Post edited 9:22 am – June 30, 2009 by optimism

The market has remained in a relatively tight range of about 8200 to 8900 for this period. Back in the day, a 10% range would seem like a lot, but now it appears to be pretty calm, considering the much higher volatility of the past 2 years. Another wave of higher volatility is approaching, but it still may be stuck here for the next few weeks.

The markets are improving from an oversold condition, which makes an upside breakout real possible, but perhaps delayed a bit longer. This is all a part of a normal consolidation process that often follows a huge move. In the meantime, sector rotation studies show the trends are improving in the Healthcare and Technology sectors, and weakening in the Energy and Natural Resources-in some trends that could carry for the next few months. It appears that the generally assumed areas of strength and weakness are NOT trending in the manner that popular opinion would seem to dictate.

An uncanny characteristic of the market is how various groups and stocks can move in the opposite direction of the consensus opinion. This baffles investors and catches them unaware of what may be happening. This is the case for the Healthcare stocks today as the sector has been showing market-beating relative strength, with many of the components setting new recent highs.

Even the pharma (much maligned) stocks have started to move up in trends that are threatening to break out into some larger long term bullish moves. This is happening in the face of the unknown possible healthcare reform and a possible nationalized health care system that is scaring investors into avoiding the sector completely. Perhaps the market is looking out beyond the concerns of today and sees better time ahead, or maybe the markets know something that is not apparent in the news today.

The Health Care sector appears to be emerging from an important long term bottoming period and could be one of the better investment areas in the months ahead. The Health Care sector has not yet broken out from the bottoming range of the past 8 months, but many of the individual components already have done so.

Does anyone here get Sam Collins daily e-letter from http://www.optionszone.com?
I've found his opinions useful and his stock picks for a given day  pretty good

Post edited 8:33 am – July 1, 2009 by stockcrazy10

Here are a few paragraph's from Sam Collins' Daily Trader'sAlert for today:

“There appears to be a real lack of follow-through on the Nasdaq. After vigorously breaking to a new high on June 11, the Nasdaq is looking very tired and barely able to hold above its 20-day moving average.

The low yesterday penetrated the 20-day, which is now at 1,826, and a close under it would force us to interpret the June 11 breakout as a false breakout. As I said yesterday, if that happens, look out below, because the next support for Nasdaq is at about 1,675.

All of our internal indicators are rising from oversold territory. But the advance is so lethargic that it is taking weeks to resolve a situation, which, two months ago, would have happened in a couple of days.”

http://www.optionszone.com/tra…..umble.html

The market is settling into a consolidation period that can last another month or longer, with the DOW stuck between the rough levels 8200-8800. It's normal for a period of lower volatility to follow a stretch of high volatility. The VIX is at its lowest level in 10 months as it is also indicating a move back to historically normal levels after its record setting black-swan readings during the bear market. The long term normal range for the VIX is 15-30.

The investment strategy seems to be shifting from a trading mentality to one that requires patience. It's OK to hold and wait, but as the bear market has taught us, it's prudent to have an exit strategy just in case the outlook changes.

In the healthcare sector, I still like ATHN (see old forum). It pulled back today, but probably not quite in buying range yet. What do you Fib/tech wizards think?

Post edited 8:45 am – July 11, 2009 by optimism

The historic rally that began last spring has stalled now that the major averages have pulled back for four straight weeks.

The Dow has corrected 7.4% and the S&P 500 has pulled back 7.1% since the June 12 peak. The selloff is attributed to the following developments:

Technical Deterioration

Intermediate-term technical indicators have been negative for weeks.

The S&P fell below its 200-day m.a. on Tuesday and finished Friday’s session slightly below it as well. This is as a line in the sand between a healthy and an unhealthy market & may have provided additional motivation for some institutional investors to reduce equity exposure and raise cash.

Weaker Commodity Prices

Commodity prices have pulled back swiftly. The reflation trade, the global economic recovery, and China’s recovery are under scrutiny. Energy, materials, and other cyclical stocks have corrected and weighed on stock market averages. The Energy sector has fallen 15.8% since its June 11 peak.

Economic Uncertainty

Last week’s disappointing U.S. employment report (a lagging indicator) damaged investor sentiment. The selloff in the stock market accelerated and the S&P has fallen 4.8% since its release. Among strategists and economists who are optimistic that a modest recovery is at hand, there are new concerns that the recovery could be shallow and sluggish. Among the pessimists, it heightened worries that the recession could drag on even longer than they anticipated.

Insider Selling

In late June Bloomberg reported that corporate insiders sold into the rally.

Standard & Poor’s also reported a meaningful increase in insider selling.

Corporate Earnings Jitters

Several weeks of speculation about whether or not second-quarter earnings will live up to their low expectations will come to pass soon. A slew of S&P 500 companies are scheduled to report earnings during the next three weeks. These reports will likely set the tone for the near-term direction of the stock market.

Look beyond the headline earnings or loss numbers, as the difference between an earnings “beat” or “miss” may come down to cost cutting. Instead, dig into corporate balance sheets and strategic plans to separate future winners from losers.

________________________________________________________________________________

Investors should not overlook the fact that the stock market mounted a historic 40% move from the March 9 bottom during a very short time period. This was a very rare move rivaled by only those in 1932, 1933, and 1982. While some of the challenges facing the U.S. economy and financial markets are anything but normal, it’s quite normal for the market to pull back following extreme rallies.

Do not be surprised to see additional downside at some point during the summer because of the fundamental and economic uncertainties and the deterioration in technical conditions.

Prudent investors should be more interested in adding exposure to U.S. equities if the S&P 500 pulls back toward the 800-810 area, which would be a 50% retracement of the spring rally. Currently, the market is trading at a p.e. multiple of 15.0 based on trailing 10-year normalized earnings. That’s not considered cheap, but it isn’t expensive, either.

I agree.  Great post.  Appreciate it. 

Thanks for the update.    

The steadily decreasing volume is mildly encouraging news… but we'll focus on the support levels and 200-day moving averages.

Thank you!

Thanks opri, it seems that the market can settle for to long and I guess that's expected. Today really suprised me in the rise of the amount.

Post edited 12:55 pm – July 17, 2009 by optimism

When (or if) the S&P reaches 950, use caution. The current short-term range on the S&P is 870 to 950. There are two scenarios. If the S&P breaks & closes above 950, the target is 1000. If the S&P reaches 950 & fails to break & close above this level, it may pullback to the 870 range.

A plethora of earnings next week & beyond, will set the course. Have a great weekend.

Post edited 7:13 am – July 20, 2009 by optimism

The Fed upgraded its economic outlook, and employment data improved slightly. The bulls overpowered the bears as earnings season swung into full gear. The DOW and S&P rose 7.3% and 7.0%, respectively, for the week. The Nasdaq Composite rallied 7.4%. Sometimes the market has a short memory, it was as if investors’ concerns of the past month were forgotten.

This is truly an unpredictable and difficult market to maneuver. It continues to be dominated by trading-oriented swings. Even though official volatility measures—such as the VIX—are currently low compared to six months ago, the market’s rapid moves can feel rather volatile.

It’s unclear whether the rally was driven by short covering. The hedge fund sources argue that of course it was. However, statistics argue otherwise and make the case that real buying took place.

The market rallied despite news of the potential demise of CIT Group, a lender to roughly 950,000 medium-size and small businesses.

It also rallied despite the passage of expensive health care reform proposals in House committees and the Senate health committee. The market shrugged off these proposals because many investors don’t believe they will become law in their current form. Even Blue Dog and freshman Democrats in the House are pushing back hard because of the proposed tax increases and other issues. Moderate-leaning leadership of the Senate Finance Committee and a handful of moderate senators will determine the fate of health care reform—for good or for bad.

The Technology, Materials, and Financials sectors led last week’s rally, rising 9.6%, 9.5%, and 9.4%, respectively. Goldman Sachs and JP Morgan beat second-quarter earnings expectations and reported solid results, as expected.

Commodity-oriented stocks in the Materials and Energy sectors fared well as oil and other commodities bounced. Crude oil rose to $63.39 per barrel from $59.89 the prior week. Transports rallied 6.5%, due in part to a better-than-expected earnings report from railroad company CSX. The earnings beat was due to cost cutting, but the CEO cited bottoming conditions in rail traffic, which caught Wall Street’s attention.

Despite the strong performance of the broader market and multiple industries, it was the Tech sector that stood out the most . The Tech sector has provided important leadership in 2009. It’s the best performing sector so far this year.

Considering the powerful performance of tech stocks relative to the broader market, individual investors may be wondering whether the sector’s rally has run its course. After all, tech stocks have already risen in anticipation of positive fundamental news that is likely to unfold during the coming months. Are the fundamental improvements fully priced into the sector?

In the near term, the Tech sector could consolidate or pull back and will be hard pressed to outperform to the degree it has. However, the move has not run its course on a mid- and longer-term time frame.

WOW….

So much for transparency!!! 

Six days ago on this thread, I mentioned the two possible scenarios for the S&P and the significance of 950 from a technical standpoint. A few days ago the S&P broke and closed above 950.

The near term target remains at 1000. As long as the S&P remains above 950, I'm bullish. I'll look to get more defensive on a break and close below the 950 level.

Good trading to all.

If the money ever gets back into the market, some of us stand to make big money from buying these good buys at lower prices..humm ??