Dow -86.06 at 12216.40, Nasdaq
-19.65 at 2261.18, S&P -10.54 at 1315.22
Fibonacci socks. We use Fibonacci numbers in our charts. The "inventor"
Actually not invented but expanded on - was Leonardo of Pisa (c. 1170 - 1250) He
was also known as Leonardo Pisano, Leonardo Bonacci, Leonardo Fibonacci. A
famous mathematician. In the Fibonacci sequence of numbers, each number
after the first two is the sum of the previous two numbers. Thus the sequence is
1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, etc. The higher up in the
sequence, the closer two consecutive numbers of the sequence divided by each
other will approach the golden ratio (approximately 1 : 1.618 or 0.618 : 1). (as
example 233 divided by 144 as seen above is 1.61805) For our use in charts the
most common points are 38.2, 50, 61.8 but others are 23.6, 76.4 and more as can
be seen in many chart programs like quotetracker. The socks use the Fibonacci
sequence to determine how many rows of each color to knit (up to a max of 5
rows). The pattern pattern went: 1 red, 1 blue, 2 red, 3 blue, 5 red, than
repeat with 1 blue, 1 red, 2 blue, 3 red, 5 blue. So Fibonacci is not just for
charts. Happy knitting!
Friday continued the sell off in the markets. The S&P is down more than 10% this quarter, which is its worst
since 2002. The final March University of
Michigan Confidence reading came in at 69.5, compared to the expected number of
70.0. There were some negative earnings news from companies like JCP and
ORCL. APOL the for-profit education provider disappointed
and the stock dropped 27%. So people are not spending so much for education - at
least not with APOL. Personal income however did grown a
bit more than expected as shown below.
The number of new stock lows declined
sharply this past week. They were the highest on Friday but even that was better
than each day the week before. This lowering of the number of new lows is a
positive and we therefore expect an upside this week. We are about to start
April (and daylight savings time for most of the rest of the world) and usually
April is one of the best months of the year being up 69% of the time overall
with an average gain of 1.5%. During the last year of the presidential cycle (we
are in one now) it is up 55% of the time - a toss up this year.
A Bureau of Economic Analysis report showed Personal income rose 0.5%
in February, which topped the consensus
estimate of 0.3%. Personal spending met expectations
with a 0.1% rise, however, it is the lowest level since
Sept. 2006. The core-PCE deflator—one of the Fed’s
favorite inflation measures—met estimates with a 0.1%
rise. Adjusted for inflation, income rose 0.5% and
spending was flat.
The past week and the major indexes. Gold's rebound made
the largest gain.
The top and bottom sectors for the past week.
In general for long term positions there is not yet a
clear signal to get into the market. We get quick
excitement from action that some call a bottom but then
the retraces as we saw this week. Volume
has been some of the lowest this year and for a good
reversal one wants to see big volume as that translates
into conviction.
On the Dow the Fibonacci 50% retrace from the
March low to the recent high is at 12,177. This
does not correspond with any support exactly so we will
just have to watch a shorter term chart for the
reversal.
On this chart of the Dow we see that the pullback started
exactly at the apex of the triangle as drawn. This does not always work out this
way but it is still helpful to draw them when see them. On Stockcharts they
allow you to add blank space to the right of the chart in order to make room to
do extensions like this. Also note that the stochastics dropped under 80, also
signaling the pullback. In my opinion it will find support before reaching 20 on
this cycle. It closed right at the center Bollinger band that may give support.
The longer term Dow as reference. The RSI failed at
resistance.
As the Dow fell of course the DXD ProShares Ultra
Short went up and it started exactly at support so made for a very low risk buy
as your stop could have been right underneath the 200-day EMA. Volume however
has been very light so keep a tight stop.
Of course the ProShares long Dow DDM dropped with
the Dow.
The transportation index has been acting quite well.
It did fail at resistance but a first try often does. It closed the week still
over the 200 and 50-day EMA. Perhaps some see a decrease in the oil prices
(gas) in the future regardless of this week's rise.
The Nasdaq ran into the
50-day EMA and put in a toping candle and stochastics
dropped under 80.
The longer term Nasdaq as
reference. Now at the drawn trend line.
The Nasdaq 100 is about to
test the trend line from above and a successful test may
set up a continuation of the rally that started 8 days
ago. However there really needs to be stronger volume.
During he first part of the week the Russell 2000
was holing up much better than the rest of the market
but Thursday and Friday brought it in line. We cheated a
bit on this chart and brought the trend line down to the
closing prices in February (25-26) instead of using the
top shadow. This is legitimate also so lets see if we
can get a reversal near here. Stochastics though are
very slow to a drop under 80.
The Value Line index monthly , a good broad
market look shows the 5-month decline that got close to
the 62% retrace in January and March.
This Gold chart had given a stochastics sell signal and this week gave a
buy from the move off the low. The bounce came near the first support area but I
think in time it will test at a minimum least the 850 line.
Silver bounced a penny away from it former resistance, now support, and
made a fast $2 gain. Good chances it will break that support in the future and
test the lower line which by that time may correspond with the 200-day EMA.
The bullish percent index
BPCOMPQ for the Nasdaq is at the top of its range
since mid December. This is resistance area.
The NNAD is cumulative so
this is why we see the drop that seems not in relation
to the index. Still a break above the trend line will
signal a potential rally in the Nasdaq. You can see the
slight bounce in the lower portion of the chart, which
is the Nasdaq.
The percentage of stocks on the
NYSE now trading above their 50-day average is at 46% -
very average for a range bound market.
The gold and silver index XAU
bounced at the 200-day EMA but did not even make it to
the 50-day EMA. If it does it may become a short as your
stop would go a bit above. (you cannot short this index
but we refer to the sector in general) The gold stock
ETF Market Vectors Gold Miners
is GDX which allows you to
trade a basket of over 34 gold and silver mining stocks
at once.
The Japanese Yen has stayed pretty steady this
week. This will eventually touch the 50-day EMA but we
do not know at what price as the 50-day is rising. A
drop here may help the US market.
This Chinese index you can trade using FXI. Noticed it as chart of day
and pass it along. It found support at $119, its January 2007 resistance (now
support) but think it needs more time to base.
On Oil - a government report
showed that supplies of gas dropped more than forecast
as refiners shut units. (so nice of them) Gasoline
inventories fell 3.29 million barrels to 229.2 million
barrels last week. This shows that refiners are in no
hurry to produce gasoline because of low margins and
high gasoline supplies. Also, the demand just isn't
there so I read. Gasoline for April delivery rose 6
cents, or 2.3 percent, to $2.74 a gallon in New York, a
record close Earlier in the week crude oil rose to
its highest in more than a week after a pipeline
explosion in southern Iraq, cutting supply to the
country's main export terminal. On Friday though crude
oil dropped on news that oil is already again flowing
through the Iraqi pipeline. For the week oil closed up
3.2%.
There were some rumors on
Thursday that Lehman Brothers could suffer a fate
similar to Bear Stearns and this hurt the trading
sentiment though Lehman called the rumors "totally
unfounded". There was a news item that investment
bank Morgan Stanley could see its $11 billion-plus
credit line backing its commercial paper program
shrink under $5 billion as banks grow cautious about
extending credit and this added further pressure on
the dollar. This week was also just in front of the
March 31 Japanese fiscal year-end and exporters and
institutional investors repatriated overseas
earnings and investments before the date. If the
Dollar can hold here this retest is "base building".
|
Butch Cooley Market Comments
(Butch is founder of
Leg Up House
and the
Butch Cooley Worldwide
Hunting and Fishing . He has
been an active trader for decades.)
Market Comments March 28, 2008
It always amazes me just how quickly the market
forgets. Nothing this week on Spitzer and his hooker.
Not that is was very important anyway, except maybe to
all those people that Spitzer made enemies of on Wall
Street. Didn’t hear too much about Bear Stearns, except
the CEO sold about $68,000,000 worth of stock. That
ought to let everyone know that it probably won’t be
going any higher in the near future. And he probably
lost a fortune? Yeah, makes me feel really badly for
the guy.
Oil is still over $100, but no one is really talking
about it. They will in May when gasoline goes over
$4.00 a gallon. But for now, no one cares.
The housing markets are a mess, but no one seems too
excited. Oh, there were the usual reports all week,
every day, that housing was bottoming out. But they are
from those selling houses. So that’s a little suspect.
I think the prices were down around 11% from a year ago,
and more than likely they are closer to 20%. Las Vegas
made the top of the list for housing price drops. Check
out
http://foreclosure.com
and type in Las Vegas. Amazing actually. But Wall
Street didn’t care. And the GDP was just terrible.
Awful, but not much reaction from the traders. It was a
nothing week. And very typical of range bound trading.
What we need is some new bad news. We are all sick and
tired of the old bad news. We need a bank to actually
fail, not almost fail. We need the Fed to step and
raise interest rates, just to be different. That will
get this market moving, maybe the wrong way, but moving
none the less. AAPL has made some nice moves in March,
and I read many reports that when AAPL started to move
up, then the Nasdaq was going up too. Well, it did go
up a little when AAPL moved, but not very convincingly.
There is just nothing to get excited about I guess.
So I looked up the most viewed news article on Yahoo
News today, and it was about Raul Castro allowing cell
phones in Cuba. I’ve never been to Cuba. I always
wanted to fish Cuba, but didn’t want to travel there and
get my passport stamped. From what I understand, that’s
a no no!! Ernest Hemingway fished there, lived there
for awhile, and I always wanted to. But now they have
cell phones, and microwaves (I didn’t know these things
had been absent). Imagine getting your first
microwave. So maybe now I'll go to Cuba.
I’m going to go take a nap. All this excitement has
worn me out.
BC
|
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Stocks of longer term
interest: NNRI
is is a fully reporting company and as such has
until April 15 to report year end results if they file
an extension and March 31 without, so we will know which
by Tuesday as they can file to the end of the day. This
is the year end results so the data is from the end of
December. So wether we find out this week or next seems
not too important in the long run. This will be the
first report using equity accounting so we imagine in
the future the process will a easier. I went to
the NNRF new office this week and it is a pretty new
building so brand new office also - just putting up the
security cameras outside. It is larger of course than
their former office as there will be the new corporation
- Nuclear Container Corp - office there and the
financial director of ATOLL and a ATOLL's bookkeepers
are there now as is Nucon-RF. This is very positive for
all four companies to have offices in the same place. I
expect this to have a positive synergy. Using this
definition - "The simultaneous joint
action of separate parties which, together, have greater
total effect than the sum of their individual effects."
It is very clear that the company is expanding in
a good way.
SIPC had news after the close
on Friday though it traded very heavily the day before.
They signed a letter of intent to acquire Santa Fe
Springs in Albuquerque, New Mexico. From
the
press release it
says "This acquisition provides SIPP with an experienced
production management team, the National U.S. Government
approved license to manufacture and distill alcohol, a
certified bonded warehouse and approximately $1 million
in trailing revenue. The management of SIPP believes the
bottling of its ultra premium Private Reserve will
dramatically improve the Company’s
operating margins." The stock dipped to $0.54 on
Thursday but then rose 100% on heavy volume of about
120,000 while usually it does very small volume.
We look forward to future contacts for its Private
Reserve and news of its pouch drinks as well. GWDC
reported that their
first coffee cafe in China will open in April.
Now additions to our watch
list. Check the
trade record
for ones that hit their trade points. We had 75
in February and over 60 so far in March so very
good results in a tough market.
RRR An erratic one but looks like a scalp play
on volume over about $11.60 (from Fastcash)
CSGP Back over $44.00
Watch the 50-day EMA as may set up for a
pullback play there if it pulls back that far (from
Fastcash)
SIMG Over $5.10 or
$5.15 - watch the gap as may be resistance
(from MB)
VPHM Biotech Over $9.20 - $9.25 on good
volume
OPWV Back over $2.70 - $2.75 also on
good volume - $2.89 may be resistance
FHN Short
under $14.62
SHW Short
under $49.99
DV Short
under $39.70
IAR Continuation Short
$3.40 was recent low
SBUX Short
under $16.77
Photograph by Dikiy Sobak
Photograph by Waka
Another flower for spring
Photograph by Savvik
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