Snowicane helped keep the action in the market pretty quiet on Friday. The index’s were about as flat as they could be on below average volume. I think that was probably helpful. If we are going to break out of this range I would like to see it on some volume and conviction.


AAPL which has been a pretty good market tell closed above its 50 day MA for the 1st time in a month and that may be an indication that the market is also ready to break out of this range. The SPY closed right under the 50 day (110.99) and it looks like any breakout above 111.75 is blue sky.

TLT broke above the down trend line I have been watching and the TBT bounced right of the trend line on the weekly chart. Any more strength in the bond market and this leg will be stopped out. I think TBT below 46.40 closes this leg of the trade. The SPY leg is still working.

We have personal income & outlays at 8:30 and ISM mfg, construction spending at 10:00 barring any big negative numbers here we should be able to take out the 50 day MA on the SPY and breakout of this range. In the mean time keep your eye on the MA’s in all the important stocks/etf’s and anything you are trading.

Right now I have a bullish bias but I am including some support break shorts in case things get ugly.

bke 30 long

rah 67 long

amzn 121 long

cnx 51 long

zion 19 long

brcm 32 long

bcr 84 long

bdx 79 long

cmp 76 long

orcl 25 long

gme 17 short

gpn 42.5 short

gva 27.14 short

The market opened down hard on the durable goods orders and jobless claims. As it turns out the SPY put in its low for the day at 9:46 holding the 20 day MA (108.96) and then rallying later in the day closing at the highs just below the 50 day MA (111.02). We are still stuck in this range and technically in no man’s land until we break one of the levels. It does however make for some decent trading opportunities, if you can pick up shares around the moving averages and then have the patience to hold on. I caution that this will not last for long and we need to continually monitor these MA’s until one of them gives.


Today’s come back was pretty impressive and came on some decent volume which was also encouraging. The TBT/SPY trade is still intact but another day of strength in the bond market and the TBT leg will likely be stopped out, but the SPY leg is still working. Today’s rally and the bullish charts I mentioned yesterday (IWM, IYR, IYT, IYR, XLY, XRT) make me feel better about this leg of the trade.

I can’t stress enough the importance of the moving averages (20,50,150,200) in the stocks, indexs and etf’s that you are trading. In a market that is trying to find a direction these levels are crucially important. If you are involved in a name you need to know these levels. Go through your charts from today and see how many stocks bounced off of or stopped at the 20 or 50 day MA you will be surprised. For illustration look at the SPY 20 day MA (108.96) low of the day 108.94 and ORCL 50 day MA (24.20) low of the day 24.21 and AAPL 50 day MA (202.91) high of the day 202.86. These are just three examples but there are dozens out there.

The snowicane here in the northeast will probably keep me from trading tomorrow but I do have a few ideas that I like.

aet 30ish long

anf 36.25 long

bke 30 long

gpn 42.5 short

rah 67 long

Today was basically a mirror image of yesterday. The 50 day MA once again kept a lid on the SPY, QQQQ and literally hundreds of other stocks and etf’s. AAPL also managed to make it back into to the range between the 20 & 50 day MA. If you are actively trading stocks my best suggestion is to know where these levels are and have them on your platform at all times. If/when you see multiple stocks in your sector starting to break one of the ranges you will have your tell on what way the market is breaking.


Again like I said it was a mirror image of yesterday. Financials and real estate lead the way with the solars oil holders and gold miners lagging.

TBT bounced off of the 150 day MA and the TLT roughly stopped at the 20/50 day MA today so this should be a good test of the TBT/SPY trade.

The trend lines I wrote about in this trade thesis are still intact, down trend in TLT, uptrend in the TBT and 150 day MA in SPY. That coupled with what look like some bullish charts in leading sectors (IWM, IYR, IYT, IYR, XLY, XRT) makes me believe this trade will work out.

Until the market breaks out of it’s current choppy range SPY 20 day (111.03), 50 day (108.91) trade quick and don’t press.

Tomorrow brings durable goods and jobless claims Friday hosts GDP, Chicago PMI, consumer sentiment and existing home sales. Hopefully some there will break this market out of it range.

Again I don’t have a lot that I feel comfortable sharing with you because the markets are such a mess but I will be trying the following if the set up on good volume.

gnk 20 short

swn 42 short

au 34.5 short

brcm 32 long

A weak day in the markets thanks to an abysmal consumer confidence number. Materials, solars and steel lead the way down with fixed income and the dollar rallying.


AAPL went right through his 20 day MA (198.75) and underperformed both the SPY & QQQQ. Neither of those closed below their 20 day MA, so I am wondering if this uncoupling means that AAPL is losing some of his leadership. This merits watching.

The flight to quality today definitely did not help my SPY/TBT trade but again this is a longer term idea and I want to see if Bernanke’s testimony tomorrow changes anything.

The charts are a mess right now, so I don’t have anything that I really feel comfortable sharing tonight. I will just note that even though today felt pretty ugly the SPY is still trading between its 50 day (111.02) and 20 day (108.84) so today’s action got us right back to where we were about a week ago.

The Durable Goods number is tomorrow morning along with jobless claims and Bernanke, and Friday brings GDP, Chicago PMI, consumer sentiment and existing home sales. Hopefully these numbers can get us broken out of this range.

All things considered it was a quiet lackluster day with light volume. Financials, metals &mining and transports outperformed, while the energy patch and solars trailed but mostly dips were bought and breakout levels were sold.


The SPY tried to pull away from the 50 day MA but light volume and mixed market kept the SPY basically inside Friday’s range.

I still believe AAPL is one of the key stocks in the market right now and he is stuck between his 20 day (199.05) and 50 day (202.69). One of these levels is going to give and it should be a good tell for the market. Have both these levels on your trading platform and monitor them until something gives. He tested the 20 day today and it held, so my guess is we are going to try that 50 day next and we will see what happens.

I was a little disappointed in the market reaction to the Fed decision to raise the discount rate and its effect on my TBT/SPY trade, but this is a longer term idea and I think the thesis is still intact.

I will continue to monitor it and if anything changes I will let you know.

The market is trying to figure out what it wants to do and the key tell to that will be AAPL, until something happens take it easy and wait for really quality set ups.

Following are some of my alerts for tomorrow. They all happen to be longs but given the punky nature of this market these levels may turn out to be places to fade the move and not look for a break out. As always look for good volume and use reasonable stops.

adp 42

hmin 35

ipi 29

cnx 51

iag 15.5

nem 49

pru 50

rost 47.4

slab 46.5

teva 60

tsco 54

var 49

wsm 21

The Federal Reserve Board raised the discount rate charged to banks for direct loans by a quarter point to 0.75% this afternoon after the close. This move is small but the message is clear and should help the TBT leg of the SPY/TBT blogged about yesterday. How the SPY leg reacts remains to be seen. I am not sure how much I trust my afterhours pricing data, but it looks like the SPY, XLF and the bigger banks have retraced the gains they had today. It looks like nothing dramatic right now and that makes me optimistic about the SPY leg of the trade. We will see what tomorrow brings.


As I write this the dollar index has broken out of a two week range and appears to be headed to a new resistance level up around 83.20. In the recent past dollar strength has been bearish for equities and commodities. We are going to continue to monitor that and see if that trade is still valid.

GLD has recently made a comeback after bouncing off the 150 day MA back on 2/5. There is some support in it down around 107 (down trend line & 20 day MA) and then again at 105.

USO has support down around 37.50 (150 & 50 day MA).

I am pleased that the TBT leg of this trade should start working so quickly, but I honestly never thought there was going to be a surprise discount rate hike. It’s amazing what charts tell you without even knowing it.

I will include some trade ideas for tomorrow but I would treat them subject because we don’t know how this Fed news is going to be received yet.

These ideas all happen to longs and could possibly be used as a spot to fade a move. Be sure to look for good volume some setups and keep reasonable stops.

acl 160

aet 30

anf 36

bac 16

bhi 49

cnq 70

rimm 72

As regular readers of this blog you know that I have been watching the 89 level in TLT for quite a while and have commented on it in the past. I have done some more work on this and it is posted below. It is a bit longer than you are used to some please indulge me.

The trade:

Buy TBT on a breakout above 50 and SPY on a breakout above 110.50 and a breakdown of TLT through $89 in. Because these are highly liquid products and the trade is essentially a market bet a larger position can be taken. An equal dollar amount of each product should be put on.

Expected return: 7.50% on the SPY leg and 9% on the TBT leg. The SPY Price target is 120 and the TBT price target is 55. Partials can be taken at these levels and then the trade and stops should be reassessed. The SPY leg should be stopped out on any close below the 150 day MA (106.63) for a 3.5% loss and the TBT leg should be stopped out on any close below 48.50 (break of the 50 day MA) for a 3% loss.

Potential Risks: Risks to this trade are primarily flight to quality based. Also any meaningful change in the Fed’s stance articulated today’s FOMC minutes about looking to end quantitative easing would have a negative effect. A run to US Treasuries and out of equities would cause this trade to be unprofitable.

Expected Duration: Six to Eight weeks

Trade Thesis:

Since the market low in March 09 there have only been 2 meaningful pullbacks in the market a 9.48% correction (top to bottom) during the weeks of 6/5/09 and 7/10/09 and more recently a 9.17% correction from the weeks of 1/15/10 to 2/5/10.

Preceding both of those selloffs the etf TLT broke $89 (on the downside) but immediately snapped back and sell off in equities occurred. After the June/July selloff the SPY made it back to its previous high within two weeks. I believe we are in the second week of the recovery after the selloff.

Following the FOMC minutes today the TLT closed the day at 89.34 down 1.12% on the heavier than average volume.

It is my belief that the selloff in bonds came after a wave of fear had hit the market. The GM bankruptcy and issues regarding Fiat’s purchase of Chrysler were issues in June and fears over Greece et al were the problem more recently. A buy the rumor sell the news trade in the bond market if you will. Yields subsequently got pushed up to almost 4.8%. Equities were sold to buy bonds and hence the selloff.

In the Fed minutes today the Fed gave some tough talk on unwinding “quantitative easing”. The next two days bring PPI, jobless claims, leading indicators, the Philly Fed and CPI#’s. Benign numbers from those indicators coupled with some positive earnings will likely have the TLT break 89 on the downside again but this time I expect a rally in equities.

Why? A different kind of fear, this time we are coming off of an almost 10% correction in the SPY. That was not the case the last two times. Bulls want to buy the pull backs in this market now, the correction has come and gone and they have missed their chance. On top of that the Fed has signaled their desire to tighten and has sent a message of lower bond prices not higher. That was also not the case in the past.

 
 
 
 
 
 
 
 
 
 

The last time we had a 10ish% pullback in the SPY was during the weeks of 6/19/09 and 7/10/09.Back in the middle of July it took less than two weeks to recoup the 10%ish pull back; we will see what happens this time.


You can make the argument that the SPY broke the down trend line on Thursday and Friday and that we are in the clear to move higher. I am not going to say we didn’t, I just would have liked to see more enthusiasm in the market when we did. However, we were looking down the barrel of a three day weekend and Greece so I will wait for tomorrow and see what happens.

With that said, under the hood some of the etfs I track that came in and tested the 150 day MA during this sell off have started to pull away from the 150 day and look like they want to move higher.

IWM (small caps), IYR (real estate), JJC (copper), KOL(coal), MDY(mid caps), QQQQ (NASDAQ 100), RSP (S&P Equal weight), RTH (retail), SLX(Steel), XLI (Industrials), XLP (Consumer Staples) and XME(Metals & Mining) all have some nice day light between them and the 150 day now.

Friday was a quiet and whippy day ahead of a three day weekend so I don’t really want to put too much into it. I continue to watch the 150 day MA on the SPY (106.36) to see if we bounce when we get close and I will feel a whole lot better about being long when the low of the day in the SPY is 108 and we close up around the 20 day MA (109.35).

A 1% rally in the SPY today materials, coal, steel metals and miners lead the way. A number of the commodity etfs have broken their down trend lines and appear to be headed back up to test the 20 & 50 day MA’s. You can make the argument that SPY broke it’s down trend line as well but I definitely would have liked to see better volume.


Fixed income etfs were among the worst performing etfs today due to a bond auction that Rick Santelli rated an F.

The SPY continues to respect the 150 day MA and bounced off it again today almost to the penny. This is a level that is going to have to be monitored until we either break down through it or start to pull away and trade convincingly above the down trend line.

The other spot I am watching closely is the 89 level on TLT. Two poor bond actions in a row is getting us close to the 89 level and I want to see if we break snap back and have equities come for sale like the last two times or if it sparks a rally.

Considering the concerns over sovereign debt out there, I am not sure how a poorly received US treasury auction can be, but I am not panicking just yet. The stock I watch, especially the material and commodity space, feel like they want to break out of their recent slump and move higher. However, I would like to see the SPY hold on 107.50 and for some volume to coming pouring to make me feel better about this move.

I may be crazy but I think the following levels are important on a macro basis and need to be watched.

$ Index 80.68/79.56 break of recent range

GDX 44.80 breaks out above the 50 day MA

VXX 33.05 50 day MA

AAPL 200/190.25

SPY 109/106.23

TLT 91/89

I didn’t trade today because of the snow but it looks like it was a pretty quiet market. The SPY effectively traded in a $1.25 range with solars, steel and junk bonds the weak sectors. While the brokers, banks and agribusiness sectors lead.


The SPY bounced off the 150 day MA (106.10) this morning and is pinned between it and a down trend line stretching back to January 19th. This should resolve its self in the next few days but in the mean time keep an eye on these two levels. My belief is that we are going to need some good strength and volume to get through that down trend. If the market fails at the line we may just simply ride the trend line down until we get to the 200 day MA (102.38).

There was a poorly received bond auction today and the TLT sold hard in reaction. It closed at 90.40 and has pulled away from its trend line but is now closing in on the 89 level. I will be monitoring it to see if it is still significant.

The SPY trend line/MA issue will resolve itself soon enough so be patient until it does because we will probably have choppy quiet trading until then unless Iran decides to do something silly tomorrow.

On Sunday I wrote about the down trend line in the TLT. My thought was that as fear comes into the market investors sell equities and buy government bonds. The down trend line represent the decrease in fear and the corresponding rally in the stock market.

As equities were selling off early yesterday, major financial stocks were closing in on last Fridays lows, because of fears over Greece. The TLT was closing in on that down trend line, and was in danger of breaking through it and have equities take another leg down. Things were about to get a little scary when a “news release” came out saying that Germany was going to bailout Greece, sparking a massive rally in the stock market. As it turns out the t “news release “was not true no deal had been reached, but the down trend line remained intact and the market rallied.

This only reinforces in my min d that the trend line is significant and needs to be continually monitored.

I will also be watching the 89 level on TLT below to see if still matters.

A quiet and choppy market down day; considering we had such a strong close I think the bulls were hoping for more. It is kind of a standoff in the market right now. The SPY is stuck between the January 29th close (107.39) the 150 day MA 105.84 and Fridays low 104.58. This will resolve itself at some point but until then I expect more chop. Until we close above 109 on the SPY I am probably going to be short biased.


If today’s action is what passes for a continuation rally in the market then we are headed lower and the next stop for the SPY is the 200 day MA down around 102.

The DJIA closed below 10,000 today for the first time since November; it’s good for headlines and little else. A much bigger deal would be if it closed below Fridays low and the 150 day MA roughly 9800.

Not much action in the TLT today but I am going to continue to monitor the trend lines I wrote about yesterday and see if they are significant. It looks like 92.50 is the breakout level on TLT and I will be watching that closely.

If you are actively trading be patient and don’t get chopped up these levels will resolve themselves soon enough.

On Sunday January 24th I wrote the following: “Back on January 6th I wrote about TLT for the 1st time. I made the observation that back in June the TLT broke 89 on the downside and snapped right back but the SPY went down for the rest of the month. It was about a 10% correction from top to bottom 96.11 to 87.

TLT broke 89 on January 8th the day before the SPY put in it’s high 115.13: I know we ticked at 115.14 on 1/14, but its close enough. A correction of similar magnitude now, would get us down around 104.20 which as it turns out roughly coincides with the 150 day MA on the SPY 104.56. I think that may be where we are headed. “The low tick on the SPY Friday was 104.58 and we have had 4 red bars on the SPY weekly chart. The question now is where we go from here.

Sovereign debt worries are being blamed for this most recent selloff and the strength in the dollar. I wrote on Thursday that it appeared we were headed for about 80.61 on the dollar index and Fridays high was 80.68 so the strong dollar weak equties trade still seems to be in tact.

When fear comes into the market and investors run away from risk they have traditionally gone to fixed income, specifically US treasuries. The TLT is an etf that tracks 20+ year Treasuries. At the height of the financial panic in late 08 and early 09 the TLT was trading over $120; it closed Friday at 91.99. This sell off has created a nice clear down trend line on the weekly chart going back to December 08. There is also one on the daily chart going back to10/02/09. Recent strength in the bonds has us bumping up against both down trend lines. I will be monitoring these levels to see if we can break through them on the upside and maybe have a selloff in equities or if we don’t have what it takes to get through and rollover and may be get a rally in stocks. The TLT is also trading between its 20 and 50 day MA’s and we will need to see if they act as support or resistance levels.

Stocks and etf’s too numerous to mention bounced off of the important ma’s (150 & 200 mostly) on very heavy volume. The heaviest volume I have seen on the upside in quite some time. My feeling is that we have put in at least a short term bottom. I am not sure what next week is going to bring but we will have to watch Friday’s lows on any test and be sure they hold.


Once again AAPL told the tale of the market. Early on in the morning he tested the lows from last week, held and bounced hard. As the day went on and the market was weak and looked like it might take a strong leg down: AAPL was trading strong. He never took out last week’s low and when the market rallied he closed the day on the highs.

I expect tomorrow to be a pretty quiet and choppy session as people try to sort out what happened on Friday and see if it is for real. I don't have any clean alert levels for tomorrow but I will be trying to pick up some longs as they bounce of f of the MA's and try some resistance shorts if the market can make its way back up Thursday’s highs around SPY 109. I know that is pretty vague but the charts are a mess right now.

In a word it was ugly. For some perspective, I have 275 equities on my watch list 247 of them were negative 6 six positive and the rest were flat.


Basic materials (UYM), big caps (BGU) and solars (tan) had the worst of it; while the dollar index and fixed income outperformed. For additional perspective every etf I watch that tracks an equity sector or index was down on the day.

Not that it really matters technically but the DJIA closed right on 10,000 and that is good for a lot of chatter and headlines.

The “Lehman Gap” on the SPY occurred during the week of 10/3/08, the dollar index closed that week at 80.61. The high in the index today was 80.28 and it seems we are bound for at least that level if this risk aversion trade continues. Dollar strength has equaled equity weakness recently.

Like everyone else I have been waiting for the famous “10% correction” and it appears that we are in the midst of it. My belief is that we are headed for at least the November lows in the major index’s which would roughly coincide with the 150 day MA’s and then October lows which would bring us down around the 200 day MA’s. We are not going to go there in a straight line but that appears to be the glide path now.

Employment Situation numbers are out at 8:30 tomorrow morning and should set the tone for early trading. If we gap down hard after the number my plan is to let the dust settle a bit see if we hold and then try and pick up some shares on the important MA’s. If we gap up then I am going to be looking to get short if the market starts to roll.

Watch last Friday slows in the indexes and whatever you may be trading, it is important that they hold.

Following is some of the levels I will be watching. They either represent last week’s low and major support or important moving averages.

aapl 190.25

bac 14.68

c 3.13

cat 51

ge 16

gs 147.81

jpm 38.07

x 43.75

qqqq 42.08

smh 24.3

spy 105.62

uym 25.19

xle 53.26

The markets were decidedly mixed. Solar’s, tech and ag’s were up with real estate, silver and steel down on the dollar index strength.


Aapl rallied back through lesser resistance at 197 but mostly respected the 200 level but QQQQ 44 and GS 160 were a brick wall.

It looks like the CSCO #’s will take the QQQQ back up through 44 so the next level we will want to watch is 44.83 the 50 day MA.

My guess is that tomorrow will be much like the rest of the week; a lackluster trading environment where you buy weakness and sell strength until a major level is broken.

I actually expected a little more out of this week but it has been pretty rangy so far.

The daily charts are still a bloody mess and I don’t feel comfortable making breakout or break down calls. Watch the MA’s above and last Fridays lows below in most anything you are trading.

The only thing I will leave you with is the TLT. As you may recall I wrote about the TLT breaking 89 (on the downside) and how the market sold off for a month in June. The TLT closed today at 90.33 down 1.18% on a huge bar of volume. Maybe we got to keep an eye on that 89 level again.

A decent rally again today but the charts are still a mess. It has been a difficult market for the breakout/breakdown trading I prefer the last two days and I have been pretty quiet waiting for a less choppy market.


The market needs to figure out where it wants to go. Back up through the 50 & 20 day MA’s above or down through Fridays low and then probably to the November lows.

There a few key spots I will be watching to see how we react when we get there.

SPY 111.50 (50 day above) 107.40 Fridays low.

QQQQ 44 (prior support above) 42.63 Fridays low

AAPL 197 (prior support above) 190 Fridays low

GS 160.54 (200 day MA above) GS 148.27 Fridays low

Until these levels start to resolve themselves I think we are going to continue to have choppy action.

Be patient and don’t press in this environment we should get a clearer picture of where we are headed in the next couple of days.

More or less what I expected for today a quite choppy inside day on lighter volume. Basic materials (UYM), Steel (SLX) and Gold Miners (GDX) outperformed with fixed income (TLT, LQD) and regional banks (KRE) underperforming.


Small Caps (IWM), midcaps (MDY), the djia (DIA), QQQQ and SPY are all more or less in the same position; stuck between the 20 and 50 day MA above with Fridays low and the 150 day MA below.

The charts are a mess right now and there are very few clean spots but simply put we need to hold Friday’s lows in these etf’s or we are likely headed lower probably to the 150 day MA’s.

My guess is that we are going to have another couple of days like today, sideways to up on light volume and a fair amount of choppiness. We are going to have to watch Friday’s and today lows to see if they hold and the moving averages and previous support levels above to see if they can be recaptured.

So keep an eye on SPY 110 & QQQQ 44 above and SPY 107 & QQQQ 42.60 below.

A couple of other spots I will be watching are GLD 109.42 (50 day MA above) GDX (42.95 today’s high and 200 day) JPM 39.93 (today’s high & 200 day) ,and SMH 25.41 (today’s high and 150 day MA). This is an important enough group of names that it should give us a sense if resistance is being sold or if the market wants to try and take these levels back and rally for a bit. If you start to failure after failure at these resistance points start looking for shorts but if they can reclaim these levels then we have a shot at trading higher. I know it’s pretty vague but they market is licking its wounds after last week and it is a little tricky right now.