Charts

The S&P hit 875 on Friday...where every possible resistance level was converging at. So as expected, we had a nice sell-off today. Market sentiment is still naturally split - it will take more than one down day to change anyone's mind. Almost everyone with a brain believes that this bear market is far from over; however, there is plenty of disagreement as to whether we see 700 or 1000 first, before heading lower. One thing that people can agree on, is that the market ran too far too fast in the last 30 trading days. At the moment, and given what is happening with earnings/guidance, I expect a more serious pullback. Now enjoy some charts.

SPY


QQQQ


VIX


SHORTS
TIE


OIH


WYNN


MMM


X


XOM


LONGS
TXN


USD



UUP

Decision Time

This graph suggests that it is about time for something interesting to happen...
SPY


AAPL


MMM


SHLD

Triangles

For a precursor on triangles, click here.


AKS - ascending triangle

CELG - symmetrical triangle

MMM - descending triangle










Trading for a Living
Valid breakouts occur during the first two thirds of a triangle. It is better not to trade breakouts from the last third of a triangle. If prices stagnate all the way into the apex, they are likely to remain flat. A triangle is like a fight between two tired boxers who keep leaning on each other. An early breakout shows that one of the fighters is stronger. If prices stay within a triangle all the way into the apex, that shows that both boxers are exhausted and no trend is likely to emerge.

SPY | FLR | MMM | RIMM

Friday has left us overbought; however, a breakout scenario still seems imminent.

If (SPY) can in fact overcome 140 (should earnings continue to meet lowered expectations) 144 may be much tougher. To the right is a five year chart that helps illustrate why - basically 144 represents a key breach in an otherwise seemingly healthy 5 year trend.




Here is a
chart showing
the number of
S&P stocks trading
above their 200 day
moving average.



Below are some more stocks worth watching.

Fluor (FLR) - nice reverse head & shoulders pattern.
If this looks like a bullish opportunity to you, consider debit spreads or calls with an expiration of JUL or OCT and an initial price target of 170 (all-time high set back on Nov 26, 2007).









3M (MMM) - broke out to the upside and closed above 200 day moving average. Potential to revisit 86.







Research in Motion (RIMM) - might be getting ready to have another go at resistance.







Keep in mind some of these are currently overbought so you might want to be patient.


Here is a short clip I recommend watching. It provides a little insight into Dan Sheridan's thought process and how he might have played Google (GOOG) before earnings.
http://www.cboe.com/tradtool/webcast.aspx?movieid=36693&channel=1252