For Whom the Dell Tolls

Yesterday was the perfect storm for the Bulls.....Today is the perfect storm for the Bears.....

DELL blew their earnings and put the whammy on Tech stocks. Oil jumped back up on Hurricane concerns. Personal Income dropped in July, which shouldn't be that big a surprise, but it caught the Bulls off guard a little after they got fat and happy on the Durable Orders and GDP reports of the past two days. The final nail on the morning was that the Prices component, the PCE Deflator, rose by the most in 17 years, sparking inflation fears (although the drop in Oil prices and Spending should attenuate those fears). The only number that really surprised the market was Personal Income, but after several days of solid economic reports, the Bulls were hoping for better numbers out of Personal Income/Personal Spending.

7:35 am MT: The Naz gapped way down below yesterday's open. That puts the Naz at risk for a Kicking Pattern. The Dow and the SPX are holding above the critical areas of support for the current upswing this morning. The Naz is trying to bounce a little after a big gap down. This is an important area for the Naz. If it fades below the opening lows around 2,383 then it could drag the market down today. If it holds up, the Dow and SPX could rally into the green a bit, and perhaps finish the week on a bullish note.....

GDP Gives the Market a Boost

GDP readings came in higher than expected and Weekly Jobless Claims came in lower than expected, which has pre-market Futures up slightly. Bulls are enjoying the two days of stronger than expected economic reports, but the readings are coming at the cost of Oil. The Hurricane and the stronger than expected economy are boosting Oil prices towards the $120's again. Gas prices were just starting to alleviate at the pump and that relief may be short-lived if Oil takes off again.

The market is set for a bullish open, and some carry-through from yesterday. As is the norm this year, I want to take advantage of it, but also be smart and not take big positions yet. I also want to be ready to lock in some of my profits earlier rather than later. The tone is positive early today, and as long as Oil prices don't run away from us, it could finish that way as well.

Market Wrap: GDP brought out the Bulls today and the major indexes carried through on the bounce from yesterday. A drop in oil prices added to the buying strength. Financials, Cyclicals, Retail, Leisure, and Transportation (including Railroads) were the biggest movers today.

Here are some interesting Bullish Movers:

Retail: TIF, SHLD, RL, BBY (I like those four the best), and also JCP, KSS, AMZN

Financials: PRU, NTRS (I like those two the best), and also HIG, JPM, MS, STI, MCO

Transportation: FDX (The Railroads are bullish too, but BNI, UNP, and NSC are probably just about done on the short term upswing)

Note: DELL missed earnings and is down sharply after-hours. Oil futures are trading back up a dollar or so. The net result may be a gap down on the Naz and maybe the overall market in the morning. If the market does gap down a bit in the morning, it will be important for the Naz to hold the 2,390 area at worst. It will also be important for the SPX to hold 1,290 and at worst 1,285, and for the Dow to hold 11,600 – 11,630 and at worst 11,550. If the indexes go much below those battle zones there may be too much chart destruction and the current upswing would then probably be over. It is important to see how much the market drops early in the day (if it does), and if the market holds up mid-day. If the market does hold up and rally, then the current upswing could finish out on Tuesday or Wednesday after the Labor Day Weekend. I’m not interested in holding very much over the weekend unless we see a strong close on the markets tomorrow.

Market Bounces Up on Durable Orders

Pre-market futures are down a little with oil climbing to short term resistance at $117.50. The Oil Inventory Report comes out 60m after the open. Also, Durable Orders is due out 60m before the open, which will probably also affect the futures and the market open.

If the Durable Orders number comes in stronger than expected it will probably boost everything, including oil. If it comes in worse than expected, it will probably drop the market, but Oil may still stay up a little on the potential hurricane disruption in the Gulf of Mexico. If the Storm/Hurricane doesn't materialize then Energy traders will go looking for the next catalyst. A breakout above $117.50 would probably take Oil back towards $122.50 and a drop below $116 will probably take prices back down towards $112 - $112.50.

7:15 am MT: Durable Orders came in stronger than expected, which is giving the futures a little bump up. It looks like much of the strength in Durable Orders was due to exports, which traders are expecting to attenuate in the coming months because of the economic slowing in Europe and Asia. So the early morning bump may be short-lived. It is giving Oil a boost as well, so I will look to sell my Energy calls right out of the gate.

7:45 am MT: I sold the DVN calls for a 2.53 profit or 35% gain. I sold the EOG calls for a 1.50 profit or 22% gain. I sold half the SWN calls for a 1.00 profit or 36% gain so far. I also stopped out of the Q’s calls for a small .02 cent gain, so basically breakeven.

8:15 am MT: The market is gyrating around as bullish Speculators buy the past (Durable Orders), and bearish Speculators sell the future (slowing economies in Europe and Asia and a jump in the price of Oil). The net result is somewhat of a sloppy, light volume morning, which follows sloppy, light volume trading the past several days.

I picked up some more SWN calls that I will look to sell right into the Oil Inventory Report.

8:35 am MT: I sold the rest of the SWN calls. The total trade was a 1.20 profit or 43% gain. I also nibbled on ADSK calls. 11:00 am MT: I bought and sold ADSK calls in the past two hours. I made 10% on the calls. I also nibbled on BTU calls. In addition I’m looking with interest at calls on JOYG, RIMM, FLR, NIHD, and ADBE. There are some interesting movers today, but nothing really sector-wide. The Energy stock play appears to be over, and Retail is not doing anything.

I made $2,862 on all the closed positions today.

4:00 pm MT: Market Wrap: The SPX bounced today on the positive Durable Orders report and ran up to the short term downtrend line resistance at 1,285. The Dow pushed through 11,500 and did basically the same thing as the SPX. The Naz bounced to the top end of its consolidation channel. All three indexes bounced today, which puts me in chop and slop mode with my trading. I won’t do anything new on the DIA, SPY, or Q’s that isn’t a short swing using the 30m/60m charts. If I see a big sector move like the Energy stocks yesterday, then I may go in with medium size, but even those will be quicker trades just like the Energy calls were. With the tail end of August and September coming up, I’m guessing that we won’t see strong intermediate term trending in the market. However, there could still be some nice sector swings here and there, just like the Energy calls were yesterday and today.

Tomorrow we will get GDP and Initial Jobless Claims. I doubt either one will drive the market out of the channel, or out of choppy mode, but they will impact things a bit in the morning.

Here are some charts on ADSK, BTU, and JOYG, which I like for (paper trading) calls right now. As always, keep any swing trades a little quicker and shorter, but these three, along with the others I mentioned above, might have 1-2 days left in the current swing, perhaps more.

Here is a chart of ADSK showing the confirmed bounce off the Earnings Gap. The first target is 38.50 - 39.00. A full swing could take it to 39.75 - 40.00. I doubt we will get a full swing under our current market conditions. A stop would be in the 35.50 - 35.75 area.
(click on image to enlarge)


Here is a chart of JOYG showing a Rising Three Methods variation. The first target is 72.50 - 73.00. It's possible that JOYG could go as far as 74.00 on the current move, but I would be scaling out at 72.50. A close stop would be 69.90 and a wider stop would be in the 68's. Keep in mind that JOYG has earnings coming up, so this is a 1-2 day play at most.
(click on image to enlarge)


Here is a chart of BTU showing a hybrid of a Tasuki Gap and Upside Gap Three Methods and the formation of a potential Reverse Head and Shoulders. The first target is 68.00 - 69.00, and a full swing would be 71.00. As with the others, I'm not looking for a full swing, but I'm open minded.....
(click on image to enlarge)


Here is the 15m chart of BTU showing an Ascending Triangle today, which bodes well for a continuation tomorrow.
(click on image to enlarge)

Now remember, 2008 has been 2008, so bullish probability hasn't played out as high as it did in 2006 - 2007. Just because I've showed you these nice looking call setups doesn't mean they will all work. But as a speculator, I'm speculating that they could play out to the upside tomorrow, or in the next couple of trading days. We shall see.....

Market Pauses Before Next Move

Oil is down slightly on a wiggle up in the Dollar and the market appears to be pausing briefly after the strong reversal yesterday. Traders may be taking a quick breath before the next move. The Economic calendar starts heating up a bit tomorrow through Friday, and traders may be eyeing Durable Orders, Oil Inventories, Weekly Jobless Claims, GDP, and Personal Spending to get a feel for economic conditions. I don't expect anything in the reports to be a huge surprise, so I'm playing the stock market to finish out the current technical move down.

The only thing that would have me cautious on my puts today would be a big drop in oil or a move above the 11,500 area on the Dow. Otherwise, I will continue to nibble away on puts. If momentum picks up to the downside then I will add to the puts, but I'm keenly aware of the possibility of getting a little choppy. So I will probably only trade a few positions, and I will probably only hold small positions overnight.

8:00 am MT: I started nibbling on calls for DVN, SWN, and EOG. Oil is bouncing strongly this morning after hitting $112.50, and it’s bouncing despite a rising Dollar. The stock market got a brief boost from the drop in oil early in the day, but if oil keeps rallying it will probably put pressure on stocks. The price action in stocks and oil is a little wild on the intra-day charts, and a little choppy on the daily charts, so I’m not taking very many positions, and I’m not taking very big positions.

9:00 am MT: I’ve been kicking the tires a bit looking for catalysts behind the oil move and there really aren’t any. That means that this is probably a technical move and oil may be basing a bit along the $112 - $112.50 area. I think stock traders are starting to look at oil as holding this region for now, which is why the market is chopping a bit and why it dropped yesterday. But there is not much conviction from traders, which also means that even if they think $112.50 holds for now, the signals are muddy, so volume continues to be extremely light. There appears to be a good degree of uncertainty over what the market and oil are going to do next, so I’m seeing some sloshing and banging on the intra-day charts and a little choppiness on the daily charts.

1:15 pm MT: I added a little to the SPY, DIA, and Q’s puts. If the market drops down tomorrow morning, I will sell the puts. I’m targeting 113 on the DIA, but I may hold some of the position for a possible drop to 112. The SPY has downside potential to 125, but it may battle with 126.50 for a bit. I don’t want the SPX going above 1,280 and the Dow going above 11,500, otherwise I will stop out of the puts. The Energy calls look fine. Any bump up tomorrow and I will start scaling out.

3:00 pm MT: Market Wrap: Oil seemed to put the market in a pause today. Oil did test $112.50 as I speculated it would from Saturday’s post, but the test was short-lived, and prices bounced back strongly intra-day and ran up into the $116’s. Except for the Thursday – Friday anomaly, oil has stayed range-bound for two weeks between the $112 - $112.50 support area and the $117.50 resistance area. We’ll see if the Oil Inventory Report tomorrow morning causes oil to move outside the range and start trending again. If Energy stocks bump up out of the gate tomorrow I will probably sell most of the Energy calls before the report, which comes out 60m after the open. The Naz dropped right into the support zone that I pegged on the chart yesterday, and the SPX is battling with the short term support zone between 1,261 and 1,263. The Dow is dangling in no-man’s land above the 11,300 short term support. If the Dow drops through 11,300 it’s probably headed to the 11,200 area. We’ll see how the battle in the markets goes tomorrow.....

Note: I got caught up on answering comments and questions from yesterday and today.

Market Chops Down and the Naz Goes Kicking

Traders continue to fixate on Oil and Financials as the pre-market futures reflect a soft open. Monday morning is shaping up to be a pause before the next move. There isn't any really big news for traders to digest, although Oil is up a little this morning, perhaps on a pause of its own after the huge one-day drop on Friday. Also, in Financial news, the Columbian Bank and Trust Co. of Topeka, Kansas collapsed amid bad real-estate loans.

So there you have it, the same story part five million and three, Oil and Financials, Financials and Oil, and some more Oil and Financials.

9:30 am MT: The market is staging a significant reversal from Friday, especially on the Naz, which is almost in a Kicking Pattern today. Very ugly price action for the Bulls. I’m looking at picking up puts on the major indexes. It looks like the first resistance of the Wedge line is holding. Oil isn’t helping out with any kind of serious selling, so the market just can’t catch a tailwind.

I stopped out of the AMZN calls for a total loss of $459. Today is starting out much like last Monday for me, the market is going against my grain.

9:50 am MT: I picked up some puts on DIA, SPY, and especially the Q’s. About five minutes later the market took another leg down. I think you can stick a fork in the Friday bounce, it’s unlikely the market comes back today.

10:10 am MT: The drop was so fast and sharp that I sold most of the three puts. I made .25 cents or 5% on SPY. I made .40 cents or 10% on DIA. And I made .13 cents or 5% on QQQQ. So I picked up a quick $247 and got out. I will look to buy back some of the puts on any bounce in the next hour or so.

11:00 am MT: I picked the Q's puts back up for a cheaper price. I will probably hold this second set of Q's puts overnight and see if the market follows through to the downside tomorrow.

4:00 pm MT: Market Wrap: The market chopped down the bullish bounce from Friday and then some. Volume was extremely light, but price action to the downside was sharp and deep. Market Bulls look like they are not ready to do much of anything, and they may be getting queezy. There wasn't a whole lot of conviction on the Dow and SPX during the Wedge/IT uptrend for the past month anyway, but now the Bulls are caving in a bit. If the market snaps down another day or two, then it could be headed for a test of the July lows. Oil didn't do much, but the problem was that it didn't help either. I speculated that a drop to $112 - $112.50 would bump up the market today. But Oil had a one-day consolidation and was a non-factor today. That left the Bulls to focus on all the things they didn't like, and evidently they don't like alot.....which isn't all that surprising considering our current macro-economic conditions.

Here is a chart of the Dow showing how the index turned away from the lower side of the Wedge (turquoise line) and looks headed towards support around 11,200 (orange lines)
(click on image to enlarge)

Here is a chart of the Naz showing how the index turned away from the 200dma/10dma cluster and threw a Bearish Kicking Pattern variation today. The index is likely headed to the 50dma in the 2,340 area:
(click on image to enlarge)

I am still holding the Q's puts and I will look for SPY and DIA puts again tomorrow. If the Dow bounces up much beyond 11,500 then I'm stopping the puts because a move above that level would be too many headfakes in just a few days. If that happens then I will switch to Chop and Slop mode and play swings on the 30m to 60m charts.

Personal Note: I will be posting fairly lightly this week and into Labor Day since it is my last week to get a lot of necessary things done before September is upon me. I will get the posts open, and I will do summaries, but I need to prioritize some important things this week so that I am ready for next month. Today was more than I was intending to post, but it was a key reversal day, so I wanted to get the info out to all of you.

Watchlist Saturday

Market Posture:

Dow: IT (intermediate term) Neutral to Bullish and ST (short term) Bullish. The Dow bounced back to test the bottom side of the Wedge. A drop in Oil to $112 - $112.50 probably pushes the Dow to the 11,700 - 11,750 area. A drop in Oil to $110 probably pushes the Dow to the 11,850 - 11,875 area. And a drop in Oil to $105 probably pushes the Dow to the 12,000 area. Volume wasn't very big on the bounce Friday, but the price action was still fairly strong. Short term support is 11,525 - 11,550, and then 11,300.

Here is a chart of the Dow:
(click on image to enlarge)

SPX: IT Neutral to Bullish and ST Bullish. The SPX bounced back to test the bottom side of the Wedge. A drop in Oil to $112 - $112.50 probably pushes the SPX to the 1,300 area. A drop in Oil to $110 probably pushes the SPX to the 1,305 - 1,310 area. And a drop in Oil to $105 probably pushes the SPX to the 1,320 area. Short term support is the 1,285 area, and then the 1,265 area.

Here is a chart of the SPX:
(click on image to enlarge)

Naz: IT Bullish and ST Bullish. The Naz bounced back to test the 200dma (and 10dma). A drop in Oil to $112 - $112.50 probably pushes the Naz to the 2,435 area. A drop in Oil to $110 probably pushes the Naz to the 2,440 - 2,443 area. And a drop in Oil to $105 probably pushes the Naz to the 2,473 area, and possibly as high as 2,483. Short term support is 2,390 - 2,400, and then 2,360.

Here is a chart of the Naz:
(click on image to enlarge)

Oil: IT Bearish to slightly Neutral and ST Bearish. Oil really reversed down hard after a one-day breakout that took it right to resistance in the $122.50 area. Bullish Speculators in oil still appear to be curled over in the dry heaves and pumping down the Maalox. The reversal on Friday was dramatic enough to make me speculate that oil has a high probability of testing the $112 - $112.50 area and a decent probability of dropping to new lows at $110. If Oil drops through $110 then there is a big vacuum all the way down to $105. The Dow jumped up to test the bottom side of theWedge as Oil dropped down to test the top side of the downtrending Channel. Oil has reacquired its strong correlation to the market.

Here is a chart of Oil:
(click on image to enlarge)

Here are a few interesting Bullish looking stocks or Bullish Movers:

NIHD, JCP, KSS, TGT, BBY, ENER, QQQQ, IWM, AMZN, MCD, BNI, ADSK, CL, ADBE, NOC, EL, (STP, SPWR, AET, SHLD, PRU, STI, KO, WLP, RL)

If Oil does a double head-fake and pops back up, which I think is unlikely, then I will build a bearish watchlist. If Oil sinks down into the $112 - $112.50 area on Monday or Tuesday, then the market should continue to move up for another day or two in the current bounce.

Personal Note: I will be posting fairly lightly this week and into Labor Day since it is my last week to get a lot of necessary things done before September is upon me. I will get the posts open, and I will do summaries, but I need to prioritize some important things this week so that I am ready for next month.

Market Bounces Back

Financials and Oil continue to monopolize the focus of the market. However, today the Financials news is more upbeat as news bites come in about possible acquisitions and private investments. Oil is also down a little bit, which is giving the market a small tailwind early in the day. There isn't anything breathtaking about any of the news. It may be that traders are simply looking for any positive report to support their desire to be bullish this morning as a carryover from yesterday's resilience.

Look for a test of the bottom side of the Wedge from the SPX and Dow this morning, that will probably be the first battle zone. Then it will be a battle to see if the Bulls can push the market into a strong closing today. I'm not looking for a huge bullish day today and I would be cautious of the diagonal resistance line on the Wedges. Nevertheless, traders are making a bit of a bullish push after Thursday's resilience, which is interesting given the pop in oil prices yesterday.

Market Wrap: the major indexes confirmed bounces today and the Dow and the SPX came back to test the bottom side of the Wedge. Oil sold off in a fairly dramatic one-day reversal considering it broke out just yesterday. So if oil keeps on dropping back in to the $112 - $112.50 area on Monday then the Market will probably keep moving up. A drop in oil to $110 would probably give the market some tailwind to move near the previous swing high, and a drop to the next support at $105 would probably get the market back to the previous swing high, and maybe even exceed it for a full swing.

Market Holds Up Even on Rising Oil

Pre-market futures are down on more bad news in Financials. A Citigroup analyst lowered earnings estimates on Brokers LEH, GS, and MS. Financials could take another leg down in their current swings today.

Weekly Jobless Claims came in slightly better than expected, which briefly boosted the futures until traders started focusing on Financials again. The Jobless Claims number is above 400k, which is bad, but down from last week and below the consensus, which is good.

Financials and Oil will take front and center again today, and the market will battle with yesterday's range. If the Dow breaks through yesterday's floor, then look for another 80 - 100 point drop down into the 11,200 - 11,220 area. We could have a mixed day if oil drops towards $110, which would offset the bearishness in Financials. But the drop in Weekly Jobless Claims just might get oil running up, which would put the double-whammy on stocks today.

7:25 am MT: I just checked the current price of oil and it's up and climbing towards $120.....So the resistance area that I posted yesterday at $117.50 is breached and the market is probably headed south today on a double-whammy.

7:00 pm MT: Quick Market Wrap: The market stuck it out today. Considering oil broke resistance and ran to the $122.50 area as I warned of on yesterday's post, the market hung in there pretty good. Ok.....so buying in Energy and Commodity stocks because Oil is going up and the Dollar is dropping is not my favorite recipe for a bullish day, but the market is holding up fairly well.

Obviously Energy and Commodity stocks are moving up like POT, COP, HES, NOV, ACI, and BTU to name a few, but other sectors looked decent as well. Tech stocks like ADBE and RIMM were flashing some decent signals (and of course STP and that group - which is getting overbought short term). Machinery/Agriculture stocks like JOYG were strong. Railroads like BNI were bouncing. Healthcare like AET bounced. And even some Retail stocks like AMZN, TGT, and KSS are bouncing a little.

Bearish sectors are the Casinos and Financials, and a number of stocks continued to sell in those areas today.

I got caught up on answering comments/questions for the past two days. I will try to get caught up sending out the latest referral files by tomorrow.

One last note: I am taking Thursday and Friday off. I will still be doing VC, and I will still get the post opened pre-market as usual. But the rest of the postings will be brief until the weekend.

Market Wiggles Up on a Mixed Day

Pre-market futures are up, especially tech stocks which are getting a boost from the HPQ earnings just as I speculated yesterday. However, oil is up over $115 and and several Financial stocks had their earnings estimates cut. Interestingly, Goldman Sachs is at the center of both news bites as they are the ones cutting estimates on other Financial companies, and they are reiterating their $149 per barrel oil forecast.

We could have a mixed morning with some Tech stocks moving up, some Financial stocks moving down a bit, and some oil stocks moving up. I will probably sell most of my puts today, and I will probably sell my DVN calls just ahead of the Oil Inventory report due out 60m after the open.

I speculate that we could have a tug of war today between various sectors that could lead to a narrower range day than we have seen the past two days. We shall see.....

7:25 am MT: The Naz futures have backed off quite a ways into an area that I thought they were more likely to open this morning about +9 to +10. I thought +20 earlier in the morning was too much for HPQ’s earnings. So the mixed morning looks like it will play out. I will be busy scaling out of positions.

7:35 am MT: I sold part of the DVN calls into the nice gap up this morning.

7:45 am MT: I took profits on LVS. I also sold some of every other put.

8:30 am MT: I am out of all the puts and the rest of the DVN calls. Here are the final tallies: PRU was a .50 cent profit or 14% gain. DVN was a 2.56 profit or 46% gain. DIA was a .17 cent profit or 5% gain. SPY was a $15.00 loss, so basically breakeven. HIG was a .50 cent profit or 9% gain. LVS was a .30 cent profit or 4.5% gain on the second trade. STI was a 2.25 profit, or 41% gain. And MS was a 1.59 profit or 59% gain.

On Monday I lost $486 on my (paper) trades. Tuesday and Wednesday I made $5,753 on my (paper) trades. So my three-day total for the week is a gain of $5,267. There haven’t been a lot of times this year to take bigger swings at sectors and stocks. And when I can take big bites, I still have to keep it to short swings. But Tuesday was about an A to A- type of day, which allowed me to go bigger and wider, and pick up some quick, solid money. Now the market is back to B to B+ type of trading, which means I'm nibbling and pecking.

1:00 pm MT: Today turned out exactly as I thought it would. I posted this morning pre-market that I thought we would get a tug of war with a narrower closing range, and that's exactly what happened. The market had a mixed, tighter day of back and forth price action. Selling the puts was exactly the correct thing to do. The downswings may resume (in fact they did a little for LVS and MS) tomorrow or Friday, but I can always hop back on that bus when it looks good.

Energy stocks and some Commodity stocks were the bullish sector movers today, along with Electronics and some Tech. On the bearish side of the market Leisure, Retail, Transports, and some Financials continued to look sloppy or fade. Oil is still dropping in its downtrending channel, so the bump up in Energy stocks is an interesting divergence from the actual price of oil.

Here are some interesting bullish movers on the day:

Tech/Electronics: STP, ENER, LDK, HPQ, RIMM, SPWR

Energy: DVN, XTO, CNQ, OXY, SWN, HES, NBL, EOG, SII

Chemicals: MON, TRA, AGU

Steel: AKS

Biotechs/Healthcare: MYGN, MDT

Here are some interesting bearish movers on the day, although the market will need to reacquire its downswing for me to get rolling with puts again:

Leisure: WYNN, LVS, HOT

Cyclicals: TXT

Financials: MS

Transports: UPS

1:50 pm MT: I nibbled on some STP calls just before the close. I ended up buying September because the 40’s had .10 - .20 cent spreads and everything else was too wide.

3:00 pm MT: Market Wrap: Oil is still in its downtrending channel, although it’s starting to make a little more noise. Traders refuse to close oil below $112.50, and oil stocks are beginning to take off a little as traders speculate on a possible short term bottom on the charts. The stock market pushed up a little today on the buying in Tech and Electronics stocks from various positive earnings in those sectors, and also buying in Energy and Commodity stocks. The bump up today wasn’t very strong, and it wasn’t very broad. So the market is sitting in a one-day mixed consolidation gyration. The Dow will need to clear 11,500 on the upside for me to go a little more bullish, and it will need to clear 11,300 on the downside for me to go a little more bearish. I’m speculating that we will see little mini-moves in sectors the next couple of days, and therefore smaller moves in the market as traders watch the price of oil. However, that could all change if oil breaks its downtrend channel, then oil prices will probably rally to the low $120’s, and the market will probably drop through short term support levels. Now if oil goes the other way and sloughs off, it may drop to $110, then the Dow and SPX may rally back up to the bottom of the Wedge, and perhaps even poke into the Wedge a little.

Note: you should start using the October Light Sweet Crude Futures now. Another tip: flip over to a line chart if you want to see past data that doesn't show up on a candlestick chart. I'm showing two visuals on oil for you. One is the candlestick chart to show you the downtrending channel and the clear short term horizontal and intermediate term diagonal resistances converging at $117.50. If oil goes above that resistance, it's probably headed up for several days to at least $120, and probably $122.50. The second chart is a line chart to show you how oil has NOT closed above the 10dma for over a month. So a move above the 10dma resistance, the short term horizontal resistance, and the intermediate term diagonal resistance will probably get the shorts screaming and the bulls punching for a sharp jab to $122.50. You can also clearly see the $110 support I keep yapping about as the low end of the $110 - $115 support zone I pegged. If oil drops below $112, then it's probably heading towards $110 pretty quick. A drop below $110 and we could see oil drop to the convergence of the horizontal and diagonal supports at $105. Got all that?.....Good!

Here is the candlestick chart of Near Month Oil Futures:
(click on image to enlarge)


Here is the line chart of Near Month Oil Futures:
(click on image to enlarge)

One last note: I am taking Thursday and Friday off. I will still be doing VC, and I will still get the post opened pre-market as usual. But the rest of the postings will be brief until the weekend.

Dow and SPX Break Below the Wedge

Pre-market futures are down after more grumblings in the Financial sector about tough conditions in the mortgage market and continued writedowns. The news is not new, but it's convenient for a market that is having a technical rollover.

HD posted less than catastrophic earnings results, but as with the Financials news, traders are focused on the glass being half full because it fits the model for profit taking after a big run-up in the market the past several weeks.

There are more earnings and economic reports set to be reported this morning, but unless Housing Starts and Building Permits has a big "wow" factor, the futures will probably stay down. Oil is also a factor, but it's probably going to take a sharp drop through $110 to get traders attention away from the technical rollover. It will be noteworthy to see if the market can hold important support levels throughout the day today.

6:40 am MT: Just hitting the wires: PPI came in much higher than expected (although traders are looking forward to lower inflation for August because of the drop in oil prices). More importantly (because it dovetails with the Financial sector grumblings this morning), Building Permits missed consensus, although Housing Starts were pretty much in line with estimates. TGT beat earnings, but once again, traders are more focused on the Financial sector and the Housing Market this morning, probably because it fits the focus on the glass being half full and the technical rollover. Futures took another dip on the news.

8:00 am MT: I sold part of the MS and STI puts for a solid gain on those trades so far.

8:15 am MT: I nibbled some puts on LVS, SPY, DIA, and HIG. I’m going to stay focused on the six puts that I have for now, I may add another one later in the day. I’ll also add to the puts I bought if we get a nice wiggle back intra-day.

8:25 am MT: I sold a little more of the MS puts. If the market and stocks bounce back intra-day, then I will add some of the puts back.

8:30 am MT: I sold the LVS puts because I got one of those insane swings in about 15m. The cult traders are pushing the Casinos like the building is on fire…..I pulled in a 1.00 profit, or 15% gain in just a few minutes. I will look to get back in the stock in the next 30m or so.

8:45 am MT: I nibbled back some LVS and MS puts.

9:00 am MT: The market looks like it will rally a bit intra-day right here. I will look to add to the LVS and STI puts, and possibly the DIA and SPY puts. The key questions for the market right now are: Will the beginnings of the technical breakdown from yesterday, and the gap down today, lead to a clear breakdown of the Wedge on the Dow and SPX? Or will the market repair itself today and tomorrow, and reacquire the IT uptrend? I’m positioned for a technical breakdown, because that’s what the charts are showing. However, like I have been doing all year, I will be scaling out of some of the profits early, and I will still be playing for short swings of 1-3 days.

9:25 am MT: I sold a little more of the MS and STI puts.

9:50 am MT: I sold a little more of the MS and STI puts.

10:00 am MT: Energy and Commodity stocks are working counter to the market as usual. Here is a list of the bullish movers in various sectors that I like (remember that for many of these stocks the IT trend is still bearish, but some are changing trend a bit, like DVN):

Chemicals: AGU, POT, CF, TRA

Coal: BTU, ACI

Gold: AEM

Energy: HES, DVN

I started nibbling on DVN calls. I may pick up calls on 1-2 Chemical stocks and add to the DVN calls before the close today. I’ll keep an eye on the Coals and Gold, but I don’t like them as much as the other stuff yet.

1:00 pm MT: I took a little profit on the MS, HIG, and STI puts. I am looking to take some profits on the LVS, DIA and SPY puts as well.

1:30 pm MT: I nibbled on some PRU puts. I’m loaded about as far as I want to go with my put positions for now. The market has broken support, but I’m keeping a sharp memory of how choppy much of this year has been, so as usual, I’m locking profits early as I go along.

1:59 pm MT: I sold a little more HIG just before the close. I’m sitting on DIA, SPY, MS, STI, HIG, PRU, and LVS puts. I also have a nice call position on DVN. I have a very small call position on AMZN that I’m sitting with for the next bounce because the most I can lose on it is $600, and I would really rather add to the position on a bounce and then sell it. There are still some Retail, Healthcare/Biotech and other sectors that intrigue me for calls if the market bounces. So I’ve got that idea dancing around in my head while I watch the puts and the mini-rotation to Energy and Commodity stocks. I will look to sell most of the puts into any type of early drop tomorrow morning, if the market gaps or drops out of the gate. It still looks like some of the puts have quite a bit of room to drop, and normally I would give it more room over the next 2-3 days, but 2008 is 2008, so I’ll lock earlier on most of the positions.

Volume wasn't very heavy on the drop in the market today, which is all the more reason I probably won't be hanging around with the puts beyond tomorrow.

2:30 pm MT: Market Wrap: Financials, Inflation, and Housing Oh My! Financials, Inflation, and Housing Oh My! Actually it was nothing new…..but the technical move on the indexes was due, so the news became the catalyst for what would have probably happened anyway. The only thing the news did was make it happen faster and sharper. The Dow and SPX clearly broke their Wedges, which I have been warning about since last week. Because I was anticipating the possibility of a Wedge break all the time I was playing calls last week, I was able to not only lock and walk profitably on the calls, but I was all over the puts yesterday and today. That’s the speculator’s game. I’m always looking for the next move while I play the current move.

After the Wedge break, the SPX immediately dropped to the next short term support at 1,262 – 1,263, and is clinging to the 30dma as well. The Dow broke down and is dangling out in no-man’s land, with about 70 - 100 points to the next support area around 11,250 – 11,280. Here’s how I’m playing this tomorrow: If the market drops right out of the gate then I’m selling most of the puts at 11,300, because we haven’t had three long drops in a row without a wiggle since March. We saw something like that in the middle of June, but traders covered the third day half-way through the day. So a drop out of the gate and I’m selling my puts. If we wiggle up out of the gate, then the Dow may test 11,400. If the first move is a test with a rollover, then I may hold more of the puts longer into the end of the day and see if the Dow closes down in the 11,250 – 11,280 area.

I wrote yesterday that a drop below 2,400 on the Naz would probably lead to a move down to 2,365 – 2,385. The Naz broke 2,400 and hit a low today right in the middle of my support target at 2,376 before closing at 2,384.....

I wrote yesterday that a drop below 737 on the RUT would probably lead to a move down to 727. The RUT broke 737 and hit a low of 726.90 before closing at 730.....

Tomorrow we’ll get the Oil Inventory Report 60m after the open, and that’s it from the Economic Calendar.

After the close: HPQ beat earnings expectations and is trading up strongly in after-hours trading. This should give the Naz a little boost out of the gate, and probably lead to scenario #2 from above, which is a test up to 11,400 on the Dow first instead of a drop to 11,250 – 11,300 right out of the open. If the Dow rolls over from 11,400 then I will watch for the 11,300 area to scale out of my puts. If the Dow goes above 11,500 then I’ll be stopping out of all my puts.

Market Rolls Over

The stock market is set to open in the Green this morning as futures go positive on European trading, Lowe's better than expected earnings, and a slight dip in oil. However, European indexes are up on Energy and Commodity stocks, Lowe's issued mixed forward guidance, and oil is still holding the $110 - $115 support zone that I have been stating for the past week. So even if we get a bump this morning, I'm not seeing a recipe for a big continuation of the short term swing. I will look to sell most of the calls that I have left today, especially if the indexes test their recent highs, and then look for the next idea. If I enter any new call positions later in the day, it will be for quick, short swings.

7:55 am MT: The market gapped and faded right out of the gate, just as I anticipated. I sold the SHLD calls for a small gain. I’m only carrying a small position on AMZN and HOT.

8:15 am MT: Energy and Commodity stocks are on the move. I’m watching AGU, MON, AKS and a few others. In addition, all the other recent bullish areas are seeing profit-taking and selling. I’m interested in puts on PCLN, MTB, STT, and PH. I may not do much today, but I’m watching those stocks. I’m also still bullish on EL, LDK, ADBE, and AMZN for possible short term upswings if the market pullback finds support by tomorrow or so.

8:30 am MT: I nibbled on puts for STI. I also nibbled on calls for AKS, AGU, and MON. I picked up another call on AMZN and lowered my cost basis while still maintaining a very small position.

8:40 am MT: I stopped the last of the HOT calls. The total trade was a small .16 cent loss. I don’t want to hang around with a lot of positions right now in Retail or Leisure, especially with the overall market acting a little squishy this morning.

8:45 am MT: I added a little to my STI puts. Just to give you a little perspective, even though I have five positions, the total contracts are about the equivalent of one full position. I really am just a nibbler today.

9:50 am MT: I culled out MON for a small $40 loss. I’m just not inspired to hold any big positions today. I have a reasonable cost basis on AGU and AKS, and I really like the STI puts.

10:00 am MT: I nibbled on some MS puts.

11:30 am MT: I don’t like how feeble the momentum is on the early move in Energy and Commodity stocks. I stopped AKS for a $332 loss, and I sold AGU for a $21 gain. I’m all gone from the Commodity trades this morning. I’m starting to wonder if the market is going to sell off more across the board today. Be very cautious of long positions right now, the SPX and Dow are right at key tipping points. My best positions right now are the puts, and I may add to them.

The likelihood that the market makes it back into the green today is pretty much over. This is a pretty critical area for the intermediate term uptrend on the Dow and the SPX.

3:00 pm MT: Market Wrap: I warned that the disconnect with oil was beginning on Friday. It continued today as oil dropped but the market also dropped. For the past three weeks, whenever oil has dropped the market has rallied. Financial stocks were in the middle of the souring of the bulls with a Barron’s article on FNM and FRE which suggested that the Treasury may need to re-capitalize the two companies fairly soon. In addition, there was some chatter that the Fed is going to have to pick and choose which Financial institutions that they let go under because they can’t bail ‘em all out.....Nevertheless, I speculate that the majority of the move today was a technical move. I warned that the Naz was at resistance, and that the SPX and Dow were vulnerable because they are Wedging up rather than trending up. I showed on the chart of the SPX yesterday that the most recent bounce on the SPX was NOT like the previous four bounces, and was at risk. Well.....there you have it.....

All the major indexes confirmed rollovers today. The Dow is inching below the IT uptrend support line of the Wedge, and just clinging to the previous low. A drop below 11,400 on the Dow clearly breaks the Wedge. The SPX is inching below the IT uptrend support line of its Wedge, and just clinging to the previous low as well. A drop below 1,270 on the SPX clearly breaks the Wedge. The Naz threw an Evening Star Reversal today which tested right at the previous low and the 10dma today. The Naz also broke back below its 200dma. A break through 2,400 - 2,404 would probably lead to a drop down to 2,365 - 2,385. The RUT also tested right at the previous low, which was also the 10dma. A break below 737 would probably lead to a drop down to 727.

Here are charts of those indexes showing the levels I described:

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)


Here is a chart of the RUT:
(click on image to enlarge)

Tomorrow we get more earnings and economic reports, which will make the market more newsy. But the most critical thing about tomorrow will be whether or not the Wedges hold up on the Dow and the SPX. If we go too deep on all the indexes, then the IT Bullish posture could move back to IT Neutral, we shall see.....

Watchlist Saturday

Market Posture:

Dow: IT (intermediate term) Bullish and ST (short term) Neutral to Bullish. The Dow is still Wedging its way up towards the top end of the long term channel, but the Wedging price action is somewhat troublesome. Short term resistance is in the 11,875 area, but there are little trouble spots between 11,750 and 11, 785. If the Dow can carry through with a full swing, then resistance is between 11,950 - 12,000. A drop below 11,400 could mean a bearish breakdown of the IT uptrend/Wedge.

Here is a chart of the Dow:
(click on image to enlarge)

SPX: IT Bullish and ST Neutral to Bullish. The SPX is doing the same thing as the Dow. The only difference is the numbers. Short term resistance is in the 1,313 area, but there is a little trouble spot at 1,305. If the SPX can carry through with a full swing, then resistance is in the 1,320 area. A drop below 1,270 could mean a bearish breakdown of the IT uptrend/Wedge.

Here is a chart of the SPX:
(click on image to enlarge)

I want you to notice what the SPX did the first four times it bounced off the IT uptrend line of the Wedging price action. Now look at what it did Thursday. Notice the difference? That's one more reason I'm a little cautious right now. I'm bullish, and playing calls, but I'm watching very, very closely early next week.
(click on image to enlarge)

Naz: IT Bullish and ST Neutral to Bullish. The Naz is much stronger than the Dow or SPX, and is solidly IT Bullish. The RUT and the SML (Small Caps) are very similar to the Naz. This is exactly where you would expect Speculators to get frenetic and steamy during the early stages of a "potential" market recovery. The quick drop in oil prices coincided with the sharp move up in Tech and Small Caps. However, Smart Money has been reluctant to buy in a broader spectrum of sectors, so the current bullishness in the market is not across the board with really wide breadth. Nevertheless, I have been playing calls for the most part the past several weeks until the charts show me something else. The Naz is battling with the long term downtrend line, and is about as far above the 200dma as it was in May and June when it rolled over. At the very least, I am expecting a short term consolidation in this are. However, if oil takes a fast dive down to $100 without any short term wiggle this week, then the Naz could go parabolic right up to 2,550. As it is, there is short term, intermediate term, and long term resistance right in the current 2,450 area. Very short term support is at the 200dma and the mid point of the long candle on Thursday (2,430), with the next support down in the 2,400 area.

Here is an intermediate to long term view of the Naz:
(click on image to enlarge)

I am still good with the Bullish Watchlist from last Thursday, and I'm not going to update it yet. If the market rolls over on Monday or Tuesday, then I will update it. The only thing I will note is that many of the stocks are just about done with their upswings. I'm also interested in a couple of Commodity stocks like MON and AKS, and some Energy stocks like DVN and CVX. If Energy and Commodities catch a little short term bid, then I expect the rest of my bullish watchlist to consolidate for at least a few days.

The Economic calendar won't do much until Tuesday, and even then PPI is not as big a deal as CPI, which already came in with inflationary numbers that traders blew off because they're looking forward towards lower inflation from the recent drop in oil prices. Earnings also doesn't give up much until Tuesday when we get HD and TGT before the open and HPQ after the close. Monday will probably be technically driven unless we get a news bogey or a big price move up or down in oil. As always, keep one eye on the oil charts when you're trading stocks this week.

Note: I've caught up on answers to the comment questions for Thursday and Friday.

Another Note: I'm caught up on the most recent round of email requests for my Continuation Pattern Search and my Index Watchlist. If you haven't received them yet, and you requested them from me, then you may need to give me another email address. If you don't know what the Referral Program is click on this link: referral program

About the Continuation Pattern Search: The directions include a 10dma but the screenshot doesn't show the 10dma. I will actually run both sometimes. If you want a little tighter, shorter consolidation then keep the 10dma in there. If you want a little wider, longer basing pattern then just use the 21dma and the 30dma. I used the latter most recently (just like the screenshot). But you can use both and check out the slight differences in the results. You can see that this is an easy search to play little variations on when you're looking for slightly different patterns. You really have a lot of versatility with the criteria. I like both combos, but I probably use the 21/30 more than the 10/21/30.

Market Upswing Starts to Stall

Stock Futures are up slightly on a dip in oil, which is testing the $112.50 area for a fifth day in a row, and Retail stocks, which posted better than expected earnings results. Industrial Production and Capacity Utilization and the NY Empire State Index both stayed out of the way of the market bulls by coming in slightly better than expected.

7:50 am MT: ADSK had a huge gap up, so I nibbled a call at first. I sold most of the KSS calls into the gap up. I'm also taking some profits on HOT. I sold the ILMN and GENZ calls because I think I can get a better price later in the day. In addition, I nibbled on calls for SHLD, AMZN, and RIMM.

8:00 am MT: Oil is clinging to the five-day support level, but if it goes through $112.50 into the $111's then the market will probably take another leg up in the current swing.

8:55 am MT: I sold some more of the KSS calls.

10:30 am MT: Oil dropped through support at $112.50, which is giving the market a little bit of a boost. It looks like things are getting quieter, though, because the SPX was not able to push to new intra-day highs on the drop in oil. That means the short term drop in oil may be just about done, and the upswing in the markets is either going quiet for a little while, or it’s done.

11:55 am MT: The RUT was a real gap and fade out of the gate. The drop in oil through $112.50 down to $111.35 only gave the market a temporary boost. The RUT rolled over at a lower high intra-day and looks like it’s done with the current upswing on the daily charts. We may roll this over on Monday. I unwound the IWM Bear Call spread portion of one of my IWM Iron Condors for .15 cents. I’m leaving all other Iron Condors alone. It looks like I will make money on every IC this month. This has been a good year for Iron Condors so far.....

1:55 pm MT: I stopped the RIMM call for a small loss. I don’t like the price action over there. I sold the ADSK calls for a nice profit. In addition, I sold the last of the KSS calls, and I sold part of the HOT calls. I’m keeping very small call positions on HOT, AMZN and SHLD. That’s all I’m willing to carry through the weekend.

3:00 pm MT: Here are the final tallies on the closed trades: KSS was a .66 cent profit or 23% gain. ILMN was breakeven. GENZ was breakeven. ADSK was a .30 cent profit or 16% gain. RIMM was a $170 loss on the total position. And I made .26 cents on the IWM IC, .30 cents on the SPY IC, and .23 cents on the DIA IC.

For the week: I made $1,304 on swing trades and $790 on Iron Condors for a total of $2,094 on the week. It was a decent week of trading, nothing special but onward and upward.

9:00 pm MT: Market Wrap: The simple thing I want to say in the market wrap is that the drop in oil is starting to disconnect a bit from the stock market. The major indexes had every chance and excuse to rally and stick on new swing highs today when oil dropped through the five-day support level and down to $111.35. But Smart Money wasn't buying the drop in oil anymore, and oil bounced back a bit by the end of the day. Based on the apathy towards new oil lows I'm speculating that the sharp move up in the Naz and the RUT recently are probably going to consolidate early next week. The Dow and the SPX will need to show that they can continue to hold support in the grinding, wedging uptrend that they are in. We should have interesting market action on Monday and Tuesday. I will be taking it one trade at a time.....

Market Bounces Anyway

Pre-market futures are down despite the better than expected earnings report from WMT. The culprits are a worse than expected inflation reading from the Consumer Price Index, and a continuing of the worse than expected readings in the Weekly Jobless Claims. The Jobless Claims climbed well over 400k for the fourth week in a row, which is starting to get into the fringes of recession territory. That weekly number needs to stabilize itself under 400k in the next 2-3 weeks in order for traders to not start batting around the "R" word.

Despite the bad economic news, the earnings out of WMT should help Retailers today. We may see a bit of a mixed morning as the bulls and bears fight it out over the numbers. As longs as the bulls hold up the indexes, then the trend will continue.

I will unwind the IWM bear call 75/76 portion of one of the IWM Iron Condors today. I am also looking to sell the KSS and AMZN calls into the bump up today in Retailers.

7:45 am MT: I stopped the BNI puts for a .65 cent loss or 16% loss on a 3/4 sized position. I am watching the IWM 75/76 for a closeout around .15 cents if I can get it, which will preserve the majority of my profits on the trade. All other portions of all the other Iron Condors appear to be safe going into expiration this Friday.

10:15 am MT: I sold half the AMZN calls for a .24 cent profit or 3% gain. I’m looking at easing out of KSS as well. The market is making a little noise to the upside, so I’ll keep riding with this today.

12:00 pm MT: Oil is holding the lows of the past four days and continuing to consolidate short term. The price dropped enough to give the market a bit of a tailwind, but I don’t think the market moves higher short term unless oil breaks below $112.50.

The Naz looks the strongest of all the major indexes and is in an unconfirmed Rising Three Methods right now. The RUT looks bullish as well. The Dow and the SPX are lagging, and probably won’t make much more noise short term unless oil breaks short term support.

1:00 pm MT: The Bull Flag on the 60m chart for AEM looks interesting. Also, EL is powering up after earnings and URBN looks like it’s also making a push after earnings. Here are some other bullish movers on the day: ILMN, GENZ, AMZN, RL, JCP, TGT, RTH, MCD, HOT, QCOM, and VNO. There are others, but I like that lot o’ stocks for now.

1:15 pm MT: I nibbled some calls on ILMN, EL, and HOT. I’m contemplating some more Retail, but I’m still watching for now. I think I’m fine with the amount of Retail that I have been playing this week. That play may be just about done. I don’t think it will carry much past Friday.

1:35 pm MT: I sold the EL calls because Fast Money was doing the Frenetic Thing and I made .35 cents or 15.5% in just a few minutes. This stock will probably not Bang tomorrow, it will probably pull back a bit. I also sold the last of the AMZN calls and settled for a small 1.5% gain.

1:45 pm MT: I added to the HOT calls. Just before the close I picked up a nibbler on some GENZ calls.

2:15 pm MT: Market Wrap: Traders once again proved that they are focused more on the current price of oil than any other factor. The market shook off bad news on the inflation front and an uptrend in unemployment and fixated on oil. Light Sweet Crude dropped to its four-day low at $112.50 before zinging back a little intra-day. Oil is continuing to consolidate short term, which is putting the market in stasis for the past three days. However, the major indexes all finished in the green today because traders are looking forward and not backward. August CPI will likely come down since oil and commodity prices have declined for the past month. So even though we got inflationary numbers, those numbers will probably attenuate back this month. Employment trends are a little more worrisome, and a continuation of Weekly Jobless Claims in the 450k area will signal a possible transition to recessionary conditions.

The Naz bounced today and reached back up to the longer term downtrend line in the 2,455 – 2,460 area. The Naz almost confirmed a Rising Three Methods. The RUT had a similar move to the Naz and is fighting with resistance in the 755 – 765 area. The SPX put in a Bullish Engulfing Pattern, and the Dow is lagging as usual. Both the SPX and the Dow are showing signs of legging up in a short upswing, just like last week, but both are at risk as long as they continue to Wedge and Grind their way up instead of picking up some momentum. A drop below 11,400 on the Dow and 1,270 on the SPX would be bearish, and might send those indexes back down for several weeks.

Tomorrow morning the Industrial Production and Capacity Utilization economic report will garner some interest from traders. In addition, Retail will watch for the reports from KSS and JWN this afternoon and ANF and JCP tomorrow morning. Tech will be affected somewhat by the ADSK earnings this afternoon.

After the close: Earnings Reports: KSS beat earnings and is trading up. JWN missed expectations slightly and is trading down a little. ADSK beat earnings and is trading up sharply. ADSK will be in play early tomorrow as the stock is looking like it will open above the neckline of a Reverse Head and Shoulders at 36.00. ADSK looks like a nice setup for tomorrow morning.

Here are some Bullish Movers from today:

Retail: AMZN, SHLD, KSS (probably bounces after earnings this afternoon), EL, JCP (earnings tomorrow morning), RL

Leisure: HOT, MCD, LVS

Biotechs/Healthcare: ILMN, GENZ, AGN

Tech: ADSK (earnings breakout tomorrow), RIMM, NIHD, QCOM, QQQQ

Financials: MCO, PRU, STT

Note: Defense is interesting: LMT, RTN, NOC, GD, GR, and COL

Market Hangs Tough

Pre-market Futures are down slightly after DE missed earnings. The Naz is holding up, though, after positive earnings reports from AMAT and NVDA last night. Traders are waiting on July Retail Sales and the Oil Inventory Report, both due out this morning. The market is more interested in the price of oil than anything else right now. Oil futures are sitting tight ahead of the Oil Inventory Report, which will come out one hour after the open.

7:25 am MT: Retail Sales came in close to expectations. Oil futures are flat. The market is still looking to open up a little down, which may mean a move to support on the channel on the 60m charts.

7:40 am MT: I nibbled in on puts for BNI, FPL, and GS. I’m sitting on AMZN, which is hanging in there pretty good, and KSS looks like a Rising Three Methods so far. I added a little to KSS this morning. MON is Hammering on the 60m charts, so I’m good over there as well.

8:10 am MT: I sold the GS puts because the stock moved so fast that I had a 1.40 profit, or 16% gain in just a few minutes. I will look to get back in later this morning.

8:20 am MT: MON is fussing around on its 20dma. Since my calls were countertrend, I had a really tight leash. I decided to sell for a small .03 cent gain, so this is a scratch trade and allows me to focus on more on other stocks. I also sold the FPL puts for a small .05 gain, so another scratch. The market looks pretty mixed this morning. I’m pulling in the reigns and focusing on just a few stocks. I just don’t want to be over-positioned in a squishy market.

8:50 am MT: The SPX is coming up on diagonal support. The market may get a little quiet for a bit. Financials and Retail are underperforming.

11:00 am MT: There is a mini-sector rotation going on this morning as traders cover and buy Energy, Commodity, and Gold stocks and sell Financials, Retail, Leisure, Cyclicals and Transportation/Airlines. I’m intrigued enough that I may look at Gold, Steel, Chemicals, Coal, and Energy for quick calls, we shall see.....

I created two Iron Condors, one on DIA and one on SPY. I’m not doing an IC on IWM this month because the pricing is poor for the risk. I would rather have two SPY Iron Condors instead. Here are the two September IC’s: SPY 119/120 137/138 for a net credit of .30 cents with .70 cents of risk, or a potential 43% return on risk. And DIA 106/107 123/124 for a net credit of .25 cents with .75 cents of risk, or a potential 33% return on risk.

3:00 pm MT: Market Wrap: The Dow dropped to the bottom end of its tight diagonal channel. The SPX did the same and bounced back a bit late in the day. And the Naz and the RUT are in a tight, bullish short term consolidations and looking pretty strong. Oil bounced, which put the market down early and mid day, but traders shook off the news and pushed the market up at the end of the day. Something will give eventually between oil and the stock market, but if traders are convinced that any bounce in oil is only a short-term relief move and not a new uptrend, then the stock market will stay more bullish intermediate term. The Naz and the RUT are a lot stronger than the SPX, and the Dow is lagging well behind. The SPX and the Dow are still in too much of a Wedgie for my liking, but that shouldn’t be completely surprising given all the crosscurrent in the market. Remember that Financials and Real Estate are still sloppy, Retail, Leisure, Cyclicals, and Transportation are too dependent on a shaky story (oil going down is good.....but because of a slowing economy and not an increase in supply is bad.....and gas is still around $4.00 a gallon), Tech is not as immune as Maverick and Cougar think it is, and employment is starting to atrophy a little too much.

Our economy is still not in a recession, statistically speaking, and the market was fairly oversold last month, so we are moving up on the Dow and the SPX, but it’s more of a grinding drift than a momentous occasion. The small caps (SML) are the biggest bullish stocks right now, far ahead of the mid caps (MID). Big Tech (NDX) is also a big bullish performer. Those are exactly the areas you would expect speculators to do their most speculating when they are looking for a turn in the market from bearish to bullish. So many segments of the market are steering their way up, some choppy, some trendy, and Energy and Commodity stocks are still trending down. We may see a little mini-rotation because Energy and Commodity stocks got pretty oversold short term, but again, if traders are convinced that it’s only a short term consolidation in the downtrend, then the overall market should maintain its modest to decent bullishness.

Here are some interesting Bullish Movers today, although many of the stocks are still in downtrends:

Gold: AEM, GG, NEM (downtrending sector, but AEM looks like it could still move up to 55.00)

Chemicals: CF, TRA, MON (Monsanto could be coming to life a little)

Steel: CLF, AKS (both these stocks look interesting, and AKS may be changing trend)

Energy: HES, DVN, NOV, WFT, OXY, CVX

Coal: WLT, ANR, FDG

Tech: NIHD, QCOM, (AAPL)

Note: TYC (Ascending Triangle), ILMN may be trying to turn up off a short term Rounding Bottom

Most of the stocks that dropped today in Leisure, Retail, and even Financials did so in a fairly orderly manner. I’m not seeing a lot of chart destruction out there. The market acts like it still wants to stay bullish. As a result, I’m not as interested in Railroads and Utilities as puts today, although it was a very narrow set of stocks I was watching with BNI and FPL. I’m still holding some BNI puts but I may look to exit those tomorrow. I’m also still bullish on Retail and Leisure/Discretionary Spending in the near term, and it will be interesting to see how WMT affects Retail after the company reports earnings tomorrow morning. URBN and EL will add to the Retail focus tomorrow morning with their own earnings reports. As always, oil will be the biggest influence. And more importantly, the question will be: if oil has an expected short term technical bounce (which may have started today), will traders shrug it off as a normal consolidation and not a change in the intermediate term trend? I’m speculating that the stock market will not go intermediate term bearish even if oil has a technical bounce back to the low $120’s. It may take the market down a bit, but I don’t think we will see panic selling unless we go over the $122 area. We shall see.....

One Final Note: I'm caught up on the most recent round of email requests for my Continuation Pattern Search and my Index Watchlist. If you haven't received them yet, and you requested them from me, then you may need to give me another email address. If you don't know what the Referral Program is click on this link: referral program

About the Continuation Pattern Search: The directions include a 10dma but the screenshot doesn't show the 10dma. I will actually run both sometimes. If you want a little tighter, shorter consolidation then keep the 10dma in there. If you want a little wider, longer basing pattern then just use the 21dma and the 30dma. I used the latter most recently (just like the screenshot). But you can use both and check out the slight differences in the results. You can see that this is an easy search to play little variations on when you're looking for slightly different patterns. You really have a lot of versatility with the criteria. I like both combos, but I probably use the 21/30 more than the 10/21/30.

Mixed Nuts Chop the Market for a Day

Financials.....remember them? UBS reported its fourth straight loss and JPM is losing more money on mortgage-backed securities.....Financials are putting a damper on pre-market futures. However, oil is down a little in the mid $113 area, which is boosting futures right back. The net result is a flat to soft looking open.

Keep an eye on oil, as usual, because if it takes a quick run to the $110 area today then the market could make one more reach in the upswing. If oil stalemates here, then the Financial news could be enough to cause a deliberation in the current upswing.

7:45 am MT: I picked up a little more AMZN and I nibbled in to some KSS calls. Retail is consolidating a little, which is to be expected from yesterday’s huge moves. I’m not looking for a higher high, especially with oil starting to hold a bit right in the middle of my short term target zone of $110 - $115. In addition, Financials are really getting thumped early on with the negative news out of UBS, JPM, and MS. Oppenheimer piled on the fun with an earnings estimate cut on GS, which has Goldman trading down sharply this morning.

MON reported a positive outlook in gross corn profits, which is putting a tailwind under some Commodity based stocks. I’m keeping one eye over there now.

7:55 am MT: I added a little more to the KSS calls.

10:20 am MT: The market continues to Flag off the move from yesterday. We have a better than 50% chance of taking another thrust to the upside either today or tomorrow. But I’m not looking for the market to exceed the highs of yesterday on the current swing, or if it does, I don’t think it will exceed by much. So I’m playing a few “squeezers” where I’m taking what I think is the last move up in a swing.

I nibbled on MON calls. If Energy and Commodities come to life, I want to be part of something that has good news. Technically it’s a counter-trend trade, so this isn’t going to be a multi-day swing. But the stock is in a Rising/Straight Flag intra-day, which may lead to more momentum later in the day. If the stock can get back to the 20dma then I will sell half the position. If it goes through the 20dma then it could reach to 115 and I would sell the rest. It’s a small position, so I’m only risking a few hundred dollars to make a few hundred dollars with a better than 50% probability base on my chart analysis.

10:40 am MT: The market has gone very quiet. I’m continuing to speculate that the greatest momentum in the current swing is over. Any further thrusting will probably tap out near the swing highs. I’m not sure which side of the swing highs it taps out, but I’ll start scaling out of my calls in the 1,305 – 1,306 area on the SPX.

11:55 am MT: I sold part of the MON calls for a .30 cent profit or 5% gain.

1:30 pm MT: I picked up a little more AMZN and KSS calls, and I added back the MON calls I sold at a cheaper price. I’m willing to hold a little bit overnight, although I have smaller positions right now.

3:30 pm MT: Market Wrap: The market is following a typical pattern of running up for a couple of days and pulling back for a day or two before running up again. The Dow and the SPX officially confirmed a rollover, but that doesn't mean much in our current price action. Financials were the main catalyst to the downside since oil slid down just a little more today. The drop in oil would normally have helped the market but Financials were too much of a drag. Oil is holding the low to mid $112 area for the past two days and is right in the middle of my short term support zone of $110 - $115. I’m getting a little concerned about the Wedging price action on the Dow and SPX. The Naz and the RUT are both established nicely in an intermediate term uptrend. The RUT looks like a candidate for a momentum pullback or Rising Three Methods type of consolidation, and may decide to test 735 – 740 in the next day or two. We’ll see what Retail Sales and earnings do to the market tomorrow.....

6:00 pm MT: AMAT beat their number by a penny and the stock is trading up over 4% after hours. They are the biggest chip equipment maker, so that will give the bulls a boost in the morning, especially in Tech. NVDA also beat their estimates and the stock is trading up almost 10% after hours. NVDA looks like it will open above 12.00, which clears the way for the stock to test its Bearish gap at 13.00. It looks like Tech and Chips will be up in the early part of the day tomorrow, especially if Retail Sales doesn't get in the way.

I like the bullish gap on LDK after earnings. Other than that, I wasn't too excited about any bullish moves today. Other than Railroads and Financials and a smattering here and there, I'm still ok with most of my bullish list from Saturday. But the market may decide to consolidate another day, especially if oil bounces a little and Retail Sales comes in poorly.

Here is a list of interesting Bearish movers today that might be put opportunities Wednesday or Thursday for a quick swing:

Railroads: BNI, CSX, UNP

Financials: GS (variation of a Kicking Pattern)

Utilities: FPL, XLU (in a possible Bear Flag)

Note: EWW (breaking a Triangle)

Here is the daily chart of BNI showing the breakdown of the Broadening channel with volume. The stock is probably headed towards the 200dma and horizontal support in the 92.00 - 92.50 area:
(click on image to enlarge)


Here is BNI on the Weekly charts showing a possible confirmed rollover (it would have to finish below 98.00 at the end of the week). The pattern is an Evening Star Reversal. The first target is the 91.00 - 93.00 area:
(click on image to enlarge)

If the market gives me any bullish wiggle out of the gate on Tech earnings or Retail Sales, I will probably sell all my calls. I'll also be looking at BNI, GS and perhaps some other stocks for puts. But I'm not bearish on my bullish Watchlist, or the market right now. An orderly pullback is probably going to be another opportunity to buy calls.