on huge volume as can be seen by the chart of XLF:

This not only validates the rally, but in my opinion, gives it new life.  I believe we are starting a new wave/trend up.  However, having said that, this market needs some consolidation period or slight pullback to digest these gains.  The market still needs new catalysts to go higher, and there is plenty of momentum to go up.

I took a look at the Stocktwits50 list today.  Twice.  All the stocks on this list have fantastic charts.  The only problem is that most (not all), are making new highs on lower volume, with some major divergence between price and MACD and/or Money Flow.  I am finding it very hard to get on board or recommend most of these stocks at these levels, without some sort of low volume pullbacks/consolidation.  The most promising ones I found for next week are below (only 2):

NXTM: Huge breakout last week on very strong volume. Long over 22.50 on volume.

VHC: Low volume consolidation the last couple weeks. Looks poised to go higher. Long on break of upper trendline around 19.20.

In addition to the picks from ST50, I believe we will see some of the stocks that are not at 52 week highs but broke out last week (like the financials) make a move in the coming weeks.  Some picks I tweeted late last night are:

COV
FWLT
HEV
IO
ITT
JEC
JRCC
KSS
WFC

I hope you have a great week of trading and as usual, please do your due diligence on any stock you wish to pursue, including earnings dates, news releases, etc.

Favorite setups from ST50 for week of 10/24

I hope everyone is having a great weekend.  As usual, there were some fantastic and endless ideas and analysis on Stocktwits this weekend.

Let’s start by taking a look at the weekly and daily charts of the SPY:

Price action is right at the weekly 200MA of around 119, and the resistance areas on the daily can clearly be seen on the chart as well.  The persistent trend keeps grinding higher in the face of some overbought conditions, but as we all know, that does not necessarily mean we will not go higher.

Personally, I will be exercising some caution next week and will not hold any overnight positions should the indexes exhibit any signs of weakness.  Regardless, there are still some great looking charts out there.

Please do you due diligence on the picks (such as earnings, news releases, etc.).  The recommendations are only meant as idea generation and my own personal analysis on these stocks.  Additionally, please use proper money management should you decide to get into any positions.  This are my weekly picks from the Stocktwits50 list:

APKT, UNP, INFA, CGNX, TIBX, INTU, CMG.  Entry points and commentary on the charts below:

Good trading and good luck next week.

My favorite setups from the ST50 list for next week

I hope everyone is having a great weekend.

Well, it was certainly quite an impressive week with some phenomenal action in individual stocks.  Momentum names were up big, financials took a beating, and solars sold off hard on Friday to give up the entire week's gains.

I still believe there are some warning signs of a a correction - but it has not materialized into actual weakness in the indexes.  On the contrary, the markets held up extremely well in the face of a selloff in Financials and some semis including Intel.

Looking at the chart of the SPY, there are some major challenges ahead.  Some strong resistance areas are coming up in the 120-122 area.  The election is coming around soon, and the majority of earnings will be released the next couple weeks.

It is clear that there are some major hurdles to keep this rally going. It would appear a lot of good news has already been priced in.  But how much good news?  This market has managed to surprise and just like the Energizer bunny, it just keeps on going.

The following are stocks that I will keep on my watchlist from the Stocktwits50 list:

CTSH
AMZN
LXK
NBIX
MIPS - probably my favorite setup

Don't forget to keep an open mind and not be 'married' to a position or an opinion.  Things change on a dime and we must be prepared to adapt appropriately.

Good luck and good trading!

Do you believe in Divergence?

One of the tools I find to be indispensible on a chart is the MACD. The boring, good old-fashioned MACD with default settings. In addition to its traditional use, the MACD is one of the best tools that can be used to identify divergence patterns with price action.

Divergence is when price makes a new high, but action in MACD is not confirmed - i.e. the MACD makes a lower high than the previous price high.

In the daily chart of SPY, I have highlighted the previous divergences on the chart. New highs in price were not confirmed by new highs in MACD. This can be seen in Divergence 1 and Divergence 4 on the chart. Subsequently, the SPY broke down and we had quite a drop in both instances. On the other hand, when prices made new lows, MACD did not confirm with new lows as can be seen in Divergence 2 and 3. Subsequently, prices went up.

We have what I believe is another such a divergence on the SPY shown by Divergence 5 on the chart. Recent price highs (which happens to be on a strong resistance area by the way), are not being confirmed by a high in MACD. In fact, the MACD is not only declining, but looks ready to cross over below 0.

Now this does not mean that prices will drop for sure, we may just rest here for a while, or make even higher highs. But it does make one be a bit more cautious, even defensive. Raising a bit more cash is not a bad idea, especially with the run we've had in September.

Personally, I always like to have two watchlists to use at any time - a long and a short watchlist. But this week, I will pay extra attention to stocks that are ready to roll over, and I'll be more aggressive with the futures if I see that we are indeed breaking down to lower prices.

Good luck and good trading!

Breakout Alert! Now What...

What a day Friday was. You could tell from even before the market opened the bulls would not be denied. And did they ever deliver...

If you went short on Thursday, you were licking your wounds on Friday. A painful message to anyone who tries to step in front of a high speed train. Which is exactly the feeling that the permabears had yesterday. This is the same message that applies to those who try to pick a bottom during a downtrend. Don't try to be a hero - if the trend is up, find stocks that are going up and go long. I mean, it's so simple, even a caveman can do it ;-)

My countertrend trades are usually limited to very short time frames and the risk is managed very closely. I will usually bail out of a countertrend trade if I feel it is not moving in my direction. But when the path of least resistance is in a certain direction (up or down) - I just follow the trend. That's where the money is. I don't try to be a hero and catch the top or bottom - I usually leave that to two kinds of people: 1) those who are MUCH smarter than me and understand Macroeconomic conditions so well that they 'just know' when the top or bottom is in, and 2) gamblers.

The action last week was very encouraging. The previous week the $SPY closed with a doji, and last week, we closed higher on higher volume. The weekly chart shows we still have some room before we reach significant resistance around the 200MA around 120. The daily shows we are comfortably above the 200MA, but I have posted some resistance zones on the daily chart.







What I would like to see happen is some consolidation/pullback to digest these gains and NOT go into earning season overbought. But of course, the market will decide what to do and it is our job to keep studying and adapting to price action.

I will make another post on this blog with my recommendations for some long entries.

Have a great weekend.

Possible Double Top

It was a very interesting day today. What started out as another gap up and continuation certainly did not end that way. The buyers were very eager this morning as Geithner was answering questions about the economy to a congressional committee.

In what can only be described as 'panic buying', the indices marched straight up right from the open with very little breathing room. You either had to chase or be left behind. The ES emini futures topped out at around 923 - right at last week's highs and filled the gap from last Monday 5/11.

That's when the sellers stepped in. The selling was intense and accelerated in late afternoon. ES ended the day right at 900, while the Dow Jones retreated all the way from around 8600 to close at 8422. The daily chart of the SPY shows that we are in a very congested area, with a tightening triangle forming, along with a possible double top. The 'glass half full' argument would debate that we may be forming a Cup with handle that will be triggered with a push above today's highs on volume. There is a valid argument to be made for either case, but the fact remains that until this area gets resolved one way or another, it is going to be very choppy. The weekly chart is still overbought and the stochastics have crossed, but the sell signal will only be triggered if we take out last week's lows.

The next few days will be key again for the market. There are support and resistance levels galore, and one of these levels will have to be taken out. Although I am leaning for a correction, I am prepared for either scenario. Ags are looking mighty ripe for a correction, as are energy, solars and coals. Gold and oil look good for a continuation.

Stay alert and good luck with your trading. I'll see you on twitter.

Bear in bull's clothing, or more bear stew?

The pullback week that we have all be waiting and yearning for is finally here. After a historic monster of a rally, stocks took a much needed breather last week with the indices down between 3-5%. However, some sectors took bigger hits, e.g. XLF, IYR, XLE and XME were down between 6-11%. I think it is safe to assume that the 'character' of this rally will be tested in the coming week, if not the next few days. Is it a bear in bull's clothing, or is the bull setting up a trap for more bear stew?

This move sets up a much important test for the market. Many stocks are at 'logical' pullback buy points - whether you are looking at stochastics, CCI, MACD, etc. or simple pullback chart patterns. Additionally, many stocks are resting at the 20 or 50 MA on daily charts. Declining 200MA resistance still sits comfortably above the majority of stocks and the indices. Usually, the first test of this resistance fails, and the second test on strong volume is a good indication of a recovery in the chart pattern.

Although the daily charts do look very promising technically, the corresponding weekly charts are pointing to an even more significant pullback if the lows of last week are taken out convincingly. The SPY weekly is setup perfectly for a stochastic sell signal on the weekly chart and has historically been a very accurate indicator if/when triggered. Obviously, this does not mean the same thing will happen. It is very possible we may not even retest or breach the lows of last week. Also remember, that there are now 'trapped' longs who jumped in late on this rally and will be anxious to 'break even' the longer we do not get back up to the highs (more fuel to the selling fire).

Additionally, my TA system is showing a strengthening of the US Dollar vs. Euro and GBP, which could adversely affect commodities and oil - meaning a more severe pullback might be in store. Furthermore, MOO closed with a 'doji' on Friday with above average volume. Ags have been unstoppable the last few weeks and are due for a pullback, especially with the 200MA in close proximity as resistance.

In conclusion, I think it is safe to assume that this is becoming more and more a stock picker's market. Focus on the strong stocks in strong sectors for long positions (i.e. the leaders), and short the weak stocks in the weaker sectors. There is no shortage of watchlists for both longs and shorts in this market, so be prepared for both scenarios and look to book profits when you have them.

The burden of proof now lies squarely on the shoulders of the bulls. Is the worst over? Will more banks fail? Is unemployment going to hit 15%? I don't think ANYONE really knows the answers to all these questions. The market will let us know in due time. No need to guess or force our opinion on anyone, including the market. Prices are THE best leading indicator - follow the market for your cues, and stick to your trading plan.

I hope everyone had a great weekend and is ready to make some profits this week. Good luck and I'll see you on Twitter.

Assessing the damage

Well - it sure wasn't pretty! Actually, the adjective that comes to mind is: Ugly. That's right, it was downright ugly today. If one were to pick up a newspaper (like anyone ever does these days), or go to Yahoo and see that the indexes were down around 2-3% they'd probably think 'Ok, not too bad'.

But the real damage was 'under the hood'. Yikes. In fact that there was carnage out there. Steels down about 10%, solars -9%, energy -9%, real estate -8% - you get the picture, and don't even ask about casinos. The momentum stocks got crushed today with losses of 10% and more. Decliners outnumbered advancers by about 9 to 1. The bulls could not even muster the usual late day rally attempt.

When analyzing charts, especially for SPY (or ES), I like to look at multiple timeframes to get a feel for the short and long term trends. The weekly is setting up as a stochastic sell which has not triggered yet. A move below last weeks lows and I believe we are in for more correction. The hourly chart is looking precarious - trend lines that extend all the way back to Mar 10 have been broken for all majos indexes, and the 20MA is about to cross below the 50MA. This was attempted several times in the last several weeks, only to be reveresed rather quickly with a resumption of the rally.

It is obvious, and quite healthy, that a pullback was needed in this market. Many people (myself included) who don't like to chase have been calling for some consolidation, and an opportunity to get on-board. This is the bulls chance to show the rally is for real. The daily chart still looks intact and bullish - we are still above the 20 and 50 day MAs. There is some strong support in SPY around the 87 area - if that gets taken out easily, then the next area of support is around 83-84.

Fundamentally, it became rather obvious with today's retail numbers that the consumer is still ailing and the economy may not be rebounding as others would like to think. Unemployment is still rising, and the treasury bond yields are rising as well. The bulls have a lot to overcome here.

Regardless of what happens, there should be some fantastic opportunities to profit in this market - long or short. Remember to stick to your plan and take profits when you can.

Good luck with your trading.

Some support and resistance levels to watch for

I watched some absolutely phenomenal analysis this weekend by great traders like @tickerville and @HamzeiAnalytics. Traders I would not have known or met without Twitter.

In addition to the great analysis already done, I wanted to get some charts out on SPY, QQQQ and VIX to show where some of the support and resistance areas might be and perhaps watch for signs for reversal or continuation. The first thing to notice on SPY and QQQQ is the fibonacci retracement from the pivot high to the low. We are sitting right at the 38% retracement level. Does this mean it's time to short? Absolutely not. We just need to watch this level to give us some guideline on the next move. Also notice the proximity of the 200MA to this level in both ETFs.

The other level of support/resistance is called MOB (Make-or-break) which is an eSignal proprietery indicator. Notice historically how the price either bounces off this level, or continues in the same direction after going through. It is an important tool in my analysis as it acts as a 'magnet' for prices and in most cases the price will often test this level.

For SPY we are at that level (MOB and 38% Fib Retr), with possible continuation to the 99-100 level and then pretty strong resistance around 106-107. A slight correction would take the SPY to around 81-83 level, a more severe correction to around 75, and a really severe correction takes us back to the lows.

Similarly, QQQQ has tested the MOB on a couple of occassions, has gone through the existing MOB level, and next areas of resistance are around 36, and very strong resistance at 38. A slight correction will take the QQQQ back to around 31-32 level.

The VIX is currently sitting at an important MOB level and I am 'expecting' a bouce here in the coming week. The next areas of resistance are around 40, then around 50 and 56-57. The thicker the MOB on the chart, the more powerful that level of support/resistance is.

Please remember these are just points of reference and NOT meant to be hard targets. Historically, prices gravitate towards these points, but not always. A reversal at a point just means there is a good chance for a trend reversal. A continuation through the levels means just that - trend continuation.

One thing for sure though, I believe the market is setting up for a buy on pullback. Additionally, any shorting of stocks should happen on weak stocks in weak sectors. For now, I'd stay away from shorting the leaders, such as financials.

Just some additional things to think about on a lazy Sunday afternoon. :-)

Will BAC be the catalyst for a correction?

A story is breaking this evening at the Wall St Journal regarding BAC needing an additional $34B in capital to survive. This news has caused the futures to dip quite a bit. So, I wanted to take this opportunity to post an update of my thoughts on the overbought indicators I am seeing on the SPY.

I read a post earlier by Keith Shepard (@keithshepard) where he talks about the NYSE Bullish Percent Index approaching overbought levels, and how it might be time to be defensive. On the SPY chart, I have included the traditional Stochastic and RSI indicators on a weekly chart. The stochastic is setting up as a high percentage low risk sell, but is yet to be triggered. 1 or 2 down weeks will trigger this signal and the market should go through some correction - how much is yet to be determined. My initial target would be around 80-81 for a minor correction, and around 60-63 for a more severe retracement. The RSI indicator is also overbought at these levels and one can see the historical response to these levels on the chart. Declining volume over the last few weeks is also of some concern.

The question we have to ask is: will BAC or stress tests results or any bad news for that matter, produce enough of a catalyst to induce a round of profit taking. If so, then the next dilemma becomes do we buy the pullback or watch this market sink to new lows? One step at a time. Let's get a pullback first and then we can react to the market as it unfolds.

I personally think a pullback is going to provide some fantastic opportunities for longs in leading sectors.

In the words of the always real @tickerville: Let's keep it real.

Good luck.

Fed - Running out of Ammo?

It was another very interesting FOMC day today. Futures were up on the GDP numbers - the markets opened up big and never looked back. Of course, like most people, I was looking to short the opening gap, but really did not find any opportunity. I tried once and quickly gave up as the buyers were out in full force this morning. So, instead of buying, I stepped aside. We later chopped around for a while until the Fed decision came out - then things got interesting.

There was really nothing new in the FOMC statement. The rate (target) remained the same, they are buying more (lot more) distressed assets, and a comment was made regarding the 'softening of the contraction' - whatever that means. Whatever. There was a period of indecisiveness after the release, and eventually a new wave of buying drove the indexes to the January highs. This prompted some profit taking and then a selloff during the last hour of trading, but not enough to prevent some solid gains and breakouts today.

My feeling is that the FOMC really has nothing else they can do at this point to stimulate the market, and are running out of bullets. They certainly are not going to raise interest rates, and are already pouring trillions into the market and the financial institutions. But that's just my observation.

The markets are at an interesting point here. The weekly chart of the SPY is setting up as a classic stochastic sell, and there are some stiff overhead resistance levels coming up - 20MA on Weekly for SPY and 200MA Daily for QQQQ. So, it would appear a logical place for a pullback (that's longer than 2 days). But this market has been anything but logical these days.

It'll be interesting to see how the pullback (once it gets here) is handled by the bulls. I am expecting a pullback to support and then an advance to retest the current resistance levels. And I am beginning to view this market as a 'Stock Pickers' market. You can begin to see the leaders emerge and breakout, and the pretenders languish and churn sideways and even go lower.

We'll see how things develops, and like I always say, the market leads and we dance.

Good luck with your trading.

Relax - It's Just One Day (so far)...

It was a sea of red today. With the exception of GLD, all major sectors were down. BIG. The catalyst? Some rumor about the stress tests results, and the BAC earnings report - something about a surge of bad loans. What? You're kidding, right? So, all this euphoria over the last six weeks and the 'record' earnings in some banks was just smoke? Hmmm...

In my post yesterday, I mentioned that if history repeats itself, we are due for a correction. Well, part 1 of that correction occurred today. Now the question becomes, is this part of a slight pullback in the new 'bull' market, or continuation of the bear market? That's why the title of this post is'It's just one day'. The market was waaaaay overbought and needed an excuse to go down. Technically, the daily chart of the SPY is not broken yet. We are still above the 20 and 50MAs, and the 20 is still above the 50. However, on the 60 minute chart, we look vulnerable for more downside. The next levels of support seem to be around 81.50 and then around 78. Make no mistake, today was a big drop, bringing us that much closer to the next levels of support. If those do not hold, then there is much more downside to go.

My trades today were GS which was scalped for a short twice, and I took shorts in ADM (highlighted by tickerville on Saturday), and NIHD which I mentioned on Twitter yesterday. I was able to scalp about 60c to $1 on those trades. The best trade of the day which I DID NOT take was a signal to go long SKF at around 12:30 which would have been good for 3-4 points. Ah well, you can't take 'em all - it was a good day regardless.

I see some more downside this week, but the burden is now on the bulls to resume the uptrend by buying the pullbacks. Oil looks terrible and I will be looking there (ERY) for shorts this week.

Good luck.

Where's the volume?? Market overview for April 17

Ok. We have all heard the same story over and over for a few weeks now. This is a bear market rally. We should turn any day now. We are going down big. No jobs, bad housing market, commercial RE tanking, toxic assets, etc. etc. etc.

I will leave the discussions about the economy to the so-called experts. I have my charts to guide me and my trading account. This is what the chart of the S&P is telling me. It does NOT care what I or anyone else thinks. It will go where it will go. Period. All we can do is try to read the tea leaves and ride the wave.

So, looking at the daily of the SPY, one question comes to mind: Does history repeat itself? It usually does (notice the 'usually' here). I am not hedging, but my analysis only gives me history to look at to try to determine the future (occasionally, my analysis is wrong). History tells me that during periods of low volume gains in the SPY, especially recently, followed by a reversal candle, the market usually goes through a correction phase. I anticipating a reversal in the coming week - how severe is yet to be determined. Ideally, I'd like to see the SPY challenge its 50MA and either make a clean break below, or bounce and continue its upward move. Either way, I'll be ready to take advantage of any opportunities - long or short.

On Friday, I took a couple of low risk entries for reversal from resistance areas for the ES/SPY. The first one was stopped out for 20c loss, and the second one a 10c loss. I completely ignored my one good signal from my TA system to go long SPY at 11:30 which would have caught most of that nice reversal move. I just don't feel comfortable going long right now - but with an 80% win rate on my signals, I really should pay more attention to it.

We'll see what BAC does tomorrow pre-market. Should be a very interesting week indeed.

Good luck with your trading.

Too late to Long, too early to Short? And Market overview for April 16

Another earnings release that beat estimates, this time JPM, early in the morning was setting up a 'sell the news' reaction. JPM actually traded down for a while but then quickly recovered to end the day positive. Unemployment claims number came in better than expected, however, the more important number in my opinion - the CONTINUING claims was at a record high. A record HIGH. Not sure how the economy is going to recover with so many people out of work.

Anyway, we started the day down, chopped around for a bit and then around 2:00pm the market marched straight up and we closed near the highs of the day. I took two trades: a long in SDS when the ES/SPY bounced from its VWAP at around 10:30am, and a short in SDS when the ES/SPY bounced from the daily pivot point around 11:00am. Both trades were scalped for 50c/60c and 35c. I closed my second trade quickly as I thought we were hitting resistance on ES, and going into lunch hour I felt we might drift lower. Boy was I wrong! The market just kept going higher and higher. This is an area of weakness for me and I definitely need to improve on letting winning trades run. Unfortunately, I had to run some errands and I missed a great signal to long the market again at around 2:15pm.

So, where are we now. It seems like we have been saying this for a while. It's too late to go long, yet it's too early to go short. So, what's one to do? Well, it depends on your style and trading plan. If you don't like to chase prices, then going long here might be risky. If you like to buy on a pullback, then you are still waiting because a pullback has not happened. If you are itching to short, I think you already know that it can be dangerous to your health. If you are a day trader, then it should NOT matter because your focus is what trend is developing DURING the day.

The only advice I can offer is to stay patient. Do not force a trade if it is not there and stick to your plan and rules of engagement. Let the trade come to you (or jump out at you when you see it). There is no need to force things, or try to catch a top, just like all those who got burned trying to catch a bottom just a month and half ago. We need the market to digest these gains and consolidate to see if we REALLY have hit a bottom. The only way is for a pullback and then a move back above to challenge and reclaim the 200MA.

Tomorrow we have C and GE announcing earnings and should provide some fireworks, along with options expirations Friday. I may take it easy on the trading (I usually do on expirations), unless a nice short opportunity presents itself.

I hope this helps. Good luck with your trading.

Market overview for April 15

We started the day on a negative bias for the index futures as a result of the Intel (INTC) earnings and some negative economic news regarding consumer price index.  Shares of INTC were under a lot of pressure despite the strong earnings and revenue report, which in turn led to strong weakness in Nasdaq and Semis.

However, it did not take long for the buyers to show up and as has been the case recently, financials and real estate led the market higher.  AMR preannounced early during the session and its stock soared 25% in 10 minutes and lifting all airlines stocks.  Initial strength in railroads quickly faded though and these ended at the lows.

It was another see-saw whipsaw kind of day for sure.  My first trade of the day was a long in ERY as the crude inventory numbers came in. However, the weakness in that sector did not prevail and the trade was good for a 50c scalp on half the position, and stopped out on the rest. I had four signals on the ES chart today which is unusual.  I acted on 3 of these for scalps of 30c to 50c.  Ironically, my last signal was the best of the day, but I only took half a position and the market rallied very strongly into the close.

My list of short candidates grows longer by the day.  We are still overbought and have not had breather in a while.  I believe the SPY has not had more than 2 down days in a row since March 10 - very impressive.  Tomorrow JPM and GOOG release earnings, and C on Friday.  My opinion is that anything short of spectacular is going to be sold - as has been the case recently with INTC and GS.

We are getting close to a stochastic sell setup on the weekly but the pattern is in early stages of forming.  The SPY is currently sitting right at the 20 period MA of the Weekly chart.  Lots of resistance overhead.

In the meantime - stay alert and focused in your trading and stick to your plan.  Good luck.

Is the rally over? Market overview for April 14

Well, Goldman Sachs (GS) reported record earnings yesterday and the market sold off on the news - the stock was down almost $15 today. The economic news from this morning (PPI and retail sales) were not very good and provided the excuse needed for taking some profits in a very overbought market.

Ironically, my two signals for today were longs on the ES (SPY), taken via short in SDS. I was able to scalp 50c for half on the first trade, then stopped out at entry. I also shorted SDS when SPY failed to go below Thursday's low, and that was also good for 50c in a wacky last hour of trading. I also piggybacked on Todd Stottlemyre's call on BTU which was good for at least $1 - this is not something I usually do, but BTU used to be one of my favorite stocks last year and is one of the better coal plays. This happens to be one of the reasons I decided to end my boycott of StockTwits - lot's of good ideas that are generated during the day.

I am including a 60 minute chart of ES mini. It can be seen on the chart at around March 11, there was a bullish MA crossover of the 20MA and 50MA. This is usually a good indicator on market trend and is still intact. So, one really must be looking to buy on pullbacks, until proven otherwise. The hourly chart is showing a bullish stochastic buy (which is yet to trigger).

My good friend on Twitter, fortune8, has an interesting post on his blog, about this rally. Have we missed this rally? In hindsight, and if you are one to buy and hold for more than one day, then you have missed a big part of this rally. But one cannot give up just because the market has run without us. I believe the psychology of the market has changed for now, and everyone seems to be chasing strength and buying the pullbacks. Momentum and breakout trades seem to be working again, and all we can do as traders is trade what we see. It sure feels like it is easier to put on a long trade than short (quite the opposite of a few months ago).

And remember that for all the moves that have happened recently, we are still only back to where we were in early February. Have all our problems been fixed? Is the worst behind us? I have NO idea - and I cannot claim that I know. But I do know this - I will take ALL my buy and sell signals on an intraday basis, and now I am looking for pullbacks to start swing long trading again.

Good luck with your trading.

Couple days to reflect, and Market Overview for Apr 9 and 13

I hope everyone had a great weekend and spent a wonderful holiday with their families.

If you read my blog over the weekend, you'd know that I was a little miffed as to why anyone would retweet a link as their own, especially only a couple of minutes after the original tweet. But hey, perhaps it was a coincidence, an oversight or whatever. We are not here to cry over spilled milk. We are here to make money, share ideas, and most of all learn. I know I've learned a lot in the short time I've been on Twitter and met a lot of very smart and very friendly people. I believe I have some ideas to offer as well, and I hope to do just that with this blog and Twitter.

On Thursday, eSignal's data feed was down most of the day - I think it came up around 12:30pm. It was another difficult day to trade as we gapped up pretty big on the (surprisingly) strong earnings pre-announcement by WFC. The only signals I received from my system (which I could see after eSignal was online) occurred at around 10:45am for a countertrend move, and at around 12:00pm for a continuation of the trend. I did not take any trades, as by the time I was back online, I would have had to chase the entry point - something that is a no-no in my plan.

Today, I got 2 signals on ES (and SPY), the first one at around 10:15am. This was a tough signal to trade, as it would have required me place a wide stop on my position, so, I decided to take half a position. Also, it was a long signal, and I am being very careful with anything long right now. After a gut-wrenching move back down, the position started to move in my favor around noon and finally cracked the opening range highs for a continued move up. I ended up scalping 50c and 75c from my SDS short. My second signal was also a long in ES at around 3:15pm which I decided not to take.

GS announced earnings after hours and surprise - it was another record earnings. I guess the AIG short must have worked nicely for them. Stock was all over the place in AH, and I believe ended down a couple of points.

I have been doing some research on stocks for long and short positions, and my shortlist of longs is almost non-existent right now. And I think it is too early to short - I will need some confirmation before jumping in. We are coming into some stiff resistance on a lot of stocks, and the 200MA is lurking above for most stocks.

Good luck and stay patient.

Favoring the Short side if....and Market overview for April 7 and 8

It has been a very choppy week and very difficult to get a sense on the direction this market will take. It seems that 'all news' is out regarding banks, TARP, TALF, GM, bailouts, etc. The question is has all the 'bad' news been priced in?

With this impressive move the last four weeks, it definitely feels a lot like last Apr/May when the market got quickly ahead of itself and the rest is history. Earnings will be key, especially banks and financials. Already we are hearing about BAC requiring some odd $36B additional capital, and the results of the banks stress tests will not be released until after earnings - this can't be good. But the market seems to be taking these news in stride, so we'll see what happens.

Since I did not post yesterday, I wanted to include my signals for the last two days. Yesterday, my first trade was a short in SPY on the expectation we would continue the gap down. I was stopped out and eventually got a couple of signals after that which were good for good 50c - 70c scalps.

Today, I started the day with a short in SDS and a long in POT which reversed nicely after the earnings news by MOS and the trade was good for 50c and 70c scalps. It continued on to for at least $1-$2 additional gains - but I closed the trade when I got a signal to go short SPY. I had a couple of other signals which were good for 70c and $1 scalps on SDS.



Going forward, I am attaching a daily chart of SPY. I still feel we are in a critical trading range here which has not been resolved. I mentioned on twitter that I have a sell signal on SPY which will be triggered on a close below Tuesday's lows of 83.51. It also happens to be a break below the lower trend line shown on the chart. The last couple times I got this signal was around Feb 10, Jan 7 and Sep 3, 08, which marked the begining of a severe correction each time. Will the same thing happen? I don't know - but we will soon find out.

A break above 84 on the SPY invalidates this setup and it may mean that this rally is real and time to get on board for LONG positions.

Either way, we will be ready for what the market brings.

If I don't post tomorrow, have a great weekend, and good luck with your trading.

Market overview for April 6

It was a very choppy session today and we gapped down at the open. My first trade of the day was reversal from the Opening range highs with an SDS long and the trade was good for 60c and 50c on each half. I closed the position when I got a signal to go long the SPY which I took with an SDS short. In hindsight, I should have waited for the SPY to close above the VWAP, but I had a very tight stop in case it reversed - which it did.

After that, I got about four additional conflicting signals (long followed by short, etc.) on the SPY so I scalped a few trades here and there and decided to stop trading as I did not have a good feel for the direction.

On an average day, I'll get 2 or 3 signals using my TA indicators on a 15 minute chart. On days like today when I get several signals, it usually means I need to step aside until the market moves in a clear direction.

I attempted a low risk short in RIMM today as price stalled at R3 - the move was good for at least 50c but quickly reversed and I scratched the trade for BE. RIMM broke out today and the next stop is 67-68 and possibly 77-80.

I believe that earnings will determine the direction of the next move in this market. We have gone up too far too fast in the last 4 weeks, which means that earnings expectations are high. Investors will have their finger ready on the trigger to protect profits. The key is whether buyers will step up during pullbacks.

As usual, good luck with your trading and let the trades come to you!