31st: The election looms large on the horizon, and the
market waits anxiously
for the result. How do the markets sit just prior to the election.
could go either way; the strong volume close over the 200-day MA
combined with a strong weekly close are clearly bullish. But the
Index sits at a long term resistance line (resistance is redrawn
on the chart below to account for this - the original channel lines
are the light blue hashed lines). Should Kerry win we could be looking
at a swift dive down to the lower channel line (sub 1,700) as the
"market unfriendly" democrat wins. We do have a convergence
of various technical lines (moving averages and Bollinger bands)
which will bring a big move with it. Look at a similar event in
June with all three moving averages faked a breakout (bullish cross).
A similar faked breakout looks to be building here.
What of the Dow?
We look to be in a similar situation to that of July/August following
a rapid relief rally on declining volume. The rally stalled in July/August
at the 20-day moving average, a similar even looks to be in play
here. New lows in on-balance-volume doesn't bode well for the bulls.
Unlike the tech indices [NASDAQ,
100], or the S&P
there is no accumulation going on here. This index remains the most
vulnerable to a Kerry win.
What of the S&P?
This has experienced the strongest accumulation of all the markets
- but it too has its vulnerabilities as the moving averages converge.
did sell off in July/August along with the Dow,
but the current technical picture is stronger now than it was then.
Given that, I think there is roon for a rally to the upper Bollinger
band (c1,144) before it too rolls over (likely the last market to
capitulate). Any sell off in the S&P
should make it all the way to the lower channel line as marked by
the black hashed lines on these charts. Based on this, short positions
look favored (the NASDAQ
now, the S&P
by the end of the week).
A brief commentary on oil. The
current move looks to be a correction to the 50-day moving average.
Shorts should cover here and reassess price action should the 50-day
moving average fail to hold as support.
Breakout failures: CELL
featured on Sep 15th hits
its stop for a 9.21% loss. CATT
featured on Oct 25th clipped
its stop for an 8% loss, but ended the day higher on a bullish hammer.
Breakout targets met: ARBA
featured on Sep 20th reached
its target for a 49% gain prior to been featured again on Oct 29th
for a new price target of $23.50.
Oct 27th: The
last of the shorts scrambled to cover as markets rose in lower volume,
assisted somewhat by the decline in oil prices. The S&P is leading
the markets and sits just a few points shy of ending the lower high,
lower low sequence dating back to the start of the year. Should
this index manage to beat 1,145 it will begin the next (and likely
final) leg of the rally started in 2003. Technicals have improved
in all markets - a bullish sign.
Oct 26th: The
second day of accumulation in a row, pushing markets to their resistance
levels. The tech indices [NASDAQ,
100] sit at the upper end of their trading ranges. The NASDAQ
100 actually managed to break resistance, but the governing Sox
did not confirm this move with an upside break of the ascending
triangle. The Dow
tested the 10,000 level while the S&P
is fast approaching former support of the rising trendline (now
resistance c1,132). Secondary indicators are indicating the start
of a new rally, the question now is can today's gains hold? If we
close down, but in the upper range of today's trading I would consider
Breakout failures: WOOF
featured on Oct 25th had a
roller coaster day, closing higher but hitting its stop for a 3.76%
Breakout targets met: ISRG
featured on July 12th and
28th closing for a 51% and
28% gain respectively.
Oct 25th: Continued
in consumer confidence did not inspire further selling, indeed it
did little to prevent a solid accumulation day, negating all of
Friday's losses in the Dow,
2000 and S&P.
The tech indices [NASDAQ,
100] fared less well, although gaining on higher volume, neither
index was able to cut back more than 50% of Friday's losses. Both
tech markets are trading below the rising trend channel from August
lows - whether today's test of it's former support (now resistance)
is significant will be determined tomorrow. If the channel line
is resistance there should be no gains tomorrow in the tech markets.
The governing Sox
remained in limbo, although the ADX line (a measure of trend strength)
has begun to tick up in favor of a rising trend, leading to a probable
break of a bullish ascending triangle (a common bullish reversal
triangle) in the index (as marked in grey on the chart). The MACD
trigger line (in the Sox)
slightly favors the bulls although it's current flatness could swing
either way. The day looked to me as sector rotation from tech into
beat down Dow and S&P stocks in the run up to (and the eventual
conclusion of) the election. It should be a clear cut victory, all
this "too close to call" is media spin which has kept
the markets nervy. Once the decision is in, the market will rise.
Unfortunately, there is still a large degree of complacency as marked
by the low volatility
index. If we do have a tight election with lawyers and their kitchen
sinks involved it will spark a rise in fear as indecision will still
control the markets. This should bring a capitulation that will
bring a rapid drop and rise as the year's woes are flushed out of
Oct 22nd: Do
I eat my words from yesterday? Based on today's showing it looks
like I should be. Amazon's big tumble and Microsoft's
earnings disappointment reversed yesterday's bullishness and slipped
the tech indices back into their trading ranges. Unfortunately,
huge move could not be accounted for by the tech averages. Google
now has a market cap comparable to Yahoo ($46b to $47b). The NASDAQ,
100 would have likely had finished weaker even if Google as
part of the averages, but it may not have looked as bad as it did.
was the day's main casualty as it said goodbye to 9.800 support.
This was to oil's
Oct 21st: I
think we are finally getting some support in the market. The tech
100 are now leading the broader Dow
averages with solid breakouts in both indices. The Dow
ended the day with the second of two "hammers".
Today's higher volume combined with yesterday's volume increase
mark both as technical distribution days, but in this situation
(trading between 9,800 and 9,900 just as the market did in early
August when the Dow found support) I would view the volume action
as bullish. Caterpillar's
earnings was the day's Dow drag, as some of the larger pharmaceutical
companies continued to struggle. But wise buyer's step in when things
look bleak and recent volume action has the look of pre-election
buying (retail buyers will be late to the rally, providing the momentum
and the big volume action as today's buyers dump off on them once
the election is decided). The Dow
has acted the inverse of oil.
harami cross will keep oil speculators skittish as yesterday's
gains failed to follow through with further upside today - another
bullish marker for the equity market. Oil prices have extended too
far beyond the 200-day moving average. Oil's fair value may be $50+,
but prices look set to swing violently in the opposite direction.
made a solid higher volume break from its bullish flag. The NASDAQ
100 went one better and closed at new highs. What has been impressive
from the standpoint of the tech markets has been the strength of
the technical indicators. Unlike the broader averages, these markets
have held their bullish stance (as marked by the green hashed line
- indicating MACD, on-balance-volume, and slow stochastics are all
above their bullish tick levels). Driving today's breakouts was
the swift reversal in the Sox.
This index has moved from a bearish stance to a bullish stance in
the space of a day, leaving a substantial bear trap in its wake.
Also note how its technicals held above bullish levels. The only
spanner in the works has come from weakening secondary indicators
which tend to lead the market. Should these turn upwards (ie cross
their exponential moving averages to give the green arrow), then
their recent declines will mark a bear trap and should lead to a
substantial rally. Joining the tech markets in strength has been
cap index, which relate to many of the stocks featured on this
Now is the time to monitor the
breakout list more closely. On the surface, the ratio of losers
to winners has been almost 5:1! as whipsaw killed good positions
before they had a chance to mature, but for breakouts made during
the market bottom of Aug 4th to Aug 20th the score reads 7 price
targets reached for an average gain of 25.47%, 4 failures for an
average loss of 9.52% (an average return of 12.75% per trade), with
10 stocks still in play. Of the 10 stocks still in play, the average
gain as of today is 1.99% per trade. Unfortunately, market bottoms
produce few decent candidates, if you run through the breakout archive
for this period you will see 16 "scratches" (ie. no suitable
breakout candidates). As the breakout list started at the end of
May I don't have data for the breakout success rate of the May 10th-24th
bottom, but it will be interesting to see how the current market
bottom breakouts do by Christmas. Gold member picks had a higher
proportion of failed trades, due to tighter stops and failed short
trades. There were 3 winners for an average gain of 13.18%, 29 losing
trades for an average loss of 4.46% (for an average loss of 2.74%
per trade), with 10 stocks still in play. Of the 10 gold member
stocks in play, the average gain as of today's close is 14.02% per
trade. Gold member plays cut losses earlier and let the big gainers
run. This analysis is based on my fixed target and stop prices.
A more actively managed account using raised stops and GTC buy orders
would have substantially improved on this return.
Breakout failures: ELGX
featured on Aug 20th and Sep
Breakout targets met: none
Oct 19th: Update
to follow soon. Markets remain caught within election indecison
and are likely to stay this way until the election is over. Markets
hate indecision, reflected by the failure of bull or bear to take
Breakout failures: LPSN
featured on Sep 3rd. SIMG
featured on Oct 4th. MOBI
featured on Sep 13th.
Breakout targets met: none
Oct 17th: The
markets spent Friday recovering from the prior two days of selling.
Neither bull nor bear had control by days end, although higher volume
may have given the decision to the bulls. The Dow
remains the index to watch as it approaches August lows. It will
be interesting to see how tight trading in early August holds as
support now. A busy week
ahead on tech and pharmaceutical earnings front with the CPI reading
on Tuesday to add to the fun. Given the oversold (and rising) condition
I suspect it will be another hard week for the NASDAQ,
100. Weakening secondary indicators [$BPCOMPQ,
will add to the tech malaise. The one plus on the trade signal front
will be support at 350 in the Sox.
I would look to place aggressive buys in tech stocks as this index
tests this level. The S&P
remains stuck between positions; lurking at near term support of
1,101 but vulnerable to losses back to 1,060. Small caps [Russell
2000] are retracining in an orderly fashion into fib retracements
- but it still looks too early to be buying here.
prices remain overbought, although gold
stocks look to have priced in much of the inevitable pullback
in the base metal. At June, July support levels these stocks look
Oct 15th: Update
to follow this weekend.
Oct 13th: The
last couple of days of flat action gave way to a torrent of selling.
Good news from INTC and YHOO was insufficient to keep the markets
afloat after a strong open in the technology markets. Leading the
move down on the back of oil
concerns in Mexico and Nigeria were the Dow
and the S&P.
Point losses in the tech indices [NASDAQ,
100] were lighter, but these markets had toppled from the big
gap open. Hope for the bulls came from the Sox
which continued to trade within a bullish ascending triangle. Small
2000] were not immune to the damage as traders rushed to take
profits. Secondary indicators remain mixed, the $NASI
put in a bear trap as its recent high was not confirmed by the MACD,
so we are likely to see further downside until this snaps out of
its bearish malaise. Volatility
also took a leap, so we should see some fear selling which will
help put a bottom in this decline.
What are we looking for? The
bulls will want to see light volume as we head to August lows. We
have yet to see a break in the lower high, lower low sequence dating
back to the start of the year, but if markets start finding support
before we see a test of August lows we will be well positioned for
a rally. How will we know if such a low is made? We will look to
secondary indicators ($NASI) and a break of near term highs as marked
by 4-week highs for confirmation.
Breakout failures: AGT
featured on Oct 11th hit its
stop for a 6% loss. DWSN
which was featured yesterday
hit its stop for an 8% loss. FOSL
featured on Sep 27th fell
for a 8.45% loss. SWC
featured on Oct 1st hit its stop for an 8.71% loss.
Breakout targets met: AIRT
featured on Sep 21st and Sep
28th, reached its target for a 68% and 28% gain respectively.
on June 9th reached its target
for a 35% gain.
Oct 12th: Markets
again treaded water on light volume. The NASDAQ
attempted a bullish piercing pattern, closing above support as defined
by September congestion (a successful bullish piercing pattern should
have retraced at least half of Friday's losses - I ignored yesterday's
holiday trading). Technically, the pullback has done little damage,
so there are buying merits at these levels. After hours news from
will add to the bullish fervor. The NASDAQ
100 also attempted a bullish piercing pattern, but it ended
the day below resistance, however, its technical picture remains
strong. The Dow
managed a bullish doji, resisting attempts to drive the index below
10,000. The Russell
2000 gained some footing on its doji, but has yet to mark a
38% retracement of its September rally. On today's doji it is an
aggressive buy for a move to retest 592 resistance. The Sox
continues to trade inside its triangle. But bullish news from INTC
should bring it back to triangle resistance. The S&P
managed a bullish doji of its own, and this should gain from likely
strength in tech tomorrow.
Oct 11th: Columbus
day kept trading quiet. Markets held station, we should see an increase
in action as the week wears on.
Breakout failures: FAST
featured on July 14th.
Breakout targets met: none
Oct 10th: From
early week optimism too end-of-week woes, the market did an about
turn last week. Disappointing jobs
data put a palor of gloom on the proceedings. Earnings for next
will be the key fundamental drive. Technically, we will be looking
at the degree of support mid-September congestion will provide (the
grey boxed areas on the NASDAQ,
100, and S&P).
For the Dow,
we will be interested in how the broadening wedge acts as support
as it did in September. Are there any bullish undertones to this
negative shift? On Oct 6th I said the markets had the edge, technically,
versus oil. If
you look at the chart for oil you will see it is well beyond all
of its moving averages. Although the MACD trigger line is at a new
high, it sits at resistance of its previous peaks. Unfortunately,
I cannot plot the volume, but even without that it appears oil is
in line for an intermediate term correction lasting at least a month,
a good time to short oil stocks? The coverage in the mainstream
media would be of note to a contrarian.
In the NASDAQ,
the MACD trigger line and on-balance-volume are at new 6-month highs,
but still have room to move to resistance, implying a strong up
trend. The last attempted breakout in late July had the on-balance-volume
confirmation, but not the MACD trigger line to support it. The volume
pattern is strong - declining in downtrends and rising in uptrends.
The last reaction high of 1,971 marked its first test of the 200-MA.
The next test should be good enough to break it. The best trade
plan is to sell, move to the sidelines and wait for the reaction
at the 20-day and 50-day MA. The latter moving average (now at 1,864)
was support in September and it should be again if we are to see
an election rally.
The spanner in the works remains
which has failed to show the bullish traits of the tech indices.
The September-October rally has the looks of a bear flag; weak MACD
and slow stochastics, with a slow rising on-balance-volume trend
below resistance. The volume pattern does look bullish on the main
chart, but the breakdown form the bear flag does not give much reason
for optimism (other than the potential for support at the broadening
wedge as illustrated in my public stockchart of the Dow).
is the strongest index on paper - but all is not 100% warm and cosy
here. The recent breakout has the looks of a bull trap, as confirmed
by a failure of the MACD trigger line to regain a prior breakout.
However, the 200-day MA and 20-day MA are nearby and it will be
interesting to see how these act as support on Monday. It has a
strong bullish volume pattern. Close to resistance it is a better
sell than a buy. Bulls should look to the 50-day MA as a potential
area to re-enter as this was an area of support in September.
Oct 9th: Fundamental
scan updated. Stocks now featured on my public
Oct 8th: Update
to follow. Public stockchart list features some new stocks, and
some old ones were removed. Looking to update the fundamental scan
over the weekend. In short, bears took control - negating last Friday's
breakout. Best to watch from the sidelines. Technicals still look
good, but if the selling continues these will break.
Breakout failures: LRT
featured on Oct 7th failed
to build on its breakout, closing down 2.97%, but leaving behind
a potential double top. FOX
also featured on Oct 7th
hits its stop after a second day of declines
Breakout targets met: none
Oct 6th: Markets
holding their resolve as oil
prices inch higher. Which will win out? Oil hogs the headlines,
but technically, the markets (the tech and small cap markets in
particular) look to have the edge. The MACD trigger line of the
100 have reached new 6-month highs. On balance volume in these
indices are very strong. The Sox
is forming a small handle around 400 and is well positioned for
further gains on strength in its MACD which will be the fuel to
push the tech markets out of its 10-month consolidation. The Russell
2000 is the first index to break June highs, and small caps
continue to perform well. The Dow
remains the market laggard, but it has managed to regain the breakout
it lost yesterday, but still has some way to challenge September
highs. The S&P
sits 4 points shy of its June high, the actions of this index over
the coming days will be key to markets as a whole. Neither its MACD
nor on-balance-volume has not the strength of the tech indices,
although on-balance-volume is at new 6-month highs which will provide
the bulls with sustenance the S&P index itself can follow suit.
There is not much for the bears to hold on, other than a lack of
in the markets.
Plenty of strength in my public
list. Of the precious metal stocks, KGC
and the silver stocks [PAAS,
remain strong even at the mature stages of their advance. Big moves
from featured breakouts including ATPG,
From my portfolio list, LEXR
continues to rise in the run up to Oct
14th earnings. Interestingly, stocks on the most
active list have underperformed, most, with the exception of
stuck in congestion ranges. LU
managed to rise on higher volume. Other gainers from the members
pick included ELGX
(a breakout play), and IVAN.
Breakout failures: none
Breakout targets met: none
Oct 5th: Will
do a detailed report on the market tomorrow - suffice to say, last
weeks' breakouts are holding, only the Dow
is showing evidence of a struggle. Although oil
prices are rising, the markets are hanging on.
Oct 3rd: In
the space of one day we have seen a dramatic shift from sell side
pressure to bullish momentum. Shorts will be working double time
to cover their positions as new buyers take advantage of market
"clarirty". Concerns remain over oil
prices (and commodities/ inflationary pressure in general) but
there should be sufficient upside to push the markets to June highs.
The real bonus was the accompanying volume, particularly in the
tech markets, NASDAQ
100. There are still some niggling concerns. Friday was a good
day for the Sox,
but the bull trap remains in effect until we see a close above it's
highs (406.66). In addition, the Dow
sits below 10,200 resistance and still has some work to do to break
September highs, let alone June highs. The S&P
sits at a make or break point, but the Russell
2000 shows where the strength lies in the market. Small caps
generally lead new rallies, while larger caps lead the end phases
of rallies. Small cap tech stocks look to be the place to search
for value. Commodity stocks remain the momentum favorites, watch
for a breakout in the commodity
Oct 1st: Update
to follow. Excellent day for the bulls - psychological resistance
Breakout failures: none
Breakout targets met: CAND
featured on Sep 10th reached
its target for a 50%+ gain. UHAL
featured on Sep 9th reached
its price target for a 19% gain, it exceeded the price target today.
on July 29th reached its
near term target for a 14% gain
public list - please remember to vote!
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