Chart Courtesy of StockCharts.com
The Wilderhill Clean Energy Index is trying to hold the line at the 180 area, and is showing some improvement.
Chart Courtesy of StockCharts.com
Crude oil prices are closing in on $60, but are having trouble.
Chart Courtesy of StockCharts.com
The Philadelphia Oil Service Index (OSX) is now testing the resistance near 200, but has yet to cross the line.
Chart Courtesy of StockCharts.com
The Amex Oil Index (XOI) made a new low on 1-10, but has since bounced back. 1200 is still the key chart point.
Technical Summary:
Chart Courtesy of StockCharts.com
Growth Stocks Get Clocked
Growth stock investors got a bit of a beating on Friday, with the Nasdaq's chart (below) possibly hinting at a double top.
It's early in the game, but last week's action is not the kind of stuff from which major bull markets that last are made of.
No major support levels were broken, but no major resistance was taken out either, leaving the market in the proverbial no man's land.
The action in the Nasdaq was particularly disappointing, as the index failed to rally to new highs, not even on a marginal basis, and is now in danger of breaking below 2500.
The traditional leader for the Nadsaq, the chip sector (see the SOX Index below) has run out of steam, while Microsoft also broke below key support, giving the index two reasons to fade.
Small stocks also gave back some ground, although the broad market did not break down.
From a longer term stand point, based on historical trends, this should be a positive year for stocks, given the fact that it's the third year of the Presidential Cycle, which calls for rallies in the third and fourth years of a presidency.
Our long term forecast remains upbeat, unless the major indexes fall convincingly below their 200 day moving averages.
What To Do Now
It's a good time to let the market trade without us for a couple of days, and to see where things shake out. Use this time to manage open positions, but not to take big chances.
Focus on strength, but don't fall in love with any particular stock, as news could hit any position hard during times such as the current ones.
The Fallen Angels, with a large focus on the housing sector, is another very useful area of the site at the current moment.
Energy and gold/metals were areas of strength but have lost some of their pop, as of 2-9, although that may change.
Visit all our individual sections, both our ETF and individual stock picks daily for new ideas, and changes to open positions.
Still, it pays to be careful in any market. So, be very methodical about monitoring portfolios, adhering to trading rules, and ratcheting up sell stops is clearly still here.
If the market turns south, your chances of preserving your profits by following a sound trading plan, such as outlined above will increase.
Second guessing decisions, and hoping that things will turn out o.k. in the long haul, is the recipe for disaster at a time like this in the market.
Check all our sections daily. See tech, biotech, Fallen Angels, and timing systems for the latest adjustments. Our ETF trading systems for energy, Spyders, Small Caps, and technology have also been updated.
Chart Courtesy of StockCharts.com
Sentiment Summary:
Still No Worries
Option players are not panicking about he current status of the stock market. Yet, other sentiment numbers remain quite concerning.
The divergence in the markets continues, as short term sentiment figures in the options market remain fairly bullish, while long term sentiment figures are not so bullish. This mixed picture, is one of the reasons for the market to be so volatile of late.
The UBS sentiment index, see below, rose to the highest number we can recall in January, setting a very cautionary tone in the market.
The CBOE Put/Call ratio checked in at 0.94. A consistent string of low readings can be a sign of excessive optimism and often signals a top in the markets. Readings below 0.5 are of concern, but not as serious as readings below 0.40. Readings above 1.0 are bullish. The numbers cited here are meant to be evaluated on a closing basis.
The CBOE P/C ratio for indexes checked in at 1.43. Numbers above 2.0 as the market sells off, often lead to rallies. Readings below 0.9 suggest too much bullish sentiment, just as readings above 2 are usually required to mark major bottoms.
The VIX and VXN had readings of 11.10 and 17.11. A fall near or below 20 on VIX and 30-40 on VXN is considered negative, a fact that is usually confirmed when the volatility indexes begin to rise. Readings above 40 and 50, respectively, are often signs that a bottom may be close to developing.
NYSE specialists were mild sellers of stock on the week of 1-26-07 for the second week running. Specialist short selling remained at very low levels, though. Rising short selling from specialists is usually a very bearish sign.
Market Vane's Bullish Consensus remained at sell signal levels, checking in at 72% on 2-9. The UBS sentiment index blasted to 103, a downright scary number, and the highest one we've seen.
Market Moves
Microsoft's Quiet Breakdown
Shares of Microsoft (Nasdaq: MSFT) caved in on 2-9 as Google (Nasdaq: GOOG) continued to struggle.
Chart Courtesy of StockCharts.com
The Nasdaq continues to weaken, having failed to match the recent marginal new highs from the Dow Industrials, the S & P 500, and the Russell 2000 indexes.
Part of the reason is the weakness in Microsoft and Google, with both stocks seeming to be well entrenched in the early stages of intermediate term down trends, having broken below their 50 day moving averages.
While there is no guarantee that weakness in these two stocks will translate into overall market weakness, there is the possibility that these two big stocks are forecasting something for the overall market.
As investors and traders begin to fret about corporate earnings going forward, they often take profits from large, liquid stocks such as Microsoft and Google.
If enough sellers take hold, though, the weakness could start to spread, as the herd mentality takes over. For that reason, watching the Nasdaq, and particularly Microsoft and Google, makes sense at this time.
Chart Courtesy of StockCharts.com
The Amex Biotech Index (BTK) is still in play. The 780-800 area is important resistance.
Chart Courtesy of StockCharts.com
The Amex Pharmaceuticals Index (DRG) is consolidating.
Chart Courtesy of StockCharts.com
The Philadelphia Semiconductor Index (SOX) has broken down after failing to break above 480.
Chart Courtesy of StockCharts.com
Small stocks are once again resurging, but are not likely to be areas of relative strenght if the market rolls over.
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