In This Edition...

• Market Outlook 
• New Trading Ideas - BSRR, UXG 
• Open Trade Updates - ICOC, TK, OZRK, MMEX

Market Outlook

I'll say this much for the bulls.... they're working hard to hold the line at May's lows. 

For the S&P 500, that's around 880. The all-important 200 day moving average line is lending a hand in the effort too; the SPX has held tightly to it since Tuesday. 

I'll acknowledge there's a possibility the market is making a floor there instead of my initial prediction of 847. I don't think that's what's going to happen... I'll just honor the possibility. 

Regardless, I think the important thing to keep in mind now is that we're approaching what's likely to be a relatively significant bottom, not just for the S&P 500, but for the Dow and the Russell 2000 as well (which is what makes it significant). Each of those indices is within 3.5% of reaching a 38.2% Fibonacci retracement of the March-through-June rally. The only index not even close to playing ball is the NASDAQ Composite. 

I don't think the S&P 500's 200 day moving average line (blue) is going to be a factor, as none of the other major indices are dancing around theirs. 

Also, I'm still expecting at least a little more downside simply because the market hasn't really worried the daylights out of investors yet. A couple of nasty days over the last two weeks have gotten us close to extreme worry, but we need something of a mini-capitulation to clear the decks, so to speak, before we can get rolling again. 

To that end, I'm still watching the VIX, which as you see didn't really spike that much on the days it probably should have. 

Ideally, the VIX will surge and the market will plunge back to those Fibonacci lines all on the same day. Otherwise, one theory or the other won't hold up all that well. 

I'll keep you in touch with all these clues, but like I said, I'm basically just looking for a little more downside. 
 

New Trading Ideas

Yes, once again we've got a short/bearish and a long/bullish idea for you.

Sierra Bancorp (BSRR) - Bearish

Despite the last short/bearish bank stock trade (OZRK) not going as well as I would have hoped [see below], this is one of those setups with a risk-versus-reward profile that's too good to pass up.

As rewarding as volatile stocks can be, frankly, it's easier to trade setups that take a while to develop, and visibly accelerate. That's what I see on the nearby chart of BSRR.... a gradual shift in momentum that looks like it's starting to pick up speed. 

The fact that the selling volume is picking up and the 20 day moving average line is now acting as resistance is just a little gravy. 

Given how big the March-through-May rally was, there's actually a lot of retracement potential here. Factor in that Sierra Bancorp is in a long-term downtrend anyway, and the trade's potential is raised even further.

US Gold Corporation (UXG) - Bullish

Against my better judgment, I'm trading something that has the word 'gold' in it. 

Actually, I have no particular beef with trading gold, whether it be as a commodity, as a stock, or as an ETF. I'm just not a fan of jumping into a pool that's full of amateur speculators who can remain irrational well beyond the point where they become insolvent. 

Nevertheless, I'm disciplined when it comes to charts, and if the nearby chart of UXG were any other stock from any other sector, I'd still be interested enough to buy in. So, I have to do the same for this one.

There are two basic things I like about this chart... the modest, well-paced progress we've witnessed since April, and the amount of room we have to recover 2007's highs. Is this a commodity play for me? Maybe a little, though it's not my exact intent. Given that lots of dollars are flowing into the economy and with interest rates being low, I sure don't think commodities are going to have a hard time heading higher.

If you're following my lead, I'll warn you now to prepare for volatility. 
 

Trade Updates

Almost needless to say, our bearish picks have been pretty productive while our bullish picks have been hit and miss... though that's the whole point of trading both sides of the market, particularly when it looks as if the market is trying to head lower.

Most of our open trades don't need any meddling, but a few of them probably need to be managed, if not exited. Here's what we recommend:

ICO Inc. (ICOC) 

Good thing we had this short trade on our plate. The chart looked like it was pointed lower anyway, but the market's bearish phase certainly helped it along. As of right now, we're up about 10%, so we can effectively lower the trailing stop on this one now. 

I think moving the stop all the way to the entry price of $2.70 is a little too aggressive, as ICOC shares peaked at $2.67 yesterday without even threatening to break the downtrend. Maybe we should set it just a little but above that mark. Your call.

TeeKey Corp. (TK) 

If you're still in this one, get out. The bearish parabolic SAR signal was triggered a few days ago, and the 20 day moving average line (one of the key reasons we were in the trade in the first place) was also breached. There's no point in being stubborn.

Of course, Murphy's Law dictates that TK will find support at its 200 day moving average line in a few days and will bounce higher shortly thereafter. We just can't afford to take on any more risk though.

Bank of the Ozarks, Inc. (OZRK) 

Let's go ahead and pull the plug on this short trade too, while there's still some profit left (about 5%). I don't know where it's finding these buyers, but I can't worry about that right now.

Management Energy Inc. (MMEX) 

Don't forget, Management Energy's new ticker is 'MMEX'. It used to be MGMT, but was changed a few days ago. I'm not sure if I mentioned it, but the stock also split, 5 for 1. Therefore, our entry price of $3.91 per share has effectively become 78.2 cents per share.

With the stock currently trading at $1.09, we're up about 40% on this trade... more than enough to raise the stop to above break-even levels.

Trading remains pretty thin on this one.

That's it for today, but be sure to check the next newsletter for any additions or subtractions. Have a great weekend.