Is Technology The Next Sector To Breakdown?

September 30, 2011

The technology heavy NASDAQ Composite has held up better than the other major stock indexes such as the Dow Jones Industrial Average, S&P 500 Index and the Russell 2000. As long as the NASDAQ Composite holds up and does not breakdown, this tells us that people are still willing to take on risk. Please remember, most stocks in the NASDAQ Composite do not issue dividends. The majority of stocks in the NASDAQ are considered growth stocks, therefore, if this sector breaks down it is a sign that investors believe that the chance of growth is over for the time being.

Recently, the Dow Jones Industrial Average (DJIA) has been beginning to hold up better than the other major stock indexes. This tells us that investors are trying to find yields and have given up on growth. Please understand that all of the 30 companies in the DJIA pay a dividend and are considered multi-national blue chip stocks. Therefore, if you buy a stock such as Procter & Gamble Co (NYSE:PG) you know you will receive a dividend and you hope that the stock will not decline as fast as other stocks. For example, PG stock is one of the few stocks that are trading above all of the major daily chart moving averages. At this time, there are very few stocks that have been able to recapture the daily chart 50 moving average. When stocks trade below the daily chart 50 Moving average most institutional traders will view the stock as being in a weak technical position. Obviously, PG stock is in a strong technical position at this time.

The bottom line, when the Dow Jones Industrial Average is stronger than the other major stock indexes it is a negative for growth stocks. If this remains the NASDAQ Composite could be under some severe selling pressure. It is safe to say that these markets will remain very volatile in the near term. Traders should be aware that the technology sector could be the next major indexes to breakdown.

Nicholas Santiago
InTheMoneyStocks.com


Buffett Bounce

September 30, 2011

When the stock markets get into serious trouble the Oracle of Omaha will come out of the woodwork to defend stocks. Once again, Warren Buffett just appeared on CNBC live from the New York Stock Exchange. Mr. Buffett said that he is buying stocks and is investing in the United States. The SPDR S&P 500 Index (NYSE:SPY) has climbed sharply off the lows. Traders should watch for intra-day resistance on the SPY around the $115.52 area.

Nicholas Santiago
InTheMoneyStocks.com


Financial Stocks Are Talking

September 30, 2011

On days like this, where the stock markets are down sharply at the start of the day there is only one place to look for guidance, it is the financial stocks. As long as the financial stocks remain weak traders must expect lower prices on the major stock indexes. If and when the financial stocks bounce that is when the major stock indexes will catch a small bid and trade higher.

J.P. Morgan Chase & Co (NYSE:JPM) is the most important stock in the United States and possibly the world. This stock has lead the stock markets higher and lower throughout 2011. Traders should always watch and monitor JPM stock at all times. This morning, JPM stock is trading lower by 0.58 cents to $30.81 a share. This financial giant will have some minor intra-day support around the $30.43 area. Should that near term support level breakdown the next intra-day support areas will be around the $30.00 and $29.50 levels.

Other leading financial stocks that traders should follow are Goldman Sachs Group Inc (NYSE:GS), Morgan Stanley (NYSE:MS), and Bank of America Corp (NYSE:BAC). All of these leading financial stocks look horrible on the daily chart at this time. This is how the financial stocks talk to us.

Nicholas Santiago
InTheMoneyStocks.com


Yo-Yo Markets, End Of Quarter Window Undressing

September 30, 2011

Once again, the major stock market indexes are coming under heavy selling pressure. The S&P 500 Index e-mini futures (ES Z1) are trading lower by 13.50 points to 1142.75 per contract. The declines in the market come as the economic data out of Europe was worse than expected. Inflation jumped in Europe and this is at a time when the ECB may need to do more bailouts. This could be the start of another perfect storm brewing in the Euro-zone. Who would want to hold stocks on a Friday ahead of a long weekend? Unless another band-aid solution comes out from the central banks intra-day this trading session is likely to be very volatile.

 


It Is Time To Bring Out Buffett

September 29, 2011

This afternoon, the major stock indexes have once again rolled over reversing a 200.0 point rally on the Dow Jones Industrial Average (DJIA). The talking heads in the financial media continue to talk about the recovery from the 2008 financial crisis, meanwhile, we are still in that very same crisis. Stocks such as J.P. Morgan Chase & Co (NYSE:JPM), Bank of America Corp (NYSE:BAC), and other financial giants continue to look terrible on the charts. Investors are still waiting to hear and see the central banks inflate the markets higher again in that typical Keynesian fashion. So far, we can see how much that money creation approach has gotten us. The stock markets have not yet gone into panic mode, however, stock prices continue to decline and fear is beginning to creep in.

Tomorrow, the world’s most famous investor, Warren Buffett, is going to appear on CNBC. You know things must be getting bad when everyone’s favorite Keynesian is going to make a television appearance. Sure, he will tell everyone to buy stocks when people are fearful, however, he knows that he will be bailed out  by the government if his trade goes bad. He was bailed out in 2008 when he invested in Goldman Sachs. That was just about as a trade as I have ever seen. Now Mr. Buffet has invested in Bank of America, many investors jumped right on his band wagon when he bought those preferred shares. That stock is underwater from that time and a lot of investors are underwater with him. This guy has benefited from bailouts more than anyone on the planet. You know things are getting bad when Warren Buffet has to come out from Omaha and make his save the market TV appearance.

Nicholas Santiago
InTheMoneyStocks.com


Stock Market Videos: Another Roll Over Screams Crash

September 29, 2011

The markets rolled over again today. This is the third day in a row and if the downside holds, could signal a major decline on the horizon. When the bulls cannot prop the market up, and each time they do, they lose, eventually they will throw in the towel. For InTheMoneyStocks members holding shorts, this is fantastic. Another major week of gains. While news filtered out from Europe about a German vote, more debt rating downgrades soured the tone. The markets are heading for the $110.00 level on the SPY and it is just a matter of time until they hit.

 


Buying Opportunity As DOJ Joins SEC On China Stocks

September 29, 2011

Today, word hit the markets that the U.S. Department of Justice is helping the Securities & Exchange Commission look into “accounting irregularities” among U.S. listed Chinese stocks. This sent companies like Baidu.com, Inc. (ADR) (NASDAQ:BIDU) and Sohu.com Inc. (NASDAQ:SOHU) down over 10%. Other Chinese stocks listed on the U.S. exchanges dropped as well.

While this news is causing some selling, it is probably the best possible outcome and should be cheered. It also may be setting up for the best investment opportunities over the next decade. In the last year, Chinese companies like RINO International Corporation and many others have been exposed as frauds. This has made investors run from all small and mid cap Chinese names. Whether legitimate or not, investors are not willing to take the risk of buying them.  The DOJ and SEC action will hopefully cleanse the system of bogus companies. Out from under the ashes will emerge companies trading at P/E’s of 1,2,3 and 4 that are legitimate. This will be the place to be in the next decade and these valuations will not last long.

Now is not the time to jump in to these small and mid cap names. However, once the DOJ and SEC do their jobs, the sun will rise and those that survive will be some of the best values in the stock market.

Gareth Soloway
InTheMoneyStocks.com


Why The Stock Market Rally Will Hold Today

September 29, 2011

The stock market opened sharply higher today. This move took the Dow Jones Industrial Average up by more than 200 points. In the last two days, similar up moves have taken place but sharp selling has come in late in the day and driven the markets back down. Today, the markets are seeing sharp selling again from the gap higher. While this looks almost identical to the last few days, there are some major differences.

First, the sharp sell off is occurring very early in the day. This is far different than the last two days. The last two days saw the sharp decline late in the day. Often times, early selling is done to lure in the shorts who are eager to believe another roll over is coming. When trading the markets, always remember, nothing is easy or that simple. Second, the last few rallies were based on myth and rumor out of Europe. Today, the markets actually saw a vote from Germany that took a major bailout deal one step closer. Fact is always better than fiction.

These factors make the sell off today more likely to reverse, moving higher and holding gains.

Gareth Soloway
InTheMoneyStocks.com


Forget Europe, This Is Worse

September 29, 2011

As you all know, the banking crisis in the European Union is an absolute disaster. Most of the countries in the European Union are insolvent and they will have to likely default at some point. Whether or not there is a structured default remains to be seen. At this time, the European Union is likely pass this European Financial Stability Facility (EFSF) to help bailout all of the Euro-zone banks in the near term. This plan is simply paying off debt with more debt. While it may keep the European Union together for a little while longer there are still going to be major problems in the region for a long time to come.

Believe it or not, there is a bigger problem lingering in the global economy. It is not the European debt crisis, it is not the massive U.S. debt crisis that grows every day. It is a Chinese slowdown that could cause the stock markets to decline further. The Shanghai Index (China) made a new 52 week closing low last night. China is the growth engine of the world, they produce most of the goods that people buy and use in the world. The Shanghai Index has actually lead the global stock markets for years now. If you look at the March 2009 low on the S&P 500 Index and the rest of the major stock indexes in the United States you can easily see that the Shanghai Index actually bottomed in November 2008. This is clearly indicating to us that the Shanghai Index is the leading economy in the world.

China is facing many problems at this time. The country has a housing bubble in place. Real estate prices are much too expensive compared to the average wage. Next, the Chinese economy is facing high inflation. This is obvious in Chinese housing and the cost of food for the people who live in the nation. The Chinese are also starting to face an uprising in the labor force. The Chinese workers are demanding raises and better work conditions. These are all problems that are happening right now in this massive country. People must understand that the nation has a population of 1.3 billion. Any economic slowdown will hurt that country.

This morning, the Chinese ADR’s are behaving terrible. Leading stocks such as Baidu Inc. (NASDAQ:BIDU), Sina Corp (NASDAQ:SINA), and Sohu.com Inc. (NYSE:SOHU), and Netease.com Inc. (NASDAQ:NTES) are declining sharply lower on a day when the stock markets in the United States are rallying higher. This is not the type of action that is healthy. Remember, it has been Chinese investments around the world that everyone has been hanging their hopes on. If the Chinese stop investing in different places around the world the entire global market will slowdown. This is worse than the European crisis.

Nicholas Santiago
InTheMoneyStocks.com


Will This Early Rally Fade Again?

September 29, 2011

Nearly every day the major stock indexes gap up sharply or gap down sharply. The stock market participants are extremely focused on every rumor or word coming out of the European Union. Who really knows what to believe at this point? One day Greece is going to be bailed out again, the next day Greece is going to default. One day Germany says they will bailout the Euro Union, the next day they will not. This news is absolute insanity for anyone that trades off of news or the so called fundamentals.

What we do know as a trader is that the major stock indexes in the world have traded inverse to the U.S. Dollar Index. Therefore, as long as the U.S. Dollar Index declines the major stock indexes will usually inflate and trade higher. On the flip side, if by some chance the U.S. Dollar Index rallies or trades higher throughout the session the markets will likely decline and sell off again. The movement of the U.S. Dollar Index is the real driving force in the stock market. Who cares about economic reports these days? They are revised and never tell anyone the true story. Traders should just remember that the markets will trade inverse to the U.S. Dollar Index.

Some stock sectors that will trade higher on the back of a weak U.S. Dollar Index are energy, industrial metals, and believe it or not, technology. Should the U.S. Dollar Index decline throughout the trading session stocks such as U.S. Steel Corp (NYSE:X), Caterpillar Inc. (NYSE:CAT), and Chevron Corp (NYSE:CVX) could see higher prices. These same stocks will likely fade or decline if the U.S. Dollar Index rallies higher. Traders should watch for intra-day support on the U.S. Dollar Index futures (DX Z1) around the $78.15, and $78.00 levels. As long as the U.S. Dollar remains weak this rally could hold up into the close. If the U.S. Dollar rallies traders should watch out below.

Nicholas Santiago
InTheMoneyStocks.com