Ugly Reversal!
Wednesday's action reversed much of Tuesday's strength. That said, breadth wasn't nearly so bad and my best breadth indicators remain solidly positive. I had thought that we might have a bit more weakness to complete the correction, and I still think so, but tomorrow may finish it.
DOW: The Dow took back all of yesterday's gains. There's probably a bit more downside, too.
S&P500: The S&P also looks like it has perhaps as much as 10 points downside.
NDX: The Nasdaq is holding better and I think that the lows hold.
QQQQ: The Q's are going to be the place to play if they'll broaden out the next rally.
HUI: I worry that the Miners may have to trade lower before they can start their next run.
BKX: The Banks paint a pretty Bearish picture, but check out the next chart...
XBD: Look at the Brokers. I can't remember ever seeing brokers trade so well if the market is going to be heading down.
TTH: I really didn't want to see that in the Telecoms. They aren't dead yet, but they don't look great.
SMH: The Semi's put in a decent showing today, considering.
OIH: Oil goes up to new highs, but Oil stocks are weak? Stocks discount future events. Perhaps we are near a top for Oil?
KMG: Kerr Mcgee had us going early. I was thinking that we had a break out, but it couldn't hold it. The strong close keeps me from calling it a failure.
SBUX: Starbucks is going to rally soon, even if it's heading lower, but I'm inclined to make them take us out by hitting our target or stopping us.
DYAX: Dyax has unusual options activity in it. If it were not for that, I'd probably bail on this action.
TASR: Taser has friends, even as it has ample short sellers in it. We've corrected and a break up could bring a flurry of buying.
NT: So long at the telecoms look weak, we'd better pass on Nortel.
KOOL: Thermogenesis gapped up and never gave us a chance to buy.
GSS: Goldenstar was weak at the close, which is exactly the type of action I didn't want to see. We probably should have cancelled our order when we weren't filled by noon.
AWA: Considering OIL, this one did pretty well.
AAPL: Apple can go either way. The weekly chart shows something that looks a bit like a Head and Shoulders pattern, and overall, the stock looks like one you ought not hold blindly. Don't marry longs here, even though we will probably rally, near term. I don't care how many Ipods they sell.
PD: One of our colleagues brought Phelps Dodge to our attention. There's a big short position in this stock even as they are minting money and are sitting on a ton of cash. That's a recipe for a short squeeze. The fundamental case is strong and the chart looks good. Let's give 'er a go.
Summary:
We'll have to see how the sentiment sets up, but I'm betting that this market makes a low tomorrow and rallies, led by the semi's. What we need here is a weak dollar tomorrow and lower rates.
We are now up on the year by 22.20% net of comissions and up 110.98% Since inception. In the last 9 weeks alone, we are up 17.3% after comissions and expenses.
Be Well, and Trade Smarter Than the Average Bear!
-The ChartSmarts Team
Current Positions:
Long KMG at 73.63, stop at 77.36
Short SBUX at 54.29, stop at 52.22. Target is 49.25
Long DYAX (50% position) at 4.68, stop at 4.55
Long GSS at 2.97, stop at 2.91.
Watch List :
TASR: Buy a print of 10.10, stop at 9.63
PD: Buy on a limit of 94.66, stop at 92.76
Changes in Current Positions:
Move the stop on SBUX to 52.22. Target is 49.25
Move the stop on DYAX to 4.55
We are now long GSS at 2.97
*30 Minute Trading Rule:
In order to prevent whipsaws, we use a 30 minute trading rule. This means that, as a general rule, we are going to "sit on our hands" during the first 30 minutes of trading. Additionally, if after the first 30 minutes of trading the range of the stock pick is within the stop and buy/short boundaries presented, the trade recommendation is valid. If the stock's range is outside of the buy/short and stop boundry, the trade recommendation is VOID. E.g. if the recommendation is "Buy a print of 10.25, with a stop of 9.95," and the stop trades up to 10.50 during the first 30 minutes, we would pass on the trade. Similarly, if that stock were to trade down to 9.90 before 10:00, the trade would also be void.
There is no 30mn rule on limit orders, but if price gaps out of the buy/stop range the trade is void.
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