May

28

Investing Systems Research Lab Blog for Week of May 31st 2011

Filed Under Main Content | Leave a Comment

I hope you had a great Memorial Day weekend. Tuesdays session is/was the last trading day in May. As summer kicks off, we hope the word “doldrums” doesn’t apply to the market this year.

For better or worse, we didn’t really get the “capitulation” sell-off I was hoping for this “cycle”, and the market look like it wants to go higher, at least in the near-term.

While many stocks did experience massive sell-offs, I am suspect of the recent lows since the indexes didn’t correct enough to get truly oversold, base and then turn up. It seems almost like we are turning back up prematurely.

However, based on the recent strength, and the fact I see a ton of charts with good risk/reward setups, I think there are a lot of short-term trading opportunities right now.

The key is a stop at the recent lows on any stock we trade long.

Here are some setups that look good to me now. Some charts have notes.

While it seems this week should be a great environment for short-term trading in individual stocks, I don’t want to get too complacent until the recent string of “lower highs and lower lows” in the indexes is broken.

We will watch closely the next couple weeks for signs of “higher lows and higher highs”, in which case the rally lives on.

However we will not lose sight of the “potential” it all comes unraveled at some point.

The Macro economic picture is by no means encouraging, but the market will tell us how to proceed.

This week I think gold, oil, silver and “stuff” go up and the dollar goes down.

But. As we have been saying recently, we are watching the news on Greece closely as a Euro “Black Swan” could change everything in an instant. It’s like the sword of Damocles hanging over the market. If something bad happens, all bets are off, but I would expect the dollar to instinctively rally. It is at that point we will be watching for a “decoupling” of the inverse relationship between the dollar and the “stuff”.

As we continue to whistle past the graveyard, let’s hope the word “contagion” is not reintroduced into the daily vernacular.

Join us live in the Research Lab as we thumb our noses at the collective danger lurking everywhere and trade stocks.

Cheers!

Share and Enjoy:

May

21

Investing Systems Research Lab Blog for Week of May 23rd, 2011

Filed Under Main Content | Leave a Comment

We are headed into the last trading week before Memorial Day weekend, and next week will be critical to the tone of the environment going into Summer.

But before we talk about what to expect next week, let’s review what we discussed in May so far.

In the April 30th post, going into the new month, I said “The market is very likely to have a pullback in the near-term, which I think that can start at any time.” Pull up a chart of the S&P or the DOW and look where we closed April. The gap-up open May 2nd, that quickly faded into a red candle was a perfect clue of a short-term market reversal, which started on….you guessed it, the first trading day of May.

The following week I said “Keep in mind that the market can take another leg down, so be sure to use stops on all open positions.” I feel the exact same way right now.

Finally, last week I stated “My instinct and common sense tell me we are due for a week or two of “weak market conditions”. Now if I can figure out which it was, instinct or common sense, that turned out to be right,, I would know which to consult now. Keep in mind we are potentially only 1/2 way through “a week or two” that at this point.

Reviewing previous sound bytes from the blog is not intended as an exercise in gratification or “I warned you”, but rather a heads-up to consider noting the “sentiment” expressed in my weekly ramblings here. I know a lot of new members, and probably a couple old members forget to read the blog, lost in the plethora of other tools in the Research Lab.

I always try to make notes here that give an overview of my personal “market sentiment”, based on looking through more charts than anyone else I know. I typically have about 200 stocks I monitor in real-time and another 1000 I go through each evening after the close. Doing this allows me to keep my finger on the pulse of the market. I generally have my watchlists broken up into sectors so I can compare similar stocks.

I seriously “live eat and breathe” individual stocks all the time, so that I can share my observations with you. That’s why we are both here now.

OK, so I showed you the RENKO chart of the SPY last week and lo and behold, we have our first “red brick in the wall”.

This chart is based strictly on price levels, not time. Look at the previous sets of red bricks and note only once in the past year has the pullback consisted of 1 brick.

It would not surprise me to see another red brick on this chart before June.

From what I gather, the price level to watch is 130.68, at which point the SAR stop gets hit. If I were timing the market, this would be a good sell/stop level, just in case the market is about to drop significantly.

As you know, one thing I am always acutely aware of is the possibility that a “devastating market correction” can begin at any time. For all we know it’s already started.

Every day I wake up and the Global Financial System hasn’t collapsed overnight, is a good day. I feeds my “normalcy bias” and I am relieved that today isn’t Doomsday.

To sum it up, I strive to “never be complacent” and stay hyper-vigilant for signs that “it’s time to clear the decks”, sell all long positions, move to cash or perhaps go short.

If you know what you are doing, taking select short positions on the next bounce might not be a bad idea. To keep things simple here, I generally write from the perspective of a long-only trader.

So what do I see going into this week?

The charts of the oil, energy, mining and particularly the silver stocks look like they might just get a near-term bounce. If you pull up charts of some of these stocks you will see what I mean. Many have had extraordinary pullbacks, bottomed out (temporarily?) and moved sideways to up last week. With a stop under the recent lows, there are some that look pretty good and due for a move up. There’s lots of overhead resistance, but on the slim chance that gold, silver, and oil are setting up for a rally, I see some worth trading.

Here are some charts I will be watching, with the idea of buying into strength IF the overall market cooperates.

As rough as the market was last week, I found it very encouraging that the stock picks in the Research Lab scans made extraordinary moves in many cases, like MAKO, LNG and others. Watching the picks in the scans, I realized that few winners escape our view on a day-to-day basis, no matter what the overall market is doing.

So regardless of the indexes, each day presents new stocks to trade, and we have always focused on that.

Speaking of which, the Live Grid is coming along well and is probably less than a couple weeks away from being introduced into the Research Lab.

CLICK HERE to see a screenshot of the Grid.

Please join us Monday morning at the market open as we take the picks from the scans and mark up the charts.

Share and Enjoy:

Investing Systems Research Lab Blog

Become A Member of the Research Lab

Free Download

Download The Market Toolbox
Desktop Financial Portal
The World’s Most Comprehensive Financial Software

Blog Roll

More Resources