Note: You are reading this message either because your browser is not standards-compliant, or your browser failed to load our css files.

A description of the content follows :

Search SCN
Hot Stock Picks
and Trading Ideas
RSS
Current Market Calls
RSS
Sign-Up For Our
Free Newsletter
RSS
To subscribe to our newsletter, please enter your email address below.
Privacy Policy
Current Profiles
Previous Small Cap Stocks and Penny Stock Profiles

Add to Google

Small Cap Network Blog

10/28/2009

Breadth, Depth Turn Bearish for SPDR S&P 500 (SPY), NASDAQ 100 (QQQQ)

Filed under: — SmallCapNetwork Editor @ 9:35 am

If you’re a fan of trading the SPDR S&P 500 Fund (NYSE:SPY), or any index vehicle for that matter, you may want to put your bearish hat on. It’s no secret that the market’s been sinking for the last few days - we’ve seen plenty of ebb and flow since March. What traders may not realize yet, however, is that index funds like the SPY or the PowerShares QQQ Trust (NASDAQ:QQQQ) just fell under some crucial support lines today. It could get uglier before things get better.

Here’s the most critical part of our bearish forecast for QQQQ or SPY though - it wasn’t exactly the charts of the exchange-traded funds that are leading us to a near-term bearish view. It was the NYSE’s and NASDZAQ’s breadth and depth that prompted the outlook.

It was only last week we pointed out that, though the market had been rising, the number of stocks participating in the rally (the ‘breadth’) was actually sinking. Moreover, the volume behind the gains (the ‘depth’) was also shrinking. Stocks were still pointed mostly higher, but underlying support for the rally was crumbling fast.

That’s how we knew SPDR S&P 500 Fund and the PowerShares QQQ Trust were essentially on borrowed time; today the price is being paid.

———————————————————————-
Sign-up for Free to Receive Future Commentary
and Trading Alerts on QQQQ and SPY.
———————————————————————-
As for how we interpret breadth and depth data, we explained that in detail with last Friday’s newsletter, though we explained in tremendous detail a long, long time ago. (If you’re looking for a powerful market-timing tool to add to your arsenal though, studying our technique would be time well spent.)

At any rate, a quick comparison of today’s NYSE breadth and depth chart to last Friday’s breadth and depth chart (same chart, just updated data) plotted along with the S&P 500 illustrates a bigger-picture shift to bearishness that we’ve not seen in months. All the breakdown signals are marked in yellow. Be sure to compare the two charts - you’ll clearly see the breadth and depth trends have remained bearish long enough to turn the tide and actually generate bearish crossovers on both fronts. [Note we use the NASDAQ breadth and depth data for the QQQQ’s. though we didn’t show it here.]

And just so you know, both the QQQQ and the SPY broke under the equivalent support lines that we marked for the S&P 500.

To answer the next question, yes, we know the technique gave us some errant signals in July, but the market didn’t break under a support line then. Now we’re getting a breakdown of support at the same time the breadth and depth tide has turned.

There are several ways to play this…. put options, shorting the ETFS, and others. The easiest though - if you agree that things just turned bearish - would be to tap one of the leveraged inverse index funds. Think about the ProShares UltraShort S&P 500 ETF (SDS), or the Rydex Inverse 2x S&P 500 ETF (RSW). No margin or option-approved accounts are needed for either.
If you’d like to know of any changes in our opinion of QQQQ or SPY (or if we officially recommend them as trades), be sure to sign up for our free newsletter today. It’s delivered weekly.

3/30/2009

Today’s a Buying Opportunity for the Bold

Filed under: — SmallCapNetwork Editor @ 7:50 am

Wow. It’s not too often stocks lose a collective 3% within the first 5 minutes of trading. I suspected we were due for a nasty pullback (the kind of dip I forecasted on Thursday), and sure enough, here it is. The S&P 500 has now given up 4.8% from Thursday’s high. Is this enough to jolt the euphoria out of the bears and bring them back down to earth? I think so. More importantly though, I think the result today is a huge buying opportunity for the bullish…. which I am.

One of my key indications was going to be support at the 50 day moving average line, currently at 791. Today’s low of 787 technically broke support, though the two levels are close enough to say - so far anyway - that support is still in force. A little more to the downside though, and I’ll have to rethink things.

Nevertheless, you have to swing the bat sometime, and sometimes you have to swing at a fastball that nobody else would swing at. Today’s one of those days. If I miss, so be it - I’ll pull the plug very quickly (another point I made on Thursday). I’d just rather try and fail than fail by not trying, as I think today’s negative reaction to the news is going to be short-lived.

That said, I strongly recommend you keep an eye on an intra-day chart today (I prefer a five-minute chart), because the market could change course just that quickly. The opening gap is taunting the buyers, and if they bulls call the bears’ bluff - if it’s a bluff - the rebound could happen quickly.

We’ve attached a daily chart as well as a five-minute chart.

Are other forecasters missing too many opportunities by chasing old trends rather than finding the new ones? Yep, you’re not alone. Start getting notices before it’s time to buy or sell - not after the fact. Sign up for our e-newsletter today.

3/26/2009

Market Update: Don’t Get Giddy Yet

Filed under: — SmallCapNetwork Editor @ 10:53 am

I hate to be a wet blanket here, but since nobody else seems willing to do it, I’ll put the task on my shoulders. So, here goes - despite the 22% bounce since March 9th, it’s not like the market is out of the woods yet. We still have some barriers to break through before this is a trust-worthy bull market.

But wasn’t I the guy who was optimistic to the point of saying I felt the bottom had already been made? Yep, that was me. Just keep in mind the end of the bear market isn’t necessarily the beginning of a bull market. But wasn’t I also the guy who was saying the rebound would come without warning, and that most of the early gains would come in the very first days of a new bull market? Yep, that was also me, and I still stand by my words.

So, am I bullish, or bearish? Ha. That’s the $64,000 question.

Actually, I’m more bullish than bearish. And frankly, I do think we’re now at the onset of a new bull market despite several more challenges we’ll have to face through the remainder of 2009. But, corporate profits are being seen again, and the economy’s perking up in terms of comparables. The thing is, I can afford to be that bold - and possibly wrong - because of the way I trade.

Bless their hearts, but all these pundits out there can only think one-dimensionally. The ones who are bearish talk and think as if 100% of your portfolio should be in bearish positions, and that once you decide to be bearish you have to stick with your bearish positions forever. The ones who are bullish talk and think the same way - if you’re bullish, then 100% of your portfolio should be in the market, and you simply can’t sell anything ever again even if the market tanks some more.

Those two extreme stances make it tough/risky to take any side.

Since I phase into trades, and am willing to pull the plug if they’re not working, I can afford to be ‘mostly bullish’. I wouldn’t behave the same if I had to adopt an “all or nothing” approach. I don’t know how anybody can stomach that kind of approach in this kind of environment.

My point? I’m bullish, but not married to the idea. Said another way (as described in this post’s title), while I’m encouraged, I don’t think we need to be giddy yet. Here’s what I’m seeing….

The S&P 500 is back above its 50 day moving average line (purple) again. That’s good, as it shows the bigger, intermediate trend is bullish… at least bullish enough to give the bears a black eye. The thing is, we’ve seen this crossover before, to no avail. The indices crossed above their 50 day averages in early January, and two months later we were hitting multi-year lows. This time could be different, but we really won’t know if it is until the S&P 500 is tested, pulls back to the 50 day average, and then starts to move higher again.

Additionally, on the chart below you can see that the S&P 500 still has to face and beat resistance at 876, where we topped in January and February. Getting above 943 would be very reassuring, but that’s not even on the radar yet.

Needless to say once you look at the chart, a big chunk of the reason things have been so good the last three weeks was that things were so phenomenally bad over the three weeks before that. We really haven’t accomplished anything of significance yet.

So why my sudden increase in bull market chatter? Though the gains and rebound haven’t been significant, there is one difference with this bounce that we haven’t seen with other recent bounces…. breadth and depth. The number of advancers and the volume of those advancers is much more bullish than we saw during prior bounces. This is subtle - almost imperceptible. But, it’s also crucial if a rally is to last.

Bottom line - be bold, but don’t get giddy. I feel we’re due for a short-term pullback bigger than the one we suffered Tuesday, and even bigger than the one we saw in the middle of last week. Maybe we need to pull all the way back to the 50 day average line. As long as we find support afterwards, I’ll continue to add onto my bullish trades. I’m not pouring money into them in the middle of a rally though.

Are you tired of getting bad advice from other media sources that tell you to buy at short-term tops and sell at short-term bottoms? The Small Cap Network newsletter can tell you the right time to buy…. on short-term dips during long-term uptrends. Conversely, we have our pulse on bear trends too, telling you when to short or sell at short-term peaks within long-term downtrends. Nobody else can do this better than we can. Sign up for the newsletter today, and start timing your trades successfully.

3/24/2009

And that’s why you stay invested in stocks

Filed under: — SmallCapNetwork Editor @ 11:11 am

Yesterday’s gain was touted as being the best gain of the year. Fine, but that’s no big deal. The sellers have been relentless most of the year, so it wouldn’t necessarily be a great feat to be the biggest gain of the year (less than three months) so far. What I’m kind of baffled about is how nobody really seemed to notice how yesterday was actually in the top 20 daily percentage changes for the Dow Jones Industrial Average….ever.

Oh, it was also the fourth biggest day since the 1930’s.

Granted, we’ve also seen some phenomenal daily losses in the last few months to go along with the daily gains (three of the top 20 days have been in the last six months). So, don’t get giddy yet. However…

As of right now, the market is up 21% from its March 6th low. Technically that constitutes a new bull market and the end of the bear market. Don’t go and bet the farm just yet though… we saw the same kind of pop in January and that clearly wasn’t the end of the bear market.

Still, I think this time around really could be different. Why? Because despite the size of the bounce, it seems like the majority of traders and ‘gurus’ out there still feel this is nothing more than a bear market rally. The market has a way of climbing a wall of worry. So personally, I think we’ve seen the ultimate bottom, but if I’m wrong it’s not going to haunt me….I’ll just sell my stuff before it sinks into the red (which is a lost art).

Anyway, the lesson learned here is that it doesn’t pay to hesitate or follow the crowd. That’s not permission to hold onto stocks through an entire bear market (or even one bearish leg). But, it is encouragement to step in at low points even if it feels uncomfortable to do so.

They say 30% if what was lost during a bear market is regained during the first 40 trading days of the next bull market. Based on what I’ve seen the last two weeks, I believe it. I for one am still phasing into stocks, and buying on the dips. I’m not buying today because yesterday was a little much to follow, but I will buy on the next dip.

Do you want/need insight about how the market works in the real world? You won’t get it from TV commentators or the mainstream media. Sign up for the Small Cap Network newsletter today, and start making money right away.

3/4/2009

Will the Dead-Cat Bounce Today Get the Bullish Ball Rolling? (Plus Thoughts on Trades)

Filed under: — SmallCapNetwork Editor @ 12:40 pm

It was bound to happen. In fact, each bearish day that passed made it more and more bound to happen. Of course, what I’m talking about is today’s (so far) +2.0% rally. It’s a nice relief, but don’t forget the S&P 500 fell by 20% in less than a month to get to new multi-year lows by the end of yesterday. So, let’s not pop open the champagne bottles just yet.

And what should prompt a celebration? Considering 12 of the last 16 trading days were losers (big losers in a few cases), I’ll suggest that 12 of the next 15 days need to be winners to be excited. Easier said than done. Also, those gains - if we’re lucky enough to see them - really should be made with some substantial volume… more volume than we saw on the selling side of the fence over the past three weeks. If we can do that, and if we can legitimately threaten to surpass recent peak levels, then I’ll get excited.

Until then, I’m riding the bullish wave that stems from being oversold. I’m not calling it a bottom yet, however.

OK, with that business out of the way….

In Tuesday’s newsletter I made five harsh points about bear markets. The only ones I want to reprise right now are numbers 3 and 4….. the one that told us 3 out of 4 stocks moves the same direction as the market, and the one that suggested nobody really knows when the bottom is made until well after the fact (and yes, though it’s hard to believe, that even includes me).

Think about those two things for a minute. They aren’t contradictory…. not at all. But, the combination of the two sure can make it tough to get into and stay in long positions no matter how well you pick ‘em. In other words, you want to stay invested as much as possible because you don’t know when the market will surge higher. However, if you’re fully invested like you’re in a bull market but you’re actually still in a bear market, you’re fighting the trend (and probably losing money).

I say that to somewhat explain why we’ve been holding on to some of our picks rather than officially cutting bait on some of them. I’m fully aware that Xoma (XOM), Molina (MOH), Agilent (A), Edwards Lifesciences (EW) and a few others have been lackluster of late. The thing is, that’s more attributable to the market than to those stocks - a major distinction.

Were it mid-2008 and stocks were still frothy, I may not be as bold. In fact, I probably would have bailed on all of them. However, it’s not mid-2008. It’s early 2009, and stocks are basically priced at half what they were worth in mid-2008. And, dynamics, sentiment, and even the economy are all looking like there’s more upside than downside from here. So, from a risk/reward perspective, sticking with trades and taking a few lumps is the better choice - because you sure don’t want to miss the early part of the rebound (where the bulk of the gains are).

I don’t know if today is the pivot point for the market or not. It might be, but like I said, nobody really knows. If it is though, I think you’ll be glad you’re in the stocks you’re in, even if we were a few days early.

And by the way, almost all those trades that are still ‘on’ are also up big-time today. Many of them have made solid reversal patterns too.

Let’s be patient here, and see if we can’t at least recoup the ground we lost on some of those stocks. If they stall again at or near break-even levels, we can get out then and it won’t hurt as much. And who knows? Maybe this - yesterday and today - really is the bottom, and we can keep on riding their rallies.

Is your broker, adviser, or the media off the mark when it comes to helping you steer your portfolio through the economic minefield? Don’t fly blind any longer! Sign up for our free newsletter and you’ll start to receive money-making and money-saving ideas 2 to 3 times a week.

2/19/2009

Dow Jones Industrial Average at a Breaking Point

Filed under: — SmallCapNetwork Editor @ 9:36 am

Today is an important day. A real important for the Dow Jones Industrial Average, to be precise. After a disastrous Tuesday and an indecisive Wednesday, we’re still at a pivotal point…. and still asking the question “Just how bad can it get?”

The Dow came within 30 points of a multi-year low yesterday. It hit 7479 on Wednesday, which nearly eclipsed the November 21st low of 7449. The blue chip index didn’t close there, but it closed low enough to merit concern. I thought that might be enough to constitute a double-bottom and a follow-up rebound, but so far this second bottom really hasn’t shaped up as a ‘bottom’.

On the other hand, the patient may have at least stabilized.

I like the way the market stopped its bleeding. That’s about all I can say at this point, but it’s an important step if - and that’s a big if - stocks are going to rebound. My biggest fear is that the patient could go into cardiac arrest again.

For the Dow Jones Industrials, a move under 7449 could do a good job of convincing a whole slew of people to get out of the market. Where that selloff stops is anyone guess. I’ve heard ‘reasonable valuations’ that put the Dow somewhere between 6000 and 6500. I don’t know how anybody could actually come to that conclusion, but the estimate itself could be enough of a reason to make it happen… a self-fulfilling prophecy.

Anyway, as I’ve said about nine-billion times over the last four months, how you end the day is the only thing that matters. I’ve seen (and so have you) the market unwind huge losses in the last half hour of trading. Having no losses to overcome today, we could see this market start a recovery later this session, despite the fact that it’s not all that compelling as of right now.

Let’s chat again about 4:00 p.m. EST.

The best way to get our big-picture as well as our small-picture thoughts about the market is to subscribe to our free newsletter.

2/17/2009

Kaboom! S&P 500 SPDR Trust (SPY) Getting Trashed, But…

Filed under: — SmallCapNetwork Editor @ 8:41 am

Honestly, I am not entirely surprised about how deep the knife cut the U.S. market today. Remember, the American stock exchanges were closed on Monday in observance of President’s Day, so they had to “catch up” with two very bad days from overseas markets. It took - literally - about a half an hour to do that though. With the deed now being done, I’m not against at least discussing the possibility that the worst is over, and that we’re poised for a rebound. I mean, it’s not very often you see the S&P 500 SPDR Trust (SPY) plunge 5% in less than thirty minutes. Perhaps it’s too unusual to persist. The key is the intra-day action… can we end the day with stocks rallying back, even if they close in the red?

Just to be realistic, the market and all the index ETFs like the SPYders do a pretty good job at bouncing back from plunges as long as those plunges are (1) unmerited, and (2) not excessively deep. Today’s plunge is unmerited. However, a quick 5% drop right at the open is huge. In fact, it may be big enough to keep any potential buyers away for the the rest of the day. That’s the risk we’re running now.

As for how long this dip can keep buyers at buy, it could be far more than a day. That’s something you have to judge on a day-by-day basis. I’m just saying don’t be shocked if the entire week has been soured by this rough start.

So, we’re now forced into plan B… what to do now that the S&P 500’s support at 800 has been broken (which we mentioned in yesterday’s newsletter). Today’s low of 789.91 (so far) doesn’t bode bullishly. In fact, it’s a bearish omen I’m taking at face value. Therefore, my ‘plan’ is to at the very least not enter any new long trades. I may not enter any short trades yet, but I’m not going to enter any new bullish positions until the S&P 500 works its way above 800 again. For the S&P 500 SPYders ETF, that line in the sand is 80.85.

We also now have to turn our attention to 741 as support for the S&P 500… a scary thought, considering a move under this level would also mean a move to new multi-decade lows. If that support is broken - and stays broken for more than a couple of days - I think we’d be crazy not to entertain the addition of some bearish, short, or put option trades.

Here’s the rub… economically speaking, we’re actually in better shape now than we were two months ago. Oh, the country’s in debt up to its ears, but we knew that was coming. However, at least the debt-creating stimulus is on the way, and we’re seeing glimmers of hope for the economy. Retail sales were up in January, and real estate prices (by some measures anyway) are starting to stabilize. The overall numbers are still ugly, but they’re not in a precipitous tumble.

Anyway, don’t over-react to today. You can react... just don’t panic. If you’re weaker positions are in jeopardy, shed ‘em. If you’re stronger positions are still holding up reasonably well, hang on to ‘em. More than anything though (for right now anyway), let’s just see if the intra-day charts give us a reason to be encouraged later in the day. Defense is merited in the meantime in case they don’t.

Would you like to receive ongoing, down-to-earth perspective like this at your e-mail address? Just sign up for the newsletter.

1/23/2009

Market in a Wind-Up, But Where’s the Pitch Going?

Filed under: — SmallCapNetwork Editor @ 11:09 am

Believe it or not, the market is flat for the last three days. It has certainly been all over the map this week, but the lack of any net movement suggests traders are just not quite sure what to think. There is one upside to this flat period though… these consolidation periods set up a big move once the market does make a break for it. (In fact, the longer the market stays flat, the more explosive the eventual break is.) The question is, which direction will it be headed this time around? Bearish, or bullish?

I’m inclined to think the bulls will have the edge in the short run, despite a few blatant clues to the contrary. The more subtle hints like the VIX, and the late-in-the-day rebounds, tell me the bulls want to be buyers here following last week’s implosion.

The VIX, despite no net movement either over the last three days, has curiously closed at the lower end of its range the last two days, and is apt to do the same today. We’ve also watched a point/peak form with Monday’s high close of 57.36. Though the market hasn’t quite mirrored the move, the VIX has been giving us better (i.e. earlier) reversal clues lately. So, the VIX’s peak is indeed a bullish hint. Now if we could just get the VIX to make a lower low.

And like I said, though Monday’s huge selloff unwound most of these efforts, we’ve seen rallies - and comebacks - in five of the last six sessions. The bulls are persistent if nothing else.

On the other hand, those same bulls need to get over the nearest hurdle first before they can start to think about any bigger-picture progress. Specifically, though we’ve seen a few brilliant flashed of strength this week, we’ve also seen four straight lower highs. The result is the formation of a resistance line. We need to get past that to continue any bullish conversation

On the flipside, the bears have remained within striking distance of a serious meltdown all week long, and a little stumble could get that snowball rolling.

The S&P 500 is only being help up by support at 804 (Monday’s and Tuesday’s lows)… and that’s weak support at best. If the SPX slides under 804 - let’s just call it 800 - I can foresee everyone abandoning ship. If they all do it at the same time like I think they will, the dip is gonna’ get big, and violent.

No matter what, we think it’s going to be a big and fast move once the walls come a-tumblin’ down. Get ready for a wild ride once it happens. The downside target is 750, while the upside target is 920.

Did you know there are some thoughts and comments that only appear in the e-mail version of our newsletter? That’s right - if you’re just reading the blog or the online version of the newsletter, you’re not getting everything. Be sure to sign up for it today.

1/15/2009

Dow Jones Industrials ETF (DIA): More Tales of the 5 Minute Chart

Filed under: — SmallCapNetwork Editor @ 12:38 pm

Care to see some peculiar trading before, during, and after we got a dose of bad news this morning? Not unlike Friday of last week, this morning, we saw some unusual buying activity that had index ETF and index futures into positive territory. In fact, the Dow Jones Industrials ETF (the DIAmonds) rebounded off of lows made at 7:50 AM, and rallied into positive territory right up until 8:45 AM.

You could argue that the Citigroup (C) and Bank of America (BAC) news was the root, but the timing doesn’t jive… that wasn’t anything new to drive a 7:50 AM rebound.

The Labor Department’s reported spike in jobless claims? Maybe, though that comes out at 8:30 AM, and usually takes about three seconds to start whatever response it’s going to start. There’s 20 minutes worth of rally still unaccounted between then and the time the market (well, pre-market) rolled over. See the 5 minute chart of the Diamonds (DIA) below to verify.

While it’s easy for me to say and hard for me to prove, I think once again this is the clever trader preying on the gullible investor. It takes very little to pump up things before the regular market session opens at 9:30 AM. I can’t help but wonder if someone was fueling a slightly higher open so they could make exits or enter shorts.

In the grand scheme of things it’s not that big of a deal… really. It’s not new, nor will it ever be stopped. And there’s some good news even - these guys rarely have a permanent effect (today proves that). It’s annoying all the same though.

The point/lesson (once again) is to not flinch at the early action. That means don’t get too engrossed in the pre-market futures all the way through the 10:00 AM mark… and sometimes even later.

If you want to day-trade the reversals and momentum, that’s fine. If you’re a swing trader or a long-termer though, you really can’t afford to flinch every time the market takes an odd turn.

Did you know there are some thoughts and comments that only appear in the e-mail version of our newsletter? That’s right - if you’re just reading the blog or the online version of the newsletter, you’re not getting everything. Be sure to sign up for it today.

1/14/2009

Just Another Routine, Run-of-the-Mill 3 Percent Selloff

Filed under: — SmallCapNetwork Editor @ 11:22 am

It’s scary, but my headline above isn’t off the mark - we’ve all gotten comfortably numb regarding massive market setbacks that would have been horrifying had they occurred before September. While I have no empirical evidence of this, it just seems like these plunges are bigger, faster, and more common than the ones I remember from 2001, and the ones I somewhat remember from the early 90’s. I don’t think things economically are considerably worse now than they were then - this is volatility just for the sake of volatility. Still, what a wild ride. Anywho…

Take a look at the 5-minute chart of the S&P 500. A rough start for the day to be sure, but it looks like the bulls started fighting back around 11:00 am.

Do I see that as partially-bullish? Nope. Mostly I’m on the sidelines, but more often than not (and I do have empirical evidence of this much) these terrible early moves - and I mean the horrific ones like today’s - are not undone by the end of the day. The mild ones often are undone; the harsh ones usually just stay harsh for the day.

That said, I don’t know that I’d be making any kind of bet on the matter. I’m following the end-of-day trend, which leads to a bearish conclusions. On an intra-day basis though (and despite the fact that I’m looking at an intra-day chart), there’s just too much indecision to fool with trying to get a read.

S&P 500 , 5 minute

Did you know there are some thoughts and comments that only appear in the e-mail version of our newsletter? That’s right - if you’re just reading the blog or the online version of the newsletter, you’re not getting everything. Be sure to sign up for it today.

1/12/2009

Not Every Index Found Support on Friday

Filed under: — SmallCapNetwork Editor @ 7:18 am

All last week I was talking about how badly the bulls needed the indices to find support somewhere around the 50 day moving averages and/or the 20 day moving averages. A small pullback would be fine, but a big one that broke under those support levels could spell trouble. Well, Friday’s nearly-3% drops did indeed let some indices slip under these important moving average lines. The Dow is now under them, while the NASDAQ and the S&P 500 are barely hanging on. The bigger rally could still be salvaged, but this isn’t good news for long positions.

Moreover, the futures are in the red as I write this. They’re only slightly in the red though (less than half a percent), I think fueled partially by losses in Asia (which were ironically fueled by U.S. losses on Friday). I don’t want to over-react to that just yet…. let’s let investors shake off the weekend and regroup before we read too much into the market’s momentum. Remember, the closing price is far more important than the opening price.

On the flipside, you know what was eerily scary about Friday? It wasn’t the size of the loss, but that fact that actual ‘fear’ (not necessarily selling) really wasn’t all that elevated. The VIX barely budged, and was nowhere near what it would have been if that 3% selloff had occurred at any other point in time. Either we’re getting very used to getting smacked around, or the worst is yet to come before a short-term bottom is made. Yikes.

Check back later in the day for a more meaningful look; the pre-market action on Monday is always a coin toss.

Did you know there are some thoughts and comments that only appear in the e-mail version of our newsletter? That’s right - if you’re just reading the blog or the online version of the newsletter, you’re not getting everything. Be sure to sign up for it today.

1/9/2009

Market Regains 2/3 of This Morning’s Loss in a Wild Day, Then Gives it Back

Filed under: — SmallCapNetwork Editor @ 1:20 pm

I don’t want to keep dwelling on this particular day, but students of the market like myself have to be fascinated - even if only in an academic sense - about the way things took shape today. Here’s the time line…

  • 8:30 AM - A big (yet ridiculous) futures rally following the 8:30 AM announcement about terrible employment numbers that were at least better then expected’
  • 9:30 AM - Market opens respectably higher, surging on high volume
  • 9:32 AM - Market peaks, pulling the rug out from underneath almost everyone
  • 9:55 AM - Market finally hits bottom, having lost about 3% over the span of 23 minutes
  • 2:45 PM - Market has regained most of what was lost, and is not down only about 1%
  • 3:05 PM - Another reversal, this one to the downside…
  • 3:50 PM - We’re at new lows for the day, down more than 2% for the day
  • 4:00 PM - The day ends, gladly

Check out this 5-minute chart of the S&P 500 SPYders; it’s crazy to think that this is now the norm.

Ignore the spikes in the last half hour of trading…those are tick errors from my charting service. Instead, focus on the two most important times of the day….the first half hour, and the last hour. Those are the two points where big decisions are forced. As such, they tend to mean the most (particularly the closing hour).

With all that being said, just like I had my doubts about this morning’s strength, I also have my doubts that this weakness will persist come Monday. You generally don’t want to start making guesses three days in advance though, especially based on a day like today that was 100% driven by emotion.

I’ve got an edition coming out tomorrow that has nothing to do with indices or charts - it’ll be a nice break.
Did you know there are some thoughts and comments that only appear in the e-mail version of our newsletter? That’s right - if you’re just reading the blog or the online version of the newsletter, you’re not getting everything. Be sure to sign up for it today.

1/8/2009

Well, The Indices Got All The Way There. Now What?

Filed under: — SmallCapNetwork Editor @ 1:36 pm

I mentioned this morning that the indices were within striking distance of important support levels (namely, the 20 and 50 day moving averages). What I wanted to see was a good, healthy pullback all the way there, and then a rebound. If charts could make that shape, then the bulls would be in business.

Well, that’s basically how it took shape. Though not all the major indices reached all the way down to their 50 day line, they all at least got close. And, considering the market’s fallen an average of 5.0% between Tuesday’s peak and Thursday’s low, I’d say that was a sufficient selloff to humble any overly-optimistic bulls. More importantly, the indices have recovered very well since this morning’s lows; some are even in positive territory for the day. I’m taking that hint at face value.

A decent to strong finish on Friday would bode really well.

Did you know there are some thoughts and comments that only appear in the e-mail version of our newsletter? That’s right - if you’re just reading the blog or the online version of the newsletter, you’re not getting everything. Be sure to sign up for it today.

Wednesday’s 3 Percent Dip is Just What the Dr. Ordered

Filed under: — SmallCapNetwork Editor @ 6:23 am

They say you should be careful what you wish for, because you just might get it. Take yesterday’s dip for instance. Nobody really ‘wanted’ it, but we all needed it in order to protect the longevity of the bigger uptrend. (Better to take a small hit now than a big one later.)

The question is, was it enough of a pullback to bleed off any excess? I think it was, or close to it.

For most of this week I’ve been clamoring for a retest of the 20 day and 50 day moving averages. Well, we got very close to that on Wednesday with the Dow and the S&P 500 (though not quite with the NASDAQ) - all the indices pushed off their lows, and came very close to pushing off the support being made by those key moving average lines. That may have been the small washout we needed, but…

As of right now though, the futures are bearish again. The S&P 500 futures are down 9 points, as are the NASDAQ futures. In both cases that puts the index back down to yesterday’s lows. That’s a good thing on some regards, however, as it leaves us very close to a nice, healthy retest of those short-term moving averages mentioned. If we can make strong (i.e. slightly worrisome) lows today and then push up and off of them later in the session, that would actually be a very strong bullish hint.

On the flipside, I worry that a ’strong’ low will just get stronger and stronger throughout the day, pushing the indices all the way under key support levels. Not good.

Potential problems to the rebound might include rough unemployment numbers or weak retail sales. However, after the news we’ve been getting this week, I don’t think anybody expects good news. So, any bad news is apt to be priced in already.

By the way, on the chart below the red line is a 10 day average, the blue line is a 20 day average, and the purple line is a 50 day average. As you can also see, the S&P started to flounder when it became stochastically overbought.

Did you know there are some thoughts and comments that only appear in the e-mail version of our newsletter? That’s right - if you’re just reading the blog or the online version of the newsletter, you’re not getting everything. Be sure to sign up for it today.

1/7/2009

The Bulls’ First Real Test - Losing 693,000 Jobs

Filed under: — SmallCapNetwork Editor @ 7:54 am

Ouch. I’m sure by now you heard there were 693,000 jobs lost in December, which isn’t likely to inspire a lot of buying today. In fact, stocks opened much lower right out of the gate. While I hate to see that particular cause for the dip, this may well create a much-needed inflection point for investors.

One of my chief complaints over the last several months has been this “all or nothing” mentality. If stocks aren’t blasting off, they’re getting torpedoed. It’s our own fault though… if a quick rally leaves you no choice but to take profits, then nobody should be surprised to see profit-taking undo a rally’s gains.

This was also my big concern about the prior five trading days. Stocks gained 7.5% during that time. Very nice, but a little excessive.

Well, today we’re paying the price - stocks are in the red nearly 2% as of the time I’m writing this. The massive job loss is getting the blame (and perhaps rightfully so), but let’s be honest here… the selloff likely to happen anyway; we’re way overbought. Heck, the dip may ultimately be a good thing in the long run.

The downside here is simply that the market could continue to fall before a short-term bottom is made. I’ve personally been waiting for the S&P 500 to slide all the way back to its 20 and 50 day moving average lines before regrouping. They’re both right around 888, versus the index being at 918 right now. That leaves room for another 3.2% worth of selling before the overall uptrend is jeopardized. Not fun, but perhaps a necessary evil to cool things off before they get too heated up.

So what’s the possible ‘good’ part? Before anybody freaks out about today’s and maybe even tomorrow’s selling, bear in mind that (1) we’re still up about 5% for the last six sessions, and (2) we’re still seeing a bigger momentum shift. As long as the market finds support at those key moving averages, we’ll be ok.

Did you know there are some thoughts and comments that only appear in the e-mail version of our newsletter? That’s right - if you’re just reading the blog or the online version of the newsletter, you’re not getting everything. Be sure to sign up for it today.

1/6/2009

Market to Climb a Wall of Worry, Aided by Obama Tax Cuts?

Filed under: — SmallCapNetwork Editor @ 7:35 am

I was hoping for a little more of a retest yesterday. The major indices spent a fair amount of time in the red, but didn’t sink all that deep - only a pullback of about 1.3% at the lowest point of the day. By the close, the loss had been cut to less than 0.5%.

So why am I complaining? That dip didn’t retest (touch) the 20 day moving average line or the 50 day moving average line. Worse things have happened, but we still don’t yet know how the bulls are going to respond when really - and I mean really - pressured. So, it’s a task that I think still has to happen sometime.

As of right now though, it doesn’t look like it’s on tap for today - the futures are well up this morning (about 1.0%, depending on the index). The bullish effort isn’t likely to stay that strong for good, as we’ve seen recently that the morning futures are exaggerated at best, and downright pointed in the wrong direction at worst…sometimes. Perhaps today will be an exception, and the strong pre-market activity will carry through the entire session. I have my doubts though. I’ll let you know for sure at the end of the day.

In any case, a couple of bright spots…

I’ve been waiting for the S&P 500 to make that all-important close above 918, which it did on Friday as well as Monday (even with Monday’s slight selloff). And second, Obama’s tax cut plan appears to have teeth. It may take months or even years before any effects of it are actually felt, but it’s inspiring a little confidence in the meantime.

Any downsides?

Yeah - Obama’s tax cut plan may take months or even years before any effects of it are actually felt. It’s not apt to keep the market inspired long enough to prop stocks up all the way into the second half of the year. We’ll need some other motivation in the meantime.

As far as today goes, it looks like the early strength is stemming from retailer and automaker raliies in Europe. Let’s see if today’s ISM numbers for December - or the Commerce Department’s November factory orders - hurt or help the effort; they’re both due this morning. The National Association of Realtors’ November pending home sales report is also scheduled to be released this morning. It should be ugly, but how ugly is the question.

The Fed’s also going to release the official minutes from their last meeting later today…. the meeting where they cut rates to 0.25%. It should be a non-event, but maybe there’s a nugget in there we didn’t know about yet.

By the way, I’ve noticed something lately… a lot of perma-bears seem to be coming out of the woodwork now, warning us that things are going to get worse, and that the current strength is just a sucker’s rally. Or, maybe it’s just that the media is more interested in giving them an audience and less interested in talking to the bullish commentators. I’ll just say this about that recent trend - don’t assume they know any more than anybody else. My advice is the same as (and I cringe to say this) Jim Cramer’s advice….. don’t listen to the gurus - listen to the market.

But isn’t Jim Cramer a ‘guru’ too? Yes, he is, and he’s a bit of a goof in the grand scheme of things. However, I think he’s absolutely right about focusing on what the market’s doing instead of what all the pundits are saying it’s going to do.

As far as what it’s ‘doing’ goes, though I still have my doubts about everything, the indices are above their 20 and 50 day lines for the first time in months. The 20 day averages are above the 50 day averages in months. The VIX is just above multi-month lows. Maybe the market is going to climb this wall of worry.

Did you know there are some thoughts and comments that only appear in the e-mail version of our newsletter? That’s right - if you’re just reading the blog or the online version of the newsletter, you’re not getting everything. Be sure to sign up for it today.

12/31/2008

Market Does a 180, Tests 50 Day Moving Average Line

Filed under: — SmallCapNetwork Editor @ 7:04 am

After five days of a mostly-bearish drift towards the lower side of a narrow trading range, the S&P 500 bounced up, fairly firmly, to highs not seen since the 19th. It was the best close since the 17th. Not bad. Not great, but not bad. My only beef stemming from the analysis is that - once again - the 50 day moving average line (purple) is acting as resistance. And bigger picture, my line in the sand at 918 still hasn’t been crossed. So, I guess I’m not overly-excited for two technical reasons.

The VIX closed lower, though no lower than the bottom edge of its near-term range. That’s still more on the bullish side of the fence though… just very weakly. It’s probably more a sign of volatility being reigned in than a directional clue for the market.

The futures are barely in the black as I write this. However, I suspect today will be an very uneventful day, and more apt to be slightly on the bearish side as traders wrap up any selling for calendar for 2008. There’s no particular advantage in buying in calendar 2008, so any significant pressure should come from the last minute sellers. Even then, it should be barely perceptible, as most traders are not working….volume should be oddly light.

My advice for investors is to do the same - take care of whatever trading/investing business you need to as soon as you can, and enjoy some time off after you’re done. I’ll be working, but that’s my problem.
I may add another blog entry later today, but if I don’t get to, have a great and safe New Years event (whatever that may be for you).

Did you know there are some thoughts and comments that only appear in the e-mail version of our newsletter? That’s right - if you’re just reading the blog or the online version of the newsletter, you’re not getting everything. Be sure to sign up for it today.

12/30/2008

Market, VIX in Consolidation Mode

Filed under: — SmallCapNetwork Editor @ 6:25 am

If my math is right, after Monday, 11 of the last 15 Mondays have been bearish. So, I’m not too rattled by yesterday’s selloff… it’s par for the course. My concern is rooted in something much deeper than that. Remember the 50 day moving average line (purple) we started to toy with on the 16th? We still haven’t broken past it. Usually - though not always - those breakout moves happen pretty quickly and decisively. I don’t like the way this one is lingering…. I don’t get a warm fuzzy for the bulls.

Likewise for the VIX - after reaching new multi-week lows last week, it’s just been moving sideways (though the market has too).

If I were totally objective I’d point out how the last four days were nothing but a consolidation phase, and I wouldn’t be an optimist or a pessimist. I’ve been trained to be skeptical though, which has been the most productive/profitable mindset since October.

The good part about a consolidation phase is that whichever way the index ends up moving out of the tight range, it should stay pointed in that direction for a while. We might be able to squeeze a trade out of it.

Futures are up this morning, though they were up yesterday morning too when the Gaza/Isreal situation was less troubling. Either the conflict there wasn’t the real reason for the selloff on Monday, or someone is trying to push the futures higher so they can sell a bigger position into that early strength.

It just makes me want to reiterate something… the only price that matters is the closing price, which lately has only been determined in the last hour of trading. I wouldn’t worry about the futures or the opening price much, if any at all.

I’ll update this chart at the end of the day.

Did you know there are some thoughts and comments that only appear in the e-mail version of our newsletter? That’s right - if you’re just reading the blog or the online version of the newsletter, you’re not getting everything. Be sure to sign up for it today.

12/29/2008

Stock Futures Pointing Higher, as is Crude Oil

Filed under: — SmallCapNetwork Editor @ 7:55 am

Looks like the tepid buying mood we witnessed in Friday’s lethargic session has carried through to this morning - index futures are up slightly. So is oil though, thanks to some geopolitical turbulence in Gaza. It’s nothing unusual though, so I don’t see oil prices staying pressured for too long. Either way, trading should remain thin - even if modestly bullish - this week, as most traders are taking the week off to celebrate Christmas and New Years.

Just to catch everyone up, we’ve been semi-optimistic about the apparent change in the market’s overall direction. The S&P 500 broke out of a bearish rut in early December, and started to make higher lows. That’s good, though we haven’t actually seen the SPX make higher highs yet. In fact, the index closed under the 20 day moving average line (green) on Friday… a pretty clear indication to me that things aren’t en fuego.

The line in the sand is still 918, which the S&P 500 has brushed several times in the last few weeks, but has thus far been unable to hurdle. If we get above that line, then I’ll be very excited. Take a look.

Now, as far as oil goes, it’s been a while since we looked at a chart. I’ll correct that today.

The daily chart is pretty much meaningless anymore, since the pullback has been so huge, and so prolonged. I’ll show it to you anyway just to make that point.

So, we have to focus on crude’s weekly chart to get any kind of reasonable bearing on what may be next for oil. Take a look at this chart and see if you spot what immediately caught my eye.

Yep, last week, oil futures matched - but didn’t fall under - the lows seen in late 2001 and early 2002. I don’t think it’s unreasonable to assume support’s going to be made there. My key clue is the fact that oil’s trading well off those lows today. However, being waaaayyyyy oversold is a decent argument too.

How far might any bounce take us? I’d look to the $59-ish area; it’s been support as well as resistance in recent months. That’s just a rough guess though. We’ll pinpoint a target for oil when/if the need arises.

Did you know there are some thoughts and comments that only appear in the e-mail version of our newsletter? That’s right - if you’re just reading the blog or the online version of the newsletter, you’re not getting everything. Be sure to sign up for it today.

12/23/2008

Market Salvages a Disaster, Late Rally Closes Half the Intra-Day Loss

Filed under: — SmallCapNetwork Editor @ 6:47 am

At 3:25 PM EST all hope seemed lost…. the S&P 500 was under water by 3.2%. Within 35 minutes, things didn’t seem nearly as bad - the S&P 500 only closed 1.8% below Friday’s close. It’s still a loss, but one that leaves the bulls with reasonable hope. Indeed, the strongest volume of the day came with the rally in the last 30 minutes of trading. The bulls are resilient, even if a little flighty.

Anyway, I promised a chart update, so here it is.

Even with the last-minute (well, last-hour) rebound though, we still saw the market close below its 20 day average. Not good. As I mentioned yesterday, however, volume is going to be light this week, and will get lighter as time passes. So, this is not a majority opinion….. it’s just a frustrating drift. (Still, how things take shape this week sets up how they do next week.)
As for the VIX, you can’t deny it looks like it’s pushing off that lower Bollinger band line. That’s strike two.

The futures are on the plus side of the  board this morning, though that may not mean much - if anything - regarding how we’ll end the day.

Did you know there are some thoughts and comments that only appear in the e-mail version of our newsletter? That’s right - if you’re just reading the blog or the online version of the newsletter, you’re not getting everything. Be sure to sign up for it today.

Small business web directory by catagory and pages.
Also try at Beauty | Business | Construction | Education | Finance | Health | Insurance | Jobs | Medical | Real Estate | Travel

High Pagerank Google PR Link Directory - Transops.Net - Find Real Estate Directory and Real Estate Resources. - Finance Seek Directory - Financial Web Directory - Zorg Directory - Collection Of the Best Site - RcrEducation - Submit Your Site - Investment Directory - http://www.financiallinkdirectory.com/ - Financial Blogs Directory

penny stocks, hot penny stocks, penny stock picks, small cap stock picks, small cap stocks, small cap stock trading, stock trading newsletter, trading small cap stocks, best small cap stocks, top small caps, small cap value stocks, small cap growth stocks, list of small cap stocks, how to find small cap stocks Blog directory Finance Business Directory - BTS Local Blog Directory Finance Business blogs

Small Cap Stocks and Penny Stocks for Big Returns

Copyright © 2001 - 2009 SmallCapNetwork.com and TGR Group, LLC. All Rights Reserved.