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)
(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.
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ReplyDeleteDwight: Thank you for the pre-market analysis. Looking forward to VC this morning.
ReplyDeleteTroy
Bullion got whacked down at $860 yesterday and again through $850 today.
ReplyDeleteNot overstaying my welcome so sold my GG calls for $120; rather watch again for a better entry.
Good profits and small losses all!
Francis
Anyone playing energy today? Waiting for a pullback on HP, it just keeps going right now.
ReplyDeleteJoe
HI Joe,
ReplyDeleteI nibbled on some Canadian Oil ETF's HOU on the TSX on the basis of a bounce from lows.
Should be an equivalent play on the New York?
Francis
Looks Like I got faked out of my gold plays but that's fine, more opportunities abound!
nibbled 2 cntracts of SU Mar $20 calls, following the bounce off intraday lows and a pull back to $19.10 ish.
ReplyDeleteTarget past the $20 round figure resistance and then $25.
Francis
Hey Gang,
ReplyDeleteI missed VC today. My wife had surgery. I have not been able watch the market much in the last week. Everything went well so I should be back in action soon.
Christina, thanks for your post about ADX las t week. I am still a little confused about it but I will try to spend some time looking at it.
Did I miss anything good in VC today? (Like any new tricks Dwight taught?)
I was still holding some GILD calls so today helped offset the losses. Since I have not been able to watch the market closely, I only have a couple Iron Condors trades in play.
Hope everyone is doing well.
Chic
I'm with you on energy Francis. Picked up a Mar 25 call. Bearish candle identical three crows on the 15's didn't confirm so I saw that as bullish.
ReplyDeleteJoe
What underlying stock did you buy into Joe?
ReplyDeletewhat an intraday swing bounce for crude eh?
OIH and APA have interesting candles.
I'm still with you Chic on the GILD calls although mine are Feb so I have to ditch by this week no matter what.
BigWins&SmallLosses to all!
Francis
I got into an HP call. I liked how it was bouncing off the trendline and broke 23.80 which has been a pretty important level in the past. First target of 26.75 and second target at 29. I also like MRO, FTI, MON, and a few others. UPL looks to be setting up for a breakout so keep an eye on that one too.
ReplyDeleteJoe
Dwight,
ReplyDeleteI wasn't on VC so if I don't know if you've already answered this. Is the 8,150 no man's land because it is the midpoint of the long candle from yesterday (so no puts) and below 8,350 which is an important resistance level and a move above that would make a higher high? I have an HP call (I stated why I bought it earlier) but if you were to buy a call on an index etf what would you mainly be looking for in this situation?
Also, after you state you're target and other thing's such as a 'no man's land' at 8,150, could you also say in a couple words WHY that area? That would really help me out, ALOT.
Thanks a lot Dwight. Again, I appreciate everything you do for us. Each day I feel like I get better.
Joe
Chic,
ReplyDeleteSorry about your wife's surgery but I'm glad it went well. Best wishes to her on a speedy recovery.
Dwight didn't teach us new tricks today. He mainly went over stocks that people inquired about. He talked about how he said the banks should target the long end of the yield curve (30 year) to help get them out of the mess they are in. Remember it was exactly a year ago (Jan 2008) on a Friday night VC session I recall that he said to get the consumers back in gear, gas should be $2 and banks should adjust the long term yield to around 5% to stimulate refinancing. Well, the banks didn't listen to NostraDwightus at that time, and today, we are now slightly below 5% on mortgage rates and the banks are still in a mess. So he now thinks they may need to drop rates into the 4.5% range to stimulate purchasing and refinancing. He also talked about what he posted on the blog home page.
Francis & Chic,
ReplyDeleteYou're not alone on the GILD calls. I was torn between the market, earnings and the big bullish candle today when I wanted to take profits on GILD calls. I hope this doesn't bite me in the butt. Today was a hard day to trade after such a big move to the upside. IMO
Joe: 8,150 on the Dow was the tipping point for the formation of the Piercing Pattern, which changed the probability of the downswing.
ReplyDelete