Paden: I don't know who this Hermie is but its funny you say that because when I was little kids used to call me that because I looked like that elf of the same name from rudolph the red nosed reindeer. Either way, thanks for the endorsement. Here is just the commentary and chart of today's focus report. The full version with stock picks and real time email trade alerts is available at our site for $20 per month. The Big Picture <img border=5 width= 559 height=659 src="http://www.shadowtrader.net/focus_report_charts2008/080428NEU.gif"><br><br/> Good Morning, Traders. Though we are bullish on the market we are opening up today's letter with a potential short candidate. Note the vicious selloff on the chart of NEU above, as investors did not respond favorably to earnings on 4/23. The gap down-destruction bar of 4/24 trapped all the longs who were patiently waiting to take profits on this IBD 100 darling (currently ranked 30th). NEU basically doubled off the lows in just three months, forming virtually no areas of support along the way. Once the trend reverses on these type of advances, watch out below, as there is nothing left to slow the fall. Look for a light volume bounce into the 50ma as a low risk short entry point. This stock could easily slide back down to the 200ma over the next few weeks. Some market leaders bounced back nicely on Friday while others have a tough road ahead. Heavy volume selling in fertilizer stocks suggests they need a few weeks of consolidation to digest recent gains. These stocks have made an impressive run but are now on everyone's radar, so who is left to buy? Coal stocks look buyable on this recent pullback. CNX, BTU, ACI, and JRCC are swing setups over the prior day's high. BUCY pushed to new highs on big volume which should benefit other farm & mining machinery stocks such as CAT, AG, DE, and JOYG (all strong chart patterns pulling back off the highs). We see quite a few pullback opportunities in oil stocks like DO, DRQ, ATW, RIG, WHQ, HES, XOM, and SLB (mostly oil equipment and services). Markets got off to a rough start due to weak earnings from MSFT, but managed to stabilize during lunch and extend higher through the afternoon session. The SPX closed positive on the day and finished the week just below the all important 1400 pivot level. The early selling was heavier in the Nasdaq, as evidenced by the internals. At the session lows, the NYSE breadth was a minimal 1.4 to 1 versus a bearish 3 to 1 negative reading on the Naz. While the Naz struggled to push higher late in the day, the S&P set new intraday highs led once again by the financials. The Fed meets this Wednesday, so it would seem unlikely that the S&P will take out 1400 prior to the decision. The market knows that there is a chance the Fed is through cutting rates but doesn't seem to care (the dollar has rallied ahead of the Fed possibly signaling no cut at all). Leading groups recovered from heavy selling on Thursday and new groups and names are continuing to emerge, so the technical picture for bullish patterns remains very positive. We remain cautiously bullish ahead of the Fed and look for broad market indices to eventually push higher.
Hi Peter, Where's the market going from here in your estimation? I sold my QQQ's the other day for a nice 2 point swing trade, and bought some Q Puts at 47.5. Weekly chart looks bullish, but I'm looking for a pullback to close the gap from last week's trading. Just looking for another opinion. Thanks, Brett Fogle, President Options University
Brett: Obviously we are bullish and remain so, using the SPX as our barometer and seeing that we feel a push to 1440 is somewhere around the next corner. Below is a chart of what I see in the Q's for now. The fibonacci retracements on the chart are referencing the swing highs of early November 2007 to the dead lows of the move in March of 2008. Having crossed the 38.2% retracement we feel a push towards the 50% before a bigger correction that would put the q's in your target makes more sense. There is also that 200ma daily up there (the upper blue line) just over $48 which should begin acting as a magnet as we are getting closer and closer to it. These 200's are powerful and seem to often draw prices to them and hold 'em. I do see your point and the trade could certainly work out on a natural retracement, while still keeping the bullish argument intact. One thing to think about however is that FOMC is gonna decide rates again on Wednesday of this week. Me personally, I would not be making broad market bets ahead of that unless my options were further out. If you are talking May 47.50's and the market pops on the Fed, then there may not be enough time for you to realize a gain later even if we do start to retrace with all that time value working against you. Good trading to you..... -shadow
Hermie = Peter. I called you that occasionally in emails last year, after you confessed the Rudolph story "on air." You may remember me from "boy, I would hate it if my tail was violated to the upside as well" I thought that was pretty funny when you said, "everyone will be upset once the tail is violated to the upside, and will exit their position..." Anyhow, I still listen to the broadcast most days, as I am trading and watching the kids. It helps to have more eyes on the markets to help me watch the little ones.
Paden: Yes I remember you, good to hear from you and don't let anyone violate your tail to the upside, lol. Here is just the commentary and chart from tomorrow's focus report. The full version including stock picks and real time email alerts can be purchased for $20 per month here <strong>ShadowTraderPro Focus Report for April 30, 2008</strong> The Big Picture <img border=5 width= 559 height=659 src="http://www.shadowtrader.net/focus_report_charts2008/080430SPX.gif"><br><br/> Good morning, Traders. Rather quiet day yesterday as the market continues to chop a bit ahead of the fed. The key point here is where its currently chopping. Up at the highs and sitting right under the 1400 which we have discussed at length in earlier editions of this letter. We like the way the market is acting so much around this area that honestly if there was no FOMC meeting today, this commentary would be telling you something like "buy any strong name today on a breakout over yesterday's high and add to the position once the S&P is out of the gate over about 1405". But alas, something always has to be in the way to make the game harder. That something today is of course the fed. For the first time in a long time there is talk that after today's expected 0.25 point cut there could be a pause to the easing. As always the clues will lie in the wording of the comments that are released just after the decision on rates. From the various pundits that we have culled through to get a consensus of what might happen, the overriding theme seems to be that the language will imply a temporary pause to the easing cycle that will resume at the end of this year and then take the rate down another 75 bips in early 2009. We shall see.... Ok, now on to some stuff that would actually be of use... The best scenario for stocks we see here is the usual hard run down right on the announcement and then an immediately powerful rally back upwards that would take the market at least up to yesterday's highs. This would be ideal because it would be a simple scenario of just getting the news over with and then allowing the technicals to take over. Once they take over its obvious that nobody is selling this market up over 1400. Prices will move along the path of least resistance which up and over that pivot would be up. Visa's (V) action yesterday was a perfect example of this. The morning selling just took out the momentum players who were in the stock well over $75 and were only looking for an earnings pop. When faced with a gap in the wrong direction, they all dumped and the huge recovery in the stock was a clear sign that the sellers were simply washed out. There just weren't any there after that initial wave. We see the S&P the same way here. Fed says the usual blah blah blah, market should tank, then IF (and the IF is the most important word here) it recovers quickly and closes strong, <b>buy this market.</b> If we can get a setup going, here's some stuff we like and is on our wish list. SOL - Anywhere over $17.60 ish<br> CNQR - Needs a bit more time to pullback. Yesterday was day one of that countermove on low volume which we like.<br> TTES - Lovely, simply lovely. 20ma and uptrendline with a cute, little bottoming tail. Take it over yesterday's high, it reports 5/7 and should be strong into its numbers. Dump her the night before.<br> KAMN - A defense play, not defensive but defense as in "aerospace and". Must be over $28.65 only or no play.<br> NOV or WFT - Same group, oil services which got hammered today on a $3 drop in crude. Oil will rebound and these will fly again.<br> MW - Not a sexy stock nor a cool sector but the weekly chart speaks volumes. Just starting to crawl up to where an extremely big dropoff started which will not resist on the way back up.<br> BKE - Some clothing store. Never been in one but the word is they offer free hemming and gift wrapping. That was all we needed to hear, buy the stock. As you know we're a lot more hip-hop than country around here but we came across this quote from Dolly Parton which could not be more fitting pre-Fed and chopping around just under this key breakout level....<i>"Storms make trees take deeper roots"</i> We doubt that she was thinking about how volatility acts as cement to lock in bottoms and turning points in the market when she said that, but we feel its the same sentiment.
Market made a solid rebound today, taking back the Fed losses which was important to show that that the selloff was nothing more than a kneejerk reaction to news. We finally closed over the 1400 SPX today which is key. Next stop 1440. More than likely within the month. Some things we see of note that we feel are very important going forward: Oils, Chems (fertilizers like POT & MOS). and Steel are probably not going to be the leaders this time around on this leg. Pull up any of those and you can see that some have just been crushed. Although today's strength made bottoming tails on a lot of them, we feel that late to the party buyers could be "itching to get their money back" in some of those popular names. A good example would be agricultural stuff like DE and AG. They were leaders earlier but got so hammered down now that people will be sellers on any rallies. The oil services might still have another run in them but pass on the fertilizers. Some groups like Pharma and Retail which aren't as 'sexy' will get some bid here via sector rotation along with older established names from the S&P 500. We bought IBM and TTES today as long trades in the model portfolio, and pared down our position in GWR which turned out to be one of the strongest stocks of the day Below is the email we sent out on GWR at 11:48am. I'd love to get some comments on the Trade Explanation because this is a perfect example of where you make a cool, rational decision based on FACTS and the market basically says "f*** you". Rules are rules though, so you gotta follow 'em. Please share your own "horror' stories..... You can get these alerts via email in real time along with the rest of the newsletter (2-4 stock picks per day) for $20 per month here We'll post a full free focus report tonight...Prior issues to check are in this thread and also available here -Shadow
Commentary and chart of the day from Friday, May 2nd Focus Report: Full version with stock picks and real time email alerts is available at our site for $20 per month. <h1>The Big Picture</h1> <img border=5 width= 559 height=659 src="http://www.shadowtrader.net/focus_report_charts2008/080502PPH.gif"><br><br/> Good Morning, Traders. One need only glance at the top performing groups to get a clear picture of yesterday's rotation. Thursday's steady march higher was fueled by money flowing into tech, financials, retail, builders, and transports. After a few months of solid leadership that carried the market off the lows, commodity driven stocks were nowhere to be found. Why? The dollar has been firming up over the past few weeks and that is bearish for commodities, which have acted as a "hedge" against a declining dollar over the past year. While ShadowTrader "economics" may not be worthy of a guest spot on Kudlow, the ticker tape never lies, as oil service and gold sectors were hit the hardest (though oil recovered nicely off the lows). We are not calling for a top in commodities, only noting yesterday's rotation and the fact that these sectors will have a harder time rallying now that they have been beaten down a bit. As Q1-2008 leadership pauses, new stocks and groups will emerge to take the market higher. With financials in recovery mode we see short term bullish patterns in LEH, MS, and BX. There could be a move up happening in the pharmaceutical sector which has been going sideways in a range after a steep dropoff for some time now. Take a look at a possible bullish play on PPH over $72.00 on the chart above. PPH is poised to break the downtrend line after closing above the 50ma for the first time since mid-January. The perma-bulls finally got their close, as the SPX finished above the all important 1400 resistance level. After a sluggish start, the SPX got into gear near the end of lunch and plowed through 1400 on multiple +1,000 tick readings and heavy mid-day volume. Internals confirmed the action, as they pointed in a north eastern direction all day long. Today's action should begin the next leg up that takes the S&P to 1440. We remain bullish on this market for the short term. <BR><BR>
ShadowTrader Video Weekly for May 4th, 2008 In this week's video We continue to meander higher, 1440 still near term SPX target. Certain fertilizer stocks may be finished for the short term. To view this week's video, click here
Get this report for $1 per day on our site.... The Big Picture <img border=5 width= 559 height=659 src="http://www.shadowtrader.net/focus_report_charts2008/080506ANW.gif"><br><br/> Good Morning, Traders. The obvious take from Monday's session was that the market (most stocks) chopped around all day and did nothing....a total snoozefest. But one must dig a little deeper to find the clues that reveal the health of the current rally (hint....market leadership). Leading groups resurfaced yesterday, as steel, oil exploration & production, and coal stocks returned to action after a two week stint on the disabled list. Think of leading stocks as the number 1 and 2 pitchers on a baseball pitching staff. You expect to get your wins from the top guys and just hope that the bottom of the rotation can win a few here and there. Same goes for market leadership, as steel, railroads, and energy stocks are the aces bringing the heat, while the financials are the bottom of the staff just trying to hold up. The health of this rally is not measured by lagging stocks, as they tend to produce gains only when the broad market agrees. Trader's faith must be put into leading stocks and if they continue to push higher, we in turn must assume that the market will follow. So what's left to get excited about? Solar stocks are still hanging around with FSLR holding up well after a heavy two day sell-off. While FSLR could very well see another leg up, the stock is pretty much on everyone's radar making it a crowded trade. An alternative to FSLR may be SOL (purchased in the Model Porfolio on Monday), which bounced off support of the 20ma and looks to be resuming its uptrend. For those who just cant bring themselves to buy stocks at/near 52-week highs, solar stock TSL is sitting on top of the 200ma in a tight range and looks buyable on a breakout. Other names thrown into the mix from our scans are possible breakouts in ANW, CE, RBN, NICE, DECK, GDI, FLS, and EOC. ANW broke its downtrend line at the end of March and has been making higher highs since. It's currently trading in a tight range on top of the 20ma, and is poised to breakout and make a run at the prior highs. Note the two washout bars and the bullish recovery. Contrary to what many new traders believe, false breakouts and breakdowns are key components to quality breakouts. It was a typical day of consolidation across the board, as indicated by the mild selling in the internals and lighter overall volume. All major indices are drifting sideways to slightly lower since Friday afternoon, which we see as bullish action in this resilient market. We must also note that the market has fought off distribution when it has mattered most, as was the case with Friday's session which could have turned ugly. Due to the tight ranged action in the broad market, we could see a undercut beneath the two day low to wash out all the weak longs before heading higher. We remain bullish.
Get the full version of this report with daily stock picks and real-time email alerts here The Big Picture <img border=5 width= 559 height=659 src="http://www.shadowtrader.net/focus_report_charts2008/080508SPX.gif"><br><br/> Good Morning, Traders. There is no doubt that yesterday's ugly bearish engulfing bars in broad market indices were a clear warning signal for the bulls. However, it is still too early to tell whether or not Wednesday's reversal will lead to a buyable pullback or further distribution and topping action. From a bullish perspective an orderly pullback in the market would be welcomed, as many leading groups are quite extended from support and could use a few days or more of rest. Traders should be patient and hold off on establishing new positions right away. We suggest making a note of what stocks are holding up relatively well versus any broad market weakness. If the market pulls back in orderly fashion, then we should see new buy candidates emerge and/or quality pullback situations in leading stocks. The "professional hour" is the last hour of trading, which can often reveal the true sentiment of the pros. The selling intensified late in the session,as evidenced by re plunging internals and a noticeable pick up in volume. While we hate to use this word.....it seems as if many extended stocks fell victim to some good ole fashioned Wall Street profit taking (there we said it!). The bears certainly may sit up and take notice, but we would have to see a few more days of similar price and volume action to call this "bear market rally" dead. For every bearish case in the market you have situations like IBM which (thankfully for us) acted ridiculously strong today, testing swing highs just under the $125 even in the face of broad market selling. When the market collapsed under its own weight, IBM held up, backing off less than a point from intraday highs. So what's next? The SPX looks as though it is a lock to at the very least test/undercut the convergence of the 20ma and uptrend line around 1380 (note the chart above).