Hanging Onto Critical Support by a Thread
Jack Steiman, www.SwingTradeOnline.com, on Hanging Onto Critical Support by a Thread
Overnight Sunday we learned that Moody's decided to join Standard & Poor's and confirm the potential downgrades of many Eurozone countries, which currently have AAA ratings. Now that we have two major rating agencies on board with potential downgrades, the market is more jittery, as an actual downgrade would hurt the financial system.
The news reversed the futures to red, though they weren't all that bad until Intel Corp (INTC) came along, roughly 30 minutes before market open, and warned about 2012. They lowered everything across the board with the stock initially getting hit for a 9% loss. This pulled the futures down dramatically, especially the tech-heavy Nasdaq.
The Dow and S&P 500 went along for the downhill ride creating a very nasty open. The gap down was not met with buyers nor many sellers as volume was quite light all day. The problem was simply that there were no willing buyers looking to step in with the plethora of bad news that hit in such a short period of time. This included warnings from Texas Instruments Inc. (TXN), Altera Corp. (ALTR) and DD late last week. They did step in before the Intel warning, but refused to do so Monday until late in the session when it became apparent to them that critical support at S&P 500 1225 would hold for the day. This gave the market a nice late boost, allowing it to finish with a poor day, but at least well off the lows, and a bit further away from that nasty 1225 S&P 500 level the bulls desperately need to defend. We closed at S&P 500 1236, after testing within a couple of points of the breakdown. Not a good day for the bulls, but they held where they had to in the face of some very bad, negative news overnight and in the morning. The battle is a clear victory for the bears, but the bulls haven't lost the war quite yet. Close, but still clinging to life.
Gap, and the 50-day exponential moving average, live on S&P 500 1225. You can, therefore, understand the critical nature of losing 1225. If the bulls were to lose such major support they would be forced to close shop and sell their longs as the bears would be in complete control. Akin to a short squeeze, only in reverse. A long squeeze that could really knock the market down hard and fast. 1195 would be on deck and then it starts to get real nasty. 1195 being the bottom of the gap up. In a strong market you should not lose the top of a gap up and that's why the 1225 level is important.
Add in the 50-day exponential moving average and you get the idea as to why the bulls need to set up shop at this level and not let it fail exactly the same way the bears perfectly defended 1265 or the trend line breakout area. The bulls tried this level many times only to see it get defended over and over even when it seemed the bears were giving in. We got a bit above 1265 a few times only to see it get sheared off each and every time. The bulls need to play the same game of defend your line in the sand.
If you remember, late last week, the market dealt with three major earnings warnings over a two-day period. E. I. du Pont de Nemours and Company (DD), Altera Corp. (ALTR), and Texas Instruments Inc. (TXN). All were pretty severe warnings, and all looked lost for the bulls. However, all three of them printed bullish reversal sticks, which is what you see in more bullish behaving markets. A lot more forgiveness.
In bear markets, nothing is forgiven. Monday it seemed as if the final straw hit the bulls. There was no coming back from the punch delivered by the Intel warning. No bullish reversals, although, at least, Intel finished off the lows. Nothing to get happy about at all, but off the lows is off the lows by two percent. We'll take it. Not great, but we'll take it. Was Intel the final punch? It's hard to say, but we didn't break down, so it looks as if the bears need to come up with a bit more bad news, and they may just get that tonic tomorrow.
That tonic would come from the Fed, whose next meeting is tomorrow. The world wants to know what Bernanke is going to do to keep the banks afloat and our country solvent. There are so many problems around the globe that the market seems to be looking to him for some help. Between Europe and our own debt woes you can feel the market staring his way, wondering what he's going to do next. More stimulus seems to be the perfect tonic, although big picture it's not. Now we'll get to see what he can deliver. The market is asking for more and wants to hear it from him that it's going to get whatever it needs. The wrong set of words, or absence of words, could be what the bears are begging for. We shall know all the answers tomorrow midday, so stay tuned for that. For now, the market hangs onto critical support by a thread. It needs good news sooner than later.
Jack Steiman is author of SwingTradeOnline, a journal of his market analysis and stock trading alerts. Jack has a 93.7% total return so far in 2011, with his strongest trading coming in the last two months (20 winners of 25 trades)!Sign up for a Free 21-Day Trial!
Mike Paulenoff, of www.MPTrader.com, on Commodities Pressured by Stronger US Dollar
If we run our eyes down the enclosed chart and order it in terms of downside vulnerability, then the Euro/USD, Silver and Gold is the way it lines up.
The Euro/USD looks like it is about to accelerate to the downside within its rounded "crown formation," while spot silver is on the verge of breaking near-term support on the way to test its intermediate-term support line, now at $27.35.
Spot gold is nearing a cluster of very important support levels between its 200 day EMA at $1623 and its up trendline from July 2009, which cuts across the price axis now at $1570.
In a nutshell, the stronger USD is putting downward pressure on industrial commodity prices.
Mike Paulenoff is author of MPTrader.com, a diary of his intraday chart analysis and trade alerts on both ETFs and key ETF component stocks. He had 162 winning trades out of 260 in 2010 (125% total return) -- and is 175 for 304 in 2011! Sign up for FREE 15-Day Trial!
Avi Gilburt, of www.ElliottWaveTrader.net, on Closing in on a Bottom and Powerful Reversal Rally
As we explained over the weekend to our subscribers and based upon our primary count, the rise on Friday was a b-wave, with the follow through to the downside today in a c-wave. While we can consider this downside action complete, we still did not hit our main target region and found support 8 points above that region.
The level at which we bottomed today exhibited a relationship between the first wave down and the 3rd wave down of 1:1.618. Furthermore, that same level represents a relationship of c=.764*of the larger yellow (b) wave on the 60 minute chart. Therefore, there is nice Fibonacci confluence, which maintained support for today. However, it does not necessarily mean that the decline is complete. Since we are still within a corrective wave pattern, these declines can occur as either 3 wave events or 5 wave events. Therefore, it is still entirely possible that this rise at the end of the day can be a large 4th wave, which would mean we can still get a 5th wave down tomorrow. But, we are probably within a day of the bottom if it was not hit today.
If you remember, the 10th was a minor turn date for us, and it can still provide a bottom as late as tomorrow. Therefore, if this pattern does follow through as we suspect, we should be very close to the start of a powerful rally that will take us up over 1300, potentially by the end of the month.
Avi Gilburt is author of ElliottWaveTrader.net, a subscription service featuring his intraday and nightly Elliott Wave analysis on the emini S&P 500 as well as markets such as oil, gold, silver and the U.S. dollar. Sign up for a Free 15-Day Trial!
Harry Boxer, of www.TheTechTrader.com, on Longs & Shorts to Watch
It was a very negative day on Wall Street on Monday. The ultra-shorts did well as did some of the shorts. We will go over some of the shorts, although we'll also take a look at a select group of longs.
Endo Pharmaceuticals Holdings Inc. (ENDP) on Monday had some positive drug-related news, and jumped 2.03 to 36.04, or 6%. It gapped out of a little flag and ran up across resistance into the resistance zone that's up next in the 37-37 1/4. Beyond that, this stock has the potential to get as high as 40, or better. The volume was extraordinary at 4.2 million shares traded. That's the biggest volume since June. So, keep an eye on this one.
Westport Innovations Inc. (WPRT) may be setting up as the declining topsline and the big consolidation may be finishing. It was up 93, or 3.2% on Monday. Volume increased slightly, but if it gets through the 29.67 level with increased volume, it may make an important move, and be put out for a swing trade.
Boxer Shorts
BMC Software Inc. (BMC) continues to look ugly, down another 84 cents to 33.86, or 2.4% on Monday. It's right on the support line, and if it's broken, look for a move down to the bottom of the channel.
Progressive Waste Solutions Ltd. (BIN), one of the new stocks that was put on the list recently, was off 41 cents, or 2%, although it took out the first line of support on Monday and is testing the second line of support. Any move below 19.34 could result in a rollover to the 16 - 17 area.
Waters Corp. (WAT), which had a 1.28 decline, is right on double support. If that cracks, this stock could have a nasty spill that rolls over hard into the mid-60's, if not lower.
Other stocks in our Charts for the Day are Magal Security Systems Ltd. (MAGS), Cheniere Energy, Inc. (LNG), Generac Holdings Inc. (GNRC), FuelCell Energy Inc. (FCEL), Affymax, Inc. (AFFY), Dex One Corporation (DEXO), Westport Innovations Inc. (WPRT), Anika Theraputics (ANIK).
Boxer Shorts included HollyFrontier Corporation (HFC), Abercrombie & Fitch Co. (ANF), CVR Energy, Inc. (CVI), Franklin Resources Inc. (BEN), ASM International NV (ASMI), Kraton Performance Polymers Inc. (KRA), Gen-Probe Inc. (GPRO).
See Harry's Complete Charts of the Day Video.
Harry Boxer is author of TheTechTrader.com, a real-time diary of his day and swing trade alerts, including live audio-video of Harry discussing his charts throughout the trading session. Sign up for a Free 15-Day Trial!
Sinisa Persich, www.TraderHr.com, on Free Stock Pick: KMX
Carmax (KMX) is consolidating its big run-up from late November from the 26 1/2 to 31 area. It is currently in a bullish flag formation after dipping slightly off resistance in the 31 1/2 area.
A break of 31 1/2 would confirm continuation of the upmove with a target in the 32 1/2 to 34 area. Stop loss would be 30.41.
Sinisa Persich is a technical analyst and author of TraderHR, our newest AdviceTrade service, featuring day and swing trade set-ups for yielding profits in both up and down markets. He has 82 winning swing trades out of 112 so far in 2011 (39% total return). Sign up for a Free 15-Day Trial!
