June 29th: The bubbling broth of an oversold market boiled over into a steam of buying as shorts rushed to cover in the face of renewed buying from bulls. Breadth was strong across the board with my real time Trade Ideas scan generating stocks one after the other in rapid succession with little time for a breather. There wasn't a dry eye in the house as even the most beat up of indices, the semiconductor index enjoyed solid gains. Also triggered today was the bullish alignment of the markets with small caps leading tech indices leading large caps. Real money was put to work today. Curmudgeons will view this as window dressing at the end of quarter, but the market is too oversold for that.
The key technical indicator to watch will be on-balance-volume. Thursday's big volume gains only achieved one bullish cross of the 20-day MA trigger line in the Dow. Other indices should soon follow suit, but the distribution trend in this indicator has been the most worrisome aspect of the developing bottom in the markets.
What lies above? The NASDAQ has the convergence of the 200-day and 50-day MAs ('Death Cross') and a support - now resistance - line from earlier this year around 2,225 to spoil the party. The Dow has a layer of supply between 11,285 and 11,325. The NASDAQ
100 has the 50-day MA currently at 1,614, the first such test since the May breakdown. The same applies for the Russell
2000 with the 50-day MA at 728 and the semiconductor index at 477. The S&P will have the honor of testing the 50-day MA first as it closed 4 points away from its 50-day MA; expect shorts to pile the pressure on this index tomorrow. Unfortunately for bears, it made a clear break of its 2-month declining channel, negating what had started to look like a bearish reversal from channel resistance.
Finally, all three tech market internals [$NASI, $NAA50 and $BPCOMPQ] closed above their respective 5-day EMAs, strengthening the bullish divergences in the MACDs.
Now the market needs to throw some stocks out to ride the trend.
Target hit: none
Stop hit: none
June 27th: The tension finally broke as markets took a sharp dive on increasing volume. Given the extent of across the board declines the increase in volume was unusually muted. Has the capitulation already occurred? Watch how June lows hold in all markets. The semiconductor index is the most vulnerable as it finished Tuesday at new closing lows. While the Russell
2000 flashed a bull trap also losing its leadership role to the S&P. The S&P held to joint resistance of the 20-day MA and a downward price channel; watch for new lows if support of the channel is tested on the next decline.
Secondary technical indicators or market internals [$NASI, $NAA50 and $BPCOMPQ] stepped back from some of their recent bullish action. The $BPCOMPQ switched back below its 5-day EMA along with the $NAA50. The supporting technicals (MACD in particular) of these indicators remains strong thus favoring a more substantial bottom than market selling would imply.
Finding stocks to buy in this environment remains difficult as pockets of strength are dealt death blows as the lack of market participation bites home. Because of this there is only one Breakout play for Wednesday.
Target hit: -
Stop hit: CVTX bit the dust after only a couple of days. The June 26th Subscriber play closed for a 6% loss.
June 26th: Markets continued to compact into an ever tightening coil, supported by a mix of bearish ('Death Cross' in the 50-day and 200-day MA of the NASDAQ) and bullish (resistance breakout in the Russell
2000 combined with improved technical strength against both tech markets: NASDAQ and NASDAQ
100, and the S&P) measures. Energy was the leading sector on the day but don't look to energy stocks to lead the next rally, commodity-based stocks will be also rans in the coming months as former leaders fall back into the shadows. My breakout scan has returned little in the way of opportunities and those stocks which have appeared over the last 4 weeks have faltered. Monday was no exception. Don't force the issue, time will present plenty of opportunities.
Technically, the indices are helped by the bullish divergences in the MACD histograms along with their respective 'buy' triggers, but suffer from ever declining on-balance-volume trends suggesting continued distribution. Secondary technical indicators [$NASI, $NAA50 and $BPCOMPQ] were helped by the 'buy' triggers in the MACD trigger lines of the $BPCOMPQ and $NASI as all three secondary indicators have supporting bullish divergences in the MACD histograms.
Target hit: -
Stop hit: VITA suffered its sixth day of losses to push into the June 19th stop price for an 11% loss. PCTI undercut its 200-day MA with an upcoming 'Death Cross' in its 200-day and 50-day MAs. The April 10th Breakout play closed for a 13% loss after earlier gains of 13%.
June 24th: Friday's action brought a little bear side action into what has recently become an area of tight trading. The heavier volume upside from Wednesday dominates, both with respect to volume and the hold of its lows. Friday's light losses were enough to register potential breakdowns of weekly support, as drawn from the indices most recent reaction lows, in the Dow, semiconductor index and to a lesser extent the NASDAQ
100. These breakdowns are by no means convincing, but they tilt the markets in favor of further downside in the short term (but holding to an intermediate bullish bias).
As the indices battle it out between the bulls and bears, the secondary tech indicators [$NASI, $NAA50 and $BPCOMPQ] continue their drift into deeper bullish territory. It would be preferable to see the $BPCOMPQ in the 30s and the $NASI around -1,000, but with the former hovering around 40 and the latter in the -800s it should bring good news for bulls. Certainly another downside dip would further pressure these indicators and provide another jolt to volatility.
Bears may win out by year end but bulls have the best chance to profit over the coming months. With indicators as oversold as they are it makes sense to run with historical form.
Target hit: -
Stop hit: As summarized for the week. CSGP drifted after its breakout, below the 50-day MA and into its stop price for a 13% loss. The stock featured for June 5th. MFB ran into a similar problem on Thursday. The May 11th stock collapsed below its 50-day MA after a period of sideways trading and was stopped out for a 10% loss. RSYS failed in its second attempt to break. The May 1st and June 2nd play closed for a 4% loss and a 6% loss respectively. VLY featured as a Breakout for June 16th but failed to live up to its initial billing, even though it was able to close on its 50-day MA on a bullish hammer (a new stop could be placed 10 cents below Friday's lows) it hit its stop price for a 4% loss. However, the March 14th Subscriber play closed for a modest 5% gain. BDY featured as a Subscriber pick for June 1st. The stock crashed through its 200-day MA on disappointing earnings. The play closed for an 8% loss. GBVS was a speculative OTC BB play which was able to finish the day on a small bullish hammer, but not before it clipped its June 15th Subscriber stop price for an 8% loss too. MYOG retreated below its May 22nd stop price after an initially promising bounce (+12%) retested its lows. The play closed for an 8% loss.
June 22nd: Working on next update. Overall market swings in the bulls' favor, but individual indices look primed for one more big day of losses (a potential bear trap).
Target hit: -
Stop hit: -
June 17th: My next post won't be until Thursday as I am attending/presenting at a conference on Kauai. It was a relatively good end of week for bulls; in net terms it started more or less as it finished, but there was a whole lot of excitement along the way. Friday's higher volume reflected options expiration and although moving average resistance (20- and 200-day) held in all indices, there was little in the way of concerted selling to push markets back to Thursday's lows. The Russell
2000 gave up the most on the day, but even this index failed to retrace more than half of Friday's gains.
Technically, the semiconductor index enjoyed a MACD 'buy' trigger, as did the NASDAQ
100. All indices support bullish divergences in their MACD histograms - the first such pattern since the decline started in late April. There is still a bearish alignment between the indices with large caps leading tech markets leading small caps and this will need to change if a sustainable rally is to develop.
I would not be surprised to see this action repeat for the early part of next week as market participants figure out who is in the ascendancy. Based on the relative position of the secondary tech indicators [$NASI, $NAA50 and $BPCOMPQ] it is bulls who have the advantage.
Target hit: none
Stop hit: none
June 15th: I remain bullish on the market but the volume which accompanied Thursday's buying was not all that it could have been. Compare the volume of Monday with that of Thursday and it is clear bears hold the edge on the turnover front. What bears don't have any more is the flexibility to push markets down with ease as all of the weeks trading now sits 'in-the-money'. There was little encouragement from bulls to jump in with two feet as shorts fought with shorts to cover their positions. Markets closed at their first real test area; the 20-day MA sits in close proximity to the NASDAQ, NASDAQ
100, Dow, semiconductor index and S&P. The Russell
2000 and S&P have further interest with a convergence of the 200-day MA and 20-day MA; a double resistance area. Recent lows should provide a much stronger support area than my initial call in May as bullish divergences are apparent in the MACD histogram in all indices.
Of the secondary tech indicators [$NASI, $NAA50 and $BPCOMPQ] only the $NAA50 crossed above its 5-day EMA from deeply oversold levels, its third such attempt at these levels, but the first accompanied with a bullish divergence in both the MACD histogram and Ultimate Oscillator.
Look for market leadership in utilities and consumer staples with financials taking up the slack later on. Should the rally fail to mark new highs in the indices it could be watch out below on the next correction - but this is a problem for September and October. Look to favor stocks in these sectors as they appear.
Target hit: none
Stop hit: none
June 14th: It was a relatively weak attempt by bulls to put in a bottom with fear still in charge of sentiment. Bullish divergences in the MACD histogram abound across the indices, with convergences in short term and intermediate term slow stochastics. These are good markers for a bottom, although it is not uncommon to see new lows before the market makes its eventual reversal; the NASDAQ
100 made one such false bottom in mid-May, but the bullish divergences in the indicators suggests the current convergence of slow stochastics has a better chance of marking a bounce.
The Dow trades at January reaction low which is another opportunity to find support, although the 200-day MA will be resistance where before it was potential support. The Russell
2000 is at its first convergence of short and intermediate term slow stochastics since October 2005. The semiconductor index is well placed for a bounce with strong bullish divergences in the MACD histogram and CCI.
Secondary tech indicators [$NASI, $NAA50 and $BPCOMPQ] are close to lows of 2005, with the $NAA50 trading at levels last seen in early 2003. The lower these fall, the stronger the bottom.
Target hit: none
Stop hit: ARXT followed the wave of recent selling as it lost rising support from March and closed below the 50-day MA on Wednesday. The May 22nd Breakout play closed for a 5% loss. JTX clipped its May 15th Breakout stop for a 9% loss as prices drifted from the failed breakout, through the 50-day MA, and now looks set to test the 200-day MA. MPW hit its stop for a 5% loss, in part due to an upcoming dividend payment. The Trust featured for June 1st. CTCH hit its stop from February 22nd after early promise petered into a loss. The Subscriber pick closed for a 15% loss. DCS hit its stop to close the May 18th Subscriber pick income fund for a 1% loss. HNZ clipped its stop on Wednesday's doji as it ended the day below support. The May 24th Subscriber pick closed for a 7% loss. IWOV was able to close above support, but it dropped far enough down intraday to hit its May 18th stop price for a 6% loss. WTNY reversed a breakout (leaving a bull trap) to drop below recent congestion and into its highest stop price. The January 25th Subscriber pick closed for a 16% gain, the March 1st Breakout play closed for a 3% gain and the April 24th play for a 1% loss.
June 13th: Charts are pasted with red after another day of selling, this time on significantly higher volume (= distribution). Measured move targets from April/May highs are close to been met in the large cap indices [Dow and S&P], with the NASDAQ, NASDAQ
100 and Russell
2000 not far behind. The biggest affects were felt in the secondary tech indicators [$NASI, $NAA50 and $BPCOMPQ], with losses in all three indicators. The $NAA50 now sits below 2005 lows and is at risk of triggering a major decline in the markets (over and above a summer rally); there are only two indicators holding as support as a negative divergence develops between the $NAA50 and the NASDAQ (see blog article here).
For buyers, keep building a watch list of new highs and volume breakouts. Unfortunately, for a second day in a row there were no decent breakout candidates and a few recent breakouts fell under the weight of the selling - so the list remains small. As for sectors, Utility stocks often lead a bottom in the indices; from there, look to Consumer staples and Financial stocks as interest rates peak and then start to fall.
Target hit: none
Stop hit: ACET drifted into its stop, much like many of the days' stop hits. The April 7th Breakout play closed for an 8% loss after swinging from an 8% gain. AOB hit its stop after a series of down days. The May 15th Breakout play closed for a 10% loss after it traded gains as high as 12%. AVP experienced 5 weeks of stealth losses to push the stock below the 50-day MA. The May 1st Breakout play closed for a 7% loss. CBEY was a recent Breakout play which switched from a breakout to a potential bull trap. The stock continues to trade above all key moving averages, but the June 8th Breakout play closed for an 8% loss. LECO dipped into the May gap breakout. The stock closed with a neutral doji on the 50-day MA, but the June 2nd Breakout play is considered stopped out for a 10% loss. LPMA also went the way of the Dodo; the May 24th Breakout play and the March 23rd Subscriber play closed for a 6% loss and a 2% gain respectively. LMIA shed 12% on the day to thrash through its May 11th Breakout stop. The stock also featured to Subscribers for March 29th. The Breakout play closed for a 16% loss while the Subscriber pick finished at breakeven. Longstanding LUK was forcibly ejected by the selling. The stock featured as Breakouts for July 6th of 2005, January 13th, February 28th and April 13th. It first featured as a stock for Subscribers on February 24th when it traded at $33.08. The Subscriber play closed for a 79% gain. The four Breakout plays closed for a 48% gain, 20% gain, 9% gain and a 2% loss respectively. NEW featured as a Breakout for March 16th and April 5th. The former play closed for a 2% gain and the latter a 4% loss. BK featured as a Breakout for January 5th. The stock failed to shine after rallying to gains of 16%, it eventually closed for a 4% loss. PNY was one of the more recent Breakouts. The stock featured for June 5th, but hit a relatively tight stop for a 3% loss. STN was dragged down to its stop after 2 months of declines. The March 10th Breakout play closed for a 7% loss after it accumulated early gains of 12%. KO was able to close at support, but intraday trading knocked the stock down to its May 24th Subscriber stop price for a 2% loss. DRL failed to hold support from the June 12th recommendation. The stock hit its stop for a 4% loss. FLO failed to register a breakout after its June 8th Subscriber feature. The play reversed off resistance and eventually closed for a 6% loss. HL was hit by heavy losses in the price of gold. The June 9th Subscriber pick lost support of the bullish hammer to close with a 15% loss. ININ lost two support levels and the 50-day MA to hit its stop from the June 5th Subscriber feature. The play closed for an 8% loss. LNOP failed to capitalize on an upside gap to resistance. The stock reversed and undercut support to put the May 26th Subscriber play at a 6% loss. OSK undercut the prior reaction low and the 50-day MA after a nice bounce (+10%). The May 23rd Subscriber pick closed for a 4% loss. PRKR featured as a Subscriber pick for June 12th, but its low liquidty left it vulnerable to whipsaw and the play was stopped for a 5% loss. PDE was another Subscriber pick to bounce (+14%) and then reverse to undercut support. The May 23rd Subscriber play closed for a 4% loss. PSSI traded in a sideways pattern for much of the year, but the market sell off has forced the stock under support and into its March 8th Subscriber pick stop price for a 6% loss. TGE was another late May 25th feature to muster a nice bounce (+24%) before reversing below support to close with a 10% loss.
June 12th: Another ugly day for the markets, particularly for the NASDAQ, NASDAQ
100 and Russell
2000. All three of these indices shed 2% on the day, the only comfort coming from the relatively light volume accompanying the selling. The bullish hammers created from Thursday's reversal of fortune were negated, but this should not be viewed as a time to sell or go short - both actions should be done from rallies fueled by demand, and demand is sorely lacking here.
The large cap indices [Dow and S&P] suffered similar selling, but both indices were able to hold bullish hammer lows.
It would have been preferably to have had the retest of last week's lows occur over a number of days on low volatility and low volume. Given the extent of the selling, morning gaps down look probable for Tuesday, but with the $NAA50 at lows similar to that of April 2005, a bottom cannot be far off. The $BPCOMPQ looks set for a measured move down, taking it to 35 and placing it close to April 2005 lows of 36.50. Similarly, the $NASI could works its way down to a measured move of -1260, although April 2005 low for this indicator came in at -963.50, at -617 it has the most room still to fall.
Target hit: AERTA reached its target of $3.54 on heavy volume. The next target area to aim for is $5.00. The May 19th Breakout closed for a 34% gain.
Stop hit: CCI suffered its second day of heavier volume losses out of three. The stock has comprehensibly cut below its 50-day MA. The April 6th Subscriber pick closed for a 7% gain while the April 26th Breakout play closed for a 5% loss. CYBS broke below handle support to hit its stop; the June 2nd Breakout play closed for an 8% loss. FRD was an oversold play from June 6th which failed to generate expected buying interest. The stock finished on the 200-day MA, but still triggered its stop for a 4% loss. TS didn't get out of the stalls as the Subscriber pick for Monday hit its stop in the same day for a 6% loss. WPP suffered a similar fate as the June 9th Subscriber pick as it pushed through its 200-day MA and closed for a 6% loss.
June 10th: Bears took the honors on Friday's close; modest losses on light volume shouldn't panic the bulls too much. With large intraday ranges from Thursday, one shouldn't be surprised to see a series of low volatility down days to mark a test of last weeks lows.
The NASDAQ and NASDAQ
100 held to the greater strength of bearish gaps over Thursday's bullish hammers. Technicals continued to weaken which suggests retests of Thursday lows are favored. Even the semiconductor index, the most oversold of the technology indices, looks favored to test its lows.
No index was able to escape the predicament of the NASDAQ and NASDAQ
100, the Dow, S&P and Russell
2000 all look likely to repeat the action of the aforementioned indices. Watch for retest of Thursday's lows the take home message. Bullish divergences in the MACD histogram of all indices should soon bring the bounce indicated by the secondary tech indicators [$NASI, $NAA50 and $BPCOMPQ]. Continue to watch the new highs list and Breakout plays for buying candidates.
Target hit: none
Stop hit: none
June 8th: Bill Cara wrote a piece attributing Thursday's buying to Warren Buffett. Whatever the cause it was an interesting day, a capitulation of sorts, but there were some worrisome tags. The NASDAQ and NASDAQ
100 both failed to close the morning gaps and when candlesticks (e.g. 'hammers') are accompanied by gaps, it is the gap which takes precedence - which in this case is bearish. The semiconductor index which led the Tech decline may lead the next bounce as it has no gap to show for its efforts. All three Tech indices have substantial bullish divergences in their MACD histograms.
There were no such gaps in the Dow or S&P. The former made its first positive stab at the 200-day MA, but the clean slice through the average, and then some, should be of some concern to the bulls. Intermediate term slow stochastics [39,1] are once again oversold and a developing bullish divergence in the MACD histogram should compensate for increased bearishness in the -DI line and on-balance-volume. The S&P completed the second of two long, lower shadowed candlestick days (bullish), but was unable to close the day above the 200-day MA, although it was the only index to finish positive by the close. In this index there is a small bullish divergence developing in intermediate term [39,1] stochastics, as well as a more pronounced bullish divergence in the MACD histogram. Unlike the Dow, it closed the day with a bullish trigger cross in on-balance-volume - although it is a weak signal given the lack of a solid trend in on-balance-volume.
2000 also completed the second of two long-legged dojis, both of which found support at the 200-day MA - even if the latter doji dipped well below this average during intraday trading. As with the large cap indices there is a developing bullish divergence in the MACD histogram and intermediate term [39,1] slow stochastics, but a bearish and rising -DI line (ADX is falling = weakening downtrend).
Secondary tech indicators [$NASI, $NAA50 and $BPCOMPQ] were variable. A big step down in the $BPCOMPQ was offset by only small losses in the $NAA50. The $NAA50 is in a bottom zone, it just remains to be seen how weak the remaining two indicators: $BPCOMPQ and $NASI become.
Thin picking return to the Breakout scan, only two stocks appeared: CMTL and ILE, neither of which grab my attention here - so there are no stocks for Friday.
Target hit: none
Stop hit: TRMP featured as a Breakout for May 4th. The stock clipped its stop intraday for a breakeven return. BER was a longstanding Breakout from February 14th and a Subscriber pick for October 26th and November 23rd. The stock hit its highest stop price but also closed just above its 200-day MA, watch for a bounce. The Breakout play closed for a 6% loss after falling a $1.50 shy of its target (48% max gain from initial feature price). The two Subscriber plays closed for an 18% gain and a 3% gain respectively. ATI hit its suggested stop following morning weakness, but it was able to rally strongly into the close on heavy volume and looks more bullish now than it did when it was first featured on June 7th. The play closed for a 7% loss. WTR was another Oversold stop hit victim. This June 7th Subscriber play closed for a 3% loss. CYCL closed higher, but not before trading lower and into its suggested stop price. The May 31st Subscriber play closed for an 8% loss. TRAD clipped its stop on morning trading but was able to close on a second bullish hammer, which could lead to a double bottom. The May 23rd play closed for a 5% loss. TUP closed the day on an indecisive doji after a morning loss of support. Early trading forced the stop hit for a 3% loss on the June 5th Subscriber play. WSSI completed the threesome of stop hits for June 7th stocks. The play closed for a 5% loss. WNWG failed to push a volume break of resistance, drifting on low volume into its stop price for a 10% loss.
June 7th:The semiconductor index gave an ominous warning as to what my follow in the NASDAQ and NASDAQ
100 as near term support crumbled, leaving behind new 6-month lows. Similar moves in the NASDAQ and NASDAQ
100 could see these indices down 100 and 75 points respectively. There was little solace elsewhere as the S&P failed to hold 200-day MA support on its third attempt. The Dow did not escape the selling, but still has room to make its first test of the 200-day MA.
Volume eased across the board, either market participants are wearing rose-tinted glasses or there is genuinely few sellers. Secondary tech indicators [$NASI, $NAA50 and $BPCOMPQ] all weakened to a point where each trade below their respective 5-day EMAs. More worryingly, volatility climbed to complete a bullish "three white soldiers" candlestick combination. Watch for a measured move to 27, this will translate as more 'fear' in the markets and likely further downside.
Trading this environment is a tentative process. Market ETFs/Indices trades don't look so hot after action in the semiconductor index. As for equities, keep stops in place - but good stocks should be able to weather any further losses. The $NASI and $BPCOMPQ are the only secondary indicators to suggest we have not hit a bottom. If these hit -1,000 and low 30s respectively then one can buy with greater confidence. There are plenty of traders looking to short strength as it appears, it won't take much to send them covering.
My Collective2 portfolio is 81% exposed to stocks (based on a $100K account). Since mid-May I have been fishing for stocks to buy, it remains a tentative process with 6 losses (to date) amounting to a total loss of $2,577 (-2.6%). I will let the market dictate if I am right or wrong on current holds. All stocks carry fixed stops.
Target hit: none
Stop hit: none
June 6th: Volume increased as the indices approached May lows. The Dow deviated from this form by closing at new monthly lows but all other indices were able to hold May lows as support, even the hard pressed semiconductor index. Unfortunately, the tech secondary indicators, $NASI and $BPCOMPQ, followed the $NAA50 with a bearish cross of the 5-day EMA. Unlike the $NAA50, neither the $NASI and $BPCOMPQ are close to oversold levels, which is perhaps the best case for another wave of selling - although the $NAA50 is well positioned for a bottom inside oversold territory.
2000 and S&P both posted positive tests of their respective 200-day MAs, although further tests will weaken this area as support. Another test of the 200-day MA this week would likely kill this average as support in these indices, much like it did in the NASDAQ and NASDAQ
100. The Dow has yet to make its first test of the 200-day MA.
Technicals have weakened over the last three days, but bullish divergences are taking shape in the MACD histogram of all indices. And a bearish divergence has developed in the -DI line (or a bullish divergence in +DI - take your pick) in all indices other than the Dow. Time for another stab at a bounce?
Because of the days weakness there were no decent Breakout candidates for Wednesday.
Target hit: none
Stop hit: DLIA featured as a Breakout for June 5th, but earnings did get the better of it and the stock crashed through its stop price for a 10% loss. An IMCL downgrade following disappointing results closed the May 15th Breakout for a 10% loss. SKVI was killed in less than 24 hours as the breakout reversed into a test of the 50-day MA. The trade closed for a 13% loss. SCS suffered a third day of heavier selling from five, closing below its April 17th stop price. The February 7th Breakout play closed for a 4% gain. The April 17th play closed for a 4.2% loss and an earlier December 5th Subscriber play closed for a 16% gain. AIG was a Subscriber pick for May 30th. The stock was able to inch back over support, but the intraday move knocked the suggested stop price out for a 3% loss. ARTC was another oversold Subscriber pick from May 30th to bite the dust. It closed for a 4% loss. GRVY was stopped out on volatility, although it did close the day 5 cents higher after a positive test of the 200-day MA. Yesterday's Subscriber pick closed for a 4% loss. UFPI featured to Subscribers on May 25th, but concerted selling closed the play for a 5% loss. Watch for a test of the 200-day MA.
June 5th: All eyes will be on recent near term lows and how much support/demand they generate. It was an ugly day as moving average resistance proved too much for bulls to overcome. The day was redeemed somewhat by the light volume and an end point inside prior congestion from the week before. The biggest change was the drop in relative strength of the Russell
2000, as it took the role of market laggard once again. With large caps, leading tech, leading small caps, the breadth of the market remains weak.
The NASDAQ shed all of last Thursday's gains and then some, leaving a zone of 34 points to reach lows of 2,136. Short [14,3] and intermediate [39,1] term stochastics ticked upside in the face of the selling - bullish. Lighter volume had more in common with retail rather than institutional trading, also bullish. The NASDAQ
100 was not as badly hit as the NASDAQ with near term lows at 1,554 and a band of support at 1,570. Tech secondary indicators [$NASI, $NAA50 and $BPCOMPQ] suffered a bearish reversal in the $NAA50 with the 5-day EMA crossover, but the indicator is deep in oversold territory and remains bullish.
Although the Russell
2000 underperformed relative to the tech markets it still has 710 support to look to after getting knocked for losses of 3.2%. As with the NASDAQ both short term and intermediate term stochastics ticked upside.
Finally, large caps [Dow and S&P] each received hair cuts of their own. Although volume was lighter there was a loss of support in the Dow which may build into a test of the 200-day MA, some 170 points below.
The Dow was the only index to lose a support level.
Target hit: none
Stop hit: AMD was a Subscriber pick from May 17th which closed the day below 50-day MA. The play closed for a 4% loss. RYAN never got off the ground, ending the day beneath the 50-day MA and closed for a 4% loss.
June 3rd: Markets entered a holding pattern as bullish momentum eased into tests of moving average resistance. For the NASDAQ this amounted to a test of the 200-day and 20-day MA convergence with a close below these two averages. Also tested was a support line dating back to January/February. Volume was lighter, which is good news for the bulls. The NASDAQ
100 also tested the 20-day MA, but failed to close above this average. Like the NASDAQ it traded down in lighter volume and followed with a MACD trigger 'buy' of its own. The semiconductor index closed flat thus failing to make any inroads towards 20-day moving average resistance (this index trades below the 20-day, 50-day and 200-day MAs). The Dow remained contained by the 50-day MA although the S&P managed to make small gains it still finished Friday below its 50-day MA. The Russell
2000 was unable to buck the trend and hovered around its 20-day MA.
If these averages hold as resistance on Monday it would suggest another test of recent lows is on the cards (although the market remains net bullish in the intermediate term).
The secondary tech indicators [$NASI, $NAA50 and $BPCOMPQ] completed bullish crossovers in the 5-day EMAs of the NASI and $BPCOMPQ, strengthening the bottom - although the latter indicators have bottomed at levels above typical oversold reversal points. Volatility has still to complete a retest of the triangle breakout; the 200-day MA is the most sensible support in this regard, but the 50-day MA provides an alternative support area.
Target hit: BKD was a Breakout play for May 16th. It hit its target price for a 23% gain.
Stop hit: THS clipped its stop from May 11th after drifting through support following an earlier bull trap. The play closed for a 4% loss.
June 1st: Across the board big gains, on light volume are now at risk from a number of moving average resistance levels, not to mention tomorrow's jobs report. In the NASDAQ the MACD trigger line switched to a 'buy', but the index is only 10 points away from a pending convergence of the 200-day and 20-day MA. The NASDAQ
100, as the weaker of the two Tech indices, looks set to test the 20-day MA soon. The Russell
2000 is only a few points shy of its 20-day MA, but unlike the Tech indices it has not yet triggered a MACD 'buy'. The Dow has a test of the 50-day MA to look forward too, the second such test over the last five days. The first of the moving average tests will come from the S&P which sits a single point away from its 20-day MA.
The secondary tech indicators [$NASI, $NAA50 and $BPCOMPQ] continued to build new lows with a double bottom in the $NAA50 and up ticks in the remaining two indicators. Both the $NASI and $BPCOMPQ are below their 5-day EMAs and another day of gains would likely push these into bullish crossovers.
Trawling through some of the blogs found plenty of negativity to dampen a bulls day: The Kirk Report carried links to articles featuring a negative outlook by Gary Kaltbaum of TradingMarkets and Jon Markman from MSN Money. Tim Knight of Prophet.net had a blog debate on the state of the Dow (via TraderMike) and an article on last week's "bull trap".
I am not buying this negativity, it looks premature to be throwing in the towel at this stage. Other than the Tech averages the remaining indices have yet to confirm a lower high and lower low. Secondary tech indicators [$NASI, $NAA50 and $BPCOMPQ] are closer to oversold than overbought and my historical performance for markets at this stage have favored bullish positions (see "Fishing for a Bottom" emailed out to members over the weekend; if members need a new copy I can email it out).
Tomorrow's job report will dictate action at the moving average resistance levels (and if the MACD trigger 'buy' in the Tech averages holds into the weekend). One low key affect of Thursday's action was the outperformance of Small caps relative to the Tech Markets - another sign the stars are beginning to align in favor of bulls. Just don't forget the stops.
Target hit: none
Stop hit: none
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