The market is on the verge of taking a direction and a big move seems likely to follow. We had the worst jobs report in over a decade and the government continues to be forced to bailout industry after industry. Market players did however, again buy the negative news and closed us on highs after selling off on the open, testing recent lows around 816 on the S&P. This seems to again have given the bulls the upper hand but this has changed almost daily. If the bulls don't get good follow through on Monday and don't make a push through 900 pretty soon after, momentum will once again reside with the bears. With Christmas right around the corner this is also seasonally a strong period for stocks but at the same time, how many are still holding onto big losses they might want to close out before the end of the tax year.
The question I think many market players is how much worse can the numbers get? Can unemployment numbers continue to climb with all the bailout packages and Obama's
infrastructure stimulus due out next year? The charts seem to be a reflection of this question and the indecision by market players. Right now we are rallying on bad news. Worse news than was expected and worse numbers than what was factored into the market. This can happen if the majority of players think the next number will be better. The question is what happens if we rally from here and the numbers don't get better? It is very hard for me to believe market players will again buy the bad news and maybe that will lead to the ultimate capitulation bottom.
In the meantime, I am going to continue to be reflexive of the action and be very quick to take gains and cut losses should the market move against me. I have a list of longs and shorts I am watching for next week depending on the direction the market takes and will be posting some charts with my rationale for the trade throughout the weekend. I hope all of you knocked out some good trades this week. I had a great start to the week with a mixed last couple of days. This next week should provide some great opportunities to profit if we stay open minded and always prepared for whatever takes shape.
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A few sectors that have been seeing a lot of volume and some major improvement in their charts recently are mortgage and insurance related companies and home builders. The catalyst is obvious with the government pledging to buy mortgage backed securities and on Wednesday talks of a plan to bring mortgage rates to 4.5% hit the wires. Many homebuilders saw an immediate lift but mortgage companies and insurers didn't see much of a lift until Friday.
Real Estate/Mortgage Screen:
PLD, NLY, CIM, DRE, NCT, PDN
Alot of those are overextended or heading straight into resistance. I will be watching those to get an idea how the sector is performing overall. One interesting setup that might see nice upside if the sector continues to see bids is BMR.
Insurance Related Screen:
Big movers on Friday: HIG, PFG, LNC, PRU
Better R/R:
HMN- broke through Resistance & 50 dma on Friday...needs more volume
PNX*- good volume on Friday...might be good for a trade if group is acting well, I would keep a very stop and look for big accumulation bars to trade it. Spiked from 2.68 almost to 10 in a three day period after the 10/10 low.
MIG is my favorite looking set up in the group:
Rest up and get ready to knock off some good trades Monday.
JAX
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1 comment:
Good post dude.
Did I tell you I'm posting the Sports picks on Coleman's site now?
He wanted to focus more on poker and promotion. And I'm on his site just about every day anyway.
Question: Is the market still too volatile for casual traders like me? If so, would it be better for me to try some short term moves or just keep my capital in cash till the market really starts to show some promise?
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