I mentioned yesterday how the ingredients were there for a pivotal move in either direction, and it looks like the path of least resistance was up. When the fed minutes were first released, I thought it might be a headfake higher, but the rally was persistent and strong. In the end, I think bears had to scramble to cover some shorts and bulls pressed the action. The fact that there has been such a high level of anxiety and bearishness led me to believe that further strength was possible. However, I am of the opinion that a top is in the process of being formed. Tops usually don't occur out of the blue, tops are usually grinded out. Today could be the start of a strong rally, or it could be reversed in a few days. Ultimately, we may just be entering a difficult stretch, as bulls and bears will probably wage a battle in this area as either a top is formed, or a strong new base is. As always, mother market has surprises in store and it makes for interesting observation. I won't be trading much the next couple of days, so no new charts tonight.
Good Luck,
Joey
Tomorrow is fed day and while the last fed release days have been anti climactic, tomorrow may prove to be pivotal. Not so much because of any bombs the fed may drop, but because the indices are in a spot where the bounce could easily fail, yet they could conceivably move much higher. The reason they are in such pivotal spots is that after a steep decline, most have now retraced 50% of the decline and are near the declining 20sma with the 50sma not too far above. You can argue that shorting such rallies to declining sma's would make a fairly profitable and reliable trading system. The bullish argument is that most are near small double bottom breakouts which would point to a more significant bounce.
Here is a chart of the Q's showing the possible double bottom breakout.
NASDAQ 100 Trust Shares (ETF) (Public, NASDAQ:QQQQ)
iShares Russell 2000 Index (ETF) (Public, NYSE:IWM)
Here is a similar chart of the IWM also showing how it tagged the 50% retrace of the decline.
In another wrinkle, it looks like the Nasdaq will be gapping higher tomorrow morning off of strong moves in ORCL and ADBE after hours. While tomorrow may end up being anti-climactic again, the ingredients are there for a pivotal day.
Good Luck,
Joey
I've been tracking the QID and TWM inverse ETF's in recent weeks as a means to trade the general markets through a correction or bear market. The reason I am looking at them is not because I am averse to shorting but because they are leveraged at twice the performance of their long counterparts. The Bulls had a decent day today although on lower volume. If the indices keep rising on declining volume it should setup a nice opportunity to get long these inverse etf's.
UltraShort QQQ ProShares (ETF) (Public, AMEX:QID)
Here is a chart of QID showing a clear break of a downtrend and then a double bottom breakout which has yet to reach it's target. It is pulling back to test the breakout area as support and may find support soon.
UltraShort Russell 2000 ProSha (Public, AMEX:TWM)
The IWM inverse, TWM, is relatively new and still a little light in overall volume. It is pulling back to the rising 20sma and could find support here as well.
Vanda Pharmaceuticals Inc. (Public, NASDAQ:VNDA)
VNDA is a chart that is looking bullish to me in the case that the markets decide to rally after the fed meeting. It has retraced t partially fill the breakout gap and is finding support near the bottom bollinger band.
Empire Resources, Inc. (Public, AMEX:ERS)
ERS is sporting an interesting chart for bottom fishers. All indicators are oversold and bouncing back while OBV is in a leading divergence.
Corrections Corp. of America (Public, NYSE:CXW)
CXW is one I have been stalking for an entry, and while it may pullback a little further, it is in a decent spot here right now. I will be watching it closely.
Alberto-Culver Company (Public, NYSE:ACV)
ACV is a chart that is looking weak to me. It broke out of a triangle and retraced to the declining sma's. It looks like it may come back to test the recent pivot low.
Good Luck,
Joey
As I mentioned in an earlier post, I will traveling to Europe (mostly Spain) towards the end of the week for about two weeks on business. I have been working on a project for the trip that has been taking most of my time and I will be pressed for even more time as the week winds down. When you add the unclear direction of the markets for the next few days, and the fed meeting looming, I think I will continue to tread lightly. I will continue blogging and probably trading over the next three weeks, but the schedule for posting will probably be irregular. I will probably end up as an end of day trader for the time being as well.
As for market direction, the indices really are at a crossroads here. There are signs that the indices could be forming a short term bottom but there is still ample selling pressure above that should prevent any of the indices from rallying to new highs anytime soon. This likely wouldn't be a real bottom, but more like a floor for a stronger bounce. There is also the chance that we could see another down leg after this lateral consolidation. Either way, there are no clear signals, so be careful out there.
Good Luck,
Joey
