Dow: IT Neutral to Bearish and ST Bearish to Neutral. The Dow has minor support at 12,425, if that area doesn't hold Tuesday or Wednesday then look for 12,270 - 12,300. It is unlikely that the Dow can make a higher high from here, and it will probably make a lower high, which is why I designated its posture as IT Neutral to Bearish rather than just IT Neutral.
SPX: IT Neutral and ST Bearish to Neutral. The SPX has support at 1,370, if that area doesn't hold Tuesday or Wednesday then look for 1,350. The SPX could still reclaim its IT uptrend from here, but for now I am designating it IT Neutral on the lower low.
Naz: IT Bullish to Neutral and ST Bearish to Neutral. The Naz has support in the 2,425 - 2,429 zone, if that area doesn't hold Tuesday or Wednesday then look for 2,400. The Naz is the strongest of the three major indexes. I have designated it IT Bullish to Neutral instead of the technically correct IT Bullish (it hasn't made a lower high or lower low yet) because the other two indeces may drag the Naz down eventually. So I am more cautionary on the Naz than I might be otherwise.
The old saying in the market is "sell in May and go away," and we are definitely experiencing May selling. Summertime is usually less bullish than Fall and Winter in the stock market. However, I have seen many types of summer conditions over the years. I for one will continue to trade both bullish and bearish swings all summer. As for right now, I am looking for a possible bounce Tuesday or Wednesday. If the market does bounce, I will look at quick, 1-3 day type plays on Tech, Energy, and Commodity stocks, in that order. I really think the market is headed towards more consolidation this summer, so mentally I am starting to switch over to Short Swings, Day Swings, and 1-2 day Momentum Trades. Don't wring your hands about the Neutral conditions. The good news is that you can get in, get your money, and get to cash. It requires being on top of your entries a little more, and you probably won't be able to Momentum Trade late swings, but I don't mind at all being in and out of trades in 1-3 days.
Here is a chart of the Dow:
(click on image to enlarge)
Here is a chart of the SPX:
(click on image to enlarge)
Here is a chart of the Naz:
(click on image to enlarge)
Energy: WLL, NBR, BHI, NOV, SWN, ECA, PXP, RDC, HES, NBL, (SU, PXD, NE, CNQ, OXY)
Coal: (FDG, ANR, WLT), CNX, BTU, MEE
Steel: X, CLF, SID, RIO, (TS, GGB)
Aluminum: AA
Gold: NEM, AEM, ABX
Tech: LDK, QCOM, AAPL, CSIQ, PCLN, RIMM, ADBE, IBM, MBT, SINA, SOHU, VRSN, NIHD, ENER, GRMN
Manufacturing/Machinery: CMI, PH
Materials/Construction: FWLT, FLR, EMR
Railroads: NSC, UNP, BNI, (CSX)
Note: (SKF, SDS, DXD), BBY, AMZN, TIF, LTR, JEC, AET, QID
BEARISH SECTORS/GROUPS AND STOCKS:
Financials: TRV, STI, (MER, ICE, LM, GS, MS, NYX, LEH)
Transportation Services: (FDX, UPS)
Retail: (KSS, JWN)
Note: ERTS, AKAM, DIA, ZMH, MHP, UTX, CHK, GNK, NUE, CEG, VLO
It looks like the market is starting to get a bit oversold short-term. However, if the support areas I posted above don't hold Tuesday, we could be in for another day or two of dog-pile selling down to the next levels. I am going to be very, very selective about jumping on calls for an anticipated bounce on Tuesday or Wednesday. If it looks like the market is going to bounce tomorrow, I will only take a few positions, and take partial profits early in the trades.
(click on image to enlarge)
Here is a chart of the SPX:
(click on image to enlarge)
Here is a chart of the Naz:
(click on image to enlarge)
Here is my Weekly Watchlist. Make sure to check the option spreads before paper trading. Ideally, I want spreads of .10-.20 cents on options for stocks between 20-200 dollars.
BULLISH SECTORS/GROUPS AND STOCKS:Energy: WLL, NBR, BHI, NOV, SWN, ECA, PXP, RDC, HES, NBL, (SU, PXD, NE, CNQ, OXY)
Coal: (FDG, ANR, WLT), CNX, BTU, MEE
Steel: X, CLF, SID, RIO, (TS, GGB)
Aluminum: AA
Gold: NEM, AEM, ABX
Tech: LDK, QCOM, AAPL, CSIQ, PCLN, RIMM, ADBE, IBM, MBT, SINA, SOHU, VRSN, NIHD, ENER, GRMN
Manufacturing/Machinery: CMI, PH
Materials/Construction: FWLT, FLR, EMR
Railroads: NSC, UNP, BNI, (CSX)
Note: (SKF, SDS, DXD), BBY, AMZN, TIF, LTR, JEC, AET, QID
BEARISH SECTORS/GROUPS AND STOCKS:
Financials: TRV, STI, (MER, ICE, LM, GS, MS, NYX, LEH)
Transportation Services: (FDX, UPS)
Retail: (KSS, JWN)
Note: ERTS, AKAM, DIA, ZMH, MHP, UTX, CHK, GNK, NUE, CEG, VLO
It looks like the market is starting to get a bit oversold short-term. However, if the support areas I posted above don't hold Tuesday, we could be in for another day or two of dog-pile selling down to the next levels. I am going to be very, very selective about jumping on calls for an anticipated bounce on Tuesday or Wednesday. If it looks like the market is going to bounce tomorrow, I will only take a few positions, and take partial profits early in the trades.
Hey Dwight, do you give any wieght to the fact that the dow,spx,nas, and the rut all hit thier 200 day m.a. and bounced down or do you credit that to horizontal and or diagonal resistances? I just thought it odd that they all did almost the same exact thing off the 200 day.
ReplyDeleteThanx.
Steve: When Big Money takes money off the table on the south side of the 200dma, it is usually an indication that they not quite ready to commit to a full-fledged Bull Market. Two indexes managed to crack out above the 200dma: the Mid-Cap index is well above the 200dma (Energy and Commodity stocks) and the Nasdaq 100 is holding above the 200dma (Big Tech), which is why those are the only areas I would be more apt to play a bounce this week, if we get one.
ReplyDeleteThanx. Is the ticker for the mid cap index $djusm and how do i find what stocks are in it?
ReplyDeleteSteve: usually the ticker for the Mid-Cap index is $MID, but it can vary across different charting services.
ReplyDeleteDwight & Gang,
ReplyDeleteWell after sorting through the cooler over the weekend and having few revelations, I think I'm ready to try this again. Because of my lack of discipline, my account suffered last week. As I mentioned in VC Dwight, it started with GNK and went down hill from there. I was (am) letting some of my options "play out" with what has become too much risk. A lot of them are at or near support-support that was way too much risk. I was looking for the break in the trend to exit my positions and I perceived last week (early) to be a pull back and ended up being a major 500 point sell off. My lack of experience and "old habits" of emotions have brought me down to reality after a successful 6 week run. I'm a little gun shy this week folks, so I don't know how easy it will be to get back in the saddle. I'm pretty hard on myself as you may have been able to interpret by last weeks postings. When I let myself down I take time out to regroup and figure out where I went wrong. I will be here a lot this week hopefully talking and trading with everyone. I look forward to talking to all of you again. Please take the time to review your account and your own trading rules.
Gary
Dwight,
ReplyDeleteYou stated the Mid-Cap index is Energy and Commodity stocks. I thought the Mid-Cap index was just a measure of Mid-Cap stocks throughout the entire market, not just Energy and Commodities.
Joe
Gary:
ReplyDeleteMy week was bit off too! I don't think we (I) should get off the train totally, but we (I) plan to be a bit more selective and use smaller sizes and trades. I chased too many and had too many at one time.
To put it in a baseball perspective: Kind of like a batter in a slump-you don't quit batting. As you mentioned, I plan to regroup, look for the areas to improve, then get back in the game. Maybe not in full force as I left it but remembering you can't get a hit if you don't swing.
I'll be reviewing my rules and accounts more diligently this week.
To Dwight: Thanks for this family page and for not only coaching but demonstrating how to trade successfully.
Hope all had a great Memorial Day Weekend. Special thanks to the Veterans past and present.
Robert
CANI
Gary, I always enjoy your comments so much. I don't know if you intend to be funny, but you really do crack me up! "After sorting through the cooler..." Very funny.
ReplyDeleteRobert, I'm doing the same thing you are: trading smaller positions, and trading fewer positions at one time. That has REALLY been helping me to curb emotion. Even if ALL of my trades are not moving in my favor, my "portfolio heat" is so low that I am able to refrain from making emotional (read: bad) decisions.
A wise trader once said, "Trade small, trade safe."
Yes, amen.
These past few months, "position size" has been my mantra...
Joe: the MID is a broad index, but the question is, what has been driving it stronger than all the other indeces? Here is a link to the components list: http://finance.yahoo.com/q/cp?s=%5EMID Notice that a lot of the higher volume stocks are Energy, Basic Materials or Commodity related, and Tech. There are a number of higher volume Retail stocks as well, but the strongest price action across the board has been in Energy and Commodity stocks. You will notice a number of Steel stocks in the Commodity area, which has been the strongest sector besides Energy.
ReplyDeleteDwight,
ReplyDeleteCan you basically just go through the stocks you normally look at and realize this? Energy, commodities, and big tech have obviously been outperforming the market, and by going through and analying stocks it can be seen that these have the most impressive price action, and SHOULD be the best plays to make on a bounce.
Joe
Joe: yes, absolutely. I was only commenting on the MID index as backup or confirming type of information. I had already decide what sectors I wanted to play (bullish or bearish) and I didn't need the MID to tell me anything more. The various indexes simply mirror what we already know, that Financials and Consumer Discretionary are weak, and Tech, Energy, and Commodities are strong.
ReplyDeleteDwight and gang,
ReplyDeleteDoes BHP look like it formed an island top?
Bob: BHP probably is NOT forming an Island Top Reversal. The reason is that this stock is based out of Australia and is typically "gappy" like so many foreign based stocks that trade on U.S. exchanges.
ReplyDeleteDwight,
ReplyDeleteare you still doing vc today from 1-2MT? or was I imagining things while checking your site late last night?