Jun

12

Investing Systems Research Lab Blog for Week of June 14th, 2010

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The past few weeks have been tumultuous to say the least, but the good news is that we managed to hold above 1040 on the S&P and our stop-loss did not get triggered at the end of May.

Headed into the third week of June, we are looking for a tradeable bounce, though the market faces significant overhead resistance.

The stop-loss “range” on our long-term timing signal is shown on the chart by the yellow rectangle and a weekly close “below the zone” would trigger an overall sell. However we think at this point the market may have the propensity to “climb the wall of worry” and move up. We expect more choppy trading and volatile swings but we think some stocks are poised to make a run.

Zoomed in a bit, the weekly chart is actually quite constructive, but you can see the 10-wk and 30 wk offer significant resistance.

The daily shows exactly where we are and offers some insight into where we might be going in the near-term.

The 200 day moving average is the one to watch on the S&P. We expect to do some battle with it in the lower ellipse, then potentially move into the upper ellipse. The thin green line is a major resistance point. Down the road near the end of summer we see the potential for a head and shoulders to form on the Weekly timeframe. They are rarely perfectly symmetrical.

The past two weeks were essentially too choppy for our Trade Plans, This most recent cycle was not kind to swing traders and after a stunning performance in May, we were not going to let marginal trades through the filter.

However at this exact point in time we see more and more charts becoming constructive and we think the following stocks offer potential.

UCO ProShares Ultra DJ-UBS Crude Oil is poised for an intermediate term move up, beginning in the next few weeks. We would like to see a few more weeks of action between the yellow and green range, then a break above the green line. We are still in observation mode with the clear notion that if UCO is headed to 12.50 or higher, it has to trade at 10.50 on the way up.

On the image you see the details of the Trade Plan from May.

PCX looks like a good potential “bounce play”

FSLR might actually have a chance of moving higher over the next few months. At least the bottom is clearly defined and we are getting a trendline break. A little sideways to up action looks likely.

Let’s take a look at gold and a few gold stocks we like.

First, the weekly chart of GLD. Simply magnificent. You can almost see the perfect cup and handle pattern forming. We will likely see a couple more weeks on the handle, but after that, if it breaks to the upside we expect a major leg-up to the top of the channel.

The gold “doubters” likely have a bit of time left to try and convince investors that gold is not the go-to investment, but the clock is ticking. Summer is usually dull for gold and we expect sideways to down action over the next few weeks, but after that we see new highs.

Here are a few gold stocks that look really good right now. They will definitely be on our focus list when gold starts the next leg up.

We might be little ahead of the curve on these gold stocks, but we want to get them on the radar screen right now.

If we can get a little sideways trading and consolidation in both gold and these stocks, a break out would represent significant opportunity.

So next week should be fairly exciting. Barring any unforeseen events we expect there will be more opportunity for long trades than we have seen in weeks.

Be sure to copy our Focus List of stocks on the Research Lab homepage and paste them in your charting software. They are the market leaders and all have very constructive charts. Some are setting up perfectly for an upcoming rally, but each chart must be evaluated separately.

We should see a lot of stocks move above their 20-day moving averages this week and we will see a lot of steep down trend lines that get broken, even if they move sideways.

Taking profits quickly will be the name of the game next week. If you have a profit, take at least some off the table as soon as possible. The risk of a big down day still looms.

I realized last week that the negative market sentiment just appears too prevalent. Too much doom and too many calls for a collapse.

The “wall of worry” has been built, brick by brick. I could list a dozen bricks easily, but we all know the wall is there.

We also know where the “line in the sand” stop-loss sits.

Speaking of volatility, I found this interesting chart on a blog recently that shows just how volatile recent years have been compared to the good old days.

So we will take what the market gives us over the next couple weeks, but from our perspective we think the market is going to give us some great trades starting….right about now.

Catch us at the opening bell Monday morning as we mark up the charts on the real-time stock picks and discuss the Trade Plans for next week.

Enjoy your weekend.

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