If you were a big money institution and your forecast was for a stronger economy in 2011, would you sell stocks on Friday after a positive report that just wasn't as positive as forecasted combined with the fact that a positive upward revision was made to September and October numbers?
Post your answer in the comments section at the bottom of this post by clicking on the word comments by the pencil...
On Friday the SPX closed at 1,224, up +3.18 or +0.26%, the COMPQ moved up +12.11, the INDU rose +19.68. The RUT closed up +5.22 making another new high close following its horizontal breakout on Wednesday.
(click image to enlarge)
Breadth weakened slightly from Thursday but stayed strong on Friday as advancers led decliners 1.64 to 1 on the NYSE and 1.55 to 1 on the NASDAQ…
Exchange NYSE NASDAQ
Advancers 1,860 1,594
Decliners 1,130 1,023
(click image to enlarge)
Index Direction Confirmation
VIX Down Yes – SPX
SOX Up Yes – COMPQ
Leading stocks on Friday included FAS, ZION, WHR, STI, GME, ICE, BAC, JEC, SWK, UCO, USD, NDAQ, LXK, DE, URE, ESI, ATI, HAS, AIV, NYX, GS, PNC, INFA, DOW, CLF, WFMI, UNP, HLF, V, LDK, SNDK, SWN, SPG, AKS, FCX, ATW, F, CAM, MHS, A, TIE, CREE, CAKE, SINA, BYI, CSTR, TSL, CAT, BA, FDX, FLS, NETL, RMBS, PCP, DLR, VMW, UNG
Leading stocks on Friday included FAS, ZION, WHR, STI, GME, ICE, BAC, JEC, SWK, UCO, USD, NDAQ, LXK, DE, URE, ESI, ATI, HAS, AIV, NYX, GS, PNC, INFA, DOW, CLF, WFMI, UNP, HLF, V, LDK, SNDK, SWN, SPG, AKS, FCX, ATW, F, CAM, MHS, A, TIE, CREE, CAKE, SINA, BYI, CSTR, TSL, CAT, BA, FDX, FLS, NETL, RMBS, PCP, DLR, VMW, UNG
Losing stocks included FAZ, LVS, NFLX, NTRI, CMG, DECK, MOS, AKAM, FFIV, SKX, GMCR, POT, CRM, UAL, SOHU, NTES, WLT, TLT, CF, SLB, PCLN
Interest rates rose, bonds moved lower, the Euro rose and the SOX closed another +0.46% higher following its horizontal breakout on Wednesday. The SOX is a leading group at this time. The VIX moved down -1.38 to close at 18.01, its lowest close since April 26.
The SPX, INDU and COMPQ rose and closed near their Nov highs and horizontal resistance. The RUT, SOX and TRAN are already above horizontal resistance and finished the day with a new high close increasing the probability that the other broad indexes will break out to new highs next week.
Since the beginning of earnings season I have repeatedly mentioned selectivity and rotation being major factors in individual stock and index movement. This can be seen in the recent price action of the big seven NASDAQ stocks. AAPL and QCOM are at resistance. BIDU and PCLN both had bullish engulfing support bounces on Friday. AMZN and NFLX are both in a bull flag pattern as of Friday. Selling has pushed GOOG into a down trend and it is currently in a potential bear flag pattern.
None of these stocks were major contributors in the indexes rising during the last three days. Some leaders like AAPL, AMZN and NFLX have clearly slowed down.
Wednesday night twenty-one NDX 100 stocks crossed above their 30 DMA. One MYL crossed below on Thursday and then back above on Friday. The other 20 were all higher on Friday than they were three days earlier. I shared that list in the Talk Thursday evening. For those that missed the Talk they are: ADP, BBBY, BMC, CA, CMCSA, CTAS, CTSH, XRAY, FISV, FLIR, JBHT, HSIC, INFY, ISRG, LIFE, LOGI, LRCX, MSFT, MYL, SIAL, VMED
Similar pattern variation can be seen in the Dow 30 stocks with the leaders breaking out of horizontal resistance this week.
Leaders – AA, AXP, CAT, DD, HD, KO, UTX
Coincident – CVX, DIS, GE, HPQ, IBM, INTC, JPM, MCD, MSFT, WMT, XOM
Laggards – BA, BAC, CSCO, JNJ, KFT, MMM, MRK, PG, PFE, T, TRV, VZ
Looking for strong stocks? Look at the current leaders those already above horizontal resistance, those gaining strength which moved above their 30 DMA this week and look at the RUT, SOX and TRAN. Leading stock on Friday above and NDX leaders can also be good candidates.
SNDK, CREE, X, STLD, SINA, CLF, DOW, WFMI, UNP, VMW, FLWT, CTSH, VECO, AZO, ORLY, FFIV, NETL, RIMM, DECK, USD and ADSK also broke out of horizontal resistance this week.
CRM and RVBD are in horizontal bull flag patterns.
To trade an up trend focus on those stocks that institutions are buying and causing to be relatively stronger.
The trend is up with the SPX, INDU and COMPQ at resistance. Can there be a pull back next week? Of course there can. With rotation and selectivity occurring there easily could be a pull back.
Does a pull back signal a trend reversal? If price fluctuation stays above support it is not a trend reversal. Remember consolidation patterns are generally trend continuation patterns.
Next week if a pull back does occur and the strong stocks and the RUT, SOX and TRAN stay above horizontal resistance look for an up trend continuation.
Continue to trade with the up trend and watch for a potential break of horizontal resistance next week.
SPX
Resistance:, 1,220, 1,241, 1,256
Support: 1,209, 1,200, 1,190
Enter bullish trades with a bounce off support and a break above the high of the low day or a break out of horizontal resistance.
Wait to enter bearish trades for a break of short term support or a bounce down from the 30 DMA.
The short term 3 day trend is up.
The two-month trend is up.
The twelve-month trend is up.
Continue to focus on and trade setups on the charts of the stocks you watch. Trade with the trend of the chart and follow your rules.
The two-month trend is up.
The twelve-month trend is up.
Continue to focus on and trade setups on the charts of the stocks you watch. Trade with the trend of the chart and follow your rules.
AAPL -0.71 – spinning top near resistance in sideways channel
AMZN -0.85 – doji in bull flag
QCOM +0.33 – white candle nearing resistance in consolidation
GOOG +1.18 – spinning top in potential bear flag
BIDU +2.86 – bullish engulfing at support NDX 100 stocks stronger than the NDX include GRMN, WCRX, STX, APOL, NVDA, PCLN, BIDU, FWLT, ORCL, QGEN, NIHD, HOLX, ATVI, KLAC and MAT.
Stocks to Watch on Monday
Holding Above 30 DMA
HLF, PCLN, LVS, CMG, SINA, CAKE, CAM, UNP, WLT, ATW, SLB, NDAQ, USD, DECK, GR, VECO, CSTR, RVBD, WFMI, NFLX, BYI, MHS, NETL, FFIV, SWN, CAT, X, CREE, BUCY, GES, HAS, MCD, UNG, CLF, CRM, INFA, VMW, HANS, RMBS, SNDK, CRUS, GMCR, CF, AIV, AKAM, ATI, PCP, POT, SKX, FCX, FDX, AKS, A, AMD, AMX, ARUN, DHR, DOW, FLS, GME, ICE, MA, PNC, SPG, TBT, UCO, BAC, DE, FAS, GS, JEC, STI, SWK, URE, WHR, ZION
Moving Above 30 DMA = 5
Holding Above 30 DMA
HLF, PCLN, LVS, CMG, SINA, CAKE, CAM, UNP, WLT, ATW, SLB, NDAQ, USD, DECK, GR, VECO, CSTR, RVBD, WFMI, NFLX, BYI, MHS, NETL, FFIV, SWN, CAT, X, CREE, BUCY, GES, HAS, MCD, UNG, CLF, CRM, INFA, VMW, HANS, RMBS, SNDK, CRUS, GMCR, CF, AIV, AKAM, ATI, PCP, POT, SKX, FCX, FDX, AKS, A, AMD, AMX, ARUN, DHR, DOW, FLS, GME, ICE, MA, PNC, SPG, TBT, UCO, BAC, DE, FAS, GS, JEC, STI, SWK, URE, WHR, ZION
Moving Above 30 DMA = 5
AGU, IPI, SOHU, TIE, V
Moving Below 30 DMA = 2
Moving Below 30 DMA = 2
AMX, GS
Staying Below 30 DMA
NTRI, UAL, FAZ, TLT, MOS, ESI, NTES, LDK, ACN, CHL, NYX, TSL, BA, HSY, LXK, DLR
NTRI, UAL, FAZ, TLT, MOS, ESI, NTES, LDK, ACN, CHL, NYX, TSL, BA, HSY, LXK, DLR
Short Term Market Trend: Up
23 comments:
Thanks Dave
From your great teachings, Dave, I finally was able to properly buy at support and sell at resistance. After a bumpy few months, I think it's "clicking" for me, thanks.
Jeffrey (SF ATA workshop 2009)
I believe in this stuff. Thanks for your great daily insights!
Dave - If not for your blog, I wouldn't have a homepage on my browser. Thanks!
Joe
Hi Dave,
If I was Big Money I would not have sold on Friday.
I have been listening to you for two years and have read your writings every day since you started Chartsignals. Because of you I saw the hammer on $SPX and (finally) took action as a great technical trader should.
Thank you for your dedication and consistancy.
Ray J
It would not really make sense for the institutions to sell on positive progress, but it wouldn't be the first time something like that happened.
I personally would not sell on this news as this report is another sign of a strengthening economy at this time.
Thanks Dave for all your help.
In the 1.5yrs under your mentorship, I am finally, acquiring the discipline to follow the trend! This is the 1st trend that I'm not exiting early (as much) & my results are better than ever!
Results: Since 9/2 to 12/4, +$18,215 on a "mock", $55k paper acct for a return of +33% in 3months!!
My weakest area is managing total acct risk & exits.
And at first I was nervous about, your increase in teaching at "live events" (reduced availability for online classes) has found me discovering the other excellent coaches at Investools.
Lastly, if I were big institutional money, on Friday, I deffinitely, would have been a buyer!
Thank you, again, for all that you do for us students!
Scott L of Nashville
Dave,
In 2009 I was at the end of my rope with trading. Disgusted with my situation, my friend Denise suggested I check out your blog and follow your ATA classes. I did. Following your coaching, I am developing skills beyond my expectations. Short term news and wild swings would ruin many of good trades and I never had the discipline(nor the knowledge)to re-enter a good trade. You make it so clear Dave that if you follow rules, the money will come. I have made so much money in the past few months I'm now having a hard time accepting such large gains as a reality. Studying your entry and exit rules, my targets are almost always spot on. I would also like to say; "Thank you" for taking the time out to converse with me at the RTT in Orlando. It was very enlightening (BGO). If you're ever looking for a protege', please keep me in mind. Have charts, will travel!!
Gary
Dave,
If I was 'big money', I would not have sold but I would be taking a cautionary stance.
Thanks very much for your insights and for sharing your knowledge. I am learning from your posts, Capstones and VC's (when you can make them :))
Ron
Dave: I Agree; I would not sell.
Dave I agree completely. Thanks for spreading the good word.
Aloha Dave
Of course, wouldn't sell.
Even if the news was bad enough to start them to sell, it wouldn't all be in one day and we would see it comoing by watching the charts.
john
My answer is No.
Margaret Johnson
Gary, I am so happy for you/us.
Dave: It's true, I really had to battle with Gary but taking the time to help a friend - priceless!
D.
Dave,
It seems not all big money is smart money, as it looks like there was some panic selling at 8:30. However, within minutes a base was forming at support. By 9:30 all the sellers had sold and smart money buyers were stepping back in. The voice in my head said "news seldom changes the trend", so I was one of the parasites glomming on to the big money bounce and riding the uptrend. (I'm sure it is just coincidence that the voice sounds like yours.) Thanks for continuing to prod and cajole me into following my rules instead of my thoughts. I'm continuing to learn and then acting on my knowledge, thanks to you.
Good evening DAVE! Thanks for the trading lessons. What the big institutional buyers do is always a mystery to me. If I was a big institutional trader, I would stay with the trend, watch the present good news and continuing buying on good news in earnings and projections. I wish I could think this way confidently as a small retail trader. This has been a great year. Thanks for all your tremendous help. Judy
I would not have sold on Friday either. The trend is your friend all the way. Thanks for your insight!
No, we wouldn't sell our stocks because of the jobs reports numbers for one month missing the analyst projections. There was overall jobs growth and this is only one factor that big money is factoring into their purchase/sell/hold decisions.
We're not selling stocks now -- in fact, we're planning on buying stocks tomorrow. Thanks for the 1 green arrow method on the Nasdaq 100 group. We plan on doing that intermediate stock strategy.
Jamee & Sue
Big money is buying.
Thank you for your consistent clarity in the market. You cut through all the noise and keep things as they should be - simple.
Tampa Trent
Dear Dave:
You will be proud ...
I added when I saw the bounce after the initial sell off!
Thankyou for all that you do!
Best Regards,
If I were big money I might initially sell off with the hopes that as the market went down that others would follow, then I could begin buying at my predetermined level. Don't know if they have the power to influence to that great a degree but it would be a possible thought.
It's great having all these comments. If we could get this many folks (or more) to share and comment on their specific experiences this often, we could all accelerate the learning process even more.....
Hi Dave. No, I would not have sold, but been patient to see what happened the rest of the day ( last Friday ) and then add to positions where waranted as it started to regain the positive momentum, which is exactly what I did. THANKS FOR ALL THAT YOU DO:)
Best regards,
Susan Sherrard
Dave, thanks for your clear, consistent message! I told the IT caller today that you were the only reason we renewed trading rooms and AIT. Your subs are knowledgeable, but none speak as clearly and plainly as you do. They talk too fast, use jargon and slang, and, honestly, I just have to turn them off. YOU are the VOICE of Reason and Clarity!
Judy B
Knoxville
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