SPX Rises Slightly...and Gains Even More in After-Hours Trading...

Oh Boy, was there some interesting price action today... DJIA - 5.67 -0.06% SP500 + 2.86 +0.27% COMPQ + 6.67 +0.32% Russell 2000 + 0.10 +0.02% Exchange NYSE NASD Advancing 1,573 1,318 Declining 1,387 1,335 Oil $69.57 -1.31 Gold $1,043.80 +4.70 SOX 317.64 -1.94 VIX 24.68 -1.02 The VIX moved down and did confirm the move up in the SPX on Wednesday. The SOX moved down and did NOT confirm the move up in the COMPQ. Strongest Sectors: XLF +1.07%...XLE +0.77%...XLP +0.43% Weakest Sectors: XLI -0.38%...XLK -0.19%...XLB +0.03% Seven of nine sectors moved higher on Wednesday. Financials, Energy, and Consumer Staples were stronger than the SPX +0.27%. Financial stocks stronger than XLF +1.07%: WFC, BAC, GS, JPM, RF, AXP, MS, BK and ETFs UYG and FAS. Tech stocks stronger than XLK -0.19%: MA, GOOG, EBAY, IBM, SCSO, YHOO, SYMC, INTC, ADP, ORCL, AAPL, EMC and MSFT. Sector Watch Up Trending: XLK, XLB, XLY, XLV Horizontal Breakout: XLF Sideways: XLE, XLP, XLI, XLU Down Trending: Key Resistance Levels: 1,056 = Sep 25 R1 level 1,061 = Sep 16 S1 Level 1,075 = 875 Breakout Chart Target 1,100 = September 2008 Old Support Key Support Levels 1,044 = October Horizontal Old Resistance 1,025 = 950 Breakout Chart Target 1,017 = Aug 27 Support Low 1,007 = November 2008 Horizontal Resistance Dave’s Insight: The market doesn’t know what you think. If the market did know what you think, it wouldn’t care. The market doesn’t care what you think. Why? You don’t have enough money to influence the market through your buying and selling. If you don’t have enough money to influence the market, why should it care what you think? Every time I hear a market technician say what they think or feel the market should do, or they state the market can’t or shouldn’t be doing what it is doing I roll my eyes and wonder is this person listening to themselves? Aren’t they looking at the market technicals? Why do they think their opinion is more correct than the buying or selling of institutions? The market is driven by supply and demand. If the demand is greater than supply, prices will rise. If supply is greater than demand, prices will fall. As you might be guessing, I heard a technician today say they didn’t think the market could go above a nearby resistance level. I know you've been hearing that for the past six months... I have been looking at computer charts for more than 19 years and paper charts for over 32 years and I can’t say the market can’t go above a certain level with a straight face. It just isn’t possible to know for a certainty what the institutions will do tomorrow or next week. With technical analysis we can make a reasonable probability forecast and the most significant technical tool is trend. It is more likely that a trend will continue than end, although all trends will come to an end at some point. Technical analysis will also give us indications when a trend ends. When that trend ending information is not on a chart it is nothing more than an “I think” to say the market can’t go above a nearby level in an up trend. Remember the market doesn’t know and the market doesn’t care what you think. Earnings season is upon us and if the institutions like what they hear, especially regarding the company’s guidance forward into the new quarter, they will buy the stock and it will go higher. If they hear strong guidance from enough companies the market will go higher. That is what happened in the last earnings season in July and August. They liked AAPL, CAT, IBM, INTC and other earnings and guidance, thye bought and those stocks rose and so did the market. They didn’t like FSLR last quarter and the stock fell. A few days ago they didn’t like RIMM and the stock fell. They liked NKE and the stock rose. This morning they liked COST and it rose. After the close they liked AA and the stock rose 80 cents or 5.63% in after-hours trading on 8.7 million shares…so look for a gap up in the morning. Chart Signals posted last night, “If a pause occurs focus on if the price action stays above the 1,044 horizontal price level.” This morning we wrote, “Futures are indicating a potential pause in the support bounce that started last Friday and picked up momentum on Monday.” So what did the SPX do on Wednesday? IT PAUSED. The SPX pulled back to 1,050 (above 1,044) and rose to close at 1,057.58. The SPY after pulling back 44 cents rose to 105.80 up 29 cents. After the AA earnings, SPY rose 56 cents to 106.36 in after-hours trading. Mid evening ES futures are up 9 points. Nobody knows what will happen between now and Thursday’s open but the indication is that big money liked what it heard from AA and they are going to pay up for the stock. If big money hears enough good reports, this market will go higher no matter what you think or what any other market technician thinks. The market doesn’t know what you think and if it did, it wouldn’t care! This morning in my webcast I pointed out that AAPL and PCLN had broken out and they had breakout price targets of 197 and 179 respectively. AAPL rose and PCLN +2.86. I also pointed out that GOOG and BIDU were at horizontal resistance and if they broke out look for a breakout price target of 531 on GOOG and 450 on BIDU. Well after the webcast both stocks broke out and GOOG rose $10 above its 507 breakout level and BIDU rose $5.80 above its 408 breakout point. GOOG up 18.80 and BIDU up 12.80 on way above average volume, the ideal breakout scenario, and both rose more in after-hours trading. Doesn’t it seem kind of silly to say “I think” the market can’t go above a nearby level when there are more buyers than sellers? (click image to enlarge) Guidance: The intermediate term trend is still up as the support bounce momentum slowed on Wednesday. GOOG and BIDU broke out of horizontal resistance, while AAPL, PCLN and ISRG moved higher above their horizontal breakout. Based on after-hours trading, following the AA earnings release, look for a support bounce continuation on Thursday morning. Take entry signals as they occur and follow your rules. Breakout: AAPL, PCLN, ISRG, BIDU, GOOG Potential Breakout Setups: AMZN, HANS, FLS, JCG, APOL, FCX, JOYG, AKAM Pulling Back: Potential C Patterns: C Pattern Breakout: ADSK Lower Close in Support Bounce: LVS, BDK, WLT, WYNN, BA, FLIR, MRVL, XLNX, DE, JEC, DD, X, FAST, SPG, ZION, ADBE, AMX Flag Setups and Bounces in Progress: MA, V, CAM, DOW, BUCY, FWLT, CAT, JCI, AGU, HOLX, NWSA, STT, AXP, BAC, INTC, FSLR, WHR Potential Down Trend Setups: TXN, RIMM, AGCO, MON, MYGN, ORCL AAPL +0.24 QCOM -0.44 GOOG +18.80 BIDU +12.80 NDX 100 stocks stronger than the NDX: AKAM, ERTS, GOOG, CERN, AMZN, NIHD, BIDU, ATVI, FSLR, APOL, WCRX, SHLD, COST, EBAY, CTSH, STLD, RIMM, NWSA, CSCO, VRSN, YHOO, SYMC, JOYG, GRMN and CHKP. Stocks to Watch on Thursday Leading Stocks Holding Above 30 DMA CTSH, AAPL, PETS, PCLN, TDG, PCP, CLB, ESRX, NTLS, NIHD, K, FLS, GXDX, BAP, GME, PWRD, WRC, BIDU, HDB, JW.A, ATW, EZPW, JOYG, TRLG, GPRO, PPD, DECK, VPRT, AMZN, GMCR, ACN, SLGN, FSLR, NFLX, HANS, DV, ESI, STRA, MCD, CPLA, HLF, SWN, AFAM, AMED, CAM, GES, ICE, UYG, AMX, APEI, BLUD, EBAY, FAS, MUR, SPWRA, WCG Moving Above 30 DMA = 1 CHL Moving Below 30 DMA = 1 DLTR Staying Below 30 DMA PPD, FAZ, BDX, BIIB, BKC, GILD, JCOM, JOSB, RCI, VAR, SNHY, USD, URE, FUQI, JEC, MHS, WAB, X, CBST, RBN, RIMM, ALGT, DLB, PSYS, GR, MYGN, PWR, SNA, SYNA, MOS, BYI, ORCL, WMT, MON Intermediate Term Market Trend: DJIA = Neutral, Nasdaq, RUT, SPX = Up Short Term Market Trend: Up