Dow +73.03 at 11288.54, Nasdaq
-6.08 at 2245.38, S&P +1.37 at 1262.89
Independence
Day and hope all are enjoying a good holiday weekend.
Last week the Nasdaq, S&P and Russell 2000 joined in on the sell off which the
Dow has been the leader of for some time. We have continued housing
weakness with rising unemployment and inflation and banks that have likely a lot
more losses to account for.Oil was the biggest winner for the
week while gold was up a fraction. The market in general
is now as oversold as it has been in 10 years depending
on which measure you use. I predict that the market will
end the week either higher or lower than it is now. The
oversold readings suggest the it will be higher as does
the extreme bearishness we are seeing. However if
bearishness gets to extreme it can also lead to a market
crash rather than a rally so worthwhile to keep in mind.
I would not want to be holding many long term plays and
would keep pretty tight stops or at least hedge using
shorts or short ETFs. Cash is a position and maybe a
good one so it will be there when we do reach a turn
around.
Over the past month or so the bounces we have seen have
been weak and have been sold into. In a bull market
people do not want to miss the upside so they add on
strength and not sell into it. We have seen this kind of
buying in selected stocks such as
AMGN but the general market is being
controlled by sellers and short sellers at the moment.
We seem to really need a
catalyst to start a rally.
This week the ECB increased its key lending rate
by 25 basis points to 4.25% and this actually seemed to
help the US dollar and it rallied on Thursday. There was
a steep sell off in materials stocks and this may be a
signal that commodity stocks have or are about to top.
But it may be a buying opportunity. I am not so
convinced that it is a buying opp but often when the top
gainers finally also are being sold the we do
reach a tradable market low.
If during this time there are not many stocks you
want to trade do not forget the ETFs for the market
indices. If we do get a good good bounce then the Ultra
series ETFs may be ones to buy. We gave a good list in
last week's newsletter. For a much better profit
potential for dollars used, the futures market gives
much more bang for the buck.
We have had a poll up on the front page to see which are
the most popular futures to trade. Not many of you trade
futures but the number is growing each week as people
find that it offers a very good short term trading
opportunity with controlled risk and a good risk-reward
ration if waiting for good odds set ups. The Dow, S&P
500 and Russell 2000 are pretty evenly split with the
Russell taking the lead. The Nasdaq 100 is preferred by
10% of the respondents.
You may trade the full sized contracts though many prefer the E-Minis. One advantage
is that you can buy multiple contracts for less tied up dollars (or short sell) and start taking profit
on part of them as the price goes in your favor. The Futures broker who has about
the best margin requirement is Global Futures as they only require $500 (or
less) tied up in margin for each E-Mini contract that is closed by the end of
the day. The Russell 2000 contact pays $100 per point move so on a 5 point move
you have doubled your money in a day. This is what the popular contracts
pay per point move. E-Mini-Dow $5 per point - E-Mini Nasdaq 100 $20 per point -
E-Mini - S&P 500 $50 per point - E-Mini - Russell 2000 $100 per point. If you
have a futures account now but would like lower margin requirements or would just like
to try futures trading, Global Futures can open for you a free simulated trading
account so you can try with streaming data. Use the link below.
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My cable provider no
longer carries CNBC and it is not worth it to switch
providers but I hear that they are still having in
"experts" telling folks that the US economy is strong
and no evidence of recession. The chats are
the boss actually as far as the market goes and there
are an overwhelming percentage of sick ones at the
moment. We have
seen this before however and after a couple of weeks new
set ups started appearing and we were again in good
shape. Hopefully this will happen again this time.
Every month this year there have been job
losses. The Labor
Department reported on Thursday that the U.S. non-farm sector lost
62,000 jobs in June compared to expectations for a
decline of 60,000 jobs. The 62,000 figure is
Seasonal Adjusted though as the non
adjusted figure is a loss of actual 134,000 jobs. I
would think the investing public would be better served
with real honest figures from the government as the
truth eventually comes out anyway and it is a bit
misleading to try and plan investments based on
"adjusted" numbers. We mentioned recently that
Treasury Secretary Paulson is
suggesting that the Fed be given more power while we
think they should take the power away.
The chart of the official payroll
numbers from RTTNews is below but first a part of a
piece Jim Cramer wrote in the New York magazine.
"Wall Street closely guards its layoff numbers, but
piece together the evidence and a grim picture appears:
an estimated worldwide total of 4,000 dismissals at
Morgan Stanley, 5,000 at Merrill Lynch, 7,000 at UBS,
and 16,000 at Citigroup. Even the extremely profitable
Goldman Sachs is letting people go in some departments.
Then there’s Bear Stearns. A year ago, Bear was the firm
to work at. People talked of the Era of Bear. Now it’s
gone. Vanished. With more than 10,000 of its 14,000
former employees either looking for work or soon to be
laid off by its new owner, JPMorgan. I don’t believe all
the write-downs on that acid-reflux inventory have been
taken yet, particularly at Lehman, Merrill, and
Citigroup. I expect tens of billions more in write-downs
from those three firms alone."
The headline unemployment rate based on the
household survey held steady at 5.5%. Over the
past year, the number of workers employed part-time for
economic reasons has risen by 1.1 million and accounting
for these workers and those who have given up looking
for a job and left the labor force yields an
unemployment rate of 9.9%, compared to 8.3% in June
2007. This chart though is the one the media prefers.
Jobless claims rose to 404,000 in the week
ended June 28th from the previous week's revised figure
of 388,000. Economists had been expecting jobless claims
to edge up to 385,000 from the 384,000 originally
reported for the previous week.
In May, the non-manufacturing index
declined to 51.7 from 52 in the previous month. Evidence
of a build-up in inflationary pressures increased, as
the price paid index showed a 4.9 point-increase to 77.
A few looks at the oversold market readings. Bearishness
is at the highs as they were in March and OEX close to the
October lows while bullishness is declining.
AAII investor survey today showed only
23.9% bulls, and 52.1% bears. This is the 4th
consecutive week of more bears than bulls.
This Nasdaq Oscillator is the most oversold for this year and almost to the
summer low of 2007.
And this one similar for the NYSE.
The weekly performance of the major indices.
The weekly
sector top gainers and losers:
THE weekly best and worst industries: Biotech
which we have several stocks was the winner.
The real broad market of Wilshire 5000. RSI is now under 30 so a rally is
getting likley.
This muli chart view is only for a quick comparison
of the major indices and their relative position now
from their high. The Nasdaq 100 is the strongest still
at the 62% retrace
Dow
daily has been oversold for the week. Will watch for an
RSI move over 30 and stochastics move back over 20. Our
past apex line may mean noting but as it hits Monday or
Tuesday there may be some volatility. A move back over
11450 area may bring in buyers back up to resistance..
On this weekly Dow chart we see the close was under the
5-yera trend line. This is very bearish unless it can get back
over the line quickly. Other wide the 50% retrace at 10800 comes
into play. Stochastics are very oversold but RSI sill over 30.
The monthly Dow showing stochastics at a 26 year low.
Dow renko daily chart with the last bar under the
Bollinger band. As this type of chart is new to us we do not
have real time experience as to how renko reacts with Bollinger
bands but the only other time it went below the band to this
degree was at the January low.
Dow transportation index
still over the 50% retrace.
The Nasdaq filled the second gap on Monday. RSI is
reaching oversold area and perhaps the dotted line will hold.
Nasdaq weekly with 4-year trend line at about 2200 and
stochastics nears 20.
Nasdaq bullish percent now with a close of 28%
Nasdaq McClellan at its lowest for the past year and
levels where bounces happen.
The Nasdaq 100 closed about at the 62% retrace. No signs
of a bounce yet though a tiny move up on stochastics on the low
volume Thursday.
The S&P 500 could make a double bottom here 1190.
The number of new lows this week on the NYSE suggests that after
a bounce the lows will again have to be tested. As mostly we
make money from charts of individual stocks it will be clear
when the bulls take back control.
In the Summer of 2004 the S&P 500 bounced off the moving
averages and from that low to the high last year we are now back
to the 62% retrace. Symmetrically if this were to really break,
1091 would complete a pattern though 1291 has support also. A
Symmetrical pattern to the upside if this is the low, could take
it first to 1440 resistance and later back to the highs. This
seems to not make fundamental sense however if oil pulls back
sharply a strong rally may start.
NYSE weekly chart now at the 200-week EMA.
NYSE daily has RSI at a point that for the last year or
so has started 3 bounces. The number of new lows this week on
the NYSE suggests that after a bounce the lows will again have
to be tested.
Percentage of stocks on the NYSE now over their 50-day moving
average is only at 12% - where it was at the January low.
NYSE advance-decline almost at the bottom of this year
long channel.
S&P 400 mid caps has fallen under the 62% retrace. RSI is
back to the January low under 30. The 50 and 200-day EMAs are
worth watching as a crossover would be bearish and only a touch
would likely create volatility.
The Russell 2000 played catch up with the Dow this last
week. It may find a low above the March low as the RSI is now
just under 30.
This longer term view of the Russell 2000 adds perspective
and shows what may be a large channel with the Russell now at
the bottom of it..
The Ultra short for the Russell 2000 TWN has now moved
up $10 from the break out at the moving averages. It is almost
as over bought as it was at the markets January low.
The Volatility index VIX Friday ran to the broken trend
line.
The Value Line index of
about 1900 stocks is still over the 38% retrace for this almost
6 year period.
Two sectors most responsible for the overall weakening economy - Real-estate -
the UltraShort SRS up about $10 from its trend line break.
The banking sector index BKX oversold and only 2 points above the
10-year low.
Oil almost to the top of the trading channel. Maybe $150 is calling like
$1000 called to gold and cannot be stopped until hit or exceeded. We saw how
fast hot sectors can change this week. Coal and steel dropped quickly as all
tried to save their profit in a hurry and their exits and the shorts, who no
longer have any uptick rule to follow, took a stock like AK Steel AKS from
$70.54 to a low of $50.87 in 4 days. JRCC (coal) was one we were talking
of a high coming and it ran another $10 but then fell $20 on heavy volume. Do
not know when the oil pullback will be but as we see no lines at the gas pumps
we know there is no supply problem so this run up is not demand for the actual
product. Wonder if the government now thinks lifting the up tick rules was such
a good idea and if their loopholes in futures trading will ever get fixed. A
recent International Energy Agency report said there is a current spare OPEC
capacity of 2.5 million barrels a day and that by 2010 that may be only 1 million
barrels a day spare capacity. So now and in the future there is capacity not
even being used yet and supplies continue to increase in many areas as demand
softens. Demand in the USA is down 2.5% from a year ago. BP's Thunder Horse
wells in the Gulf of Mexico came on line last month and will be be producing at
full capacity by the end of the year and that adds an additional 250,000 barrels
per day of oil and 200 million cubic feet per day of natural gas. BP owns 75
percent of Thunder Horse and Exxon Mobile owns 25%. Bloomberg reported that
Asian imports of crude oil will fall 36% to 830,000 barrels a day in June from
May's 1.3 million barrels per day so even more supply.
Oil chart combines with the Exxon Mobile chart. Exxon near it lower trend line
while oil makes new highs.
Gold gained slightly this week as it lost most
of its earlier weekly gains on Friday. It sill closed above the
small triangle.
A closer view. It dropped as the dollar rallies so again they
seem to be paired and as one moves the other does the opposite.
The gold cloud chart shows a a bullish crossover of the Kijun-Sen and an
intra-week break over resistance tehn a pullback into it.
The 60-minute Market Vectors
Gold Miners GDX gave a sell signal on the renko chart on
Thursday as the CCI crossed under 100. On Friday the Parabolic SAR
went back over the pattern for a confirmation of the sell for the
short term as only a 60-min chart.
Gold and silver index XAU broke over
the triangle but pulled back to it.
Silver moved over its shorter term horizontal and has the next resistance
at about $10.77.
The US Dollar rallied a bit on Friday and
hopefully making a new base here just above the May low.
Weekly economic calendar from briefing.com.
The Fed chairman
Bernanke will speak on Tuesday before the open at the
FDIC forum and on Thursday he gives testimony at 10:00
to Congress, the subject regulatory restructuring.
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News on stocks of interest:
NNRI No news just waiting on
the ATOILL final numbers to include in the NNRF ones.
Company will meet with accountants 2K Audit this
month for second quarter numbers.
PLTG continues
to increase its actual production and sales.
Platina Energy Group Reports Significant
Field Production Increase
Several of our recent biotech watch list
stocks have done well but so far AMGN has been the best.
It is interesting that as biotech is speculative in nature that
a few have been doing so well while the general market declines.
We looked over charts of over 250 stocks in this sector and we
had the ones with the better set-ups. OSIP AMGN MYGN
VRTX SEPR CELG NPSP VVUS
On Friday AMGN made it to the
bottom of a gap created in December and as this is the
first attempt to fill that gap it would be common for it
to pullback fist so tight stops are suggested as it is
also quite overbought.
TRE This gold stock has been in a
down channel for all of this year. We have often heard
talk of "good news" and "new discoveries" soon and they
have yet to appear. This same chatter is starting again
so at least keep an eye on the stock as one day it may
be so and the current trend line is at $5.20
New additions to our
watch list.
Remember that we add many stocks to it each trading day. In
March, April and May we had a period of huge activity of 25
triggered picks a week and we said at the time that that much
actively could not keep up so long. It lasted a long time but we
may now start a couple of weeks or so were charts for short or
longs are much harder to find. Many stocks which may be shorts
are oversold and in this latest pullback many quite strong
stocks started pulling back so will need time to see if they
can set up again. If individual stocks do become harder to find
at the moment the ETFs may be ones to trade.
REDF Look for a rebound
over about $6.80 on good volume or nibble near a low if
experienced.
JAH Short
under $17.45
HW Short
under $9.90 needs increased volume
SOV Short
under $7.00
MEE Short
under $72.00 or alternative is to short at a test
of the broken trend line with a tight stop.
ORCL
Short under $20.59
VVUS Biotech over $7.50 or $7.84
NPSP Biotech Watch for pullback reversal
between $4.24 and $4.40
CELG Biotech Watch for pullback reversal
between $64 and $66
CLMT Short
Under $11.90 to recent low first
Photograph by
FeDD
Photograph by
Andrey Jitkov
Photograph by
Submar
That's a full lid for today - will see you all during the week.
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