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Sample MarketGauge Stock Market Outlook: March 23, 2011

**Here’s another sample of MarketGauge’s Market Outlook newsletter.  Given the amount of global political and economic news affecting the stock market, we thought this latest newsletter from MarketGauge is a worthwhile read for both the big picture and technical analysis of market conditions and trade ideas.

March 23, 2011

by Keith Schneider
According to Venezula President, Hugo Chavez, life on Mars was destroyed by Capitalists. He believes that those same guys moved here and are going to do the same thing. He could be right, if one looks at the market’s behavior today and trusts that a modicum of logic should prevail while trading.

Today we had so much bad news that it is mind boggling to see the market close as strong as it did. Bad housing starts, continued unrest in the Mid-East, a terrorist attack in Israel, higher oil prices, record setting gold prices, and food embargoes because of nuclear contamination all were headlines today.

The icing on the cake was that the 9.0 earthquake that devastated Japan will cost upwards of 300 billion (dollars… not yen). Food is unsafe to eat in large areas of Japan, including Tokyo. The US Equity Market closed up across the board with good volume. As a student of the markets, I call upon the old adage, “Horrible news/good action=Bullish.” This, however, is extreme.

SPY (S&P 500), DIA (Dow Jones), IWM (Russell 2000) and QQQQ (NASDQ 100) Indexes

The market phases of the key U.S Equity indexes are quite divergent. The NASDQ (QQQ’s) and the SPY (S&P 500) are the weakest and are in warning phases, while the DIA (Dow Industrials) and IWM (Russell 2000) are back into bullish phases after flirting with warnings. We turned from a 1% morning decline in the weakest index to a modest +.47% gain in spite of several pieces of news that should have brought this market down big time. At this point in time we are now down since the start of the year.

Market Internals

VIX (sentiment): This sentiment indicator flashed a sell signal after moving above the 200 day MA for a few days and then with the rally off the panic low, moved back into bullish territory, but in an overall weaker position before the Mid-East crises began. This indicator is cautiously bullish.

Accumulation/Distribution Volume: The market responded to all the news with several bearish distribution days and is currently on a sell signal with over 4 days of distribution in all key indexes. However to add another piece of data to the mix is that last week’s 240 plus decline in the Dow had the earmarks of a selling climax.

Sectors

Gold (GLD): Gold’s closing price is on new all-time highs today, and looks poised for another big leg up. If we can take out the 5 month intraday high, we could move up another $100-$125 quickly.

Oil (OIL) and Coal (KOL): The Mid-East unrest and current disruption of Libya oil production along with the viability of nuclear power in question put continued pressure on energy prices. This includes coal, crude and natural gas.

New Economy Stocks: The most interesting charts playing out in terms of leading stocks representing the web economy are both NFLX and BIDU. BIDU is at all-time new highs and NFLX keeps roaring. Other leaders such as AMZN GOOG and AAPL performed well today but have been a drag overall on the NASDQ indexes. All look a bit oversold, so they could bounce.

Netflix Nasdaq Tradestation Chart Technical Analysis

Opening Range Strategies

Today we featured an energy play BTU in our live trading room. It was a fairly classic pattern with the daily chart pattern very strong and we bought an OR breakout but waited for the stock to clear R1 (a floor trader pivot number) before entering. By the end of the day we achieved our first profit target as the stock ended up over 3%.

BTU stock opening range breakout trade

Good Night and Good Trading.

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For more insight into specific Opening Range trading strategies, try our brand new AM Trader Course, along with our new Live Trading Room (Day Trading with HotScans), and watch us execute Opening Range strategies live!


Technical Analysis of SPX Chart Shows Deteriorating Social Mood

contributed by JW Jones, OptionsTradingSignals

“We crawl on our knees for you,
Under a sky no longer blue
We sweat all day long for you,
But we sow the seeds to see us through
‘Cause sometimes dreams just don’t come true,
Look now at what they’ve done to you.”

– Rise Against: Re-Education (Through Labor) –

Before getting into the broader markets, I thought it was pertinent to share with readers that recently I have noticed a trend in alternative music, also known as modern rock. As a fan of music in general, I have noticed that more modern and mainstream music is starting to underscore the deterioration in social mood. Mainstream songs are having a resoundingly similar lyrical undertone which outlines the “us against them”, “rich versus poor”, and the political class versus everyone else.

While I am not a sociologist nor do I have any real training in the area, the underlying tone in a lot of artistic mediums highlights the current chasm between the haves and the have-nots. While some might argue that it does not matter, if you as a reader, trader, or investor believe in behavioral finance you might agree that social mood matters a great deal. After all, the entire premise of technical analysis is an attempt to quantify market participant behavior at specific price levels.

Social mood is but one catalyst that can have a dramatic impact in price discovery, and thus must at the very least be monitored. Current music trends are literally screaming loud and clear that the average American can relate to the undertones and messages of song lyrics with the same resounding tone as the Rise Against lyrics listed above. Believe me, it may not matter right now, but it will matter and when it does it will likely be too late for financial markets.

Now that I have my little rant out of the way, why don’t we take a look at where the S&P 500 has been, where it is now, and where it might be going. Currently price action in the S&P 500 is sitting on the edge of a fence. We could be looking at an intermediate bottom or it could end up being a bull trap. As for me, my recent prediction for lower prices has indeed come to pass, but from hereon I have no real idea where price action is headed. Mr. Market is leaving a few clues behind which I will outline, but anything is possible. We have seen stocks climb a wall of worry for nearly two years now so there is precedent for a rally from this current point of indecision.

The daily chart of the S&P 500 listed below illustrates key technical levels on the daily chart, however readers will notice that we are currently caught between a ton of overhead resistance and a key support level. Until we see price move in either direction with volume confirmation, I will be sitting on the sidelines.

Another key chart to consider is the SPX weekly chart. A quick glance at the slow stochastic readings at the bottom of the chart reveal that the S&P 500 might have additional downside left before the market is able to form a solid bottom. If that is true, we could see the SPX test the 200 period moving average on the daily chart which would be around the 1186 price level. Additionally, the 50 & 200 period moving averages on the weekly chart correspond with the 1180 price level which is likely not coincidental. The level also corresponds with key resistance areas going back to the November 2010 lows. While a downward move that large seems a bit extreme to me at this point, anything is possible.

As can be seen from the chart above, price action is currently sitting above the 20 period moving average on the weekly SPX chart. Key support levels are around the 1225 and 1180 price levels. I would also point out that a Fibonacci retracement of the recent pivot high to the recent pivot low gives us a possible 1.618 retracement around the 1190 price level. Additionally, the slow stochastic on the chart above is eerily similar to levels that were seen on the weekly chart back in May of 2010. Will price action work lower? Will the weekly slow stochastic reading kiss the 20 level?

At this point, a few of you might think I’m outlining the case for lower prices in the equity market. I honestly have no idea where price is going from here, I’m just outlining some key aspects that I have found in my analysis to the downside. The upside is just as likely and we could see the SPX price bounce off of the 20 period moving average on the weekly chart and a challenge of the recent highs could play out. Should recent highs give way to breakout, the SPX would likely test the 1,400 price level at some point in the future.

If we look at the VIX for any clues, all that can be seen from that chart is a spike higher and a subsequent selloff as fear and uncertainty leave the marketplace. The VIX is currently arguing for higher prices in equities, however the financials represented by XLF are the fly in the proverbial ointment. The banks were unable to attract a bid on Monday’s strong advance and they experienced additional selling pressure on Tuesday.

In fact, the XLF’s daily chart shown below reveals a key test and subsequent failure.


A quick look at the XLF daily chart and it is rather obvious that price action in XLF has been weak in the past two sessions. Price moved higher off of the recent lows, tested the 20 period moving average and rolled over. Price is currently below key support levels, but we could witness a reversal on Wednesday. I am going to be watching the financials (XLF) quite closely in coming days as I believe the banks will provide traders with clues as to which direction Mr. Market is favoring. Right now it would appear that Mr. Market is favoring lower prices, but that would seem a bit too easy from these eyes.

We could consolidate at these price levels for a period of time. The volume on Monday and Tuesday was light and we have non-confirming signals showing up in a variety of underlying indices. I am unwilling to accept any directional risk at this point. I will let others do the heavy lifting while I sit safely in cash and watch the price action play out.

The price action will eventually give us a confirming signal as to which direction prices will be heading, but right now I believe the prudent thing to do is remain in cash and wait for Mr. Market to signal which direction he favors. We are either sitting at the beginning of a major move higher or we are at a precipice and prices are about to plunge. Either way, risk remains high and the risk / reward is simply not there to warrant an entry. As I have said many times, sometimes the best trade is no trade at all!

Get My Trade Ideas Here


The Number One Mistake for Forex Traders: Losing Focus

by Scott Downing, BigTrends.com

This article is one that I’m asked to do over and over again…and that’s because so many people fail to focus! In the article I’ll give you some rock solid tips and methods to staying focused, and in my Forex Toolkit I’ll give you an indepth video on making the methods stick! Get my kit here, and enjoy the report!

What you probably don’t realize is that the “mind game” of Forex trading is just as important as having a proper trading system. This is why up to 95% of novice fx traders blow up their accounts. They make simple mistakes that cause a downward spiral of confidence. Or they let greed and fear push them into that one crucial decision that costs them all their profits (remember the big leverage that Forex gives you is a double-sided sword).

We’ve been successfully trading and educating traders at BigTrends.com for over 10 years and we know the proper mindset is extremely crucial to long-term trading success. One of the most important factors is to take the emotion out of your trading as much as possible. Logical, systematized, rule-based trading is a much better bet versus emotional trading and not having a plan.

[continue…]


The Market Continues The FOMC March Upward

By Chris Vermeulen, November 4th, 2010

With the election over and congress divided, it may be difficult for the president to get much done. None of this will take affect until the near year but traders are asking the big question… Will the government work together as a team or will it be a stalemate?

Today’s whipsaw action after the FOMC statement shook things up as it always does. We saw gold, silver, the dollar, SP500 and bond prices go haywire. It took about 30 minutes for the market to digest this news in that time a lot of people lost money because of the wide price swings. Trading around news, I find, is a net losing trade over the long run and I advise never to do it. Rather wait for a trend to form and trade any low risk setups that come your way.

I truly believe that the market has already priced in most news and events which unfold, and that news tends to agree with the overall trend of the market. Of course there will be short term blips on the charts from the news, but they tend to be minor setbacks in the underlying market trend. That being said, the trend is our friend, and while so many are trying to pick a top in the equities market it makes me cringe because they are fighting the trend and the Fed.

…read more


ETFs Affirm This Unbelievable Bullishness (QQQQ, SPY)

by ETFTRADR’s Andrew Hart

We all know the ride’s going to end sometime, but in the meantime (and until further notice) it’s still a trade-worthy ride. What is it? It’s this bullishness. Yes, it’s overextended, hard to believe, against the odds, and….. not a bit surprising to us?

One of the greatest parts about being disciplined enough to stick to a proven trading methodology is that you really don’t have the option – in a good way – of convincing yourself it’s “alright to ignore the evidence just this once”. Either something is bullish, or it isn’t. One of Price’s oldest and most successful of bull/bear methodologies like these can be applied by making of just two ETFs. Which ones? The S&P 500 SPDRs Fund (SPY) and the NASDAQ 100 Trust (QQQQ). Here’s the gist.

You’re probably aware that the market’s different indices – and different ETFs – tend to move in tandem with the market’s bigger trend. What’s not quite as recognized, however, is that the NASDAQ tends to lead the way with stronger moves, both up and down.

The practical application of such a theme is two-fold. First, spotting this relative strength of the QQQQ’s over the SPDRs (or QQQQ’s under the SPDRs, in bearish cases) can identify new trends as they emerge. Second, and perhaps better, by waiting for the NASDAQ’s relative leadership, you can distinguish the real emerging trends from the fakeouts.

A couple of examples will really nail down the premise. [..read more]

 


Geithner vows U.S. will not devalue dollar | Reuters

“PALO ALTO, Calif./WASHINGTON (Reuters) – Treasury Secretary Timothy Geithner vowed on Monday that the United States would not devalue the dollar for export advantage, saying no country could weaken its” -> Full Article on Reuters

‎…but U.S. will indirectly use other central banks and monetary policy to devalue the dollar. Planet earth is all in this together!


Busy day for webinars by marketHEIST featured traders

4 Major educational webinars today by marketHEIST featured traders:

4:30PM EST

Corey Rosenbloom Webinar “Trading Intraday Price Reversal Using Momentum Divergence” hosted by Trader KingdomBrand: AfraidToTrade (Corey Rosenbloom)

5:30PM EST

OptionsAnimal Webinar: “Trade Adjustments with Charan Singh” hosted by OnlineTraderCentral.comBrand: Options Animal

7pm EST

Trade Options like a DPM Webinars #4 “Synthetics & Equalities” presented by Hamzei AnalyticsBrand: Hamzei Analytics (Fari Hamzei)

8PM EST

Larry McMillan Options Webinar: Understanding and Trading VIX Options – Pt. 2 – Brand: McMillan Analysis Corp (Larry McMillan)


Japan Intervenes in the Japanese Yen Currency First Time in 6 Years!

A big news this Tuesday night (here in CA) and Wednesday morning elsewhere in the world, the Bank of Japan directly intervened in the currency markets, selling Yen to stop the Yen’s rise that’s hurting their trade and thus economic recovery.  Reuters said:

” The dollar extended its gains after intermittent yen selling and was up 2 percent on the day and nearly two yen above a 15-year low. But it was unclear whether Prime Minister Naoto Kan’s government had the stomach for a prolonged campaign similar to Japan’s last foray into foreign exchange markets in 2003-2004.

Finance Minister Yoshihiko Noda confirmed the intervention, saying Tokyo was also communicating with authorities overseas but indicating that Japan acted alone.

U.S. officials at the Federal Reserve and the Treasury declined to comment immediately about Tokyo’s action.

Noda would not say whether the authorities were buying dollars in the first intervention since March 2004, but two traders said the Bank of Japan appeared to have bought dollars around 83 yen at the start of the action.

The Bank of Japan acts on behalf of the Ministry of Finance in currency intervention.

“We will take decisive steps if necessary, including intervention, while continuing to closely watch currency market moves from now on,” Noda told reporters at a hastily arranged news conference.

The dollar had hit a 15-year-low at 82.87 yen earlier in the day but was at 84.78 yen by noon.

Prime Minister Naoto Kan’s government has been trying to talk down the yen but until Wednesday had stopped short of intervening in the markets, apparently worried that acting without Group of Seven partners would not be very effective. “

This is bound to cause big waves in trading around the world on Wednesday.  Raymond Anselmo, aka @RiskCap on twitter & Forex moderator on Hamzei Analytics’ HFT, tweeted this chart of the USD/JPY currency pair (and that is why traders should always use stops! talk about in-your-face-ness…):


Intel Continues it’s Buying Spree with Infineon’s mobile unit for $1.4 billion

Within 2 weeks of offering to buy the major antivirus software maker McAfee for $7.7Billion, Intel (INTC) is on the prowl again, announcing to buy the German chipmaker Infinion’s wireless (mobile) unit for $1.4Billion:

From Reuters:

Intel will buy German chipmaker Infineon’s wireless unit for $1.4 billion, enabling the U.S. chipmaker to boost its presence in the smartphone market.

The cash transaction is expected to close in the first quarter of 2011 and the mobile unit will remain as a standalone business, the companies said in a statement on Monday.

Three people familiar with the matter had told Reuters on Friday that Intel and Infineon would likely reach an agreement on the business’s future within the next few days.

This is the second major deal for Intel within two weeks after the company announced its $7.7 billion offer for McAfee Inc on Aug 19, its largest acquisition, bolstering the appeal of its chips as it tries to expand further into the mobile market.

Intel’s Atom mobile chips took the low-cost, no-frills netbook market by storm but are rarely found in smartphones where other chipmakers dominate.

Full Article: http://www.reuters.com/article/idUSTRE67Q3J820100830