Market Rolls Over

Note: For those of you who received my Continuation Pattern Search document: On the screenshot of the Power Prosearch there is an error that Troy caught. Stock Price should be In Between (as per the directions I wrote on constructing the search in the document), and not High As Possible. I corrected the screenshot and will re-email out the updated file to all of you tomorrow. If you follow the written directions those are correct, but I wanted to make sure the visual is perfect as well, so expect the new file tomorrow.

Pre-market Futures are down after AIG missed expectations. Once again, Financials are front and center as that sector still continues to write down credit market losses. AIG has now lost more than $40 billion dollars in writedowns. The stock is down 11% in pre-market trading. WMT is also down a little as the company came short of expectations for July same store sales. The final blow this morning is the price of oil, which is up over $120 a barrel and climbing towards $121.

It looks like we are headed for a consolidation day at the very least. It may be pretty tough for traders to simply shake off this morning's news and push the Dow up through 11,700. I didn't hold much in the way of calls overnight (as usual) and as usual, I'm glad I didn't. Traders don't like uncertainty, and every time it looks like Financials have stabilized a bit the sector puts out another news bogey. It may be that the bulls simply shrug off the news and climb a wall of worry, but those odds are a lot slimmer today than they were yesterday. The news that will help the most is if oil turns right back around and retreats towards $116. But the stock charts in Energy and Commodities yesterday were suggesting another 1-2 days in an oversold bounce, so it may be the overall market needs to consolidate today.

If bulls take back over mid-day today like they did yesterday, I may pick up some calls again, but I need to see price action hold up this morning with some decent relative strength in order to do that. I'm not to keen on puts just yet either, so I may be sitting on my hands for a few hours while traders slosh and toss, and churn and burn, and figure out which way they want to take the market.

7:30 pm MT: Market Wrap: The Dow and SPX confirmed rollovers and are headed back towards the lower diagonal line on the recent Triangle consolidation. AIG started the fun with a worse than catastrophic earnings report, which isn't easy to do, so congratulations to AIG's management team.....Citigroup added to the discontent in Financials after agreeing to settle allegations about misleading investors.....Retailers piled on the love with worse than expected July Same Store Sales. Weekly Jobless Claims rose to the highest level in six years hitting 455k versus the 420k expected. And finally, oil climbed to almost $120 per barrel. You pretty much couldn't news bogey the market much worse than that.....

Two interesting things about the day. One is that it didn't sell off harder than it did, and two that oil retreated several dollars off the high. Those two events are correlated in my book, and the main reason that selling wasn't worse than it was. The price of oil continues to be the number one catalyst behind market movement lately.

Tomorrow, before the open, FNM reports earnings. If the company does a better job than FRE (and AIG) and actually meets the catastrophic expectations, then the Dow might wiggle back to 11,500 out of the gate in the morning. If the price of oil stays in the $119 area early in the day, then that scenario is all the more likely. There could be a nice setup for some DIA puts (or SPY puts) at that point. I may watch for an intra-day test of the 115 area on the DIA and pick up some puts. If oil climbs a bit into the low $120's again, like today, then the DIA (and SPY) will probably roll over and head towards the 113.50 - 114 area. If oil drops below $118 then I would be cautious, and if it drops below $117 then I would probably be stopping out of my puts. Unless we get a drop in oil to the $116-$118 area, I'm not looking for a bullish day on the market tomorrow. It's possible that FNM blows us away, or we get an intervention news bogey by the Fed or Government, but outside of that, I can't see the market getting away from the current high correlation to oil prices.

Here is a chart of the Dow to give you a visual of where traders are taking things:
(click on image to enlarge)


Here is a chart of Oil to give you a visual of short term support and resistance, and how a little wiggle might effect a DIA put trade:
(click on image to enlarge):

Some Final Notes: I can't see any scenario where I want to hold any of my short swing trades over the weekend. So I'm playing how I have been playing most of the year, which is short swings that I keep intra-day on most of the position for my directional trading, and Iron Condors for my intermediate term type of trading.

8:30 pm MT: I have emailed the documents to all of those of you who have emailed me about the referrals program. If you haven't received the files yet, email me again. If you don't know what the program is, see the post below.

Referral Program

Anyone who refers this blog to five friends or fellow traders will receive my Index and Sector Watchlist and my Intermediate Term Continuation Pattern Search. Both documents are in Word format.

The Index and Sector watchlist is a list of key indeces and sectors that makes it easy to spot day to day strength and weakness across the stock market. In addition, it is a simple, but powerful list for spotting sector rotation.

The Intermediate Term Continuation Pattern Search is a Power Prosearch that finds strong, bullish stocks in Intermediate Term Continuation Patterns. In addition, I include a tutorial on the Basing Pattern Family (all the Cup With Handle variants), including charts examples with annotations. You won't find this instruction anywhere else. I just ran the search a few minutes ago and it kicked out a bunch of stocks in nice bullish basing patterns showing excellent relative strength.

Just email me at tradestudy@yahoo.com and let me know that you have referred the blog to five friends or fellow traders, even if it has been in the past. I will take your word for it and email you out the two files. If you are at events or conferences, you can probably get the referrals out pretty quickly.

The Naz Dreams Green as the Market Shrugs of Freddie

Earnings are still pushing the market around a bit as CSCO beat expectations and is trading up over 4% pre-market and FRE missed expectations and is down 10% pre-market. The Naz and SPX futures are down just a little before the open. It looks like the Naz won't be gapping through resistance at 2,350 at the open, but will have to fight its way through during the day. I speculate that the indexes will push up again today, but I want to see if the wiggle out of the gate holds up in the morning.

The big question for the day is this: will traders be more focused on the fear of Freddie and the Nightmare on Wall Street or the substance of Cisco and What Dreams May Come?

We've had a lot of up and down price action at times this year, so we'll see if that cleans up a bit on the current swing and we get 1-2 more days of follow through off the move yesterday.

Here is a recap of my trading day:

7:20 am MT: It looks like Financials just can’t keep themselves out of the news as usual. FRE, ABK, MS, and MER all poked their heads in there and stirred things up (or down). The biggest deal was FRE missing even catastrophic expectations, which isn’t easy to do, so congratulations to FRE.....We’ll see if the bulls climb a wall of worry or if we drop back into chop and slop. I’m playing for bullish resilience, but as always, we shall see.....

7:40 am MT: I sold the last SHLD call, which closes the trade as a 1.71 profit or 22% gain. I sold the last WHR call, which closes the trade as a 1.07 profit, or 18% gain. I sold the NSC calls for a small .18 cent profit, and I sold the UNP calls at breakeven. I am still interested in getting back in to WHR and NSC later in the day. I’m also looking at DIA, SPY, and QQQQ calls if they show themselves.

7:50 am MT: I sold the ADBE calls for a small .08 cent profit mainly because I think I can get them later in the day at a cheaper price. The market is a little fussy out of the gate because of fear. We’ll see if the bulls can keep their breakfast down and show some steel today or not. I sold the DHR calls for a small .08 cent loss. The price action over there is pretty wild, and I want it to settle down a bit. I wouldn’t mind the wiggle and figgle on some of these stocks this morning if the market wasn’t swooning just a little bit. Traders are more focused on the fear of Freddie and the Nightmare on Wall Street than they are the substance of Cisco and What Dreams May Come so far this morning. If the bulls take back over, then I will get back in to a few of these trades that I exited this morning.

8:10 am MT: I sold part of the ABT calls for a .21 cent profit or 8% gain so far. I’ve culled back to three partial positions from what I carried over from yesterday. I will go back in again when the mud clears off the windshield a bit.

8:15 am MT: Energy and Commodity stocks are bouncing, which should not come as a surprise since they sold down pretty sharply on the most recent downswing. Fast Money was itchy like it had the rash of a thousand acres of poison ivy in its pants because all it took was a little bump in oil prices from $118 to $119 (which is nothing in context of the recent $30 dollar drop) to set their collective rash on fire and get them jumping up and down and screaming to cover their shorts.

8:40 am MT: I sold the rest of the ABT calls for a total trade of .21 cents profit or 8% gain. I’m down to two positions and still watching the “Financials Down and Oil Up” double whammy on the bulls. Still watching.....

8:55 am MT: I started nibbling back in on WHR calls at a cheaper price.

11:20 am MT: In the previous hour I picked up calls on DIA, SPY, and ADBE. I also picked up more WHR calls. The market continues to consolidate from yesterday’s big move.

1:45 pm MT: The market pushed up through the highs of yesterday during the day and looks like it will finish in the green. I will hold a few call positions overnight for another move up tomorrow. I sold some of the DIA, SPY, ADBE, and WHR calls, but I’m also keeping some for tomorrow.

I finished the day with a $1,642 profit on all closed trades. I’m still holding a partial call positions on DIA, SPY, ADBE, WHR, AMZN, and WHR. If the market takes off again tomorrow or Friday, then I’ll go in heavier with more calls.

3:30 pm MT: Market Wrap: The Dow is battling with resistance at 11,700, the SPX is battling with resistance at 1,300, and the Naz punched through resistance at 2,350 and through resistance at the top end of the channel at 2,370. The Naz may be getting to the end of the short term upswing after moving more than 100 points from the low on Monday. It’s possible that the Naz might go as far as 2,390-2,400 in the next day or two. If the Dow and SPX can take one more leg up tomorrow or Friday then I will sell the rest of my calls. The Naz is IT Bullish now, moving from the designation IT Neutral to Bullish. The overall market is IT Bullish and the Dow and SPX continue to move towards the top end of the long term channel.

Here is a chart of the Dow showing the test of the Triangle today, and then the bounce towards the first resistance at 11,700. If the Dow pushes through 11,700 then a move to 11,900-12,000 would be the most I would expect out of the current swing:
(click on image to enlarge)

Traders were probably wondering if Financials are going to whammy the market anymore. Based on the fact that the bulls climbed a wall of worry in Financials today, it looks like they think that the worst news is over for now.

SINA beat earnings expectations and is trading up after-hours. The stock may confirm a Hammer from today during the day tomorrow. It will be interesting to watch, along with the other Tech stocks on the watchlist.

Ben Jovi Leaves the Market Alone so it can Rock On

Pre-market futures are up this morning on another drop in oil prices. It won't be surprising to see many of the oil stocks that sold off yesterday gap down at the open today, which will be an opportunity to sell most of the puts in Energy left over from yesterday. Look for good intra-day setups in that sector before entering new positions. The tail-end of the heavy portion of Earnings Season is still giving us less than catastrophic results, so we have a continuation of a common theme from the past three weeks this morning.

The biggest deal today will be the Fed, although most traders are assuming a non-event. Market action will probably be somewhat quiet ahead of the announcement at 12:15 pm MT / 2:15 pm ET. So although the market will probably be quiet, and then pick up in volatility after the announcement, it probably won't be as subdued as it might have been because traders are assuming no rate change or language change and therefore are more focused on the price of oil.

Here is a recap of my trading day:

7:35 am MT: The major indexes gapped up this morning and the Dow and the SPX held the support line of the Triangle. I thought we would go tight, and that’s exactly why I unloaded my DIA and SPY puts where I did yesterday and didn’t hold them overnight.

7:40 am MT: I nibbled some calls on UNP and NSC this morning. I will probably play these as short swings. Energy stocks gapped down and jumped up right out of the gate just like I warned pre-market. So selling the gap at the open was the proper exit, now you can pick up the puts much cheaper on the bounce up.

8:25 am MT: There has been some yipping about the ISM Services driving the market today because the number was better than expected. But the number was still contractionary, and it wasn’t much different than the slightly better than expected numbers we have been seeing out of many other economic reports lately. The big deal continues to be the drop in oil prices. We have now watched $30 of speculation come off the top of oil since it hit $148 a barrel. I’m guessing that represents about half the speculation of about $50-$60 that was sitting on top of the fundamentals. Real supply and demand is probably in the neighborhood of $90-$100 per barrel. This is typical speculator behavior, which is to take some asset parabolic way beyond the fundamentals and then run screaming on fire through the night to get out when the bubble pops. In this case, I think we are experiencing a short to intermediate term compression in speculation, but not a long-term bubble bursting. I still think oil holds up and eventually bounces because we haven't changed the supply and demand equation yet.

9:35 am MT: Retail stocks are really on the move with the drop in oil prices. SHLD, TGT, KSS and others are making some real momentum moves early. Cyclicals are also doing well. I nibbled on WHR calls, but I haven’t picked up any Retail stocks yet because they ran away from me before I could jump them

9:50 am MT: Railroads took a nice jump intra-day, so I sold half the positions into the move. I will look for a pullback to build the position back. Here are the gains so far: NSC is a .43 cent profit or 9% gain so far, and UNP is a .35 cent profit or 7% gain so far.

The Dow and SPX have already made it back to the other side of the Triangle intra-day (which is easier to do the further the indexes travel into the apex). I first posted the Triangle on Friday and warned you that we would probably go tight ahead of the Fed, and so far we have done exactly that with a drop to the support line and now a jump to the resistance line. I speculate that we won’t break the triangle one way or another until after the Fed, which is also something I warned of several days ago.

10:20 am MT: WHR is getting very parabolic intra-day, so I locked the calls for a .60 cent profit or 11% gain intra-day. I will look for a pullback to get back in to the position. It never ceases to amaze me how frenetic our modern trader is. Never underestimate how much of a dog pile Maverick and Cougar and the rest of the Fast Money can create, those hot dogs just go nuts when they see something. It sure smacks of undisciplined, “get rich quick,” score the Ferrari and the Upper West Side condo, show me the money, now now now trading.....But the good news is that it means more money and faster profits for me.

10:35 am MT: I sold the rest of the UNP calls for a total trade of .40 cents in profit, or 8% gain intra-day. I kept the NSC calls so I still have some exposure to Railroads, and I will pick up the UNP calls again later on a pullback.

10:45 am MT: I sold the NSC calls for a .48 cent profit or 10% gain on the total trade. I can smell a pullback coming.

11:05 am MT: I started scaling back in to the UNP and NSC calls at a cheaper price, and I picked up WHR again. I also started nibbling in to SHLD. I like where I am so far today, we’ll see how it goes with the Fed.....

12:15 pm MT: The Fed was a non-event, back to trading calls.....

12:45 pm MT: I locked in some profits on the SHLD and WHR trades, but I’ll still revisit these for more before the close. I also picked up small call positions on CCL, ADBE, AMZN, ABT, and DHR. Those along with SHLD, WHR, NSC, and UNP will be enough for me today, although there’s a lot more going on out there. I will hold some of the positions overnight, probably parts of all of them.

1:50 pm MT: I locked down some more profits on the SHLD and WHR trades because the two stocks are fairly parabolic intra-day, especially SHLD. I’m only holding a little of those two overnight looking for an early bump to sell into. WHR is one that I will probably be in an out of a lot tomorrow, I really like how it looks. I locked in a 1.07 profit or 18% gain so far on this second WHR trade. I locked in a .50 cent profit or 10% gain on one SHLD trade that I closed, and I locked in a 1.73 profit or 23% gain so far on a second SHLD trade that I still have a small position in.

I made $532 on all closed trades today and a total of $1,265 after adding in partial locks, which I will forward to the closed trades tomorrow. So I really look at this as a $532 day with the table set for a bigger day tomorrow, especially if the market wiggles up a little and then Flags intra-day before the next move.

2:30 pm MT: Market Wrap: The Fed left the market alone, which is just what traders wanted. With Ben Jovi and the Bad Medicine Band putting their show on ice for another six weeks, the market was able to focus on what it really cares about, which is the continued drop in oil prices. Speculators have been compressed down $30 dollars of the approximately $50 dollars of fluff on top of the true fundamentals in oil. So look for the $98 - $105 area as the intermediate term support zone on the chart for Light Sweet Crude, with a possible swing down to $116 area first on the short term. If traders continue to believe that Ben Jovi is going to leave them alone for another six weeks then they won’t be Livin’ on a Prayer, and they might even Have a Nice Day. But if the Rock Star pokes his head in there too much then he could be Wanted Dead or Alive.

The Dow cracked through the resistance line of the Triangle, so you can see why I was buying calls today. The next resistance is 11,700 and then 11,750, but I speculate that the swing takes us through those levels and perhaps as far as 11,900, with 12,000 being a long shot, but possible on this swing. The SPX also broke out of its Triangle with the next resistance at 1,290 and then 1,300. Like the Dow, I speculate that the SPX may go further than that on the short term swing, perhaps as far as 1,310, with 1,320 as more of a long shot. I will take the moves one day at a time and hold only partial positions overnight because this year has been.....well.....this year.....There’s no reason to lose sight of the fact that we are still paying around $4.00 a gallon for gas, even with the compression in oil prices recently. And as soon as the economy picks up, then oil goes right back up and consumer spending softens. We (I guess that’s the royal “we”) still haven’t solved the supply issue in oil. Now if we could just turn some of that Beijing algae into alternative energy we might be on to something big.....

Bejing Algae Plagues the Olympics

Nevertheless, the market looks like it's turning from IT Neutral to IT Neutral to Bullish as the Dow and SPX channel (on the intermediate term) towards the top end of the long term channel. The Naz is ugly, and right at resistance, but at a new 30 day closing high. I speculate the Naz will punch through 2,350 and move to the top end of the intermediate term channel at 2,365-2,375 where it had the nasty gap from a Kicking Pattern at the end of June. The fact that traders continue to kill Gold (AEM, GG, ABX, NEM) like it’s made of radioactive poison lends itself to the moderate bullishness of the markets right now.

Here are the index charts:

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

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

Here is a chart of the Naz showing the index right at one resistance and then the Channel resistance at 2,365 - 2,375:
(click on image to enlarge)

Here is a list of Bullish Movers today:

Leisure/Casinos/Restaurants: CCL, MCD, WYNN, MGM, (LVS)

Retail: AMZN, RTH, WMT, SHLD, KSS, TGT

Financials: STT, COF, BK, HIG, STI, PRU, MET, NTRS, CB, (MS, PNC)

Transports: FDX, UPS

Tech: ADBE, PCLN, NIHD, IBM REIT’s: EQR, IYR, VNO

REIT's: EQR, IRY, VNO

Healthcare/Drugs/Biotechs: ABT, STJ, MDT, WLP, CELG, AET, JNJ, BAX

Railroads: NSC, BNI, UNP, CSX (I’m not looking for a higher high on UNP, so I’ll be selling into any bump up tomorrow)

Defense: LMT, GD

Cyclicals: MMM, DHR, UTX

Food & Beverage: PEP, (KO, GIS)

Consumer Staples: (PG, CL)

Note: CSCO is up strongly after-hours on a positive earnings report. The stock has jumped more than 7% in after-hours trading. Expect the Naz and the market to catch a tailwind early from the CSCO effect. I speculated earlier that the Naz would punch through 2,350, now I think it's pretty much a done deal. I will probably sell some of my ADBE calls right into any gap up, and I will probably sell my Railroads and WHR into any early bump. But I will be ready to get right back in to ADBE and WHR, along with any Tech stocks I like, on an early pullback.

Energy and Commodities Sell Off on Slowing Economy Worries

Pre-Market futures are down a little on what mainly appears to be carry through from Friday. Watch for the Bear Flag on the 60m charts on the Dow and SPX to confirm to the downside. We may see some selling out of the gate, and perhaps a bit of a down day early in the day. I will be focused on puts intra-day and probably picking up where I left off on Friday. However, with the Fed Meeting tomorrow I probably won't be looking to hold a position overnight.

Here is a recap of my trading day:

Monday: 7:45 am MT: I nibbled in on some DIA, SPY, OI, and BTU puts. I’m taking small positions at first. Normally I would be selling Friday’s leftover puts into the bump down this morning (if I was willing to hold anything over the weekend these days…..), so I don’t want to zig on myself when I normally zag.

8:00 am MT: BTU got so extended so fast that I just sold the puts for a .30 cent profit or 5% gain in a few minutes. If it bounces a little in the next hour I will buy back in.

8:55 am MT: I sold the DIA and SPY puts for small gains. Like BTU I will wait for another intra-day bounce to do it again and see if I can run that into the close. I need a pretty good setup before I get back in because we are getting closer and closer to what I speculate will be tightness ahead of the Fed. Here are the final tallies for the morning: DIA was a .25 cent profit or 6% gain and SPY was an .18 cent profit or 4% gain. Energy and Commodity stocks are selling off, so there may be some momentum plays in those areas today.

12:45 am MT: I sold the OI puts for a small .17 cent profit, or 3.5% gain intra-day.

1:00 pm MT: The Dow and SPX held right on the support line of the Triangles I drew out for you on Saturday and are putting in Hammer-like candlesticks intra-day. Energy and Commodity-based stocks are dropping sharply, which is giving the rest of the market a boost. The selling in Energy and Commodity stocks is probably because traders are thinking we will continue to see slowing in demand and not because of a big jump in the Dollar. So the concerns over a choppy global economy appear to be the catalyst behind the price action so far today. I’m not super excited about a market that goes up because the economy is slowing so I’m not a big call buyer here, especially ahead of the Fed. Also note that CSCO will have earnings after the close tomorrow, which will be a driver in Tech on Wednesday along with residual sentiment left over from whatever the Fed says. So look for a quieting ahead of the Fed until the announcement at 12:15 pm MT or 2:15 pm ET. Then look for activity to pick up into the close and to be volatile again (especially in Tech) on Wednesday morning after the CSCO earnings reaction.

I really didn't get to sink my teeth into the Energy and Commodity puts like I would want to today. Some days work just catches up and swallows the time and focus away from trading, which I'm sure all of you experience. I did finish the day with $240.00, but I left several thousand on the table.

4:00 pm MT: Market Wrap: The Dow and SPX ended up holding the diagonal support line of the Triangle. I sold the DIA and SPY puts right at the support line, so that was a good exit for the day. A drop in oil prices is being named as the catalyst for the selling in Energy and Commodity stocks, but don’t let that completely fool you. The main reason was the continuing concern over slowing global demand which is causing speculators to unload the way the always do, with their hair on fire running screaming through the streets in a crazed panic. Some Commodity stocks like CNX have made a round trip. What took CNX three months to build, took only one month to blow up. The economic reports today actually beat expectations, so once again, I emphasize that the sell-off in Energy and Commodity stocks is based on speculators fleeing because their worried about slowing demand more than some current fundamental issue or any news.

Here is a chart of the Dow showing how it held the Triangle I drew from Friday and Saturday's posts:
(click on image to enlarge)

Here is a chart of the SPX showing how it held the Triangle I drew from Saturday's posts:
(click on image to enlarge)

Here are some Bearish Movers from today:

Coal: WLT, MEE, ACI, BTU, CNX

Manufacturing/Machinery: JOYG, FWLT, DE, CAT, EMR, BUCY (amazing how badly the speculators wanted in and then right back out of BUCY, I always say that our modern trader's freneticism is breathtaking to watch sometimes)

Chemicals: TRA, MOS, POT, AGU, MON, PX, APD

Energy: RDC, SII, PXP, WFT, NE, CHK, ESV, DVN, DO, RIG, RRC, NFX, NOV, XTO, CNQ, FTI, EOG, NBL, ECA, CAM, OXY, APA, APC

Steel: NUE

Copper: FCX

Financials: ICE

Oil Shipping: DRYS, GNK, EXM, TDW

Utils: FE, EXC, FPL, ETR

Note: BG, OI, WFR

Here are some stocks that are still looking ok for Bullish trades, especially on buy signals:

Healthcare/Drugs: AET, HUM, WLP, JNJ

Retail: SHLD, AMZN

Leisure: CCL

Food&Beverage: GIS, PEP, KO

Consumer Staples: PG, CL

Tech/Services: IBM, NIHD, ESRX

Steel: AKS

Cyclicals: DHR

Manufacturing/Machinery: (AG)

Energy: (MRO), SUN

Chemicals: FMC

Railroads: CSX, BNI, UNP, NSC (Railroads are starting to look very interesting)

Financials: (MS, PRU)

Watchlist Saturday

Market Posture:

Dow: IT (intermediate term) Neutral and ST (short term) Bearish. Note the first change in the IT trend in two months. The Dow is going tight ahead of the Fed. The market has had many critical earnings announcements and economic reports the past three weeks, so much of the news is being digested into the price action. It's likely that the two-month downtrend priced in "catastrophic" (as usual), and now that the news has been less than catastrophic and especially with the relative drop in oil prices, traders are getting a little indecisive. When the market or an index goes tight, there's no point in focusing on the more recent key horizontal supports (10,830 - 10,960) and resistances (11,700). Instead I focus on the short term diagonal lines around the Triangle until the index breaks out of the tightening range.

Here is a little wider view of the Triangle I showed on the Dow Friday:
(click on image to enlarge)

Here is a longer term view showing the Dow holding the real body of the Hammer/Engulfing candlestick on the Weekly charts:
(click on image to enlarge)

SPX: IT Neutral and ST Bearish. Once again, not much to say about the SPX that's different from the Dow. The recent key horizontal support is 1,200 - 1,215, and the recent key horizontal resistance is 1,285 - 1,291. And like the Dow, the SPX is going tight, so watch for the short term diagonal lines until it breaks.

Here is a shorter term look at the SPX:
(click on image to enlarge)


Here is a longer term view showing the SPX holding the real body of the Hammer candlestick on the Weekly charts:
(click on image to enlarge)

Naz: IT Neutral and ST icky-poo yucky.....Well, ok, ST Neutral.....The Naz is still chop and slop, and it's still stuck in its short term icky-poo channel (the technical name for a choppy variant of a diagonal channel). Resistance is 2,350, and support is 2,167 - 2,200 (if it ever breaks the icky-poo channel to the downside). I don't want to touch the Naz or the Q's with my bare hands until I see the chop and slop resolve itself.

Here is a the shorter term view of the Naz, I'm not even going to try to draw channel lines around that stuff, I'll just stand back and see what it does eventually:
(click on image to enlarge)


Here is a longer term view showing the Naz holding the real body of the Hammer candlestick on the Weekly charts and forming an intriguing potential Double-Bottom:
(click on image to enlarge)

Here are some interesting potential Bullish stocks for Monday-Tuesday:

Tech: SOHU, NIHD, (ADBE)

Financials: MS, STI, (PRU, HIG, AET)

Manufacturing/Machinery: BUCY

Railroads: NSC, UNP, (CSX, BNI)

Food&Beverage: KO

Note: DHR, NOV, HES, SUN, MRO, AMZN, CCL, VAR, AG, AKS, X, (CL, ESRX)

Here are some interesting potential Bearish stocks for Monday-Tuesday:

Cyclicals: OI

Coal: ACI, PCX, BTU, CNX

Note: APD (Bearish Breakout), PX, FE, FPL, KLAC, NYX, COST, WFR, AFL, ETN, FCX, NUE, (ANF, BG, PH, CAT, ETR, EXC, NMX)

Jobs Report is So So

The July Jobs numbers gave the pre-market futures a little boost because Non-farm Payrolls came in at -51k versus the -75k expected. However, the Unemployment Rate rose to 5.7% versus the 5.6% expected, so the temporary bump in the futures might not translate to a bullish day in the market. We still have the July ISM Index report due out 30m after the open. So expect some volatility in the first hour.

Right now the market is set to wiggle out of the gate a little, maybe go a little green. If the ISM comes in better than expected then the market may finish in the green. If the ISM misses the consensus then the Dow and SPX may tumble down below yesterday's lows and then puts on the DIA and SPY and other stocks could be in order. But for now it looks like a mixed morning that could be a little volatile as traders slosh back and forth. It may be tough to get a read on the market for a little while, maybe until an hour or so after the ISM report unless the report is way outside the expected one way or the other.

8:05 am MT: The ISM Index came in at 50.0 versus the 49.2 expected, which is a pretty decent reading. However, the number doesn't appear to have beaten expectations strongly enough to overcome the technical move on the price charts, which is short term bearish from yesterday. My speculation is that the 5.7% on the Unemployment Rate has traders too nervous to buy heavily this morning. In addition, oil is up a little (not much though) on the day. For now I am nibbling on puts for DIA, SPY, and OI. If the Dow and SPX Flag back intra-day for an hour or so, I will nibble some more puts. The 11,400 - 11,440 area becomes new short term resistance on the Dow, and the 1,265 - 1,270 area is new short term resistance for the SPX. If we go past the top end of those zones I will look to stop the puts.

Use the 30m charts on the Dow and SPX to guide you for the next several hours as the Head and Shoulders has confirmed on that time frame, and has caught the attention of traders. We are probably due to bounce back for an hour or so right now, but if we do get a bounce and it rolls over below the neckline then that would be a put opportunity into the end of the day.

1:00 pm MT: The market it going tight and losing it's momentum. There really isn't anything to report, nothing has changed in several hours. I will probably sell the three put positions before the close.

1:56 pm MT: I sold all three put positions. I made .05 cents on the DIA and SPY trades and a whopping .04 cents on the OI trade. It was a toss of the coin for me as to whether or not I held the positions over the weekend because I think the market is probably going a little tighter and is unlikely to have a big gap one way or another Monday morning without some kind of dramatic move in oil prices. I finished the day with a profit of $128, so the final tally for the week is a profit of $5,119. I will look at all three puts again first thing Monday.

9:00 pm MT: Market Wrap: The major indexes closed the day pretty quietly. Earnings Season is winding down with the majority of company reports on the books. In addition, the biggest Economic Reports have been reported. The Fed meets on Tuesday to announce rate policy, but the meeting will probably be a non-event. That leaves oil as the key catalyst for next week if Benny keeps the electric guitar in the case.....

That's the way I'm playing it next week. I'm focused on oil, the short term price moves on the market, and trading short swings Monday and at the latest Tuesday morning. If the Fed is a non-event, as I anticipate, then the focus goes right back on oil. Unless we see a big move in oil prices one way or another, the market could go tight for a few days. I will trade with one eye on the market charts and one eye on the price of oil, and keep the swings short.

Here is a chart of the Dow showing the tightening I was writing about:
(click on image to enlarge)

I speculate that the Dow won't go significantly outside the Triangle unless we get a 3-5 dollar or more move in oil prices Monday or Tuesday or the Fed surprises us Tuesday afternoon. Otherwise, the biggest move down I would anticipate on Monday is a drop to 11,200, or maybe 11,150 if oil jumps 2-3 dollars a barrel. If the market moves up on a drop in oil prices I would expect 11,500 - 11,550 to be resistance. After the Fed the market may loosen up a bit and show a direction, but again, it will probably be strongly correlated to the price of oil.