Bulls Still Hoping for More

Pre-market futures are down modestly, but holding relatively well. Housing Starts and Building Permits, which are two key indicators of housing activity, both missed expectations this morning. However, the bulls are still looking on the bright side of things and hoping for more follow through on yesterday's confirmed bounce in the market. Home Depot helped the bulls a little by announcing earnings results similar to Lowe's report yesterday. HD is down just a little pre-market, but up from where it was on Friday, and holding most of the gains from yesterday.

The market is set to wiggle a little early in the day, and then the bulls may try for a push and follow through on the bounce from yesterday.

Here is a chart of the DIA showing a confirmed bullish bounce:
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Here is a chart of STT showing a confirmed bullish bounce:
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Here is a chart of AFL showing a confirmed bullish bounce:
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Here is a chart of CAM showing a confirmed bullish bounce:
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You can see that many stocks across a number of sectors bounced yesterday along with the overall market. The technical charts are forecasting a continuation of the bounce today, and the bulls are holding up through the various news reports this morning.

Here are some sectors and stocks that bounced yesterday: financials: STT, AFL, JPM, GS, WFC, MS, NYS, Energy: MUR, BHI, XTO, CAM, Metals: SCHN, PCP. In addition, Tech stocks like RIMM, CTSH, AAPL, and IBM are on the move as well as other various sectors and groups: DIA, AMX, ASH, BEN, ICE, CNQ. There are others, but that is a large enough list to supplement anything else in your watchlists.

As always, it's good to have a eject button zone when trading calls or puts. The overall market is in a bullish bounce, but if the SPY drops much below 90.00 it would be a red flag and an indication that the bounce signal failed. If the bullish signals from yesterday play out succesfully, the short term upswing could last for several more days.

10:55 am MT: The market has pushed a little this morning, but is probably headed for a bit of intra-day consolidation off of yesterday's move and todays early (small) push. If the consolidation holds up fairly well then we may see another leg up towards the end of the day. The ideal bullish price action would be for the SPY to hold at or above 91.00. A drop below 90.75 would be a mini red flag. A drop below 90.00 and the bounce will probably fail.

For now, the market is still hanging around, catching its breath from yesterday and a little bit this morning. If the bulls maintain their position on the side of the hill for awhile, they may gather enough strength to climb some more later in the day.

11:25 am MT: The SPY (and overall market) has pushed back to the highs. This is an ok place to lock in a small (1/4 or so) portion of trading profits. I like the Ascending Triangle forming on the DIA intra-day charts, which is the exact kind of "taking a breather" price action I was mentioning earlier. If the bulls can hold up, they will probably break through the Ascending Triangle and push the market a little higher later in the day.

Here is a 10m chart of the DIA showing the Ascending Triangle:
(click on image to enlarge)

The price action might not stay a perfect Ascending Triangle, but if it will hang around and above the 84.75 area or so, then it may still try to make a late day push. A drop through 84.50 would be a mini red flag, so ideally this hangs around high and tight.

11:50 am MT: I like to clean my watchlist during the day. CTSH is gone. WFC and ASH are on the verge of being gone. Steel is the best performing group today so SCHN and PCP are doing well. You can add ATI and X to the strong steel stocks today. Coal also pushed strongly but is now getting extended (CNX, BTU, WLT). In energy, the stocks I mentioned have done a decent job today. You can add UPL and WLL to the list of strong energy stocks today. Add ALL to the list of strong financial stocks today. The chemical/agriculture stocks (MOS, POT), which are the very definition of cult trading, are doing their screaming move thing right now. They are too hot to touch right now.

The way price action is shaping up across multiple sectors leads me to speculate that the current upswing may have about one more day left in some sectors tomorrow, but some other sectors are getting pretty extreme. If the market takes a nice leg up late in the day it is probably a good idea to lock down at least half your profits by the end of the day. If the market gets some kind of bullish gap tomorrow morning, I speculate that fund managers will use that as an opportunity to lock down more profits on the current move. It will all depend on how far the market pushes in the last two hours today. An extreme push and the current move will be most of the way done, with perhaps a decent push tomorrow. If it consolidates the rest of the day today then the market may have one more bigger push tomorrow.