| Oil And Commodity Summary: | | Oil And Gas Mixed Overnight
Crude oil prices are comfortably above $74 as the new week starts, while natural gas prices slipped, yet remained above $6.50 in overnight trading.
That's where we are in this market now, watching tick by tick and penny by penny, paying attention to support and resistance levels.
Supplies are adequate for the short term, but by razor thin margins, given the increased rate of demand in the market.
There are two key aspects of prices, though. One is the terror premium, and the other is the potential for rising demand in the face of refinery bottlenecks.
Neither of those situations seems to be within any kind of short term resolution, which is likely to keep prices on firm footing, despite occassional dips, and even intermediate term pullbacks.
We still think that a major buying opportunity may not be too far off in natural gas. We remain positive on crude. See our energy section for details.
Energy stocks have been making a steady string of new highs and remain a viable portion of a diversified portfolio. See our energy section for detials.
Being very careful in the energy sector at the current time remains the best strategy, given the potential for daily price swings.
$75 is the key short term resistance level for crude, while $6.50 is the key support for natural gas.
Our energy section has been updated and still has a core of open positions.
Gold is still range bound, but making some steady progress lately.
Chart Courtesy of StockCharts.com
Chart Courtesy of StockCharts.com
Chart Courtesy of StockCharts.com
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| Technical Summary: | |
Breadth Still Lags Rally
If you're looking to splie hairs in this market, look the NYSE advance decline line, as it has still to make a new high with the latest round up records on the indexes.
Otherwise, it's a decent advance, in which hindsight may show us that it was a sector rotation, with money coming out of health care and financial stocks and moving into technology and energy.
For now, what's important is to be in what's working, which seems to be technology and energy, where the momentum has been driving prices steadily higher.
The most important thing for investors to do during volatile periods is to be diligent about portfolio monitoring, culling losers, and keeping what's working.
Just as important is to stick with strength, avoid weakness, and to follow trading rules.
We still like what we see in the semiconductor area, which has broken out, as measured by the Nasdaq and several key sector indexes.
The S & P 500, also made new highs last week along with the Nasdaq and the Dow Industrials.
Watch out for earnings related potholes, though.
A successful trading program requires several things, patience, attention to detail, risk management, and a sustainable trend.
A sustainable trend, up or down, allows for the steady adjustment of risk, meaning that sell stops, or buy stops if you're selling short, can be adjusted over time, giving the opportunity to reach a profit.
Volatile markets increase the chances of being stopped out prematurely, thus, making it difficult to make money.
In these types of markets, there is a need to be patient. And patience usually gives traders the feeling that they are missing opportunities to make money. When that happens, inexperience leads to over trading, which tends to increase the opportunity of losing money.
In other words, as it has been for the past several weeks, the best strategy is to stick with what's working, and give this market time to work out its own kinks, without taking too much of our money away.
Think of alternatives to stocks, such as bonds and the dollar, which are still offering a unique trading opportunity, shorting bonds, and being long the dollar.
Otherwise, be patient. 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
Don't trade just to stay busy or to feel as if you're in the game. Be selective. Follow and review your trading rules. Get a good grip on your own willingness to take risk, and don't push the envelope beyond your comfort level.
Keep a lid on emotion, and stick to your trading rules.
Consider taking some profits where it makes sense, and consider tightening stops where appropriate. Use our individual sections for guidance.
Selectivity remains the key to success. Look for strength, either on a continued basis, or in turn around areas, such as the semiconductors.
Visit all our individual sections, both our ETF and individual stock picks daily for new ideas, and changes to open positions.
Be very methodical about monitoring portfolios, adhering to trading rules, and ratcheting up sell stops is clearly still here.
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
Chart Courtesy of StockCharts.com
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| Sentiment Summary: | | Watching The Euphoria Meter
The Put/Call ratio rose on Friday, a sign that more short covering is possible in the near future. We'll take this as bullish for now, as the market seems to be in rally mode.
The CBOE Put/Call ratio closed 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 2.00. 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 15.15 and 16.44. 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 are sending worrisome signals, as they were again heavy sellers of stock for the week ending 6-29, making it four out of the last five weeks, in which this savvy group of investors has been buying. The only week of some buying in the last four reported was the week of 6-15. This has been a period of generalized weakness and volatility for the market.
The combination of high put option buying and negative action from NYSE insiders has in the past been a prelude to trouble for the markets.
Market Vane's Bullish Consensus was at 65% on July 13, remaining neutral. The UBS sentiment index fell to 89 in June from 95 in May and is starting to increase its distance from the reading of 103, registered in January.
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| Market Moves | |
Google Joins Nasdaq Breakout Party
Microsoft (Nasdaq: MSFT) is lagging, but Google (Nasdaq: GOOG) made a new high last week.
Chart Courtesy of StockCharts.com
The battle between the two tech giants continues, and Google is still getting the upper hand.
The stock closed above 540 on 7-13, while Microsoft is hugging the low end of its recent trading range and is threatening to break below its 200 day moving average.
The key is growth. Google continues to do so, while Microsoft continues to be number 2 in many categories.
To be sure, Microsoft has lots of money, makes lots of money, and will continue to print money.
Yet, Google is slowly becoming indispensable in many categories, and is still growing.
So, like IBM became a big company that made lots of money but didn't grow very fast, Microsoft seems to have entered the elephant realm.
When Google's gazelle days are over, investors will also likely desert them as well, and move on to the next big thing.
That, however, doesn't seem to be something that's going to happen any time soon.
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