Market Analysis 1/14/2011

What a run we've had. Not completely fair to call this a pure junk rally. Apple, Netflix, F5 Networks, Transocean, etc. don't exactly qualify as junk unless you're one of those ZeroHedge people. Then only your guns and land don't count as junk, and that's a little too limiting for my tastes. Just be thankful YOKU and Tesla haven't been partaking in this madness otherwise we surely would all be in a state of panic.

The Q's are at 10 year high's, and I'm lovin' it. Permatech bull here. Clean balance sheets, high profit margins, high rate of M&A, what's not to love?
Not a whole lot to say on the Q's intermediate time frame. Bernanke bucks keep this market well oiled and well behaved. Get your personal feelings out of the way and join the madness before your dollars are inflated away.


My personal favorite over the past 6 months has been a gem called Powerwave. A technical analysis follower's dream. Flag/consolidate and move higher. Bliss. I'll post more opportunities later this weekend. In the meantime, lose yourself in the glory of Powerwave

Danger Zone

Fairly discouraging session today as we were unable to build upon initial strength and make a higher high. Instead, the constant selling pressure persevered throughout the trading day and puts us near the bottom of the trading range we have had over the past two months.

SPY - 6 Month Chart - Daily

The SPY had a failed attempt at the 200 Day MA today. If we do break down tomorrow, the 88 level will be next area to be looking for support. The rising 50 Day MA along with the current channel is positive, but the SPY is exhibiting some early symptoms of breaking down.

SPY - 2 Month Chart - 30 Minute

A closer look at our lower high. We could easily gap below where the current channel and start a new leg lower.

QQQQ - 6 Month Chart - Daily

The Q's look as if some consolidation is in order. The 200 Day MA and the channel line may provide some support should the Q's go lower. A lower high was created here as well. Overall a pretty uncertain chart.

QQQQ - 2 Month Chart - 30 Minute

Update to 5/17 Post (QQQQ, VIV)

QQQQ - 6 Month Chart - Daily

The Q's have rallied above their 200 Day MA. Let's see how much resistance the 20 Day MA gives here. We are also still within the boundaries of the current down channel so don't get too excited. Still too early to call it, but I will retain a bearish sentiment until we get out of the current channel (outlined in within the blue lines) and above the 20 Day MA.

VIV - 10 Month Chart - Daily

ViV broke through the channel I outlined last night so here is a look at a 10 month chart that can give us an idea of potential levels of resistance. If you are in this, stops can be placed at the 18.55 level (see chart below) if you really want to minimize risk. I would place a stop closer to 18 in the event VIV retests the previous channel line for another move higher.

VIV - 10 Day Chart - 15 Minute

Market Commentary 5/17/09

With the Q's failing to hold the 200 Day MA and the corresponding failures in the SPY and XLF on their respective advances at the 200 Day MA, I will be looking for further confirmation on the downside this week and pick up/add on to a few inverse ETF's. I will primarily be watching the Q's for market direction. Let's see if the Q's test the 200 tomorrow and then come back down. Or perhaps it will clear the 200 once again and find some consolidation. Still too early to commit, so as I said earlier, I will be waiting for further confirmation.

QQQQ - 6 Month Chart - Daily

The 33.5 level is obviously going to be the key level. Furthermore, the 20 Day MA has acted as a major source of resistance over the past few days after acting repeatedly as support on the move up. If we do have move lower, watch the 50 Day for possible support.

SPY - 6 Month Chart - Daily

The SPY has serious potential for support at the 87.5 level. The 20 Day MA has provided some short term support. We are in no man's land, so wait for further confirmation.

XLF - 6 Month Chart - Daily

The XLF has swiftly come down from the test of the upper band of the channel. In its current channel, the XLF has had some great action where there is a move higher, consolidation, then a further move. Here we will also see how the 20 Day MA holds up. Be very cautious with the financials right now.

Keep an eye on...

VIV - 6 Month Chart - Daily

I will be looking for a breakout above its current channel, so above 18. With the market in questionable waters, if this can show some relative strength, then it is definitely worth a further look.

Market Consolidation

The overall indexes continue to remain rangebound. Based on price and volume action, the recent decline is in line with consolidation versus a reversal. The market has had a tremendous run up so managing risk is certainly mandated.

Charts:
SPY - 6 Month Chart - Daily

We are approaching the 200 Day MA for the SPY which should provide some meaningful resistance. I will be lessening my long positions as we approach this very key level.

SPY - 2 Month Chart - 30 Min

We continue to trade within this 2 month range. I would expect the range to break somewhat soon as we approach the key 200 Day MA

QQQQ - 6 Month Chart - Daily

The Q's are battling to stay atop their 200 Day MA. If the Q's can hold this mark, it will be a very bullish sign for the other indexes. However, a break of the 200 Day MA may be another piece of evidence that the SPY will have to try their 200 Day MA sometime later.

QQQQ - 2 Month Chart - 30 Min

The 20 Day MA has provided some support recently. The 20 and 200 are the key levels here. Some choppy, sideways action has 'broken out'. I am waiting to see what the Q's do with the 200 Day MA before I make any moves here.

A couple others to look at...

HGSI - 1 Month Chart - 30 Min

I am definitely liking how HGSI reacts to the 5 Day MA along with the triangle. Stops can be placed at the 2.00 mark. To me this is a great opportunity because the risk parameters can be very clearly defined. There is definite upside potential to this.

BZ - 1 Month Chart - 30 Min

I put this chart in as a kind of reminder to trust trends until they break. Don't step in front of a runaway train.

Another Ridiculous Day

Somehow the S&P 500 has bounced back to 1/2/09 levels. If anyone is not taken back at least a little by the audacity and strength of this rally, I might very well call them a liar, mustard seeds not withstanding. I suppose when Taiwan's stock market strength makes the home page of Yahoo! then there is no choice but for everyone else to follow suit. FXI and EWT were up 8-9% today! Ridiculous.

The market has been rocketing ever higher; however, investors should never lose focus on risk management. If you have participated in this rally, make sure not to give it all back in the event Mother Market decides enough is enough. On to some charts and small denomination stocks I am looking at.

SPY - 6 Month Chart - Daily

The SPY has continued to trade in its current up channel. A break from this channel on the downside should not cause you to panic short. The more important level is the 88 level that the SPY has been battling for a good long while. That is the key level to watch out for. If SPY can consolidate in this area, then maybe we can see some more strength out of this market. The market has been amazingly resilient, and it is hard not to wonder when the correction or consolidation will occur.

QQQQ - 8 Month Chart - Daily

The Q's have been in a very tight trading range over the past 2 weeks and at some point we will have to break that range. A break does not necessitate that we are heading back down, just a change in the rate of ascent. The Q's are holding nicely above the 200 day MA which is definitely bullish for the general market.

XSD - 8 Month Chart - Daily

The semiconductor index. I finally put this chart up. YTD it has outperformed the Q's by nearly 26% which is really saying something. XSD's chart actually looks quite healthy with periods of consolidation preceding each leg higher so this index actually looks less 'exhausted' than the SPY or Q's even though XSD has been moving at such a high clip. XSD has led the Q's and it would be worth keeping two eyes on it for possible hints at the future direction of the general market.

Speculative Plays. Manage Risk!
NXG - 9 Month Chart - Daily

NXG looks very interesting. It retested the 1.50 resistance level aggressively, multiple times and broke through on solid volume. It hit the next level of resistance and it remains to be seen if it will look to consolidate here for a few days or weeks before moving again.

EMKR - 6 Month Chart - Daily

EMKR broke out of a symmetrical triangle last month and has now approached a significant resistance level at 1.40. There are plenty of bullish signs for EMKR to breakthrough the 1.40 level. Keep it on the radar.

CPE - 5 Month Chart - Daily

CPE has been trading within a very large range over the past month and has approached the 2.15 resistance line once again. There is also potential resistance at 2.45. Both resistance levels look pretty strong so a breakthrough could really be huge.

Entering any position, especially these super speculative plays requries attentive and clear cut risk management parameters. Don't get sloppy. The market and these microcaps can wipe out gains faster than you can say 'October 2007'. Risk Management is Priority #1!

DBA Update

DBA - 8 Month Chart - Daily

The volume and price action are encouraging. Major resistance may be coming where the October gap occurred. Also, the 200 Day MA coincides with the 26.75 potential resistance level. Stops should be tightened if DBA continues to march up to those levels as the possibility of a reversal or consolidation period increases.

Market Overview

Just as the market was consistently oversold coming down from Dow 14,000 to 6,600, the market can seem/remain overbought for longer than investors may be expecting. There are not very many solid signs from a technical standpoint that indicate investors should ratchet up their short positions. Fundamentally, the data has certainly been somewhat positive and there were plenty of earnings reports that surpassed analysts' expectations. Granted, the expectations were low, but the numbers were still 'good'.

Just another of the many reasons why Technical Analysis should be a part of an investment strategy as a primary, secondary, or tertiary source. There is a lot of value within the technical outlook.

Volume has been diminishing, but your portfolios' account values are not dependent on volume, just price action.

QQQQ - 7 Month Chart - Daily

34 will be a critical short and intermediate term level to hold if this market is to improbably hold these gains. The Q's have broken past the 200 day MA and a past top at the 34 level. There is zero sense in being short much of anything on a broad level with tech and commodities providing strength.

SPY - 6 Month Chart - Daily

87.5 is the key level for the SPY right now. The SPY has battled this line many times over the past few months and this area should provide the next base for wherever the market will go over the next few months.
The 20 day MA is at 85 (not shown), and if the SPY does slip, the 20 day could be the next key level to watch.