Market summary for Nov. 19th

Just a short entry today on the stock market action. First, it is clear we did go up above the 3 year downtrend line I have been discussing in many several previous posts. (see Nov. 14th post) Secondly, the candlestick pattern for all 3 indexes was a "Hammer" pattern. I was looking at the 6 month Dow chart, as shown above and the more easily seen 1 month chart and noticed that this Hammer pattern has not occurred on the way up in the entire 6 month chart. It is easier to see what a Hammer pattern looks like from today's close in the 1 month chart. The significance of the Hammer pattern is that it usually signals the end of a trend. In this case it is the up trend the Dow has had now for many months. Let's see if there is follow through over the next few weeks.

Market summary for June 15, 2009

The markets were down today for the entire day. The Candlestick patterns for all 3 Indexes confirmed the reversal form last week. All 3 Indexes, the Dow, Nasdaq and S&P 500, closed with a Hammer pattern. The pre-market started off with the Empire State Manufacturing Index for June continued to deteriorate to -9.41 compared to May's data of-4.55 for state of the manufacturing sector. This was not good news for those hoping for a recovery.

I expect tomorrow to be a repeat of today and the market to go lower. Remember this is Options Expiration week for most Options. Refer to the schedule in the previous posting to know what expires each day for the rest of the month.

TZA shares gained today closing at #22.64, up 8% for the day. As predicted the VIX index closed at 30.81 after reaching a high of 31.09 in light volume.

Market Outlook for May 7th and the near term (UPDATE)

It is feeling to me this rally is going to continue. When you add some apparent news on Retail, which is better than expected, and you have a real rally going on. I knew this rally was going to be for real, but I didn't know it was going to be so steady and strong, even on less volume. All my indicators show a continuation of this trend, as there doesn't seem to be bad news enough for the pullback I anticipated. But heck, maybe that is the exact moment when things are too optimistic. :)

The Put to Call ratio closed yesterday at 0.77 and the VIX Index closed at 32.45, which is thew lowest it has been since September, the beginning of the Sub Prime impact on markets. Yesterdays Volume for Dow and Nasdaq stocks hasn't been this high since April 20th. So the gain yesterday was convincing, at least to me. The Nasdaq Composite Index did end the day with a Hammer Candlestick pattern suggesting this is the end on the move up for that Index. The Dow ended the day with a Doji Cross pattern, suggesting a draw in the contest between Bulls and Bears.

There is an expression my Uncle uses in times like this, "don't fight the tape". I think it is appropriate at this juncture of the market, and I did fight it all the way. I should sometime listen to my own advice which I made about this rally back in mid March, this rally is for real and many may regret not having stocks in their portfolio becasue there will be some good gains."

FAZ shows a clear confirmation of a Sell Confirmed signal at the close yesterday by AmericanBull.com, so I may sell my few shares in it today. Regarding my shares of TZA, currently at $26.12/share, AmericanBull.com suggests a Buy If signal at the close yesterday. I am going to continue to hold these shares and may buy more to average down my costs on the shares. The market will eventually pull back and we are closer to the top of the range now, not the bottom, with the Dow closing yesterday at 8,567. I had said the top of this range is 9,200 and the bottom of this range is 7,300, so we are clearly nearer the top. The 200 day Moving Average crosses the Dow now at 9,000, so I do not see us going over this level.

When you compare where we are now, relative to 9,000, we are set for a pullback very soon. So I am holding on to my TZA shares and may take some profits now on some recent gainers and not try to time the top. This rally is not a call to Buy and Hold, but to trade it. These markets will not return to Dow 10,000 any time soon. So trading for profit is the only wise play going forward. If you can't do that, better keep your assets in cash.

UPDATE: 9:30am PST

It looks like the Nasdaq hammer Candlestick pattern was correct, the market has pulled back. Volume on both the Nasdaq and Dow are ahead of yesterday's good volume, so this downside move has more to go and may start a real reversal in trend. Gold is up to $914/ounce.

Market Outlook for the week of March 16th, 2009 (UPDATE)

Well I got the action right this past week for a change. Shear luck. But the real difficulty is predicting this next week. Let's take a look at a number of data points to glean some prognosticative abilities. The Dow ended the week over 7,200 to close at 7,224 on 4 consecutive days of very strong volume. The S&P500 ended the week over the critical 740 resistance level, closing at 756. Both Indexes closed over their 20 day Moving averages, but just barely.

The VIX Index closed at 42.36 after hitting an intraday low of 40.03 and it hasn't been at this level since the end of January. It remains below the 20, 40 and 60 day Moving average. The Put to Call ratio ended the week at 0.71. Click on the Chart above to see the trend from January 2008 to close on Friday. You will notice most recently the trend is down. When the Put to call ratio is low it is a sell signal and when it is at the highs it is a Buy signal but what is high and what is low is all relative. As I mentioned on an earlier post, back in the year 2000 I would use the Put to Call to time trades. But back then the lows on the Put to Cal ratio were as low as 0.3-0,4 and often signaled to me to sell. They were just a bit outside 2 standard deviations limits from the rest of the data. And on the opposite side I would recommend Buying at the 1.25-1.35 level. You can play with data yourselves by clicking on this CBOE link and selecting "CBOE Total Exchange Volume and Put/Call Ratios". The data goes back to 2003 to now on a daily basis.

The Candlestick pattern of the Dow on Friday was a Doji which shows a struggle between the Bulls and Bears for direction. It also implies a possible change in direction. And one last point about the chart pattern and where we are. We had reached a new bottom in the market a little over a week ago when the Dow hit a new low of 6,440 and the S&P hit a new low of 666. We have not retested those levels and therefore most likely will need a retest to insure we made a bottom.

So if I were a betting man, and of course you know I am, considering all this data, if we get any bad news this coming week we most likely will reverse this movement up. If on the other hand there is some surprise good news this week, the market will continue to rise. Eventually we will drop back and retest the lows. So this is at best a trade, not a Buy and Hold. The only decision you must make is when to sell to look in a gain and how long to ride this up. Technically we could go to 8,000 or above before we come back down to ground and retest. So take a measure of your fortitude and your level of risk taking, as you will be tested this next week to make a decision.

Ford closed at $2.19 on strong volume, but also closed Friday with a Doji candlestick pattern. It is up $0.30/share from my purchase or 15.8%. Apple closed at $95.93 also with a Doji pattern and is up over $12/share from my purchase or 14.5%.

The ETF's SSO and TNA recovered some of their devastating losses this past week. TNA closed at $15.07 also with a Doji Candlestick pattern. I had purchased TNA at $23.36 although I have added to my position with shares at $11.35/share to bring the average price down. SSO closed at $18.08 also with a Doji Candlestick pattern. I had purchased these shares at $21.57/share so I am underwater on both of these investments. But I still am holding them. My strategy will be that when I think the market is about to turn, I will purchase TZA to hedge the gains I have made back on TNA and SSO. My signal will be triggered by looking at the Volume as it will indicate the timing.

I don't know if this is too much detail for you on how I think about decisions regarding the stock market. Let me know by making a comment. I can post less and just tell you my conclusion or I can share the details of my decision making. The default position is this, if I don't receive comments, I will just post less details. Thanks for stopping by.

UPDATE: Monday Pre-Market

The Futures show the Indexes going up today, continuing the gains of last week. The Nikkei was up in overnight trading and the CAC, DAX and FTSE indexes in Europe. Last night on 60 Minutes, Fed Chairman Ben Bernanke gave the first ever interview on the program to explain the financial crisis and how the Fed stood ready to do whatever is necessary to maintain the Banking system. It was a very good interview and showed the man was from a small town and understood what it was like being from the Middle Class. He should be commended for taking this unprecedented step to help average Americans gain confidence in the government and the Financial system. This should be good news to the markets.