7:30 am EST The dollar is weakening again this morning. Therefore the futures are strengthening. This has been the theme for the last several weeks as I have mentioned several times. There has been increasing talk questioning the global recovery recently. The people behind this are starting to move away from risky assets (stocks, commodities) and into "riskless" (dollar, treasuries) assets. As this happens, the dollar strengthens and the equity markets weaken.
While the short term trend in the market is lower for now, I am still heavily in cash going into earnings season. Alcoa (AA) reports tomorrow afternoon. Of course, it will be a loss. They may be the worst managed company in the Dow. They couldn't make a profit when the price of aluminum was at a record. They are not going to make a profit now. The key is going to be the reaction to the loss they are going to report. Either way, the company isn't (and never is) a buy. I have other places to put my money.
What you want to look for in this coming earnings season is where the analysts rate the stocks (buy, hold, sell). We are getting back to the times when, for whatever reason, the analysts will be moving stocks for a while. Upgrades move stocks up and vice versa. So for good long earnings trades, you want a company that will beat the numbers and has an overall negative rating from analysts. An earnings beat and a couple of upgrades from analysts will make for a winner on the long side. The same is true for shorts, if everyone is at a buy and you see a miss coming, it will be an easy short trade. As always, you want to use options for trades like this. There is no reason to risk a huge amount of capital on an earnings play. Small amounts of capital and 100%+ returns will add a little juice to your portfolio. I will give some trades as they come up. Until next time, stay low risk..
Tuesday, July 7, 2009
Monday, July 6, 2009
Market Rolling Over..
9:15am EST I believe I was a little early on my "market is rolling over" call a couple of weeks ago. However, I think we are beginning to see evidence of that this morning. The futures are weak, the dollar is strengthening, and the oil market is as bearish as I have seen it in a while.
The potential saving grace for the bulls is earnings. If companies come out with stronger than expected earnings AND a solid outlook AND solid revenues, the market can rally from here. the problem with that scenario is that there are three hurdles to get over and it has to happen for most of the major companies in the markets.
On the positive side for the bulls is that the weekly charts are starting to take on a reverse head and shoulders pattern. This is especially true for the S&P 500. While we still need to work on the right side of the shoulder. It means that the correction will be more shallow than the lows we saw in March, and the trade can be dramatically higher from there.
I am carefully adding to some longer term trades today, but I will spend a good amount of my time on the sidelines. Downward trending markets tend to be a little harder for me to trade, so I tend to stay away. A lot of trading is understanding your personal style. It is all a part of managing risk. Until next time, stay low risk..
The potential saving grace for the bulls is earnings. If companies come out with stronger than expected earnings AND a solid outlook AND solid revenues, the market can rally from here. the problem with that scenario is that there are three hurdles to get over and it has to happen for most of the major companies in the markets.
On the positive side for the bulls is that the weekly charts are starting to take on a reverse head and shoulders pattern. This is especially true for the S&P 500. While we still need to work on the right side of the shoulder. It means that the correction will be more shallow than the lows we saw in March, and the trade can be dramatically higher from there.
I am carefully adding to some longer term trades today, but I will spend a good amount of my time on the sidelines. Downward trending markets tend to be a little harder for me to trade, so I tend to stay away. A lot of trading is understanding your personal style. It is all a part of managing risk. Until next time, stay low risk..
Thursday, July 2, 2009
Last Trading Day of the Week..
8:20 am EST The all-important jobs number is yet to be released in a couple minutes, but I am going to get started writing right now. There are a couple of factors to look at in this market. First there are a lot of stocks out there that are getting close to their recent highs. This makes for an inflection point in stocks. If we break above those highs, we could be off to the races. If those highs hold, we could be looking at a short term double top and bearish action coming.
467k. That was the jobs number. The market will NOT like this. I have a hard time believing that there is a lot of big money out there today to support this market today. I think we should float lower for a good part of the day. We may see a little bit of strength later in the day, but there should be a good amount of selling today. It looks like we will not challenge the highs in the next couple of days.
All of that action is going to keep me on the sidelines at least today. I am hesitant to get long if the market is going to weigh on my long positions. I need some confirmation of a continued rally to jump in with longs.
A quick word on the Merck (MRK) trade. I didn't end up putting the trade on yesterday and I am glad I did. While it did get to the $28.20 buy target I originally had, there was little volume to make me feel good about the trade. I have given it a couple days and it refuses to go higher. I am certainly not getting long with this market. I think the stock has told us that it doesn't want to go higher right now and it wants to correct.
Have a great fourth, buy some puts, and until next time, stay low risk..
467k. That was the jobs number. The market will NOT like this. I have a hard time believing that there is a lot of big money out there today to support this market today. I think we should float lower for a good part of the day. We may see a little bit of strength later in the day, but there should be a good amount of selling today. It looks like we will not challenge the highs in the next couple of days.
All of that action is going to keep me on the sidelines at least today. I am hesitant to get long if the market is going to weigh on my long positions. I need some confirmation of a continued rally to jump in with longs.
A quick word on the Merck (MRK) trade. I didn't end up putting the trade on yesterday and I am glad I did. While it did get to the $28.20 buy target I originally had, there was little volume to make me feel good about the trade. I have given it a couple days and it refuses to go higher. I am certainly not getting long with this market. I think the stock has told us that it doesn't want to go higher right now and it wants to correct.
Have a great fourth, buy some puts, and until next time, stay low risk..
Wednesday, July 1, 2009
A Lesson in Trading Discipline..
8:00 EST The Merck (MRK) trade yesterday was the exact reason you need a very specific price point to look for a purchase. I was looking for a breakout above $28.20. The high for the day was $28.05. If you had an itchy trigger finger and bought a little above $28 or $27.95, you would have suffered with the position all day. The action overall was generally bullish near the end of the day, but it would have had you wondering about your trade all day if you bought too early. I am still keeping an eye on (MRK) today. I think it may stage the breakout I was looking for today.
Remember the General Mills (GIS) trade from June 8th? The stock never broke below the low of the day on June 8th. As I said, the time to make the decision is now that the earnings have been announced. I would look for resistance at the 200 day moving average to be the time to take some profits. While the stock can certainly break above the 200 day, it will probably have a difficult time. Take some risk off the table there and let the rest run. Until next time, stay low risk..
Remember the General Mills (GIS) trade from June 8th? The stock never broke below the low of the day on June 8th. As I said, the time to make the decision is now that the earnings have been announced. I would look for resistance at the 200 day moving average to be the time to take some profits. While the stock can certainly break above the 200 day, it will probably have a difficult time. Take some risk off the table there and let the rest run. Until next time, stay low risk..
Tuesday, June 30, 2009
Watching Futures...
8:15am EST While the futures are showing a weak start for the day, I think we will see some strength. Even though most of the end of quarter window dressing for portfolio managers is finished, we are seeing strength in the commodity space and a weakening dollar. That has recently been very supportive for the equity market.
The other part of the market I am watching is the overall technical levels. Of course, the strength is in the Nasdaq. The technicals on the Nasdaq chart are starting to look more and more bullish. The 200 day moving average is beginning to flatten out and the month of July will be very supportive for the 200 day. We will see some of the nasty days in October and November fall off the back of the 200 day and the flat-to-up days coming in July added in. If we don't see a dramatic sell off in July, the 200 day MA may begin to turn up for the Nasdaq. Of course, the charts for the other indexes look similar, but the Nasdaq will be the index that leads us out of the recession.
The stock I am looking at today, believe it or not, is Merck (MRK). Going back to the capitulation day on March 9th, the stock hit a high on March 24th and then another high on June 2nd. Both highs were within about $.30 of each other. The move yesterday brought the stock close to the recent highs and above the 200 day moving average. If the stock can get strongly above the $28.20 level on good volume, it is time to put a position on. My stop would be around $26.50 with an initial take-profit in the $30 range. Be sure to buy at a proper buy point and manage risk properly. Until next time, stay low risk..
The other part of the market I am watching is the overall technical levels. Of course, the strength is in the Nasdaq. The technicals on the Nasdaq chart are starting to look more and more bullish. The 200 day moving average is beginning to flatten out and the month of July will be very supportive for the 200 day. We will see some of the nasty days in October and November fall off the back of the 200 day and the flat-to-up days coming in July added in. If we don't see a dramatic sell off in July, the 200 day MA may begin to turn up for the Nasdaq. Of course, the charts for the other indexes look similar, but the Nasdaq will be the index that leads us out of the recession.
The stock I am looking at today, believe it or not, is Merck (MRK). Going back to the capitulation day on March 9th, the stock hit a high on March 24th and then another high on June 2nd. Both highs were within about $.30 of each other. The move yesterday brought the stock close to the recent highs and above the 200 day moving average. If the stock can get strongly above the $28.20 level on good volume, it is time to put a position on. My stop would be around $26.50 with an initial take-profit in the $30 range. Be sure to buy at a proper buy point and manage risk properly. Until next time, stay low risk..
Monday, June 29, 2009
Important Market Week
8am EST This week will have two major events to watch. The first is the new month and the new quarter. Portfolio managers will have all the portfolio window dressing finished and they will be into the new quarter. This will show how they really feel about the market. Look for some larger volumes over the next couple of days as money flows out of the "sexy" stocks into the stocks which will lead the next quarter.
The other event to watch is the jobs report coming Thursday. While jobs are truly a lagging indicator, the report is always a market moving event. It will be interesting to see if the unemployment rate gets officially into double digits. Either way, the bottom line is that the news is something to watch.
While I will probably be mostly in cash today, I will be looking to put on some more positions later in the week. We will see the general direction either stay on the bullish path it has been on or we will see it turn by the end of the week. Stay tuned and until next time, stay low risk..
The other event to watch is the jobs report coming Thursday. While jobs are truly a lagging indicator, the report is always a market moving event. It will be interesting to see if the unemployment rate gets officially into double digits. Either way, the bottom line is that the news is something to watch.
While I will probably be mostly in cash today, I will be looking to put on some more positions later in the week. We will see the general direction either stay on the bullish path it has been on or we will see it turn by the end of the week. Stay tuned and until next time, stay low risk..
Friday, June 26, 2009
Curious Market Reversal..
8:30am EST The strength in the equity markets was curious yesterday. The only thing I can attribute it to is the window dressing effect at the end of the quarter. The thing to remember is that action is action no matter the reason. The S&P strongly took back the 200 day moving average. The Nasdaq was exceptionally strong as well.
While you will see a high level of volume today with the Russell rebalancing, you might not see a lot of directional trading. It will be very choppy today and into the end of the month on Tuesday. I am sitting tight for now. Any trades made over the next couple of days will be VERY opportunistic, VERY small, and VERY short time frames. Until next time, stay low risk..
While you will see a high level of volume today with the Russell rebalancing, you might not see a lot of directional trading. It will be very choppy today and into the end of the month on Tuesday. I am sitting tight for now. Any trades made over the next couple of days will be VERY opportunistic, VERY small, and VERY short time frames. Until next time, stay low risk..
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