Market outlook: More of the same!

Have you been enjoying the market rise this week. Well get ready for more of the same. I know, you don't really believe it or are just anxious the market will just drop like a rock. That is how the psychology has been affected by continued daily dropping of the Dow and S&P 500. It can make you be afraid fro a very long time. And on any market pullback it can reenforce those fears. That is why many of us are saying we have changed a generation of investors. Some may never venture back into the market again in their lifetime. They have been decimated. They don't have extra cash sitting on the sidelines to put back into the market at this time.

So here wee are with Futures today pointing up. The VIX Index closed at 40.06 yesterday. One surprise was that the Fed has been buying long term Treasury debt and this has created concern about the value of the dollar. Hence Gold is up this morning over $60/ounce to $948, a real surprise move.

Citigroup has really taken off. As I posted I bought more shares at $2.41/share and watched the price sore yesterday hitting a high of $3.30 but closing at $3.08, but in pre-market it has jumped again to a high of $3.65 and currently is at $3.49/share. From my original purchase price of $1.70/share the stock is up over 100% and rising.

Ford is also doing well. It closed yesterday at $2.47 and in pre-market it is currently at $2.74. My purchase price for this stock is $1.90 so this is up now 44%. It will continue to rise to over $3.25 in my opinion.

And lastly both ETF's TNA and SSO have come back strongly and should continue to move up. Don't forget that Options Expiration is tomorrow and anything can happen. Today volatility should increase as possibly shorts start covering ever stronger as we approach 810 on the S&P, which is a major resistance level. Good luck! Oh, and if you haven't voted in my Mini poll, please do as it is on the right menu margin.

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.

Market update March 12, 2009

The Market has been relatively cam and quiet the past few days and today seems a repeat. Lots of data out today. Here's some of it:

Jobless Claims came in at 654,000, an increase over the last report but only by 9,000. Expectations were 644,000 jobs lost so definitely a close prediction. And it is good news the rate isn't increasing significantly, but rather may be leveling off as well. Retail Sales were down 0.1%. Business Inventories were down 1.1% in January compared to being down 1.6%. So maybe this is starting to level off and sales are closer aligned to inventories. This is also a good sign.

The Dow currently is up about 30 points after opening lower. The Dow seems to be having some difficulty getting and staying over 7,000. If we are going to go higher we must close and stay over 7,000. Right now it proving to be resistant. But maybe we will have 3 days of positive market action. Gold is up over $900 and did so yesterday and continues today. Oil is at $44/barrel.

The VIX Index continues to drop and is currently at 43.21. The Put to Call ratio closed yesterday at 0.75 and still high by yearly comparisons but relatively low given the past 3-4 months of exceptionally high numbers around 1.47. If the market returns to some sense of normalcy the number should be below 0.40 for market sell signals I use to use in 2001 to tell folks to sell.

And one last item on my holdings. I still own all of my purchases in TNA, SSO, AAPL, F, etc. and have no plans to sell.

The Stock Market: Should we abandon ship?

This must be on many minds this weekend as we broke through support levels which defined 25 year uptrend lines on the Dow. While we broke below support so gently the past week, nevertheless, we did break through the support levels and that is not a good sign. I took another look at the next level of support and while I can do this on a 25 year chart, I can't do it with the precision you deserve. So check with your professional stock advisor or other certified professional expert. It is my best guess we might go down to 6,300-6,500 on The Dow and 700 on the S&P. That means possibly another 10% drop of the total value of your portfolio of stocks. Ugh.

But there is also the possibility we can still have a strong Bear Market rally and go back up to 9,000 or over. That would be a 28% gain from where we are now. I personally am willing to take the risk of a 10% loss for a nearly 30% gain at this point. I can't speak for you here so you need to watch yourself and your assets. I believe this though, there is pent up demand and an oversold feeling with this market and the move up could happen very quickly. If any indicators aren't as bad as was expected in the coming week and show any possibility of no worse than last month, that could be enough for many to jump into the market.

I ventured in yesterday to buy Citi, symbol C, and so did many others as over 1.7 Billion shares were traded on Citi giving the Dow index a spike in volume for the day.

My recent purchases are underwater for my ETF's as well as the stocks I had purchased. TNA, the 3x Ultra Pro ETF of the Small Caps, closed yesterday at $15.53, after hitting a 52 week low of $15.02/share. I had recommended and purchased this at $23.36/share. SSO, the Ultra Pro shares of the ETF for the S&P 500 closed yesterday at $17.31/share after it hitting a 52 week low of $17.24/share. I had recommended and purchased it at $21.57/share. Ford Motor has pulled back after getting back up to as high as $2.20/share but now closed at $2.00/share. I had recommended and purchased this at $1.90/share. Apple, symbol AAPL closed yesterday down at $89.31/share. I had recommended and purchased the stock at $86.50 and $78/share. So there is the summary of my purchases.

Putting everything into context in a summary here, I think it's a crap shoot for this coming week as to whether we actually test new lows at the 6,300-6,500 level. If the SEC instituted back the Uptick Rule, we might not go lower but there is no certainty they will. It has been only discussed by Bernanke and others in the Administration. And further complicating matters is that Wall Street does not like what President Obama has been proposing on a host of topics like Healthcare reform, Medicaid reform, tax rate changes, stemming foreclosures and the bailout of banks. They speak with their money in the markets and that hurts us all. But change isn't coming, change is here and they had better get used to it. The good old boys network and the good old days, are gone forever or at least during this Administration. So I am not selling here and will hold and possibly add more shares of these investments as long as the cash holds out. So to answer the question asked in the title of this Blog, "Should we abandon ship?", the answer is No!

Markets pull back from the Edge today

We stared into the abyss and pulled back from the most certain painful decline that we almost had today. We are not out of the woods yet but if we can string another day or two together we may be on our way to a Bear Market rally. Much anticipation as to what Treasury Secretary Tim Geithner's plan is for the Banks so that shoe is still yet to drop. But President Obama was confident and bold tonight in what he wants to be measured on regarding the success of his plans to restore the economy. You can't say he is shy about taking on responsibility. He has set a new standard just on that metric compared to all previous Presidents.

Futures are down a little this evening but it is too early to tell what will happen tomorrow. On a positive note, Ford Motor, symbol F, went up today to $2.20/share and is now profitable based upon my earlier purchase and strong belief in the stock back on January 24th with an average price of $1.90/share. My Apple stock is also back into profitability as well, from my purchase back on January 7th for $86.50/share and again on January 14th for $78.00/share. Still own all my shares of TNA and SSO.

The Stock Market: Week ending 2/6/09

So the summary for the week is as follows: The Dow closed the week at 8,281, which was up 280 points or 3.5% from the previous week's close. The Nasdaq closed at 1,592, which was up 116 points or 7.9% from the previous week's close.

Here's a summary of the stocks I have bought and where they stand at week's end:

TNA was purchased on January 21st at a price of $23.36 and today it closed at $27.89 for a paper gain of 19.4%. SSO was also purchased on January 21st at a price of $21.57 and today it closed at $24.25 for a paper gain of 12.4%. I also sold TZA on January 21st as well as SDS. TZA has dropped 26.7% since my selling of the stock and SDS has dropped 15.9% since the selling of the stock. It seems the strategy of buying the ETF Ultra Longs near the bottom of the range of the Dow, S&P500 and Nasdaq Indexes, is paying off.

Additionally, my purchase of Apple stock, symbol AAPL, on January 7th for $86.50 and additional shares at $78/share on January 14th, has had a nice paper gain closing today at $99.72/share. That's a paper gain of 15.3% and 27.8%, depending on which dates the stock is purchased. My average purchase price is $83.50/share.

Disappointing has been my purchase of Ford Motor Co., symbol F, with an average price of $1.90/share back on January 24th and January 28th ($1.80/share and $2.03/share).

Much depends on what happens to the vote on the Stimulus package which looks like it will occur on Sunday. If there is a semblance of bipartisanship, it would be a good thing for the country. The The Unemployment report today was an eye opener. It showed unemployment at 7.6%, with 598,000 losing jobs this past month. This may have put the necessary fire under elected officials.

Watch my post on Sunday night and Monday morning pre-market to get a sense of the upcoming week.

Hope we can believe in.

As the day begins, there is more hope for reaching a bipartisan agreement on the stimulus package before the Senate today. I would estimate that a few days ago there was only a 35-40% confidence by the public, the media and the Congress that there would be a compromise within the Senate deliberations of the stimulus package. The needle has moved now to about a 55-60% confidence that there will be compromise and a good bill that most can live with.

The Unemployment rate (just announced) is 7.6%, as we had 598,000 jobs lost this past month. These two forces will result in some higher volatility in the market today (as measured by the VIX). Based upon the realities on the ground on the negotiations, I believe the Bulls have the edge over the Bears in this market. Being on the Short side right now is very dangerous as this market can snap up in a heartbeat. I do not have any Short positions nor do I currently have any ETF Ultra Short Funds like TZA, DXD or SDS and if I did have them I would sell them at the first opportunity today.

I did add to all of the shares I have mentioned here. Added yesterday to TNA, SSO, F, and AAPL and feeling very confident these will rise in the next 30 days. When the Stimulus package gets passed by the Senate today and a compromise worked out with the House of Representatives during the next week, hopefully President Obama will be signing the bill by Friday the 13th or more preferably by Feb. 12th, President Lincoln's birthday. And the President will be credited with bringing a different kind of politic to Washington, thereby increasing his popularity with the American people.

Market outlook for Feb 5th and 6th: Update 2

Took a good look at the charts for the past 3 weeks for the Dow and the S&P 500. Looks to me we formed that "W" pattern but the second leg of the "W" pattern is lower than the first leg. It suggests to me the markets most likely will go down now the next several days. How low we go depends on the results of the Jobs report tomorrow. If they are bad showing at least as bad as last month, we will drop and possibly retest the previous lows on the Dow of 7,392 and 750 on the S&P 500. If the results are better than expected we will have a short rally up. However the news that will determine where we are going is the Stimulus Bill and how it gets through the Senate. It is how the process is perceived and how the President manages the news about this and how he uses the Bully pulpit. Time will tell, but we should know by a week from now.

My choices are going to be these. First, if the market drops down to retest the lows, I will purchase additional shares of the ETF's TNA and SSO. I will add shares of Ford, symbol F, and also Apple, symbol AAPL, continuing to add shares. I will not try to gain a little on the drop by buying TZA nor SDS as we are at the low of the range for these Indexes and I can't time the next leg up.

UPDATE: 5:30am PST

Jobs data out shows an increase of 41,000 jobs lost last week bringing weekly claims to 626,000 jobs lost. Productivity is up 3.2% and Continuing Claims have now reached 4.78 Million jobs.

UPDATE #2 8:08am PST

I purchased additional shares of Ford at $1.90/share, more shares of TNA for $24.90/share and more shares of Apple at $93.99/share