Slip Sliding Away

August 31, 2011
The major stock indexes started the morning trading sharply higher. At 10:00 am EST the SPDR Dow Jones Industrial Average(NYSE:DIA) traded as high as $116.97 a share. Since that high pivot the major stock indexes have been slowly declining throughout the session. The highly traded and followed DIA is now trading lower by 0.09 cents to $115.26 a share. The SPDR S&P 500 Index Trust(NYSE:SPY) and Powershares QQQ Trust (NASDAQ:QQQ) have also declined sharply this afternoon reversing earlier gains. Traders can watch for intra-day support on the DIA around the $114.95 and $114.00 areas.

Some leading stocks that have sold off today include Biadu Inc.(NASDAQ:BIDU), Netflix Inc.(NASDAQ:NFLX), and International Business Machines Corp.(NYSE:IBM). When the leading stocks in the market fail to hold early gains it is a sign of some short term intra-day selling pressure.

Nicholas Santiago

Stock Market Videos: Markets Digest Recent Gains, Profit With The Pros

August 31, 2011

The stock market jumped early in the day on the back of solid ADP Private Sector Employment data. However, in just the last four trading days, the S&P 500 has popped 8.5%. This tells a common sense investor that a pull back or pause is needed. The markets have given up quite a bit of their gains by mid afternoon and are starting see a little profit taken. All eyes are turning towards the Friday Jobs Report and looking at the next Federal Reserve meeting on September 21st and 22nd. Financial stocks are doing well today but most other sectors are mixed to lower. Technology leaders like IBM, AAPL and BIDU have been mostly lower even in the early morning market rally. This was a solid earlier indicator of a market that would give up most of its gains. The Dollar has also inched higher putting pressure on stocks.


The Master Stock Market Outlook Revealed

August 31, 2011

The markets are floating higher on the day. The SPDR S&P 500 ETF (NYSE:SPY) is trading at $122.86, +1.18 (+0.97%). The ADP Private Sector Employment numbers were released this morning at 8:15am ET. They came in with a gain of 91,000. This number was solid and the markets liked it. However, all eyes are on the Federal Reserve for their next meeting on September 21st and 22nd. Ben Bernanke made it clear last week at Jackson Hole that there was likely new easing coming to the United States, in some form. The markets, much like a drug addict, cheered these comments. While economic data will continue to flow towards that meeting, the markets will continue to look forward to QE3. The Federal Reserve is going to have to live up to some major policy announcements. Should they not deliver, the markets may see some major downside in September.

The rally has been solid so far. Since last Friday’s low, the markets have jumped 8.5%. Short term, this is an extended move but unlikely to see a major drop in the near term. Consolidation in the form of a pause is most likely. The outlook continues to be bullish for the markets with a random down day thrown into the mix. The SPY continues to have an upside target of $124.40, then $126.25.  The upside will also be aided by the coming Labor Day Holiday weekend. Holiday weekends often see a float on light volume on either side. This must be taken as the likely scenario.

While the markets look to continue higher for the next week or two, the easy gains are definitely already in. The markets likely only have another 3% upside potential. In addition, the markets will not see their 52 week highs again. On the SPY, this level was $137.18. The upside rally will last until September 9th, 2011. After that date hits, downside could come quickly at any point in the following two weeks.

Gareth Soloway

Gold Miners Daughter

August 31, 2011

The Market Vectors Junior Gold Miners ETF(NYSE:GDXJ) is trading higher by 0.06 cents to $37.41 a share. The popular ETF of the smaller gold mining stocks has rallied sharply higher since August 5, 2011 when it traded as low as $31.62 a share. Traders can watch for intra-day support around the $36.85 level. Should the GDXJ rally or trade higher on the session the next important intra-day resistance level is around the $38.00 area. The daily chart for the GDXJ remains in good technical shape by trading above the daily chart 50 and 200 moving averages.

Some gold mining stocks that are part of the GDXJ include Allied Neveda Gold Corp Allied(AMEX:ANV), Hecla Mining Co.(NYSE:HL), and numerous gold mining stocks that trade on the Toronto Stock Exchange. The important daily chart resistance for the GDXJ is around the $40.00 level at this time.

Nicholas Santiago

Bernanke Is The Banker That Cried Wolf

August 31, 2011

The stock markets have rallied higher over the past week for several reasons. The first and most important reason for the stock market rally has been the comments of the Federal Reserve. Since the Jackson Hole speech by Federal Reserve Chairman Ben Bernanke the stock markets have rallied higher on expectations of a September quantitative easing.

Nearly every investor is expecting the Federal Reserve to begin another round of quantitative easing. It is important for all traders and investors to realize that the Federal Reserve just ended their last $600 billion QE-2 program in late June 2011. The last round of quantitative easing(QE-2) caused massive inflation around the world. Food riots broke out all over the Middle East and Northern Africa shortly after QE-2 was implemented in November 2010. Now since the Federal Reserve knows that traders and investors will chase the markets higher on any thought of a QE-3 program the central bank can simply hint that QE-3 is close without ever doing it.

How long will the stock market continue to believe the Federal Reserve? This is the billion dollar question that everyone is asking. The next FOMC meeting is on September 20-21 regarding any policy changes by the Federal Reserve Bank. This tells us that the central bank could dangle the carrot in front of the institutional traders and investors until that September meeting.

Short term traders should continue to watch the action in the financial stocks. Leading financial stocks such as J.P. Morgan Chase & Co.(NYSE:JPM), Bank of America Corp.(NYSE:BAC), Morgan Stanley(NYSE:MS), and Citigroup Inc.(NYSE:C) will tell traders everything they need to know. If and when these stocks begin to sell off that is a warning sign that traders are no longer buying the Bernanke put.

Nicholas Santiago

End OF Month Market Float, Can The Rally Last?

August 31, 2011

This morning, the S&P 500 Index e-mini futures (ES U1) are trading sharply higher by 12.00 points to 1217.00 per contract. Traders continue to be in jubilee mode as the European Union markets are also trading higher this morning. This is the last trading session in the month of August and often the end of the month will see some short term buying. This is also the final trading week before the Labor Day holiday in the United States, therefore, the volume will usually be much lighter than normal. Many traders and investors will often take a vacation around this time of the year. It is important to note that the major stock indexes have surged higher over the past week, profit taking is always possible ahead of the important August non-farm payroll report on Friday. This morning, the ADP report announced that 91,000 new private sector jobs were added in the month of August.


Trade Lesson: Understanding Bottoming And Topping Tails

August 30, 2011

Most traders do not put all the pieces of the puzzle together when learning and using technical analysis. Let’s talk about topping and bottoming tails. Simply put, a bottoming tail is a bullish signal and a topping tail is bearish. A bottoming tail MUST occur at the lows of a chart. This means that no point on the chart in recent history can be lower. Next, the tail must be substantial, not just a little thing barely seen by the eye. Additionally, the close of the candle must be in the upper 25% when measuring from the lows to the highs. If all these factors match up, you may have a bottoming tail. The same things apply for a topping tail.

Now to throw in the one key that most traders miss and costs them money. To truly keep your winning odds at 90% or better, you must also factor in the market. The below chart is of Corinthian Colleges, Inc. (NASDAQ:COCO) . You can see, a great bottoming tail formed based on all factors mentioned above. However, one factor would keep Chief Market Strategists away from this trade for now. While the stock had a great recovery, it still closed lower. That would not matter if the market for the trading day was flat or lower as well. However, the U.S. stock markets rallied 3-4% the day before. The fact that this still could not end the day higher tells us to give it a little time and then re-evaluate the trade.

Always look at the trading day in the markets and match it up to the stock chart. Too many traders see a pattern and ignore the macro action on the markets. If you want to be a complete trader, start with the micro view of the stock, then expand your view to the macro market. If all things align, a 90% success rate trade will be your reward.