Early Wiggle Fades to Red

Today is the "winding up" day for the heaviest stage of earnings. Expect earnings volatility to start attenuating next week. Here is a tally of some of the bigger deal reports for the morning (and after the close yesterday):

Bullish: AMZN up 15%, KLAC up 3.5%, ACI up 2.2%, CVX up 2.7%, XOM up 2%

Bearish: BRCM down 5.5%, MXIM down 3.3%, PG down 3.4%

HON is fairly flat after it's earnings announcement. The earnings (and economic reports this morning) tip slightly to the Bulls, which may wiggle the market up a little out of the gate. I gave an assessment for what I thought might happen today (in VC last night) and so far it's playing out exactly. I thought AMZN would give Retail a small tailwind (although I'm still bearish on Retail stocks like WMT and RTH). AMZN is also giving the overall market some bullish wiggle. I also thought that Semiconductors would not help the market much, but there were a huge amount of chip companies that reported last night. So far the chips (SMH) are fairly flat and probably won't help the Bulls very much, although there are some stronger movers in chips both up (KLAC) and down (MXIM, BRCM). I thought that the best chance this morning (besides AMZN) for the market to catch a little bit of a tailwind would come from Energy (XOM and CVX), and those two companies are up strongly after earnings.

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

Here is a further assessment from VC last night: I speculated that the Dow (market) could catch a tailwing that carries it towards 8,200 if XOM and CVX helped out AMZN (which they are). Remember that Energy has been a strong enough sector to lead the market (regardless of the fact that I think it's insane for Energy to lead the market). So Energy stocks will probably be a leadership group for the Bulls this morning. My focus on bullish calls would mainly be in that area and Healthcare/Biotech related stocks like GILD.

I also speculated that if the Dow runs to the 8,200 - 8,250 area on light volume and starts to roll over intra-day that I may look at puts for other areas like Retail, or even the index ETF's. Remember to reference the 60m chart of the SPX for a lower high, which would be a put buying opportunity. Also remember to stay nimble today, don't be afraid to take partial profits early in a move, even if you only lock down 20% of the trade and bring your stops to break-even.

Here is that 60m chart of the SPX again:
(click on image to enlarge)

If the Dow pushes above 8,250 on heavier volume then I would start the speculating process for the market tipping back to the Bulls despite yesterday's price action. However, the upswing will NOT confirm that it has reacquired itself until the market pushes back above the 8,350 - 8,375 area (and 8,400 would be a solid confirmation). If there is an absence of volume and price strength above 8,250 then I will assume that the market either stays in consolidation or continues the downdraft from yesterday - probably into the close (and weekend).

We'll see what another exciting day brings.....

7:40 am MT: Early Update: The market is bumping up and wiggling a bit out of the gate as expected. Gold stocks actually gapped up with the market, so I would be a seller NOT a buyer of Gold stocks calls right now (for partial profits - and perhaps keep a part of the positions). Gold may bounce again a little later in the morning, but I would be locking a portion of the trade right here. We'll see how the other sectors shape up early in the day.

7:45 am MT: Early Update: The softness out of the gate is indicating to me that it's somewhat unlikely that we see the Dow at 8,250 today. Anything can happen, but it looks more like a softer wiggle bounce or Bear Flag has a better chance of forming than a sharp bounce on the SPX 60m charts. If the market doesn't hold the low of yesterday, the SPX could take a quick jab to 840. If that happens, that's the second exit for Gold calls. We shall see.....

12:00 pm MT: Intra-day Update: The Dow is forming a Double-Bottom on the 15m charts, which may signal the end of the selling for an hour or so. The soft wiggle out of the gates this morning led to a nice drop, so those of you who were ready for puts should have caught a nice run and now you should look to lock about 2/3 of your positions.

The Gap and Fade on Gold stocks played out just as I warned right after the open, so anyone who held Gold calls overnight is probably glad to have locked at least a portion of the position near the gap highs.

The market may fade again into the close, but it appears to be headed towards some intra-day consolidation of the selling right now.

Today should have been a great lesson for a lot of you about things like turning on a dime (from the One-day Wonder 2 days ago), getting mentally prepared for the likely "if-then" scenarios (getting ready to pull the trigger on puts this morning), and trade management (locking and walking on at least part of your call positions on the Gold Gaps). Hopefully the things I am teaching you are keeping you moving forward in the trading game. The speed of your journey may be slower sometimes, but don't wring your hands about it too much, this really has been a tough market for the past year. It will make you a better trader to learn during the tough times.

Is There A Bailout For Earnings?

Another day, another trillion dollars, ho hum......I guess the government still believes in the Money Fairy in the land of Magic Money Trees. At some point, you would think that most people would get that the money has to come from somewhere, but I guess it doesn't matter until it actually becomes a problem.....kind of like the Real Estate wreck.....and the Financial wreck.....and the Energy crisis.....and the Tech wreck......

Well, anyway, back to the business at hand.....

Yesterday the market finally confirmed a bounce.....and today it's down sharply pre-market.....If ever anyone wondered why I usually don't hold a full position overnight in these conditions.....

QCOM is the main earnings culprit. The company reported earnings and is down 6.5% pre-market. The rest of the major earnings are mixed (LLY, MO, CL, MMM, and F). The SPY took another leg down pre-market when the Durable Orders and Weekly Jobless Claims numbers came in worse than expected.

Yesterday, the Fed said nothing, and did nothing, which was expected. In addition, the Fed also stated that it continues to purchase large quantities of agency debt and mortgage-backed securities in order to prop up the housing market, lower the mortgage rates, and stabilize the banks.....Isn't it great to be a bank.....it doesn't matter how incompetent, greedy, or corrupt a bank may operate and yet the money keeps right on flowing in.....a trillion here, a trillion there.....and the triple awesome bonus is that the Fed can purposely target the mortgage rate, and the banks can freeze the pass-through, run up the mortgage rate when the market is actually running down, and take even more advantage of the bailout. What a life.....isn't it great to be a bank.....And it's even cooler to be a government leader because that's where all that amazing free money comes from.....they just keep throwing it around and all they have to do is go back to the Magic Money Tree and collect more big bushels of the stuff.....What a life.....isn't it great to be a politician.....

7:35 am MT: Early Update: Well, the market gapped back down to the low of yesterday while I was rambling-on above.

7:40 am MT: Early Update: The market confirmed a bounce yesterday with a gap. It's important for the gap to hold in order for the upswing to keep chugging along. A drop below 82 on the DIA (8,200 on the Dow) and it's back to the chop and slop.

Here is an updated chart of the DIA so you can see the gap from yesterday and again today:
(click on image to enlarge)


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

This kind of price action is challenging for a trader, but those of you who have been following me saw me make and take profits on some short-swings yesterday and stand clear to see what might happen today. Well, today is happening down, so I'll watch for the next signal.....either a failure of the gap and support levels, or a bounce back.

It actually wouldn't surprise me if the Dow held the mid-point of the long candle from yesterday and bounced, so this is playable, but I am keeping a tight leash on things today. The selling this morning was deeper than I would have liked for a solid, momentum-driven upswing. The Bulls can still shake this off and take a run at 8,500 by tomorrow, but there is certainly a lot more trepidation today than yesterday. This is really a day to day market, even when it appears that we are in the midst of an upswing.

8:20 am MT: I am going to comment on some risk management for a moment here because I know a lot of you can't always catch everything I say in the webinars.

Market conditions are constantly changing, even from one week to the next. That's the nature of the market. It's extremely important that you, as a speculator, are able to adapt your trading strategy and your risk management to the anticipated current condition. Notice I said anticipated, because none of us ever know what will actually happen until it does actually happen. For the past several months, since things got really violent in the market, I have not bought a full position on the first order, and the vast majority of the time I have not held a full position overnight. Another thing that I have not done for months and months is take full positions on end-of-day entries. If I decide to do anything end of day, it MUST be in solid market conditions, otherwise the risks are simply too great. If I miss the boat on something early to mid day, I usually sit it out until the next day (or at least only take a 10% - 20% sized position, at most, if it's incredibly compelling). Making adjustments to risk management and trading strategies is a more "fluid" application than most traders think. Think of your strategy and risk management as more of a zone, just like support and resistance, and then realize that you will adjust entry and exit techniques, position size, and duration all the time within that zone to account for what you think the current market conditions are, including day to day.

Today, as I mentioned above with the word "trepidation" means that I will adjust even from yesterday. For those of you watching VC yesterday, you could see that I was "paper" trading 3-4 stocks (it ended up being 4 new trades: NUE, IBM, GILD, and DIA). I even mentioned the amount as satisfactory for a stronger day in a choppy overall market. Now, with the new day, I'm dropping back down to 1-2 stocks at most, and that's only if I see a good signal. In addition, I'm already in the mode of catching about a 15m swing (perhaps a 30m or 60m if things really start to shore up intra-day). And finally, I will take about a 1/2 to 2/3 position size from yesterday. So today's market action (greater uncertainty over yesterday's nice move) automatically dials me back to less positions, smaller positions, and shorter positions. See how that works? Always be ready to adapt within your "strategy zone" on any given day. It's actually not that mentally hard at all if you think of your strategy (and accompanying risk management) as a rule zone rather than a rule absolute. Rules should have upper and lower boundaries that you never go beyond, but they can also operate in a zone, and in fact, often operate much better in a zone than as a mechanically precise application. Think of it like driving on the freeway. Our speed limit is 65mph, but if it's snowing then drivers will dial it back to 45mph - 50mph. And if the weather is clear and nice, then running back up to 65mph is entirely appropriate. If every driver on the freeway was absolutely determined and unbending about applying the speed limit rule to it's exactness there would be a lot of wrecks in the snow and fog.....

12:10 pm MT: Intra-day Update: The confirmed market bounce from yesterday is over. It goes in the books as a One-day Wonder. That doesn't mean that the market can't reacquire the upswing, it just means that it will probably happen after a 1-2 day period of consolidation at the very least. The market (SPX) is at a critical area intra-day for whether or not a possible bounce-back can happen in a shorter period of time (1-2 days instead of a drop all the way back to the 800 - 810 area). If the developing Hammer on the 60m charts can hold, and the SPX can hold and push back a bit today, then perhaps an upswing can reacquire itself in 1-2 days. A drop to a lower low on the 60m charts and we are probably headed for a longer period of consolidation before the market decides what to do next - especially with the weekend coming.

Here is an updated 60m chart of the SPX:
(click on image to enlarge)

A bounce back intra-day from here would probably lead to a lower high on the 60's, but it would also open the door for an intermediate term period consolidation on the 60's, which has a better chance of reacquiring the bounce on the daily charts then if the market doesn't hold here..... For the short swing traders, which means me, I would only play a likely confirmed bounce into the close today (and as usual, I would not hold a full position overnight). I would even be ready for puts on a lower high tomorrow. But I will keep every "paper" trade in context of the 60m charts for the next couple of days on this particular formation. It's about knowing when to focus on a certain time frame, and the 60's are my focus for what happens on the daily charts. It will change to some other time frame later, but right now it's the 60's. We shall see.....

12:34 pm MT: Intra-day Update: The 60m Hammer held. This at least gives the Bulls a little bit of a fighting chance into the close.

Here is an updated 60m chart of the SPX:
(click on image to enlarge)

The SPX might bounce back a bit intra-day now. Perhaps a move to the 860 area or so is possible. If that happens, it will be important that the Bulls keep the SPX from making a new low into the close. If the Hammer fails, then the market may be headed to the 840 area and the chance of a 1-2 day "reacquiring" is probably gone. We'll see happens next.....

1:40 pm MT: Intra-day Update: The 60m Hammer failed, so this is headed towards a deeper consolidation on the daily charts. Any weak rallies tomorrow may be opportunities to buy puts. Calls are off the table completely until the Bulls reacquire themselves.

Another Bailout Lifts the Market

Earnings are still rolling in hard and heavy, but a Bank bailout is giving the market a lift this morning. The FDIC announced that it will create an operation designed to buy toxic assets from Banks in order to lift their balance sheets.....

Oh yeah, and today is the Fed "non-announcement" at 2:15pm ET.....

Pre-market futures are up strongly on the bailout news, especially in the Financial sector. The bailout announcement may be enough to cause the Dow to finally break above 8,250. That would be the beginning of a short term upswing that could lead to the 8,500 - 8,750 area. It may be that the Bulls get some help from the shorts this morning as short-covering in the Financial sector may cause as much commotion as actual buying. How ever it happens, it looks like the market will try to make another push through 8,250.

The Fed is probably going to be a non-event today, so the market may make some noise and get more active than normal ahead of the Fed. However, still be aware that there will be some wild gyrations after the announcement. Perhaps not as wild as normal, but I still expect some back and forth push and shove.

For now, the short term bottom is still intact, and the Bulls are still hanging on for the push. This mornings futures look like the best chance in several days for the Dow to finally get through 8,250.

Bulls Keep Hoping

Earnings continue to come it at a rapid clip. The latest round tips a little better to the bullish side of the market. Here is a tally of some of the pre-market (and post market from yesterday) earnings movers so far:

Bullish: AXP up 5.25%, TXN up 5.3%, DD up 1.3%, BMY up 3.4%, LXK up 1.75%, BTU up 9.9%, STLD up 8.4%, AKS up 3.7%, NUE up 4.1%, X up 9%

Bearish: VZ down 3.85%, AMGN down 1.75%, DAL down 3.22%, EMC down 2.65%, VLO down 2.5%

Steel stocks and Coal stocks look like they will be on the move with bullish gaps this morning. The overall earnings balance tips in favor of the Bulls for the first time in a number of days. As a result, pre-market futures are up slightly.

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

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

The Dow still has to get through 8,250 to turn the swing. A close above 8,250 would confirm the short term reversal. The SPX would get interesting for a bullish play on a move above 840, and would confirm a short term reversal on a close above 850.

The news keeps coming in hot and heavy, so another day, another battle. This Earnings Season has seen a much more prolonged struggle as the Bulls desperately hope for something they can hook their horns in to and push. We'll see if they get their wish today.....

Earnings Battles Continue

This is the second week of heavy reports in Earnings Season. Twelve Dow stocks are reporting this week, so I will show a Dow chart again this morning.

Here is a tally of some pre-market earnings movers so far:

Bullish: WYE up 4.75% (this one may be a little hard to chase now), HAL up 2.75% (this will help Energy a little)

Bearish: PFE down 4%, CAT down 9%, MCD down 2.25%, AXP down 0.60%, ETN down 6%, FCX down 3.5%, KMB down 3.35%,

Pre-market futures are actually up slightly (basically flat), which holds with my theme that if the Bulls can get the glass to be just 30% full then they will at least hold up the market and hope for another 10% - 20%. The earnings reports are running about 30% positive, which appears to be (once again) enough for the Bulls to at least hold up the market.

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

There are enough negative earnings reports that the market may stay range-bound for another day, but that may still be enough for the Energy and Agriculture/Chemical stocks to continue their upswing. As long as traders don't implode the market today, there will probably be a couple of sectors and a number of individual stocks that try to push up a little. The Dow still has to move above 8,250 intra-day in order to confirm the swing-up, but a close above 8,175 today would also be a positive indication for the swing-up. The Bulls really want a bottom badly (both short-term and long-term). They may believe/hope that they have the ammo to manufacture the short-term bottom, but as always, we shall see.....

8:30 am MT: Intra-day Update: The market is pushing up and substantially raising the probability of a confirmed bounce off the recent range-bound consolidation. As expected, Energy and Agriculture/Chemical stocks are leading the way. So the watchlist I gave you has held true. In addition, you can toss DHR on the list of bullish movers. The company reported earnings this morning and the stock is bouncing.

6:00 pm MT: Market Wrap: Considering that CAT, PFE, and AXP (reported after the close, but was down on the day) absolutely imploded on the Dow today, the market actually held up relatively well. Energy and Commodity stocks still want to make a push, although some Energy stock traders are getting caught up in the Contango "crisis", which is really pretty much a non-issue to me. There's not much to say, other than another day of negative earnings has passed without the market completely blowing up. In fact, the Bulls still want to make a push. If only they can get that glass to 50% full.....

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

Both the SPX and the Dow pushed and got pushed back. The Dow hit that magical, mystical 8,250 again today.....and then back into the range.....The SPX closed above it's 5dma, which may indicate a swing shift. A move back up above 840 would get the juices going in my speculator brain, although a true confirmation would come on a close above 850. And of course on the Dow, it's all about 8,250, which I have been highlighting for the past week.

This all comes down to earnings day to day, so that's the way I'm playing it, day to day. The after-hours looks a little bullish as traders will focus on the TXN earnings, which were positive. TXN is up about 5% after-hours. There are still way too many companies to report tomorrow morning to get the feel for the day, so we wait and watch. One thing to note is that Steel will be on the move one way or the other with STLD (tonight), and AKS, NUE, and X all reporting in the morning. In addition, there are several other big name companies to report tomorrow morning like DD, BMY, DAL, EMC, HSY, LXK, BTU, VLO, and VZ.

We'll see what tomorrow brings.....

Watchlist and Video Update

I have made it through several more stages of formatting and rendering issues. The biggest trick is to get a large file (anywhere from 15m to an hour) recorded in a format that I can turn in to an output that most viewers will be able to watch in a "larger picture" format. I've really been surprised how fussy video has been compared to just recording a webinar and uploading it for viewing. You would think that video would be much easier, but for what I'm doing, it appears to be about four times as much time and formatting.....hmmm.....

Anyhow, I'm rendering video again right now, so I probably won't have it until tomorrow, but we shall see.....

Just in case, here's a Watchlist of stocks by sector to keep an eye on if the market holds up and doesn't implode tomorrow:

Bullish Movers:

Energy: HES, RIG, DO, APC, EOG, NOV, SLB, BHI

Agriculture/Chemicals: POT, MON, MOS, AGU, TRA

Tech: IBM, QCOM

The above group of stocks appear to be in the early stage of a potential upswing.

The following two sectors have been on the move already, with Gold probably 3/4 of the way through an upswing already, and Healthcare-related probably about 2/3 of the way through an upswing. So just realize that with those two groups that you may only have about 1-2 more days left, whereas Energy, Ag/Chem, and Tech might have 2-4 days, especially if the Dow can crack through 8,250 and head for 8,500 - 8,750.

Healthcare/Biotechs: WYE, UNH, AET, HUM, DNA, BAX

Gold: AEM, ABX, NEM

Video Update

The good news is that I recorded a nice 35m long video with a market wrap, a look at the week ahead, and a watchlist of stock setups. The other news is that I'm having to fuss my way through "technology" as I get the formatting from my computer to the internet. I can post video on blogspot but the problem is that it comes out the size of a postage stamp.....

I hope to have the video up and running tomorrow. If I don't get the formatting unfussed, then I will type out the watchlist and work on the video again Monday. I am going to make video a regular feature, so this will work soon.....

Bulls and Bears in a Tug of War

Pre-market futures are down considerably on a mini-global meltdown this morning. The U.S. earnings news hasn't been good, but the growing concerns of "nationalization" of the financial system in Europe and the U.S. has stocks trading down even more.

Here is the news tally for the day (pre-market):

Good News: Earnings: GOOG up 0.7%, WYE up 9.5%

Bad News: Earnings: GE down 6.1%, SLB down 2.9%, HOG down 17.3%, COF down 14.5%, PFE down 2.6%, and Economic: "nationalization" becomes the buzzword of the morning as investors become extremely worried about the socialization of financial system.

If your scoring the news, it's about 7 to 2 tipped towards the Bears. That means the glass is only about 1/4 full and I warned several weeks ago that the Bulls had at least come close enough to their senses that even in their desperation they want to see a 30% - 40% full glass to hold up the market. The Bulls didn't get what they wanted and the market is set to gap down right into the lows of the past several days. The bottom of the range I posted for you yesterday is going to get its most severe test yet.

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

The market is set to gap down (on the DIA for example) right in to the 7,925 - 7,950 area, perhaps closer to 7,950 as the futures climb back a little just before the open. With the weekend coming up and the news tipping more strongly in the direction of the Bears, this is the most likely day for a failure of the low end of the zone and a drop to 7,750. The Bulls may hold the low end of the zone one more time and try to bounce the market next week, but the odds are that the Dow cracks down through the short term support today and starts heading towards the 7,850 area and perhaps even as far as 7,750 in one day. That's a big sell-off in one day, so we shall see what happens.....

8:30 am MT: Intra-day Update: Here's the first Bear Flag forming and starting to roll over on the 15m charts of the Dow.

Here is the updated 15m chart of the Dow showing the Bear Flag rolling over:
(click on image to enlarge)

8:33 am MT: Intra-day Update: The first test was about 7,900 so this next move down could be a drop from the high of the Bear Flag at 8,000 to around the 7,850 area. We shall see.....

8:44 am MT: Intra-day Update: The market (Dow) may kick around in the 7,925 - 7,950 area for a little while. I still expect the general direction to slough off towards 7,850 today, and perhaps as far as 7,750 if the fear is strong enough (although 7,750 is a pretty steep sell-off in one day). The price action has been loose and wild every day this week, which is right in line with the first heavy week of Earnings Season. This has been a bit of a goofy schedule with the number of big-name companies that reported last week, but the overall number of companies reporting this week is much higher than last week.....So far, the loose and wild action is gradually making it's way down. We'll see if that continues.....

12:15 pm MT: Intra-day Update: The Bulls are showing resilience again in the low end of the six day trading range. This kind of back and forth chop and consolidation is creating the image of Bullish determination on the charts, although the range is fairly wide and disorderly. The key tipping point for the Bulls remains 8,250 on the Dow. Bearish puts continue to be challenging because of the tenacity of the Bulls every time the Dow dips to or slightly below 8,000. That's why I gave it the nickname Beardicat Zone. It seems to be almost a Pavlovian Zone, every time we get down here the market rings a bell and everyone goes marching off to buy some stock. The best "paper" trades I have seen or brought up the past week have all been on individual stocks. The market indexes are in grinder mode, but there have been some nice stock moves here and there.

The Bulls continue to show determination to hold up January and not let it fail any further. Once again, the key tipping point is 8,250 on the Dow. The biggest key is to see whether the wild short term price action turns into a bottom, and the first trigger point for confirmation will be a close above 8,250.

I am going to post a video re-cap tomorrow. I'm working out a few bugs due to Blogspot limitations, but I should have something that I can work out for you tomorrow.

Traders Fight Through Earnings and Economic Reports

Pre-market futures are down, which will probably gap the market down at the open. Yesterday's Piercing Pattern on the Dow, along with the Hammer from last week, and the determined behavior of the Bulls in the face of bad news, is increasing the chance for a fussy bottom to the down swing in the 8,000 area. Earlier in the week I wrote about the short term momentum shift being at risk for another drop to 7,750. Yesterday's price action changed that probability a little, just like the day before's changed the probability on the Hammer.....Once again, this is the nature of the first heavy week of Earnings Season.....up one day and down the next.....

To illustrate the point:

Here are stocks that are up on earnings pre-market: AAPL, BBT, and MTB.

Here are stocks that are down on earnings pre-market: NOK, BNI, and SNE.

In addition, two economic reports came out this morning. Housing Starts / Building Permits missed expectations and Weekly Jobless Claims was worse than expected.

The net result is a drop in pre-market futures, and a Dow that could open 100 points lower out of the gate. This is the heart of the choppy price action from Earnings Season, so trying to nail a pattern on the daily charts to precision isn't going to happen. In general, if 8,000 continues to hold, then the momentum shift to an upswing stays on course. If 8,000 fails, then the Dow could drop to 7,750 or 7,500. Watch your, intra-day patterns and individual stocks. IBM was a nice bullish play yesterday (along with DO and several others I mentioned in VC). Today, there may be some bearish plays like a BNI, but also keep an eye on stocks like IBM that are set to pull back at the open and could bounce.

Don't get caught up in the freneticism, there's way too much news hitting the market right now, so keep your perspective about you. This day to day chop on the Dow between 8,000 - 8,250 is temporary, eventually it will resolve itself and a consensus will appear.

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

As of this posting, the Dow is set to open down in the 8,130 area, which is -100 points at the open. This isn't easy price action to manage for a swing trader with the up down up down day to day. That's ok, if I see a good intra-day signal on a stock or the market then I can play it, or I can sit it out altogether, and obviously, I don't need to explain why I'm not holding positions overnight.....We'll see what today brings to the table.....

7:25 am MT: Pre-market Update: MSFT just announced earnings. The company missed expectations, announced 5k job layoffs, and is down sharply pre-market after the report. Pre-market futures just took another leg down and the Dow is set to open -130 points. I'm not looking for the market to come back today after this report. It could happen, but yesterday's price action looks more like the Bulls hope and not market reality.

It is interesting to note that MSFT announced pre-market. I can't ever remember MSFT announcing before the open. As a Tech stock, they have announced after-the-close for as long as I have been trading the stock market.

7:32 am MT: Early-market Update: The open was right where I expected on the Dow, -130 points. The market is right at the mid-point of yesterday's Piercing Candle. This is the tipping point, a drop of 20 - 25 points from here could start a move back to 7,950 - 8,000. If the Dow can hold this area and build a nice base intra-day, then perhaps the Bulls hope can float the market. A move above 8,250 would clear the way for a push to 8,500 and beyond. A higher low on the 30m charts could open the door for a move back to 8,250. Outside of that type of price action, I'm going to assume a drop to 8,000 until I see whether we get the higher low on the 30's or not. The first clue will be a higher low on the 15's. Traders will really have there hands full sorting through all the news, especially the Softy news that hit just before the open, which was really unusual for MSFT.

12:00 pm MT: Intra-day Update: The 30m charts were the key time frame, just as I speculated above. We never got the higher low, and therefore we got the move back to 7,950. The first bounce on the 30m charts was at an equal low, which means the market is still range-bound, and still at risk for the drop to 7,750. For now, the range is 7,950 to 8,250 - 8,325 (which is basically the low and high of the Beardicat Zone).

Here is a current 30m chart of the Dow:
(click on image to enlarge)

Until the market breaks the range, then all short swings should at least take the range into account for entries and exits.

12:20 pm MT: Intra-day Update: The Bulls are making a big push right now to punch through the upper range. Given the nature of the news (mostly bad), the price action is revealing very resilient (or at least determined) Bulls. They really want this bad.....We'll see if they can punch through the upper range.....

1:30 pm MT: Intra-day Update: And the answer is.....no.....

Wiggles, Giggles, and Groans

Earnings Season continues to boil all over the market. Citigroup is actually wiggling up a little pre-market after cutting it's dividend for the third time in about a year. IBM is up sharply after beating earnings and raising guidance, which is giving Tech traders a few giggles of relief and delight. UTX also beat earnings, but is relatively flat pre-market. The groans are coming from the Financial sector as traders come back to the economic reality of life in the stock market of 2008 - 2009. BLK missed earnings and is down sharply.

However, the Banking Index ($BKX), which has been leading the downswing, as it should, is starting to get fairly oversold. It still has the possibility of another down day today or tomorrow, which would take the Dow to my 7,750 target, but the crispy fried smell in the air is the Financial sector reaching "burning cinder" mode.....Meanwhile earnings continue to come in hot and heavy, so we are still in day to day price action.

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

I threw volume on the Dow chart so you can see the selling yesterday was pretty substantial. The 7,750 area is the max projected target of the Falling Three Methods variant that I warned was forming yesterday. If the Bulls go in to a panic and stampede, then 7,500 is possible, but for now I'm looking for a wiggle and consolidation, or a wiggle and drop. I speculate that the wiggle and drop is more likely as traders work off the residual agony from the "worst case scenario" start to January 2009. A move above 8,150 could signal the end of the downswing, but this market continues to overshoot the mark more often than normal. Nevertheless, if the Dow goes above 8,150 then I will view it as "no man's land" and sit tight until I get confirmation one way or another. We shall see what happens next.....

9:00 am MT: Intra-day Update: Wiggle and drop it is, just as I speculated earlier.....

6:00 pm MT: Market Wrap: I mentioned in VC that IBM was the market today, which pretty much played out. The "oversold" bounce on the Banks helped out as well, which carried the market into a fairly strong close. The up and down nature of price action is actually not that out of the ordinary for Earnings Season. There have been a lot of catalysts so far, and there are a lot more to go. The Dow crossed over into my No Man's Land above 8,150 so I want to see if the market can really carry through on that tomorrow or not. How ever it shapes up, IBM is strong, and DO, HES, and RIMM are interesting as well (which I mentioned in VC). We'll see what tomorrow brings.

Financials Implode Earnings Season

Well, that glass may not even be 10% full.....analysts just can't keep up with all the earnings cuts and dampened outlooks.....So far this season, they have cut earnings estimates on the S&P 500 by a record 83%.

Financials are leading the way down today, which means that the rosey-eyed bulls are finally getting a dose of real fundamentals. It also means that Fast Money and speculative fund managers are actually not going to drive Energy stocks to the market lead, which has been their insane practice since the end of last year.

State Street is leading the way down for U.S. Financials with a gigantic 43% drop pre-market on a bad earnings outlook. European Financials are having a terrible time as well. Many Financial companies overseas are reporting bad results and forecasting a continuation of bad results. In addition, many investors are extremely worried about the nationalization (socialization) of European banks, which is moving one more step towards reality now.

The concern on the Street is that the global recession is deepening. Energy speculators couldn't stay completely away from the game, so Oil is down in the $33's now, although the March contract is not reflecting it today since this is the first day as the front month. I can't believe I'm actually typing this, but then again, I've learned to believe anything when it comes to speculators.....Oil could actually hit the upper $20's again.....granted it's on a historically bad recession and not on a boost in supply, but here we are, approaching that area again.

The fear in the Financial system appears to be getting in deep with the Banks again because they actually gapped up the Ten-Year Yield ($TNX) this morning instead of gapping it down with the market. The LIBOR is holding at a low, and the Ted Spread actually narrowed a little. So the long end of the Yield Curve got a little steeper today and the short end stayed flat to down. Banks just don't appear to be having a very good time right now.....Many Banks gave the illusion that the system woes had settled down in December, but it appears that there is still a big dose of the willies going around as they give us the "bad news" this Earnings Season.

Today will probably be a pretty volatile day. This week will probably be a pretty volatile week. And that's after I warned that volatility would increase last week.

Remember, the market is right in the middle of the Beardicat Zone. However, last Friday, when things went goofy and squishy on the gap, I knew there was the potential for trouble brewing. That's why I blew out my SPY calls for only a .06 cent gain. I know that a Hammer on big volume usually means a swing bottom, but there are nice bottoms and there are fussy bottoms. And this bottom is going to be fussy, which means that the odds of holding are a toss of the coin. We could see the Dow at 8,000 again just as fast as we might see the Dow at 8,350. In other words, trading the next couple of days is going to be a short swing and I'm outta there if I do anything at all. I'm only interested in the short stuff the next few days, and I'm only interested in the clearest signals, otherwise I'm not a player.....

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

You can see that the Morning Star last week just got too fussy, hence the selling of the SPY calls. Right now, the Dow could drop to 8,000 just as easily as jump to 8,350. I'm not going to try and outguess the daily charts, but the drop to 8,000 looks a little more likely right now. And if we get 8,000 then the two-day wiggle last week becomes a variation of a Falling Three Methods, and then the market is at risk for a drop to 7,750.....

We shall see.....

Earnings Gamers Keep Playing it Bullish

Pre-market futures are up on INTC's earnings last night, and BAC's and C's earnings this morning. So far the Banks (JPM, BAC, and C) are playing the earnings game spectacularly, and INTC has played it perfectly as well. The actual numbers were horrible, but the illusion is that the companies "beat" expectations. So with a perceived oversold market, and a Beardicat Zone that is holding so often it's starting to become a market tradition, the major indexes are pointed north this morning.

All three major stocks (INTC, BAC, and C) that reported earnings are up anywhere from 3.5% to 8.5% pre-market. The market itself is set to gap open and head right for those areas I posted last night. Refer the Dow chart I posted last night for the Beardicat Zone. As for the SPX, just like the Dow, it bounced right off the low support line I had drawn out for you ahead of time. The Hammers are likely to confirm today.

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

The SPX is set to open right into the short term resistance zone at 853. The pre-market futures have backed off a little bit on the CPI report, but this morning is probably going to be pretty bullish. The first wiggle will probably come right in the 857 area on the SPX. If that causes a gap test (on the SPY), and the gap (or slightly above around the 845 - 850 area) holds, then it may open the way for a short swing call play back (on SPY) into the 862 - 864 area, and possibly even all the way to 867. I will come in and update briefly later on, but that's how the morning could possibly shape up. As always, we shall see.....

7:37 am MT: Intra-day Update: The SPX pumped right out of the gate and ran right to 857.93 and now it's giving the first wiggle on the 5m charts. If this is going to be a "chaser" momentum type of morning then just the one 5m candle will turn and burn, but I don't think it will play that way.

Here is a 5m chart of the SPX showing the wiggle right at my target:
(click on image to enlarge)

7:41 am MT: Intra-day Update: Right in here is an area to start scaling in to "paper" calls. I would only look for a small part of the SPY position in the 85.25 - 85.45 area, and then pick up the rest when it turns and confirms.

Here is a 5m chart of the SPY showing the call buying zone:
(click on image to enlarge)

7:49 am MT: If you picked up a little on the 3 candle momentum pullback, that's good. The market is ramping again, but it may run out of a little energy right in here and double back again.

7:50 am MT: There's the double-back, so you can smooth this out on the 10m or 15m charts now and start flipping back and forth between the 5's - 10's before going to higher time frames later.

7:53 am MT: This is why I usually go small on the first wiggle. Now I can pick up another contract a little cheaper than the first entry.

Here is an updated 15m chart of the SPY (7:57 am MT):
(click on image to enlarge)

If my cost basis on some calls is in the 85.00 - 85.25 area, and my stop is in the 84.00 - 84.25 area, (maybe as low as 83.90), then I'm risking a little over a dollar for a possible target of 86.25 - 87.25, which is 1-2 dollars. I can keep the risk to .75 cents if I want and target the 1.25 move to the bottom of the gap from several days ago at 86.25 - 86.50. The reward to risk is about 1.5 to 1, but the probability is above 50%.

8:04 am MT: Intra-day Update: I'm taking off again (this is a vacation day.....), but here is the last chart update of the SPY on the 15's.

15m chart update on SPY (8:06 am MT):
(click on image to enlarge)

You can see the channel forming on the 15's, which is a Momentum Pullback / Bull Flag on the Gap. If it breaks to the upside in the next 15m - 30m then the green dot (86.50 zone) becomes the target. As always, we shall see.....

8:10 am MT: Intra-day Update: The current 15m candle went exactly to my resistance line on the channel I just drew for you and pulled back, so the channel resistance held for now. The channel appears to be the correct identification of how traders are consolidating things after the first pump.

Well, you can tell it's hard for me to pull myself away from the action even on a vacation day, but I'm going to make myself do it.....

I'll come back in later and do an update.....

1:50 pm MT: Late-day Update: The market has been very moody intra-day. Price action crunched down through the gap only to come right back. I cherry picked a 3/4 size "paper" call position on the SPY right into the low 84.25 area - starting from the 85.00 area. I didn't get stopped out, but I also didn't make much money. I ended up selling everything just before the close for a small .06 cent gain. So pretty much a scratch day on the SPY, although other individual stocks moved a little better.

I don't want to hold a full position over the weekend because we are still day to day with Earnings Season. The market is in the process of trying to Hammer out a bottom, so it's important for Tuesday (remember that this is a Holiday Weekend) to hold the lows of today in order to build on the short-term reversal pattern.

Gary: Here's a chart of the ADX as an example of how to set it up for period, color, and style:

30m chart of the SPY with ADX on a 14 period:
(click on image to enlarge)

Bulls Hammer the Beardicat Zone

The Naz pre-market futures were down sharply until JPM beat (lowered) earnings expectations. The "beat" cut the Naz pre-market losses in half and boosted JPM up over 3% in pre-market trading. The JPM earnings will probably hold the market up a bit out of the gate. In addition, December PPI didn't fall quite as much as expected, which means that pricing power at least held up a little (which was good for producers and raw materials last month).

On the negative side, the trend that I told you last week that would be followed more closely this earnings season than in past earnings seasons is layoff announcements. MOT announced another 4k cuts on top of 3k that was already announced. The stock is up slightly pre-market since firing employees is like printing money, but the macro trend of rising unemployment is what traders are concerned with. In addition, Weekly Jobless Claims came out worse than expected at -524k vs. -503k.

All in all, the pre-market futures - especially on the Naz - have come way back, which means the open is not going to be as bad as expected. The market indexes are floating in space between resistance and support, which would normally have me targeting support. I'm mitigating that a little bit because of the Broadening Pattern on the market. Nevertheless, the market could still slough down a bit more early in the day before it finds a resting spot.

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

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

The SPX has a clear target of 816 - 820, but the Broadening Pattern will have me keeping a sharp eye on the 830 area for an intra-day reversal. Because of the way this is lining up on the SPX and the market, the Dow could find a resting spot anywhere between 7,950 - 8,150 with the upper areas around 8,100 - 8,150 being areas I would watch closely.

Price action looks like it will slow a bit out of the gate from what it was indicated earlier. It's possible to get another intra-day leg down early in the day if the Bulls start wringing their hands over the jobs data, but I'm not looking for a big momentum day today like yesterday. Remember, traders will let this go so far and then they'll probably start wondering if INTC can play the game "correctly" just like JPM, which is to warn and then beat lowered expectations.

One final note: I won't be in VC tonight or tomorrow. If I get a chance I will do intra-day updates.

7:42 am MT: Intra-day Update: The market just broke to new lows, so that 830 initial target on the SPX that I gave you above is still in play.

7:49 am MT: Intra-day Update: There's 830 on the SPX.....

Here is an updated 60m chart of the SPX:
(click on image to enlarge)

Normally this would be a no-brainer for the purple circle at around 820 coming out of that kind of base. We'll see if we get a wiggle at 830 first.....

7:57 am MT: Intra-day Update: There's our wiggle (bouncing) off 829 - 830. If the construction of the consolidation on the 5m charts forms correctly, then this could be an entry for a put and a possible move down to 820. Just remember, however, that the downswing on the Dailies is getting pretty long in the tooth.....so exercise good risk management here.....

Here is an updated 5m chart of the SPX:
(click on image to enlarge)

So far, this is playing out just as I wrote up pre-market. The market has sloughed off out of the gate, and the SPX has hit the first 830 target area and then paused. We'll see what happens next.....

8:10 am MT: There's the next leg down after the wiggle. This is where I'm very curious to see if the SPX hangs around a bit. A SPY entry on the put I suggested above went +65 cents in about 5 minutes. Now is when I would be watching for the "hanging around" price action for a bit.

Here is an updated 5m chart of the SPX:
(click on image to enlarge)

I'm taking off for a while now. Remember that we are potentially getting into the last leg down on the intra-days as it pertains to the Daily chart downswing. We'll see what happens next, but the SPX is headed towards the 820 area, which is probably going to be a pretty solid support, at least for the day. We shall see.....

5:30 pm MT: Market Wrap: And there you have it.....the Bulls Hammered the Beardicat Zone for the 7th time.....They might as well hang a "Beware of the Bulls" sign at milepost Dow 8,000.....Every time but once in the past 4 months that the Bears get the Dow down to 8,000 - 8,100 the Bulls pound 'em. I spoke about volatility increasing at the beginning of this week, and volatility we have had.....

If you know ahead of time that you're going to get Mr. Toad's Wild Ride in the market, then you can dial it down to your short swings and still trade profitably. There are some who would warn you sternly "do not seek the treasure" because "they thought the market was a toad!".....but you can see from the put entry I suggested above (live, in real time) and the 820 area that I spoke of as a hard support (well before the SPX held at 817.04, which was right in the zone) that you can seek the treasure, even in this type of market, if you know what you're doing.

Beware those who tell you that you cannot swing trade this market:

Do not seek the Teasure.....We think the Market is a Toad!

Here is a chart of the Dow showing the Beardicat Zone I first spoke about over two months ago. Notice the giant volume once again.....
(click on image to enlarge)

After the close, INTC played the earnings manipulation game to perfection.....the Banks would be so proud.....INTC's profits dropped 90% in the 4Q, but that still "met" the market's expectations after INTC warned last week.....INTC is currently up almost 4% in after-hours trading.....The Hammer on the market today is likely to the carry through to the 860 area on the SPX and the 8,350 area on the Dow. We shall see what happens tomorrow.....I will post again in the morning....thank-you and goodnight.....

AAPL Sticks Itself in Stock Markets Eye

Steve Jobs is taking a medical leave of absence (I wish him well in his recovery), which is starting a chain reaction in the markets tonight that probably can only be saved by JPM in the morning.

AAPL is trading down over $6 after-hours, which puts the stock right at the November lows. The stock market (Naz and SPX) are seeing a bit of selling after hours, but not nearly as dramatic. Because this is a company-specific news bogey, it will have some negative effect on the market, but not a huge effect.

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

JPM has earnings before the open tomorrow, so if the company stinks up the report, then the Dow could see a -200 point type of day or more down into the 8,000 area. Keep an eye out pre-market tomorrow morning, it's really all on JPM, at least for the early part of the day. Remember, not every sector will drop dramatically if the market does, but if JPM stinks it up and the market sells down to 8,000 then traders will really want to see if the Bulls can hold that area. If the scenario above does play out and then 8,000 does hold, then the Healthcare and Defense stocks will probably hold their bullish bounces.

Also, INTC reports after the close tomorrow, so this is a bit of a weird earnings season with companies all out of line from where they normally report. Remember that INTC warned last week, which caused the stock and Tech to sell down in the current downswing. Usually, the way this game goes, is that INTC will now try to beat the "depressed" guidance and actually catch a tailwind. So what I'm laying out for you is a scenario that - if it plays out - is JPM misses and the AAPL / JPM selling knocks the Dow down to 8,000. Then traders hang out (just like they did today waiting for JPM tomorrow) and wait for INTC. If INTC doesn't play the game right and does even worse than their lowered guidance, then the Dow could take off down to the November lows on Friday.

I don't know what JPM or INTC will do to the markets tomorrow or Friday until we get the actual reports, but I would be ready for a "catastrophic" scenario just in case. If they beat expectations then we will probably get the turn back up in the current Broadening Pattern. This much I know, we will be in for a very interesting couple of days.

One final note for those of you thinking about refinancing mortgages. On a high credit score, the 30-year fixed bounced between 4 5/8 and 4 7/8 today with a lot of 4 3/4. The mid-day bump and hold of the market that I warned of in VC took the rate to 4 7/8 on the close. If we get a -100 or so Dow out of the gate tomorrow, then we will probably see 4 3/4 again. If we get a -125 to -175 or so Dow then we will probably see 4 5/8 quite a bit. And if we get a -200 or a little more Dow then we might even see a 4 1/2. Chew on that one if your thinking about refinancing. But chew fast because it might not stay there for too long.

Like I said above, no one knows what tomorrow will be until after the JPM report, so be ready for anything.....but make sure you are at least ready.

Earnings and Warnings Keep the Market Off Balance

Financials are starting to play their games ahead of their earnings announcements. JPM announces tomorrow and many other banks announce on Monday and Tuesday. DB warned, and C and MS combined brokerage businesses. Additionally, several other companies like TIF warned, which is continuing the (expected) trend of more companies warning of downside guidance than usual.

The market slowed it's downward momentum to a stall yesterday, but pre-market futures are down enough that it's still a toss of the coin as to whether or not we will get a swing bottom.

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

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

You can see the partial Broadening Pattern on the SPX. I've mentioned it before, but it's worth mentioning again, Broadenings are one of the most challenging patterns to handle as a trader. If the SPX drops through 850 it may not go all the way to 820, so I will make my target 820 - 830 and keep in mind that it can turn a little early. The Dow is in a Rectangle. If the Dow drops through yesterday's low, then it opens the way for a move to the 8,200 area or even lower. If the market holds up under the usual onslaught of warnings, then the swing turn is still in play and we could get a bounce for a couple of days. If we see consolidation again, then traders are probably hanging around to see what JPM does tomorrow before making their next play.

One other note: I will be away from the office Thursday, Friday, and Tuesday (remember that Monday is a market holiday). I won't be on VC Thursday. I need to get some important things ready for the next couple of weeks. I will still open the blog threads and post commentary, but I probably won't get to any live updates on Thursday and Friday like I have been able to lately.

Earnings Away

Earnings Season has officially begun with AA kicking things off. The first report is negative, but that was anticipated and pre-market futures are actually mixed, so don't look for much more continuation of the downswing today. We had a very nice move yesterday that went right to my intra-day targets, wiggled, and then dropped a little more. "Bad news earnings" has probably been priced in to the market on the very short term. The Dow is coming up on two support zones and the SPX is coming up on another.

The biggest name companies will be reporting early next week with Banks starting it off on Monday and Tuesday, and then Tech joining in on Wednesday. We are at a point with the news and the charts that much of this early week may be priced in and the market could go soft. It won't surprise me if we get more of a consolidation day, or a Hammer type of day if the market drops a bit early in the day. The Bulls may decide to completely throw in the towel and the SPX drops through 850, but I speculate that the worst case scenario for today is a drop to 850 on the SPX and a drop to 8,250 - 8,350 on the Dow. I will be ready for the market to hold a little above those areas and just go soft and consolidate, or hit those areas and Hammer. As always, we shall see.....

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

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

You can see those support areas I noted above. We don't have enough big name companies reporting earnings the rest of this week to create a flip flop market like we may have next Tuesday, Wednesday, and Thursday. But we do have enough earnings and economic reports to puts a little juice back in the Bulls blender and get them "attempting" one last upswing sometime between Wednesday and Friday on a hope for "less than catastrophically horrific earnings reports." As per our conditions, I will continue to take it one day at a time.

4:30 pm MT: Market Wrap: The market did have a consolidation day - as I speculated before the open today. The pause allowed some sectors to move up a little. I "paper" traded calls on VAR, CSC, and GILD. If the market holds this support area and bounces, then I will add to my "paper" calls and look for a 1-2 day upswing. If Retail Sales or some other report dumps the market tomorrow then I will stop out of the calls. The Dow (and DIA) is going sideways intermediate term, but I don't expect it to do that forever. However, I want to be in position just in case we do get another bounce and upswing for a couple of days. A breakdown on the Dow could mean a drop back down to the 8000 - 8,100 area so I won't give the calls much breathing room. We'll see what tomorrow brings.

I haven't had a lot of time to answer post comment questions, but I did manage to get to one today.