Archive for February, 2010|Monthly archive page

Late Day Buyers, But Still A Bear

The major indexes clawed back from steep losses earlier in the day. But seller dominant volume, which was heavier than yesterday’s, makes for a Distribution Day.

We’re still holding our Sell Bias.

Weekly analysis to follow Friday…

Advertisements

We Don’t Need No Consumer Confidence

Our Sell Bias that we’ve held for weeks sticks as heavy selling Tuesday gave us a sign that institutions aren’t supporting this market.

Of course, the news was weak Consumer Confidence. But it’s usually the case that our signals front-run these episodes.

As long as the major indexes struggle to stay above the 50-day averages we’re Bears.

Not Much For Bull’s Cause

Lack of action for Monday’s trading did nothing to change our Sell Bias.

The 50-day moving averages are in play for the major indexes.

Price action at these levels will set our bias going forward.

We’re watching for volume clues to tell us what the institutions are up to.

After heavy selling the past four weeks this recent rally’s light volume doesn’t add up much for the Bull’s cause.

Buyer Uptick

Slight accumulation Wednesday, or an increase in buyers from Tuesday, tells us institutions were a little more on board for the rally.

But it’s not a big data day. No significance can really be drawn from the modest move.

As long as sell-volume continues to weigh in heavier than buy-volume over the last month, and the indexes trade below their 50-day moving averages, were Bears.

No Follow Through Day

Nice rally Tuesday. But it lacks the high-volume institutional support that would have indicated a Follow Through Day.
wp-image-598″ />

We have no choice but to hold our Sell Bias.

Market has a knack for sucking in Bulls when its true direction is south.

As long as the major averages show sell-volume dominance and trade below their 50-day moving averages like they have there’s no reason to go Long.

Still A Dodgy Market

Nice rally Thursday – but hardly the sign of institutional support we’ve been on the lookout for.

We’d like to see heavier buy-volume, otherwise known as accumulation, accompany one of the indexes for a 2% gain to shift our bias from Sell to Buy.

Such support would have especially been endearing today in light of the proposed resolution to Greece’s bond default issues. Lots of folks still worried out there…

If institutional support doesn’t show up in the next week or so we’re going to continue calling this market dodgy.

Sellers Drying Up?

Next few days key...

Fewer sellers Monday could be a glimpse of the Bear being tired. But it’s too early to tell.

Beginning Thursday we’re on the lookout for a Follow-Through-Day where one of the indexes up about 2% on heavy buy-volume would be a sign that institutions are supporting the Bull.

The reason we wait is to give shorts plenty of time to clear out.

But if Friday’s low is taken out the slate would be cleared.

Until proven otherwise we’re sticking with our Sell Bias.

Volume Is Key

GSRTrades Weekly Market Report

Market Bias
Seller’s Edge

Where We Are

The major indexes were little changed at the end of the week.

What stands out was the heavy-duty selling, or distribution, that accompanied a sharp move down Thursday, erasing gains made earlier in the week.

The Longs were saved by Friday’s late-afternoon rally made on even heavier volume.

It’s this kind of turnaround that often accompanies a larger market rebound.

But it may be premature to call a bottom.

We’re holding our Sell Bias for the week-to-week time-frame we trade in.

Ultimately, we may see the 40-week moving averages on the major indexes tested, which in the case of the S&P 500 would be a out 1,025 – let’s say 1,000.

Volume is key in our analysis.

We’re on the lookout for a follow-through-day where one of the major indexes rallies about 2% on heavy volume. Ideally, this would come four days after Friday’s potential low, or Thursday.

The reason we wait a few days is to discern the buying from short covering that may take place. Real buying power would be a sign that institutions are still sponsoring the bull.

Ideally, sell-volume will also dry up before shifting our bias.

Leadership from top-stocks would be another sign of the market bouncing back.

Up until this recent sell-off leadership has come from tech kings like Google, Inc. (GOOG) and Apple, Inc. (AAPL), which in the past few weeks have been hit by institutional grade sellers.

We’ve been happy holding Apple as a short, though we have covered some there, as we have from some of our other short positions.

Leadership, if it returns, could come from Apple and Google again. But corrections are known for clearing the slate for new ones.

Last week’s breakout from top-earner Pegasystems, Inc. (PEGA) is also being watched. Its success could be telling of more like it to come.

Pegasystems was a rare growth stock for this is environment, meeting all of our strict fundamentalrequirements while setting up in a sound technical base.

Without leadership taking us higher we begin to look for leadership taking us lower. If that happens we’ll be in a more dominant bear leg.

Technically Speaking

MAJOR INDEX BIAS & PERFORMANCE FOR WEEK
BIAS
Index
Chg.
%
Action
+
DJIA
-55 -0.55% Trading between major MA’s
+
Nasdaq
-6 -0.29% Trading between major MA’s
+
S&P 500
-44 -0.72% Trading between major MA’s
+
Russ. 2K
-9 -1.5% Trading between major MA’s
or = Above or Below 40-week exponential moving average. + = 50-day SMA is above the 200-day MA

FOUR-WEEK VOLUME INDICATOR BIAS
Accumulation
Distribution
BIAS
Index
Major
Minor
Major
Minor
DJIA
3 0 6 0
Nasdaq
2 0 8 0
S&P 500
3 0 6 0
Russ. 2K
2 0 6 0
Accumulation: index up with more volume than previous day. Distribution: index down with more volume than previous day. Major: > 60-day average, Minor: <.

SECTOR BIAS & PERFORMANCE FOR WEEK
BIAS Sector % Action
U.S. Dollar, $DXC

+1.3% Rallies above 40-wk EMA
Gold & Silver Miners, $XAU

+4.3% Finds resistance at 40-wk EMA
Commodities, $DJAIG

-1.9% Closes below 40-wk EMA
+
Consumers, $CMR -1.5% Sells off below 50-day SMA
+
Cyclicals, $CYC -1.0% Sells off below 50-day SMA
+
Technology, $DJUSTC

+0.9% Trades between major MA’s
+
Semiconductors, $SOX +1.3% Trades between major MA’s
+
Software, $GSO -1.3% Trades between major MA’s
+
Telecoms, $XTC -0.5% Trades between major MA’s
+
Banks, $BKX -3.7% Finds support at 50-day SMA
+
Broker Dealers, $XBD -1.0% Finds support at 40-wk EMA
+
Retail, $RLX -1.2% Trades between major MA’s
+
Healthcare, $HCX -1.7% Slips under 50-day SMA
+
Biotechnology, $BKX +0.3% Pulls back after 52-wk high
+
Pharmaceutical, $DRG -1.8% Slips under 50-day SMA
+
REITs, $DJR

-0.4% Slips under 50-day SMA
+
Homebuilders, $DJUSHB +0.5% Holds above major MA’s
+
Transportation, $TRAN -1.9% Sells off below 50-day SMA
+
Airlines, $XAL

+0.1% Slips under 50-day SMA
+
Defense, $DFX -1.3% Sells off below 50-day SMA
+
Energy Index, $IXE -0.2% Sells off below 50-day SMA
or = Above or Below 40-week exponential moving average. + = 50-day MA is above the 200-day MA

News To Watch This Week

Earnings:

  • MONDAY: Electronic Arts (ERTS)
  • TUESDAY: Baidu (BIDU), Cognizant Technology Solutions (CTSH), Pulte Homes Inc. (PHM), The Coca-Cola Company (KO), Walt Disney (DIS), Warner Music Group (WMG)
  • WEDNESDAY: Dean Foods (DF)
  • THURSDAY: Buffalo Wild Wings, Inc. (BWLD), Cephalon, Inc. (CEPH), Chipotle Mexican Grill, Inc. (CMG), Marriott International (MAR), Panera Bread (PNRA), Philip Morris International (PM)
  • FRIDAY: Ingersoll-Rand Co. Ltd. (IR)

Economic:

  • MONDAY: none
  • TUESDAY: Wholesale Inventories
  • WEDNESDAY: Trade Balance, Crude Inventories, Treasury Budget
  • THURSDAY: Continuing Claims, Initial Claims, Retail Sales, Business Inventories
  • FRIDAY: Mich Sentiment

The Word On The Street

  • PIMCO’s El Erian: Retreat in stocks will worsen as economy slumps. (He’s been saying this since last summer.)
  • Nouriel Roubini: Stock market will be “flat,” or almost unchanged, through the end of the year
  • TrimTabs Investment Research: We have speculated that the Federal Reserve or the U.S. Treasury could be allowing a “buyer” to accumulate stock index futures to boost stock prices. Perhaps the “buyer” has stopped buying.
  • Securities and Exchange Commission: Will consider short-selling curbs in coming weeks as well as ways to improve market surveillance.
  • Baltic Dry Index: This leading indicator which measures changes in the cost to ship goods by sea is down more than 40% from a short-term peak last fall. It’s second major swing down after falling 50% from a peak last spring. Though at roughly 2,700 it’s well off its low of roughly 700 in 2008.

This Week’s Word On Discipline

“ Self-command is the main discipline.” — Ralph Waldo Emerson

This Market Report is our broad analysis that is the foundation for our Growth Stock Report, which highlights trading opportunities in individual stocks.

Rubbing Out The Longs

That funny burning smell today was from Longs getting fried.

If you had any doubt before, we’re very much in correction mode.

We’d be liars if we told you we knew where it stops.

Next technical support level for the S&P 500 is the 40-week exponential moving average – or roughly the 1,000 zone.

But the market doesn’t really care about tech levels. A violent turnaround could happen any day…

We’re looking for sell-volume to dry up on down days to give us a hint of when that might happen, if at all.

Accumulation’s Not Enough

Dominant buying from institutional grade investors, aka Accumulation, Tuesday looks good – though still pales to the even heavier selling we’ve seen the past month.

With the major indexes trading under the support levels of their 50-day moving averages we’d like to see them move convincingly higher before shifting our Sell Bias.