CHARTS you need to know

Today we broke out - as seen on SPY and QQQQ below (click chart to expand).
SPY


QQQQ


This market is wildly overbought, not to sound like a broken record. The market has made it quite clear though that it is in bull mode for the moment and not even 8.5% unemployment can stop it.

The market should not be able to run above 87/88 before a much, much needed pullback, perhaps that will be brought on by earnings season (even though expectations are in the loo). I think the green line is the next likely price target before retracing to 81 or even 77.


Notice in the next two graphs how the 2000-2003 bear market interacted with its 50 & 200 day MAs. Compare that to now. In 2000 the 50/200 MA crossover would have pretty much kept you out of the woods. And notice how many times price climbed all the way to its 200 day MA only to be rejected. In this bear market, we haven't even seen the light from the 200 day MA. More or less the light from any 50/200 MA crossover.
2000-2003 Bear Market

Current Bear Market


This doesn't mean we don't run up to SPX 1070 before seeing new lows. The timing of this, as always, is the hard part. I still have to think that if you are getting long now, the market cannot reward you - you missed the move - you are dumb money. Regardless, upon continued strength, here are a couple of examples of breakout stocks worth looking at, that have low risk entries:
MA

USD


With regards to GS. It did in fact close above its 200 day MA but as long as it is overbought and within its channel, I feel okay holding onto my puts. Plus, I bought OTM puts = small delta, so I'm not risking too much, to let out a little line on this one. The lack of strength in XLF gives me further confidence of a pullback. This will be a day-to-day decision.
GS


XLF


Final thing to watch:
VIX

VOLUME BY PRICE

The blue bars on the left (click on the SPY chart) represent the Volume By Price - which represents supply/demand - which represents support/resistance. Notice how perfectly the blue bar, 2nd from bottom, correlates to the most recent KEY LEVEL of resistance at 81.
SPY


Below are three good range bound stocks that can either be shorted on continued weakness or bought on strength.
USD


MA


AAPL

MA | AKS | GOOG | SKF

Three caught my eye today (MA, AKS, GOOG).
MA looks like it would be much more comfortable at 120


AKS short at 7.50


GOOG possible bounce before further breakdown



Though close, SKF has not yet trigged a short signal.

Follow Up

Due to some significant moves today, here is a follow up to last week's charts. Most notably, there is SPY, which closed below 80. Be aware of the possibility of a reversal, such as the one that took place in November (SPY went from 74 to 90 in one week).

Assuming that doesn't happen again, 75 will be the next target. There will be a bounce between now and 75, so don't chase.

Short term conditions are getting oversold (2 & 5 day RSI), so as usual, either cover, or wait for some strength before getting short. Shorting oversold stocks is a guaranteed way to lose money in the long run and usually in the short term as well.

SPY



X



TIE



MA



OIH



JPM



XLE

Free Range

The path of least resistance is SPY 80. If we get there, remember, the more times support is tested, the weaker it gets. Below are some additional setups that provide defined levels of support and resistance.
SPY



X



TIE



MA



OIH



LLL
not range bound, but rounding/topping off





Well, that tears it. I'm going skiing. Have a good weekend.

MA | RS | SHLD | GNK | RIG

XLF remains a sell, with an anticipated buy to cover signal coming later this week. The fact that it performed so poorly today while the market ate up 141 pts doesn't suggest to me the threat of an immediate reversal. I imagine that reversal will come only when the inevitably brainless announcement is released in the weeks ahead. That said, if/when it happens, it will be quick and violent. Just the mention of creating a bad bank, last Wednesday, moved XLF against me 12%, from which it just finally recovered. I suspect a further drift lower this week with the help of some less than positive economic releases.
Below are some additional ideas.

MA


RS


SHLD


GNK


RIG

Stocks above their 50 day MA

This chart shows the % of S&P 500 stocks above their 50 day MA.

A bounce is coming. It should have come today and it should come tomorrow - the problem is that this is hard to time under normal market conditions.

Note: it will be interesting to see if the short-sale ban actually gets lifted tomorrow and the effect it will have.
I would like it to get lifted because I think it will slightly help reign in option prices and bid/ask spreads.

Below are a few stocks to keep on the watchlist. You'll have to excuse the long-term charts but when so many securities are making global lows, it's necessary to zoom out to gain some relative perspective.


AAPL
AMZN
GOOG
JNJ
MA
RIMM
OXY
CHK

You serious, Clark?

QQQQ

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Congress really shit the bed today. It is a fact that many of these shaved congressional apes are too stupid to understand what they're even voting on though so you can't be too surprised. READ THIS

Please remember this come election time!

I can't imagine what the market would have done today had the no-short-sale rule not been in place.

Attached are some stocks to watch.

Everything continues to break down but don't be surprised for a huge move up should congress decide to do something else unexpected later this week. If you must trade, I recommend limiting your strategies to strangles, possibly straddles, and OTM Puts (only on a bounce, not after the market just puked up 8.79%).

Weekend Watchlist

Click on symbol to view chart.

X - broke long-term support; short entry would be on a retracement back to the underside of old support

POT - same as above.

OIH - same as above.

GNK - same as above.

BIDU - downtrend

XLY - downtrend; reaching resistance

CME - short if closes below horizontal support line

ICE - short if closes below horizontal support line


MA - establishing a downtrend

Watchist 09-05-08

Watchist 09-05-08

QQQQ
LM
GS
FDX
BIDU
RIMM
MA
CME
AAPL

QQQQ

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FSLR

I like FSLR on the long side here. Short-term. Use stops.

Shorts: FXP, ICE, NMX, MA, CSCO, PCX
Longs: GLD, FSLR, DBA, OXY, BP

Recap

Review of recent recommendations/predictions: (click on symbol for chart)
Green = profitable
Red = lost a small pittance thanks to using my trendline as your tight stop.

FLS - 07/10 - today set up a perfect entry - touched underside of trendline - still too early
USO - 07/08 - recommended calls at 110; currently at 117.
BIDU - 07/08 - recommended puts at 334; currently at 305.
GS - 06/26 - recommended puts 179-183; currently at 162.
CME - 06/26 - recommended puts at 406; currently 306. Probably the best call ever made by anyone at anytime....ever.
ICE - 06/26 - recommended puts at 122; currently at 88.
GLD - 06/26 - recommended calls at 91; currently 95.
MA - 06/26 - recommended puts at 275; currently at 257.
POT - 06/27 - recommended calls at 219; stopped out at 215.
AAPL - 06/26 - called for AAPL to go to 160; reversed at 164; currently 173. Still might be in a downward channel but either way my timing was stupid to make the call.
GOOG - 06/26 - recommended puts at 529; stopped out at 554. Still like puts. Still like 5hundo.
GNK - 06/26 - recommended puts at 64; stopped out at 65. Still like puts. Still like 50.

Not a bad couple of weeks - especially when you consider the magnitude of some of these winners.

Use caution ahead of earnings.
Bearish: VIX has not yet spiked and no capitulation low
Bullish: oversold going into earnings - if worst case scenario (should already be cooked in to share price given the recent decline) isn't realized, might see a rally.

OptionSpot

USO | BIDU | X

Once again, USO has retreated back to its trendline. If you're bullish on oil use this trendline as your tight stop, perhaps on a close, and if you're bearish on oil wait for a possible breach of the same trendline. Bottom line: USO is giving you a low-risk setup.

BIDU continues to make lower lows.



US Steel (X) - long-term chart worth noting.



Others: MA, ICE, GS

OptionSpot

Taking it

A lot of stocks rolled over and broke support today...and from sectors you might not expect (ag, steel, coal, energy, etc). Hopefully none of these moves ruined your weekend plans and you'll be able to find a way to profit from them. I will likely sit tomorrow out in protest of this obnoxiously choppy market but I am seeing a lot of nice setups for next week.


Steel and Coal stocks all took in on the chin while breaking through significant levels of support
--> X, AKS, ACI, BTU


Possible longs (as always use tight stops)
--> RIG (yes, this is the whole list)


Possible shorts (same)
--> ICE, GNK, AA, POT, MON, MOS, UNP (...finally UNP)


Watchlist (these may yet require a bounce or a pullback before taking action)
--> MA, VIX, CME, NMX


Have a great July 4th weekend! With this year's undisclosed destination, I will see if I can snap another award winning photograph - just like the one I took last year: Click HERE to see it.

If I ever get tired of raping and pillaging the options market maybe I can just fall back on my photography skillz.

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OptionSpot