July 31st: Small changes kept markets quiet. The semiconductor index may have nudged a breakout as it closed over channel resistance (the first break of resistance in 3-month), but the small doji indicates plenty of indecision so wait for a confirmed close over Monday's high before buying. The only other changes came in the market internals [$NASI, $NAA50 and $BPCOMPQ] with bullish MACD crosses in the $BPCOMPQ and $NASI and a confirmation of the bullish divergence in the $BPCOMPQ. Bulls are building on the momentum indicated by the various bullish divergences in technicals (the MACD in particular) of market internals and incides.
Target hit: none
Stop hit: DCTH hit its stop but as it stalled at the 50-day MA but negated its earlier breakout. The stock featured as a Breakout for May 2nd and July 25th. The former play closed for an 11% gain and the latter for a 10% loss. The original January 30th Subscriber play closed for a 33% gain. July 30th: Friday's focus was all on the large caps with a channel breakout in the S&P and a nudge over resistance in the Dow. Sympathy gains in the remaining markets kept the bulls interested without the powerful buying (i.e. heavier volume) associated with a follow through day. Moving average resistance remains limiting with the 20-day MAs in the NASDAQ, NASDAQ 100 and converged 20-day and 50-day MAs resistance in the Russell 2000. The semiconductor index is similarly curtailed by the 20-day MA and channel resistance. These moving averages have halted every attempt at rallies since the breakdowns in May. Challenges on resistance will be backed by MACD bullish crosses in the NASDAQ, NASDAQ 100, semiconductor index, Dow, S&P and Russell 2000. For all indices the last crossover occurred in early June and kept markets in a sideways (to modest bullish) pattern for 3-weeks. Should this repeat it will help keep the indices primed for the all important follow through day.
The one indicator which has failed to confirm any attempt by an index to rally has been on-balance-volume. This also includes Friday's breakouts in the Dow and S&P. Distribution trends remain firmly entrenched across the board. Adding to the mix is the current test of support in volatility. Should markets give up Friday's gains it could see a return of the big one-day losses experienced mid-May, early-June and early July as volatility makes another attempt at the measured move target of 32. However, stochastics [39,1] of NASDAQ, NASDAQ 100, semiconductor index and Russell 2000 have climbed out of oversold levels and have room for further gains (favoring bulls)
Market internals [$NASI, $NAA50 and $BPCOMPQ] advanced sufficiently for all indicators to complete bullish crosses of their 5-day EMAs. The $NAA50 also pushed new near term highs in intermediate term [39,1] stochastics, favoring a break of 870 (it closed Friday at 762). This would be bullish for the tech indices [NASDAQ and NASDAQ 100] and would help support the rally in large cap stocks [Dow and S&P].
The immediate focus on Monday should be the moving averages (20-day and 50-day MA). If these averages switches from resistance to support it will be then be important to see new accumulation trends develop in on-balance-volume. From there demand should drive new demand. A more sustainable rally remains favored as sell offs quickly push the market internals [$NASI, $NAA50 and $BPCOMPQ] to oversold levels, levels unsuited for prolonged declines (but ideal environments for short, sharp 'crashes' and recoveries - a perfect time to buy) and more in common with bottoms.
July 27th: Bears smeared the market with their selling; bearish engulfing patterns in the tech markets [NASDAQ, NASDAQ 100] and more indecisive market action in large caps [S&P and Dow] gave bulls little joy. Small caps [Russell
2000] sided with tech in experiencing a solid day of losses. Volume climbed in the tech averages, but was lower in large caps [S&P and Dow] compared to Wednesday. Market internals [$NASI, $NAA50 and $BPCOMPQ] were little changed and with the exception of the $NASI are deeply oversold (the $NASI is oversold but lies some 200 points away from deep oversold territory). Unfortunately there was no break of resistance in any market, the large caps in particular suffered in this regard as they lie closest to busting a move upside. Friday is another day but the scent of the market is flavored bear.
Target hit: none
Stop hit: EMCI suffered its second day of declines, losing some 30% from its highs in 3-days following disappointing earnings. The July 21st Breakout play closed for a 12% loss. HGR hit its raised stop from July 20th. The stock featured first as a Subscriber pick for May 5th and again as a Breakout for May 30th. The Breakout play closed for a 2% loss. The two Subscriber plays closed for a 1% loss and an 8% loss respectively. PRFT cracked to close below $12 support. The stock first featured as a Free Breakout on November 5th with additional features for January 17th and May 22nd. The original feature closed for a 30% gain. The January pick closed for a 14% gain while the most recent play closed for a 12% loss. ELS was a Subscriber pick for July 6th which never got off the ground as it reversed back below its 50-day and 200-day MAs. The play closed for a 6% loss. ENH took a big hit on earnings, losing 9% on the day. It featured as a Subscriber pick for July 10th and closed for a 5% loss.
July 26th: No big change on yesterday. Higher volume had more to say about Wednesday's markets than the minimal moves in the individual indices. Bulls could have capitulated in the face of increased supply but held their ground. However, key resistance has yet to break. The S&P is trading closest to major resistance but failed to advance above the channel line. The Dow ended the day above its channel resistance, but the doji suggests minimal drive on the part of the bulls.
There was an underlying shift in technical indicators. The MACD trigger lines of the NASDAQ, NASDAQ 100 and Russell
2000 issued 'buy' signals, following earlier signals in the S&P and Dow. Unfortunately, on-balance-volume has not changed with a fresh 'sell' signal in Dow to leave all indices in the red on this one.
Target hit: none
Stop hit: ARGN experienced an increase in selling as the 200-day MA fast approaches. The June 12th Breakout play closed for a 17% loss. RELL was a Subscriber feature for June 28th. The stock ran through its stop intraday, although managed to finish with a bullish 'hammer'. The stock closed for an 8% loss.
July 25th: There was a glimmer of life in the bulls as they pushed markets slightly higher on a small increase in volume. The real show of bullish strength won't come until there is a break of key resistance. The NASDAQ is fighting it out at 2,072 resistance with the 20-day and 50-day MAs nearby overhead at 2,098 and 2,134 respectively. Above that, resistance can be found at two channel lines lurking between 2,150 and 2,175. Technicals are improving but none have switched into the green. The NASDAQ 100 has a slightly steeper decline and has yet to test key resistance at 1,520. The 20-day MA is its first challenge at 1,513, while the 50-day lurks at channel resistance around 1,550. The semiconductor index struggles around 400, part of a new downward channel drawn from May highs. Bullish divergences remain in the MACD and CCI of this index. The Dow is the best placed of the indices in term of technicals with all indicators in the green, but the S&P is testing a more important price resistance level. The Russell
2000 is stuck in a no-mans-land following reasonable gains hemmed in by 'Death-Cross' resistance and a convergence of 20-day, 50-day and 200-day MAs.
Target hit: none
Stop hit: IMNY dipped out of its comfort zone and into its stop. The May 30th Breakout play closed for a 10% loss. HNR failed to break $14.41 resistance, reversing into its July 17th stop on heavier volume for a 7% loss.
July 24th: At its most brief: large caps had a good day, other markets less so. Markets were able to log across the board gains, but not one index was able to do so on higher volume. Both the Dow and S&P stopped at the 50-day MA. The Dow managed to edge new near term highs but the S&P switched a "Death Cross" in the 50-day and 200-day MAs. Tech averages (NASDAQ and NASDAQ 100) made some inroads into Thursday's losses but considerable resistance can be found at 2,072 for the NASDAQ and 1,520 for the NASDAQ 100. In addition, the semiconductor index wasn't able to close above support (currently resistance) from the narrow declining channel. The Russell
2000 made its picture perfect move off support but has a "Death Cross" of its own to deal with as resistance.
Technically, bullish divergences held in the MACD and CCI of the Russell
2000 as did a more modest bullish divergence in the Dow and S&P MACDs. For all its troubles, a bullish divergence in the MACD and CCI remains in play for the semiconductor index too.
Tech market internals [$NASI, $NAA50 and $BPCOMPQ] pulled back some lost ground with a bullish cross of the 5-day EMA in the $NAA50.
Although the strongest gains were attributed to the relative safety of the Dow and S&P it was still good to see all markets gain in what could have turned out to have been a field day for bears. Market internals remain in oversold territory which favors bullish positions.
Target hit: none
Stop hit: CLP hit its raised stop of $48.57 from July 20th even though it closed Monday above support and remains bullish. The stock featured as a Subscriber pick for October 10th and a Breakout for June 30th and July 20th. The Subscriber pick closed for a 15% gain. The Breakout plays closed for a 5% gain and a 4% loss respectively. CUSIF never went anywhere from its July 11th Subscriber feature, dipping below one level of support and finding another at the 200-day MA. As a penny stock it had a loose stop and closed for a 16% loss. NKT was a Subscriber pick from July 19th. The realty trust bucked the trend of the market to close down sharply after 3 days of declines on news of its merger with Lexington. The play registered as a 6% loss.
July 22nd: The break to new lows in the semiconductor index could spill to the tech averages (NASDAQ and NASDAQ 100) as the week's lows were tested in the latter indices. The semiconductor index closed 0.88 shy of its point-n-figure target, suggesting targets of 1,840 and 1,300 for the NASDAQ and NASDAQ 100 may not be as far fetched as initially appeared. To add insult to injury, both averages gapped down from the open and this could be the bearish trigger to initiate a new leg in the decline (a gap up on Monday would create 'bullish island reversals'). The declines in the tech averages put a halt to the bullish divergences in the MACD histograms, but not the MACD trigger lines - yet! Technicals continue to weaken although the rate of distribution (as measured by the trend in on-balance-volume) may be slowing. Higher volume on Friday as the result of options expiration will have muddied the distribution question.
Large caps [Dow and S&P] put up the best fight but were unable to stem losses. The Dow lost the most with its confirmed break below the 200-day MA (This moving average was lost in the S&P some time ago). Bullish divergences in MACD histograms and trigger lines for both indices hold for now. Large caps play to form as points of safety from the tech slaughter. For buyers of support the Russell
2000 is the index of choice. The small cap index closed right on support of 671. There are bullish divergences in the MACD histograms, +DI and CCI indicators, but any loss on Monday would negate this play in a hurry.
Market internals [$NASI, $NAA50 and $BPCOMPQ] continued their slide. The $BPCOMPQ lost the most and lies only 1.32 points away from the most common bounce area a of 35. A loss of 30 would confirm a return of the secular bear, lowering upside resistance from 70 to 50. It now looks likely the $NASI will reach -1,000 before the tech indices bottom as this is the only market internal not to reach typical oversold levels.
Target hit: none
Stop hit: ITKG hit its stop after the reversal of the July 18th breakout. The play closed for a 17% loss. AMED rolled into its stop on the 8th day of a new downtrend. Net support comes in around $32. The June 19th Subscriber pick closed for an 8% loss. CSH hit its stop on intraday action (it finished the day stronger). The July 11th Subscriber pick closed flat. EPAX hit its stop after thin trading crashed the stop price. The June 27th Subscriber pick closed for an 11% loss. FRC confirmed a quadruple top with its higher volume close below $42. Look for a test of the 200-day MA at $39.47. The June 8th Subscriber pick closed for a 4% loss. TEN sliced through its 200-day MA and into its stop price. The long standing December 16th Subscriber play closed for a 12% gain, the more recent February 1st play closed for a 7% loss. XOMA hit its stop after the July 13th Subscriber play failed to break resistance. The play closed for a 10% loss.
July 20th: Bears swept the rug from under Wednesday's buyers leaving markets at pre-Bernanke levels. Luckily, the losses did not register any breaks of support or negate bullish divergences in the MACDs (NASDAQ, NASDAQ 100 and semiconductor index) or CCIs of the indices, but pressure is firmly back on the bulls. It was unfortunate yesterday's gains were unable to cushion the bottom I am looking for.
The semiconductor index gave back all the gains it had logged and then some, whereas the Dow was able to hold the bulk of its gains - closing just below its 200-day MA. The NASDAQ, NASDAQ 100 and Russell
2000 only left crumbs on the table after bears had taken their slice of pie. The S&P managed a picture perfect reversal off the crotch of the 50-day and 200-day MA "Death Cross".
The bulk of the action was negative, with only the lighter volume to suggest selling was not institutionally driven. Market internals [$NASI, $NAA50 and $BPCOMPQ] all fell in unison with the markets, but positive technicals in the shape of bullish divergences in the MACD, ADX and Ultimate Oscillators of all these internals favors upside sooner rather than later. The other aspect which could work in the bulls favor was the failure of volatility to push above 27 from the bullish flag move - it is not completed yet but if volatility drifts back to 17-18 it would allow for a tradable rally.
Target hit: none
Stop hit: SPTN ran into its stop price from July 3rd. The stock featured to Subscribers for November 23rd and as a Breakout for January 25th, March 10th and July 3rd. The Subscriber pick closed for a 26% gain. The Breakout plays for a 13% gain, 1% gain and a 12% loss.
July 19th: No surprise who took today's honors. Unfortunately, the rapid gains in the large and small caps [Dow, S&P and Russell
2000] had more in common with scrabbling short covering than orderly buying. Given the oversold nature of the markets Wednesday's gains were only able to push the markets back to moving averages and in the cases of the NASDAQ, NASDAQ 100 and semiconductor index, not even that. The Dow and Russell
2000 finished just above the 20-day MA, while the S&P stalled just below the crotch of the 'Death Cross' of the 50- and 200-day MAs.
I remain bullish on the markets even if Wednesday's action had more in common with desperation buying. The buying helped push markets away from support, giving the market a little more leeway on the next sell off. Of the market internals [$NASI, $NAA50 and $BPCOMPQ], only the $NAA50 had a bullish crossover in its 5-day EMA trigger line. I added two more stocks to the Collective2 portfolio bringing the equity exposure up to 65%. Depending on how markets test resistance (and this is still some way off) will dictate if maximum equity exposure (80%) is necessary.
Target hit: none
Stop hit: STI hit its raised stop on Wednesday's intraday swing. The March 14th Subscriber play closed for a 6% gain while the July 17th Breakout play closed for an 1% loss. The stock finished strong so current holders can use today's lows as alternative stop price. USO clipped its stop after reversing its July 14th breakout. USO trades above key averages and remains net bullish. The play closed for a 5% loss. AFOP was a Subscriber pick from June 1st. After some lackluster sideways trading the stock traded below support and into its stop price for a 13% loss.
July 18th: Bulls did enough to reverse early day losses. Volume climbed to register as an accumulation day, but fell short of a capitulation. Disappointing after hours results from Yahoo! will spice up tomorrow's proceedings given bulls took the prize for Tuesday's action. Stochastics are again oversold in the NASDAQ, Dow, NASDAQ 100, Russell
2000 and semiconductor index. In terms of accumulation (with respect to on-balance-volume) only the Dow looks ready to reverse its distribution trend. There was no loss of support in any index and this could be key for Wednesday. Even though stochastics in the S&P are not yet oversold the index still holds to a bullish head-and-shoulder pattern.
Market internals [$NASI, $NAA50 and $BPCOMPQ] diverged with gains in the $NAA50 offset by losses in the $NASI and $BPCOMPQ. The bearish trend dominates, but with indicators at oversold levels it shouldn't be long before another attempt at a bottom is made. It has been a painful last couple of months but bulls should have the edge even if the return of the secular bear is just around the corner.
Target hit: none
Stop hit: CASY was a Breakout feature for June 15th. The stock cut through the 50-day and 200-day MAs on Monday and ran into its stop on Tuesday. The play registered as a 13% loss. AEOS was a Subscriber pick from July 7th. The play reversed its breakout to close below its 50-day MA. The play closed for a 6% loss.
July 17th: No change to Friday. Markets hovered around Friday's close, holding the lows, but not making any upwards headway. Volume took another step down. The $BPCOMPQ was the only market internal to change significantly with new closing lows. The indicator is fast approaching the 35 level (and below) associated with a strong bottom. The $NASI and $NAA50 closed down, but June lows held in these indicators. Tomorrow is another day for the markets. Maybe bulls will make an appearance given bears passed up the opportunity to further punish the markets.
Target hit: none
Stop hit: FFEX was a Subscriber play from June 16th. The stock suffered its seventh day of losses in a row to hit the stop price for a 11% loss. TWMC hit its stop on low volume. The stock did find support at the 50-day MA following a "Golden Cross" with the 200-day MA. Keep on the watch list. The July 3rd play closed for a 12% loss.
July 16th: Markets took another step downwards as the last remnants of technical strength in the S&P peeled away. Volume was less than Thursday's, either a reflection of complacency on the part of the bulls, or some measure of seller's exhaustion. With June lows holding in the S&P and Dow the former looks more probable. The Russell
2000 played the same game as large cap indices with only tech averages [NASDAQ and NASDAQ
100 ] at new closing lows. The semiconductor index escaped the worst of the selling as the index tested new channel support, although this has been suffering since it last made highs in February - unlike the other tech averages. If there is an average ready to lead to the upside it should be the semiconductor index - it's due a period of buying.
Tech market internals [$NASI, $NAA50 and $BPCOMPQ] continued their downward slide so assuming a bottom is not in place (although buyers should have the edge given the oversold condition of these internals) where can one expect the rot to stop? The Dow is on its second test of support at 10,700 - an important level looking at the point-n-figure chart; a push to 10,650 would register a breakdown and keep in play the latter chart's target of 10,200. The S&P has been holding a sharper ascent since late 2003 and it would take a move to 1,210 to register a breakdown, although the current point-n-figure chart target is 1,170. Prepare for an upcoming 'Death Cross' in the 50-day and 200-day MAs. The Russell
2000 has already initiated a downtrend on the point-n-figure chart and a fresh triple bottom breakdown was registered on July 11th. A 'Death Cross' looks likely to follow suit. The downside target is 615. The NASDAQ has an ugly downtrend in play on the point-n-figure chart with a double bottom breakdown registered on July 5th with a target of 1,860. The NASDAQ
100 registered a double bottom breakdown on July 10th and it has a target of 1,320. A 'Death Cross' was registered in June for both the NASDAQ and NASDAQ
100. The semiconductor index is some 25 points from its point-n-figure target of 384, part of its July 14th descending triple bottom breakdown.
Target hit: none
Stop hit: Another wave of stop hits following Friday's selling. AKR was a Breakout play for July 6th. Low grade selling pushed it down to the stop price for a 4% loss. CSK suffered its third day of heavy selling, cutting below its 50 and 200-day MAs and into its stop for a 7% loss. An earlier June 2nd Subscriber play closed for a 1% loss. NAVR hit its stop on the very low of the day. The July 3rd Breakout play may find support at the 50-day MA, but it had lost the 200-day MA and stop price for a 13% loss. PPS reversed its July 12th Breakout to close with a 3% loss, but not before a February 2nd and June 30th Subscriber plays closed for a 11% gain and a 2% gain respectively. AMTD was a Subscriber play for June 15th. The stock failed to push above the 20-day MA and instead retraced back to prior lows and below to its stop price for a 7% loss. CBEY was unable to push its drive above $22.50 and broke below recent near term lows and the 40-week MA to hit its raised stop price for a 9% gain. DGX experienced accelerated losses but was able to finish Friday at the 50-day MA. Unfortunately, the June 28th Subscriber play ran through the stop for a 3% loss. HAUP was a long standing Subscriber play from May 15th. The stock traded sideways for much of the last couple of months, but eventually traded into the stop price for a 12% loss. HNAB experienced a solid period of selling throughout July. The last straw came on Friday's break of the 200-day MA and the June 15th Subscriber play closed for a 10% loss. LTM hit its stop on its third consecutive period of selling. The stock had breached the 50-day MA earlier during the week. The February 10th play closed for a 3% gain. PSS undercut support $24.50 support and the 50-day MA to close below its June 30th Subscriber play stop price. An earlier November 18th Subscriber play closed for a 14% gain, the latter June play for a 7% loss. RNAI finished Friday on a neutral doji on support, but the intraday action did enough to hit the July 12th Subscriber play stop for a 9% loss. VIMC didn't stall long enough at support as selling pressure dominated. The July 13th Subscriber play closed for a 7% loss.
July 13th: Bears turned the screw yet again, sending the NASDAQ the way of the NASDAQ
100 and semiconductor index to new lows for the decline. Volume climbed to distribution levels, but the level of selling was well below a panic, baby bath water scenario. The large caps [Dow and S&P] fared no better as they edged towards June lows, breaking near term support in the process. Distribution selling was evident in large caps too. Small caps [Russell
2000] didn't escape either and lost near term support on its way to June lows.
Technicals to the red in the Dow with MACD 'sell' triggers in both the NASDAQ and Dow. Bulls are clinging to short term control of the S&P but the weight of expectation is against them. Look for the last remnants of bullish strength (slow stochastics and MACD) to crumble Friday or early next week. One thing which hasn't changed in the bears favor are the bullish divergences in the MACD histograms of the NASDAQ, NASDAQ
100, semiconductor index, Dow, Russell
2000 and S&P. The undercurrent of across the board, longer term bullish support, will eventually bear fruit - it is not a case of 'if' but 'when'.
Market internals [$NASI, $NAA50 and $BPCOMPQ] slipped a little further with the $NASI on another run to -1,000. The $NAA50 has lingered in bottom territory for the past 7-weeks and each loss pushes it deeper into oversold territory. The $BPCOMPQ has the most room to drop with bottoms coming in around the 30s. This too gives the bulls something to work with.
Given the relative position of market internals and the supporting MACD bullish divergences in the indices I will continue to maintain a 'bullish' bias. This is not to say markets can't pull off something like CSCO has done over the last 4 days with its sequence of sharp losses (watch for a couple more 1% loss days in the indices). Given international turmoil in the Middle East and India, combined with a weakening global economic climate, it has been surprising the selling hasn't been harder. The market is crying out for a capitulation - a real good dose of Maalox to clean the system. Maybe next week will be the week?
Target hit: none
Stop hit: The fire sale kicks off again after a quiet few weeks. First off the bat is ALTH. The stock didn't have a particularly bad day but enough damage was done to hit the July 6th Breakout play stop for a 11% loss. MRY was stopped out on the second day of losses. The June 19th Breakout play closed below its 50-day MA for a 9% loss. REY failed its July 3rd Breakout. The stock which first featured to Subscribers on June 26th closed for a 1% gain and a 3% loss respectively. RSG was unable to break its 50-day MA to the upside. The July 12th Breakout play closed for a 3% loss while the February 6th Subscriber play did nothing more than close flat. BWS was a Subscriber pick from July 12th which stumbled down to its 200-day MA, but hit its original stop price on the way for a 7% loss. FTEK couldn't break from its lows. The July 11th Subscriber play closed below its 200-day MA and through its stop for a 9% loss.
July 12th: A very frustrating time for the market. Bears haven't ruled to the extent that there is widescale panic, but bulls haven't taken advantage of bearish apathy by building on oversold conditions. There was an interesting divergence in the tech markets; the semiconductor index, which had been to now the weakest market, held yesterday's lows as support, while the NASDAQ
100 traded down to new closing lows. Even the stronger NASDAQ put in a new closing low. The NASDAQ is vulnerable to the losses seen in the semiconductor index and NASDAQ
100 - look to 2,065 to give way. Also bad news for the bulls was the bearish MACD trigger cross in the NASDAQ
100 to follow that from the semiconductor index. It is hard to see where bulls can be expected to make a stand. The apathetic downside volume sides more with the bears than the bulls as no fear means no bottom. The savior for the tech markets could come in the shape of the semiconductor index. Keep a close eye on this index. Wednesday's selling should have devastated this index but it never got close to testing Tuesday's lows. If it can break 435 it would at least register a break of a 1-month resistance line. From there it could work a challenge of 460 and/or the 50-day MA. Depending on how a bounce in the semiconductor index panned out would dictate how the NASDAQ
100 and NASDAQ would recover.
The large caps had their own troubles. The Dow lost 11,100 support and the 20-day MA, but there is still plenty of help to call on below. The S&P lost the 200-day MA but not the 20-day MA and has enough downside room to fit with a reversal bullish head-and-shoulder pattern. On a final note, the Russell
2000 closed on Tuesday's lows (below the 200-day MA but above the 20-day MA) and may set up a tweezers bottom (two candlesticks with the exact same low price - the individual candlesticks are not important for this formation).
Tech market internals [$NASI, $NAA50 and $BPCOMPQ] resorted to type with another whipsaw signal in the $NAA50 and modest changes in the $NASI and $BPCOMPQ. At least for now, bullish divergences in each of these market internals are holding.
In summary, I am holding to a weakening bullish bias. I have been disappointed and frustrated with the inability of markets to express leadership through the use of heavy volume breakouts. Having said that, it is not a shorters market - indices are too oversold to suggest confidence in this strategy. Maybe cash is king??? A capitulation might have the bears rubbing their hands, but it would help the bulls much more.
The market needs it.
Target hit: none
Stop hit BAK suffered on its first day as a Subscriber feature. It closed for a 6% loss.
July 11th: Bulls made their first appearance since the higher volume follow through at the end of June. Strong action across the board helped butter up support at the 200-day MA for the Russell
2000 and S&P. Trading volume increased substantially, particularly in the tech averages [NASDAQ and NASDAQ
100], which help soften some of the blows from recent selling. The bearish engulfing pattern in volatility at channel resistance should see a drop in fear, possibly back as far as the 200-day MA currently at 16.80 (it closed at 20.18), which should correspond to low volatility gains in tech averages - watch for modest gains on little pomp. Large caps [Dow and S&P] lie closest to resistance and are best placed to lead the next step of the rally off June lows. Both the Dow and S&P benefited
from 'buy' triggers in on-balance-volume, the last of the supporting technical indicators to turn bullish in these indices.
Unfortunately, tech market internals [$NASI, $NAA50 and $BPCOMPQ] didn't co-operate as could have been expected. Just as the $BPCOMPQ gained while its parent index dropped on Monday, on Tuesday it fell, falling below its 5-day EMA trigger (bearish) as the tech indices gained. The remaining two tech market internals were able to gain along with the tech averages.
Target hit: none
Stop hit: FVE featured to subscribers on July 7th. Light trading did enough to hit the stop but this is not necessarily dead with converging support at the 20-day MA and 50-day MA. It closed for a 7% loss. NGAS suffered a similar fate on light trading. The July 6th play closed for a 10% loss.
July 10th: A further day of losses for the tech averages [NASDAQ and NASDAQ
100] was not helped by the loss of support and new lows in the semiconductor index. The NASDAQ
100 sits on the brink of a closing low with the NASDAQ only a few ticks away from following suit (it could be argued it broke down from a bearish flag). The Russell
2000 is the only index which bulls can look to lead the rally but a limp test of the 200-day MA on a neutral doji was not the most inspiring of days. The large caps [Dow and S&P] changed little with the 200-day MA support in the S&P and 11,100 in the Dow. With uncertainty creeping into the tech markets look to the large caps to linger a little longer at current levels as money shifts from speculation to safety.
Interestingly, of the three tech market internals [$NASI, $NAA50 and $BPCOMPQ], two: $NASI and $BPCOMPQ, closed higher on the day. The gains were small but ran contrary to the losses in the tech indices. Adding to the bullish sentiment of the market internals was a test of resistance in the volatility index - look to the market to make a modest recovery as volatility drops.
It was another thin day on the Breakout front with current plays meandering around their nearest support levels. I have been disappointed with the failure of the rally to build stronger momentum and bears now have more of case than they did four weeks ago. But, market internals remain at historically low levels and if markets were to drop precipitously it would create an excellent buying opportunity. I posted on my blog two alternative scenarios, each of which featured a rally of about a month followed by a 2-month decline to new lows, one of which triggered a 15-month rally, the other which triggered a rally lasting 6-months.
Target hit: none
Stop hit: XSNX breached support to slice through its stop price. The June 9th Subscriber play closed for a 16% loss.
July 7th: A came across another article in favor of the bearish view on Tim Knight's blog (http://tradertim.blogspot.com/), adding to the opinion of Trader Mike (form whom I sourced Tim's article), Bill Cara and Martin Pring. Tim's charts look more compelling and if his thesis is true then there should be no break of late May/early June highs and markets should head south fast; for the NASDAQ this high is around 2,233, for the Dow it's 11,285, for the NASDAQ
100 it's 1,627, for the Russell
2000 it's 740 and for the S&P it's 1,290 - give a take a point or two. Friday's action played into this weakness as selling volume increased on a continuation of Wednesday's selling.
A number of indices have reached an important juncture. The NASDAQ closed right on combined support of the 20-day MA and former resistance from early January. A further 5 point loss below 2,125 would likely bring a test of 2,065. Look to the semiconductor index for leads as it fast approaches its 52-week low of 413 from October 2005. This index closed at new lows for 2006 and looks certain to take the NASDAQ
100 down to new 2006 lows too - only the NASDAQ has some chance of escaping this fate. The Dow again switched back, this time in favor of the bears. If what Tim Knight says is true then Thursday's high should be the peak for the rally and it should be down all the way from here. The index did close on 11,100 support - the last reaction high from mid-June. The S&P has the 200-day MA at 1,263 to look too, then the apex of the June pennant at 1,245, before looking at the prior reaction low of 1,219. The Russell
2000 also has the 200-day MA at 705 and potentially a bullish reversal head-and-shoulder formation of its own if it can bounce from 698 (to get the latter support level draw a line connecting the two reaction highs from June and July: 742 and 731 - then draw a parallel line anchored from May lows of 710).
For bulls, similar bullish head-and-shoulder patterns could play out not only in the Russell
2000, but in the NASDAQ
100 (watch for the bottom of the right-hand-shoulder (RHS) at 1,516), Dow (RHS at 11,029), NASDAQ (RHS at 2,095) and S&P (RHS at 1,240). Also working in the bulls favor are new reaction highs in the MACD trigger line and a decrease in -DI (bearish) strength on the ADX for the NASDAQ, Dow, NASDAQ
2000 and S&P - strengthening the case for new reaction highs in the actual indices (i.e. a higher close than late May/early June highs detailed in the first paragraph).
Also working in bulls favor are tech market internals [$NASI, $NAA50 and $BPCOMPQ] which are climbing from oversold conditions and have not reached a net neutral condition. The $NAA50 remains the most oversold of the tech market internals.
Individual stocks have struggled in this environment and it has been the longest 'dry' period for breakout stocks. Let stocks come to you - don't chase the ones which don't fit your risk thresholds. I still think there is more juice to this rally than the "rollover and die" some are predicting - but that doesn't mean I can't be wrong. Unfortunately, the real state of the cyclical bull/secular bear market won't be known until market internals [$NASI, $NAA50 and $BPCOMPQ] are back at their highs (i.e. overbought) and market indices are corresponding at new highs (= continuation of cyclical bull) or at lower highs (= return of secular bear). Time will tell.
Target hit: none
Stop hit: OPNT was a breakout from June 16th. The stock eased into its stop for an 11% loss. AMD failed in its bid to carry the semiconductors out of its slump. The June 28th Subscriber play hit its stop for a 4% loss. DIO was a Subscriber pick from June 16th which never looked like it was going to go far after it failed to build on its retest of April lows. The stock closed for a 10% loss.
July 6th: A quiet day across the board even as international saber rattling continued. Yesterday's lows held as support in the NASDAQ and to a lesser degree in the NASDAQ
100. The Dow was able to buck the trend to retake most of yesterday's losses while the S&P knocked around somewhere in between. Volume was unspectacular with no index seeing much change over Wednesday's action.
Tech market internals [$NASI, $NAA50 and $BPCOMPQ] also closed flat. Even the volatile $NAA50 changed little on the day.
Overall action still looks like a pause in a rally - the possible exception is the NASDAQ
100, watch what happens if further losses bring a test of 1,520. A sustainable rally will require the participation of all of the indices - tech indices in particular as these are where the majority of future market leaders will be found.
Target hit: none
Stop hit: ARRO was a Subscriber pick for June 16th. The stock cut below its 50-day MA and into its stop price for a 4% loss. TRXI hit its stop from the June 8th Subscriber play. It was a small move on the day which eventually lead to the stop hit. The play closed for a 5% loss.
July 5th: "Stocks tumbled Wednesday as renewed uncertainty about Fed policy, ongoing geopolitical concerns and record high oil prices prompted investors to lock in profits." according to Yahoo!. But I don't really know what sort of 'profits' are getting locked in from those 'investors' who haven't already sold after 2 months of declines.
Thursday will provide a clearer idea of seller's intent. Monday's low volume gains on holiday trading weren't worth the paper they were written on this proved true on Wednesday. Volume did climb along with the selling, but was below average for the month, and did not clearly mark a distribution session in the markets. The day was not without its concerns, chiefly the potential 'bull trap' in the NASDAQ
100, aided by a drop in relative strength to large cap indices [Dow and S&P]. Although the 'bull trap' hasn't emerged in the NASDAQ, it may only be a matter of time before it does. Watch the 20-day MA of the NASDAQ very closely - if this fails it could bring to end this nascent rally.
Large cap indices [Dow and S&P] fared better as last week's breakouts held as technical indicators improved. The S&P did give up its Monday's cross of the 50-day MA, but such a break on low volume was unlikely to stick. The Russell
2000 suffered a similar fate as it gave back its cross of the 50-day MA, but remains well clear of its resistance breakout.
Two of the three tech market internals [$NASI, $NAA50 and $BPCOMPQ] climbed as the $NAA50 gave back a sizable chunk of its gains from its deep oversold low. I still like the parameters for a bottom but one can never rule out a crash. Let the market decide if you should be in and out by using June lows as a natural stop level point for current positions. I still think we are good to go for bullish positions, but if you are looking for a bearish bias then Bill Cara wrote a good piece over the weekend.. Trader Mike has a more wait-and-see approach to today's action.
Target hit: none
Stop hit: LEG fell by the way side after a gap down on higher volume in the absence of company specific news. The April 24th breakout closed for an 8% loss. MYL was a Subscriber pick from May 26th. The stock never mustered up the requisite bounce above the 200-day and closed Wednesday with a 'Death Cross' of the 50-day/200-day MAs. The play closed for a 4% loss.
July 1st: Market retained Thursday's gains with relative ease. Volume climbed above Thursday's, with some markets at moving average resistance. These included the Dow at 11,187 (the 50-day MA), the Russell
2000 at 727 (also the 50-day MA) and the S&P at 1,275 (the 50-day MA). Better news for the bulls was the re-establishment of the bullish sequence of strength with small caps leading tech stocks leading large caps. There was unlikely to be any big change into the 'long' weekend and one cannot see Monday been any different.
Tech market internals [$NASI, $NAA50 and $BPCOMPQ] continued their improvement, closing up on building momentum. The key indicator to watch is volatility. The days of lacklustre activity look over for now and future dips back to the 200-day MA are likely to see bounces (i.e. increase) in volatility. It could be a rough time for swing traders.
Target hit: none
Stop hit: MW drifted back to its stop price (and through its 200-day MA) over a period of two months. The January 6th Subscriber play closed 10 cents shy of its target price, finishing down 8%.
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