Gotta be honest with you, I did not see that one coming. I figured we were going to have an inside/positive choppy day. Up 2.1% on the SPY was not what I expected. Especially since my two best trades today were BIIB and MON short. I expected a defense of the 50 day and the trend line but not this.

The focus on today’s rally will be the lack of volume, for the last six session the SPY did over 225 million shares, today we didn’t break 199 million. Even with such a strong performance the SPY did not mange to recapture its 50 day MA so we will have to see if that acts as some kind of lid.

QQQQ, OIH, MDY, JNK, IYT & IWM all had the kind of day I was expecting inside/positive on lighter volume. The exception was financials (XLF) that outperformed on better volume than yesterday.

The Fed announcement comes Wednesday so I think we are going to see some position squaring before that and then it is going to be pretty quiet. With that said I have very little for you tomorrow on the momentum front. If education names continue to be weak there is a shot of a break down in EDU below 70.

Many of the charts I looked at tonight have a very similar pattern; they peeked around the middle of October rolled down through the 20 day, touched/broke the 50 day yesterday and rallied today. Keep an eye on yesterday’s lows in the market and in many of these names. If we start to break through yesterdays low there is trouble ahead. I would also add that if we start taking back the 50's and 20's were are probably headed back up to the highs.

Obviously very ugly today, if you wanted a clue of what was to come today all you had to do was watch GS. It treated the 50 day MA like it wasn’t even there. She went through around 9:50 and never looked back; GS was down 3.7% on solid volume, it was telling.

My guess is that after 4 days straight down we are over sold and that the bulls may try to defend the trend line and 50 day. I think it will result in some choppy trading around this important level. But like I said yesterday it is important for us to hold around here to have a shot at resuming the uptrend anytime soon. If we fail here, next stop on the SPY is probably down around 102.50/102.

I would also add that the QQQQ is trading just below its 50 day as well, and the next stop on the downside there is around 40.

I have no breakout long alerts only shorts but with the oversold condition these alerts may end up becoming support buy spots.

bac 15 229
mon 70 6.1
edu 70 357
nsc 46 3.5
axp 34 13.1

To help support the market some important etfs are still trading above the 50 day MA. DIA, GLD, OIH & XLK.

Not coincidentally we had another high volume rally in the UUP. The 50 day on that is above at 22.84 and may provide a lid on it.
km

The indexes were flat on the day, but with the exception of energy I thought the individual sectors looked awful. There was another big volume bar in the UUP and a close above the 20 day MA. If this continues it could spell trouble for the market.

Still the NASDAQ and the S&P are above their 50 day MA’s and reaction to those levels is going to be key to the near term performance. Like yesterday I feel that if we approach SPY 105 in a quick vertical fashion we could see a nice bounce. If there is a second meaningful test however it could be a problem. Take a look at the RIMM chart from today and the $64 level for an example.

BAC and HIG look good on the short side in financial/insurance weakness, watch C and PRU with HIG and BAC. If we get another strong down day in C and PRU their 20 day MA will cross the 50 on the downside. Also for financial strength and general market health watch GS 176.86 that is the 50 day MA.

It’s kind of extended but XOM has a nice clean long spot at 75. Careful with that one oil numbers are out at 10:30.

bac 15 229
hig 24 11.5
xom 75 21

I am reluctant to tops and bottoms but we really need to hold these levels if we have any shot of resuming the uptrend any time soon.

It's starting to get interesting

Well it’s starting to get a little interesting out there. There was a nice rally in the dollar today and equities were soft. It was a huge volume day for the UUP they put over 6.8 million shares on the tape more than 3x the average volume. Basic materials, financials, gold, silver, crude and the ag/chem space took it particularly hard.

I wrote last week that we would have to see how the markets reacted at important moving averages to see if we are really going to rollover or if we should continue to buy dips.

The SPY is right on its 20 day, but I don’t think that is really the important spot. Down at 104.95 is the 50 day MA and trend line off of the March low. How we react at that level, if we get there, will be key.

If the market rolls hard tomorrow and gets down to 105 level in a hurry I think we could get a bounce, but a couple of days of weak markets to get us there could be a problem.

Also a number of the bond etf’s look awful. There is a lot of supply this week but any rumor of a US downgrade would not be well received.
TLT (20 year)
TIPS
IEF (7-10 year)
SHY (1-3 year)

We're back!!

The longs "We're back!"

The shorts "That's all you got!"

That is pretty much where we are in the market.

We closed below the highs and that lid remains in place. It feels like we are going to slug it out between the highs/ minor new highs and the moving averages until they converge. It will be interesting to see what happens then, but I suspect we will go higher. Watch yesterdays low in the UUP 22.26 and the 20 day MA 22.63 for some direction there.

I have heard people say "I don't know how this market can break out without the likes of BAC,GE&C. BAC closed below its 20 & 50 day, GE closed right on its 50 day and C closed well below both. Additionally BAC and GE look like they may break down if they break 16 & 15. We may want to start asking ourselves if BAC, GE & C are the MSFT, DELL & YHOO of this era.

I didn't expect much from today and expect less from tomorrow, but watch the dollar and the USO it looks like a break out through 42.

As we all know it was ugly this afternoon . However some places however were uglier than other. Pharma, financials (especially regional banks), semis, retailers and restaurants were especially ugly.

While energy, Ag's, and other commodity plays and some tech were strong.

The sell off came late in the day and was quick and violent but I am not sure how much technical damage it actually did.

The bulls will say that all the major index's are still in up trends and above important moving averages. That the sell off was contained to certain sectors and caused by some bs analyst downgrade.

The bears will say despite AAPL's strength good numbers last night and a weak dollar the market did not have what it took to get through the gap. All it took was a bs analyst downgrade to panic weak longs, what if something bad really happened.

I feel like we are still in an uptrend until the major indexs and some important stocks start to give up those MA's. With that said breakout longs are going to be a lot tougher going forward.

Today's market action and taxes in Brazil

I must confess that I was surprised by today’s action. Between AAPL being so strong and us being right at an important gap I expected some kind of fireworks, either a strong trend day up through the highs or a gap open and an ugly fade. What we got was a pullback and that is a testament to just how strong this market is right now. I would expect that there are some bears out there that maybe saw this as the beginning of a top, good luck to them.

Earnings and the dollar continue to be the focus of the market. It’s not a coincidence that the UUP rallied today on good volume and the market sold off, the question is what came first. UUP is an awful trading vehicle but it is a great indicator of the dollar.

On a seperate note I would like to point out the action in EWZ. This is the iShares Brazilian ETF. Shares were down 3.78% today on more than 3x the normal volume. What caused such an aggresive selloff?

Yesterday, Brazilian Finance Minister Guido Mantega announced that Brazil would impose the country’s IOF Financial Transaction Tax, a 2% tax on incoming investment in fixed income and equity assets. The Wall Street Journal reported that the tax was aimed at curbing incoming speculative investment and helping the country’s foreign trade balance, which has been hurt recently by a strong Brazilian Real.

I mention this because I have heard mention in the press of a similar tax being talked about here in the United States. On January 12th 2009 Bob Herbert wrote an op/ed in the New York Times discussing such a tax.

To the proponents of this idea I would point to the action in the EWZ today. Capital goes where it is treated best and with millions of baby boomers approaching retirement with Hundreds of Billions of Dollars invested in the markets. You may want to rethink wisdom of this idea.

Not only are Americans over taxed as it is, but anything that takes liquidity out of the market is a bad idea will lead to more volatility and likely lower prices.

Did I mention Steve Jobs walks on water

AAPL is arguably one of the most important stocks for the psychology of the market. So it will be interesting to see how the market deals with these numbers. Are they enough to drag the market up through the gap or will this move be faded. AAPL was up 12 points after hours and is flirting with all time highs (202.96).
Once again the dollar could be the key here. For the most part the UUP respected the 22.37 level I mentioned yesterday. It will be a level to watch again tomorrow. I want to see if the trend of lower dollar, higher equities continues or if the AAPL numbers and the parade of earnings coming out change this.
Because we are likely to start out in breakout territory I am including some pivot points for some reference.
QQQQ SPY
R3 44.38 R3 112.35
R2 43.70 R2 110.95
R1 43.46 R1 110.37
PP 43.02 PP 109.55
S1 42.78 S1 108.97
S2 42.34 S2 108.15
S3 41.66 S3 106.75
I forgot to mention yesterday that the TIPS etf looked like it wanted to breakout. Today it did on strong volume. Someone is betting on inflation right in front of the PPI.

Afraid to trade post on the dollar

I am new to the blogging game, but I have been a reader of blogs for a long time and have found a number that I hold in high regard. So it is enormously gratifying to me that some one as smart as Corey Rosenbloom from the Afraid to Trade Blog http://blog.afraidtotrade.com/ confirms something that I am seeing. For those of you that follow the Elliott Wave Theory, Corey has put up an excellent post on the action of the Dollar Index. It is far more detailed than my two line post on the UUP and I think it is outstanding.

Don't fear the reaper

The major indices gave a stay of execution to the shorts on Thursday and Friday but it is still a pretty good market for being long. The test is coming in the form of a lot earnings this week. I think we need to see is these stocks can continue to trade above important MA's or if they start to give it up and trade lower on some volume. If they can hold on and grind higher the shorts are in for some pain if not an intermediate top could be in place.

Some spots to watch on the upside are SPY 110 QQQQ 43.30 and IWM 62.61.

The plunging dollar still continues to dominate the news and the some interesting spots have developed in the UUP.

We could be seeing a bottoming process here watch 22.71 the 20 day MA above and 22.37 below we may have put a double bottom in there.

If things continue as they have a stronger dollar makes for weaker stocks, that can't last forever but in the mean time it is what it is.

The Dollar Dow 10,000 and other things

The 108 level on the SPY looked way more important than it proved to be. A lot of eyes were on that spot, and when that happens it can lead to some sloppy trading. When we were closing in on it I said that if we went through 110 looked like a lock and that still seems to be the case. In more than one place I have seen this level referred to as the Lehman gap. If you look at the SPY on a weekly chart you can't miss it.

Another thing that can't be missed is the dollar. Look at a weekly chart in the UUP and you will see a double top in the weeks of March 6th and 13th 2009. From that point on it does nothing but go straight down. It closed at 22.41 after putting in a new 52 week low at 22.37, the all time low was 21.92. It is a relatively new product but it's correlation to the market cannot be denied. I think you need to have this on your screen at all times see if anything wacky starts happening to the dollar. Ultimately I don't see how such a weak currency is good for the market but for the time being it is what it is.

Real Estate(IYR) and Transports(IYT) Junk Bonds(JNK) Corporate Bonds(LQD) NASDAQ(QQQQ) Semi's(SMH) Homebuilders(XHB) Financials(XLF) Industrials(XLI), Tech(XLK) are not confirming the new highs in the SPY.

Woohoo dust your hat off.

Dow 10,000, SPY through 108, JPM&INTC blow out we had a retail sales number and I have little to say.

If you didn't know that there were seemingly important numbers out there in the index's this was just another day. Maybe they weren't that important after all.

The Emerging Markets (EEM) had a breakout on huge volume.

Steel (SLX) broke out on good volume.

UUP the dollar index hit a 52 week low on huge volume.

Gold Miners (GDX) and Gold(GLD) had an inside bar.

And the 30 year underperformed on good volume.

With today’s action you can make an argument for increased risk appetite, but I thought the action in equities was pretty lackluster.

A complete waste of time and effort today.

A complete waste of time and effort today. Hopefully between INTC and retail sales we will get some direction.

Again stating the obvious 108 is the level on the SPY.

I don't know how much stock you can put in any observations from a day like today but here it goes.

The dollar(UUP) is still driving the market especially in advance of real economic news and earnings, it's importance cannot be overstated at this point.

The transports(IYT), real estate(IYR), and industrials(XLI) which I mentioned yesterday underperformed again today while the home builders(XHB) outperformed nicely.

The question now is INTC going to be like AA, JNJ & PEP, and is the retail sales number going to make us sell off like some of the more recent economic reports.

Stay tuned.

An interesting spot

To state the obvious the market is on hold until we get some direction from earnings, retail sales, FOMC minutes, CPI, jobless claims, the philly fed survey and oh yeah option expiration.

All eyes are on the 108ish level in the SPY. If we can break that in a convincing manner 110, or what I have seen called the Lehman gap seems like a lock. On the flip side failure here brings the 20 day MA back into play, down around 105.82.

The lack of participation from key sectors is a troubling sign for the broader market and I would like to see the transports(IYT), real estate(IYR), home builders(XHB) and industrials(XLI) coming along for the ride to feel better about any possible breakout.