The full version of this report with daily stock picks and real-time email alerts is available here for $20 per month Good Morning, Traders. With yesterday's inside day, we should assume that the sellers are in firm control and from the looks of things, today should be an optimal day to put up some plays in the short column. Seeing the market close bearish and close to the prior day's gap down into the last 15 minutes of trade is a solid signal to us that the sellers are not finished. The '02-'03 Dow lows (see recent <i>ShadowTrader Video Weeklies</i>) should be our next stop. With a bearish tone in mind, we look for where there seems to be divergence internally in stocks the same way that there is divergence in the markets (again, see recent <i>ShadowTrader Video Weeklies</i>.) When we say divergence in stocks, we mean anything like volume or <a href="http://www.shadowtrader.net/glossary.html">On Balance Volume</a> (you down with OBV? yeah, you know me!) that is moving sideways or down while price is moving up. Some nice examples in a wide range of sectors are below. <img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/081028AEE.gif"> First contestant is in the utility space. Our scans came up with a lot of utility shorts which tells us that the sector is probably under pressure here regardless of a rate cut coming or not. <b>AEE</b> has the classic bear flag pennant on and the negative OBV divergence. This happens as price goes sideways to up but the OBV bumps along near the lows. Check out <b>IDU or XLU</b> for a play on the whole sector. Almost every chart in this group looks like this. <img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/081028GENZ.gif"> This one is biotech. The divergence is very prominent here as the increases in volume on the days the stock made red candles inside of the bear flag are causing the on balance volume to tank. Note how the stock is nowhere near the swing lows in the $60 area, yet the OBV is making new lows. Negative divergence. <img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/081028CVX.gif"> How much lower can oil go? Will oil stocks make another leg lower? The chart of <b>CVX</b> above indicates yes. Same situation like <b>GENZ</b> with an inverted hammer on the daily. Any move below yesterday's low would snap the trendline and take Chevron on an all expense paid trip back to swing lows.
The full version of this report with daily stock picks and real-time email alerts is available here for $20 per month Good Morning, Traders. Basically, you can take yesterday's commentary and chuck it right in the trash. At least we didn't get short without confirmation. Those who jumped the gun yesterday were burned badly as the Dow rallied over <b>700 points from the middle of the day's range</b> which was also about the middle of the prior day's range. Not a spot where you would be expecting a strong rally. As we said in last weekend's video, there are times when volatility can trump technical analysis and just leave a trader scratching his or her head. The two emails which we sent early on yesterday, setting sell stops, turned out to be the correct moves. Had we shorted earlier and tried to anticipate a breakdown, we would more than likely have been stopped out immediately. When volatility is this high, waiting for confirmation and just letting stocks trade "through" price triggers, is your best method of entry. So obviously, for the time being, the analysis in yesterday's report was totally invalidated as the setup which was pointing lower did not materialize, and all the individual stock plays mentioned can be placed in the "no harm, no foul" file. For today it will be hard to get ahold of anything long/short now with conviction ahead of today's <b>FOMC announcement</b>, so we are listing nothing in <i>Bulls & Bears</i>. One sector that should be spotlighted however is the pharmaceutical, also known as <b>$DRG</b>. A chart is below: <img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/081029DRG.gif"> If the market can build on yesterday's afternoon rally and not fall back down in to range <B>(ie: an <b>$SPX</b> close back under 900)</b>, then some drug names would be the first place we would be looking as the sector has put in a higher low now and is building out an ascending triangle. Some small body consolidation (we love how that sounds) between roughly 260 and 270 would be sublime. Keep it on the radar.
The full version of this report with daily stock picks and real-time email alerts is available here for $20 per month Good Morning, Traders. Except for the last 30 minutes, one must admit the nascent new bull market of Tuesday is holding up very well so far. In case you haven't heard, bull markets are now classified by days, not years. In yesterday's report, we mentioned that the <b>S&P</b> must hold over 900, if we are going to be able to build on these gains at all and break ourselves out of the usual up big one day, down the next, mode. Let's look at a chart, shall we. <img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/081030SPX.gif"> We think this 900 level should be a key to future direction, simply because it was the high of the 2-3 day consolidation that we saw starting late last week. Tuesday's gains happened all at once because nobody expected them and everyone (including us) was expecting a move to the downside below the low of that consolidation which would be the lower horizontal line above. It would follow that there should be some buyers stepping in if we retrace back to the blue circled area. When we broke out of that area in Tuesday's surprise closing move, we broke a short-term trendline to the upside and many shorts were disappointed. They are all looking to cover their positions somewhere to "get their money back". The blue circled area is simply where the majority of them will be "made whole". We would be looking to buy areas of support for a quick move since that remains the only play out there.
The full version of this report with daily stock picks and real-time email alerts is available here for $20 per month Good Morning, Traders. Market continues to hold up after Tuesday's massive run up, making some small body candles which are on the right side of the trendline. This would indicate that there should be a sharp move higher very soon, possibly today if we are able to make a three day high here. The wild card is whether or not the current state of volatility will prevail and take the market back downwards for a retest of the <b>S&P 900 area</b>. This is essentially what we forsee, just to shake the bulls off of their game a bit, which is why we put on two shorts yesterday, <b>CASY</b> and <B>ABC</b>. <img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/081031SPX.GIF"> Here's the gameplan: If the market is strong today, we should buy it. The combination of the huge Tuesday rally and the break of the trendline should catch an army of naysayers with their proverbial shorts down, and they will be forced to cover. We would advocate taking positions in <b>SPY, DIA, QQQQ</b> or any other broad based index ETF if the market is able to rally above the highs made in the last two days of trade (point # 2 in chart above). If the market is weak today, we will still at this point assume strength <i>as long as we can stay above S&P 900</i> (point # 1). We would ride our shorts down to that area and then reassess the situation, possibly covering partials or fully and be looking for long entries on anything that is looking like it could be at a pivot to move higher. <b>GILD</b> in the Biotechnology space which is listed below in <i>Bulls & Bears</i> is exactly the type of situation we would be looking at.
In this week's video: -lots of factors are indicating up rather than down in the coming week <object width="425" height="350"> <param name="movie" value="http://www.youtube.com/v/Mo5Bd7SD7N4"> </param> <embed src="http://www.youtube.com/v/Mo5Bd7SD7N4" type="application/x-shockwave-flash" width="425" height="350"> </embed> </object> enjoy -shadow
Hi Peter, as always great video! Question, in the last week's consolidation, wasn't the decreasing volume suspect? Thanks as always PD
The full version of this report with daily stock picks and real-time email alerts is available here for $20 per month Good Morning, Traders. A new day, a new month, lets rock and roll. Friday put the cap on what has been the most bearish month of the year so far. That is normal as most outsized bear runs occur during this month. That also makes it the month where bear markets tend to sputter out a bit. At the end of every month, its a good idea to step back and look at monthly charts to gain some perspective. <img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/081103INDU.GIF"> October has been the bearish and widest range month we have seen in years as evidenced by the enormous circled candle above. One thing to note is that the bar does have an inordinately long shadow on the bottom of it which would indicate that sellers were not able to close the month on a down note as we know. Although Friday was no explosion to the upside, the action still shows that there could easily be some gains here in the near term as monthly shadows usually hold their lows. In addition to the comments that we have been making on the daily trendline breaks in the major averages, we would also like to mention that a recent scan of all of the 30 sectors we follow is showing many key groups such as retail (<b>$RLX</b>), transports (<b>$TRAN</b>) & semiconductors (<b>$SOX</b>) to have large bullish engulfing bars on their weeklies. Most members of our "master stock list" which is anything that is over $20 and trades more than 500,000 shares per day are also exhibiting the same pattern. Couple this with the failure of the expected retest of S&P 900 to materialize (Friday's <i>Focus Report</i>), and we see a market that should move higher at some point this week.
The full version of this report with daily stock picks and real-time email alerts is available here for $20 per month Good Morning, Traders. Market refuses to break out of range until it knows who is going to be the next President of the United States. Or seemingly so. We cannot help think that this is bullish because in an environment that is as volatile as this you can bet that if the market was going to tank backwards it should have done it already. Auto Sales, Construction Spending, and the ISM were dismal yesterday but the market responded with yet another inside day and closed flat. The whole feel of things just completely different from a week ago. <img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/081104VIX.gif"> As discussed in last weekend's <i>ShadowTrader Video Weekly</i>, the <b>$VIX</b> is backing off sharply in contrast to the market going nowhere. This is positive divergence and also tells us that the market does not want to retest lows at this point. That's not to say that it still cannot, it just seems that the current spate of bad news is being shrugged off and the fear is eking out of the market like air from a punctured tire. Slowly hissing... We remain cautiously bullish. For what its worth, Peter came in to the office this morning with a copy of the <i>Investors Business Daily, Monday special</i> under his arm. We haven't seen that in months.
The full version of this report with daily stock picks and real-time email alerts is available here for $20 per month Good Morning, Traders. Things are following through according to plan as far as the market moving up a bit. Yesterday's gap up and subsequent refusal to fill showed some resilience on the part of the bulls. As such let's look at some strong fundamental names (think IBD 100) that could get some traction in the coming sessions. <img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/081105AFAM.gif"> First item up for bids is <b>AFAM</b>. The chart is of note for the simple fact that the stock has made a new 52 week and new all time high this week. How many stocks can claim that in this market? Not many. The two horizontal lines are where we feel some support should come in to the stock. The upper line is the old all time high from August '08, and the lower line you can clearly see was also a major resistance point over the last two months. The lower line is the better entry more than likely. <img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/081105STRA.gif"> Strayer Education <B>(STRA)</b> is another one that has recently broken out as well. As there is no prior resistance breakout point like in <b>AFAM</b>, a simple Fibonacci analysis could give clues to areas of demand. <img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/081105MCD.gif"> Finally, McDonalds <b>MCD</b> is looking to be firming up. We are focusing this one for those of you who like your stocks with a little less beta. <b>MCD</b> could be nice for a longer term hold off of the support of the lower trendline, or a breakout above the upper one. If in doubt, make a Happy Meal out of it by taking some shares at the support level and adding to your position on the breakout. Our target on the S&P is 1044.31, which was the 10/14 high. The 'straight down' pattern just to the left of that date, however, indicates a complete lack of resistance until 1100 which is defined by prior swing lows and also the 50 ma daily.