SP500 1,077.96 +7.71 +0.72%
COMPQ 2,196.45 +21.05 +0.97%
Russell 2000 629.43 +9.16 +1.48%
Exchange NYSE NASD
Advancing 2,393 1,992
Declining 635 652
Oil $76.09 +0.65
Gold $1,209.60 +13.80
SOX 351.36 +3.74
VIX 24.98 -0.73
Index Direction Confirmation
VIX Down Yes – SPX
SOX Up Yes – COMPQ
Correlation suggests an interrelationship exists between variables, Causation suggests that one variable is the reason or cause that another variable changes. I have had the opportunity to observe in the stock market for more than three decades, likely well meaning but non insightful, writers and commentators describe correlation as causation. They like to write the market went up or down because of whatever happened that day.
Do you really think that everyone was a buyer or seller on a given day for the same reason?
Readers, “it just ain't so.” Because something happens at the same time does NOT mean it is the cause of what happened. There is a world of difference between correlation and causation.
To set the record straight again.
Prices go up because there are more buyers than sellers. Prices go down because there are more sellers than buyers.
Supply and Demand...Supply and Demand...Supply and Demand!
Get this concept right and your trading will likely improve.
After two weeks of sellers being stronger than buyers, buyers became stronger and sent the market up. This is not some mysterious happening that is accurately explained after the fact by some non-causal factor that happened or did not happen at the same time.
The support bounce this week is a function that selling pressure was already waning on Thursday, July 1 when a hammer was formed on the SPX and many other charts. Friday, July 2 formed an inside day again indicating that selling was weakening and buying pressure was getting stronger. After a three day weekend buying pressure continued and drove prices up temporarily on Tuesday, followed by very strong buying on Wednesday that formed a strong up trend day. Buying continued at a more moderate on Thursday and Friday.
The SPX closed at 1,077.96 above its 30 DMA for the first time since June 21 when our Yellow Alert turned to Red on June 22. Click here: http://chartsignals.blogspot.com/2010/06/yellow-alert-turns-red-as-spx-breaks.html
Check out these Charts
(click image to enlarge)
Check out these Charts
(click image to enlarge)
Looking into next week earnings will be a major factor driving the buying and selling of individual stocks as the Q2 earnings season kicks off.
Earnings of interest of leading companies include:
Monday – AA, AMR, CSX, NVLS
Tuesday – FAST, INTC
Wednesday – CTAS, MAR
Thursday – AMD, AMX GOOG, JBHT, JPM
Friday – BAC, C, GE
Guidance:
SPX formed another higher high and higher low making its highest close since June 23.
The SPX closed above its 30 DMA for the first time since June 21.
The VIX did confirm the higher close in the SPX.
The VIX moved lower for the sixth day in a row.
Breadth was strong as advancers led decliners by more than 3 to 1 on the NYSE.
Continue to trade strong stocks up with an entry signal or bounce continuation.
Wait for a new setup to trade weak stocks down. The entry for down trending stocks is a break below the low of the high day.
The VIX fell -0.73 and closed at 24.98. Volatility just below the important 25 level on Friday. If VIX moves lower and stays below 25 next week, look for the SPX rally to continue.
The short term 3 day trend is up.
The two-month trend is neutral.
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 +1.53
QCOM -0.02
GOOG +10.93
BIDU -1.23
NDX 100 stocks stronger than the NDX include: RIMM, LINTA, KLAC, JOYG, ALTR, FWLT, PCLN, LRCX, GOOG, TEVA, CELG, XLNX, STLD, LLTC and FLEX.
Stocks weaker than the NDX: VRSN, BIDU, HOLX, ISRG, SYMC, ORLY, MSFT, EXPE, LIFE, NTAP, GILD, CTXS, HSIC, QCOM and IACI.
Stocks to Watch on Monday
Holding Above 30 DMA
TLT, CHL, CREE, CRUS, GMCR, HANS, TSL, ACN, HSY, AMX, ATW, BUCY, CAT, CRM, DLR, FFIV, FLS, HAS, HLF, MA, NETL, NFLX, PCLN, PNC, TIE, V, VECO, VMW, AGU, BA, CAM, GR, MCD, MOS, NTRI, USO
Moving Above 30 DMA = 8
DE, DOW, FCX, GS, IPI, PCP, STI, X, ZION
Moving Below 30 DMA = 0
Staying Below 30 DMA
FAZ, UNG, AIV, CLF, CMG, DECK, LVS, NYX, SKX, SNDK, SWN, UCO, UNP, ICE, SPG, URE, UAUA, A, AMD, LXK, ATI, DHR, MHS, USD, WHR, WLT, POT, WFMI, WMT, SWK, CSTR, ESI, BYI, JEC, GME, FAS, BAC, GES, AKS
Intermediate Term Market Trend: Neutral
Short Term Market Trend: Up
5 comments:
Hi Dave,
Just wanted to say your Active investor talk about VMW was a BGO for me. Thank You for making it so clear that when a signal occurs TAKE IT.
Tom Cunningham
Excellent Blog Dave. so much information. Still I wish I could see more comments each day. There is so much to learn and comment on. In fact I checked out what Tom C. just said about VMW. He has a good point. Sometimes we might hesitate getting in when our rules tell us to because of the shape of the candle etc. But when you consider the strength of that trend compared to the market, all we need to know is that it IS or IS NOT a buy signal. We can clearly see that it IS, and made quite a big move to the upside. Kudos to anyone who took that trade.
Dave,
I loved your Thur AIT. I did get into Papertrades on CRUS, VMW and AKAM last Tues & Wed and have been well rewarded (virtually). Your thoughtful insights are really helping me learn. Can you go through your sell signals/strategies some time in the near future? In the past, I've given too much back on my profitable Papertrades before exiting. I think I am becoming more of a shorter-term trader than I initially anticipated (at least in the current market conditions). Thanks and keep up the awesome work!
Mike
Dave,
For me, the AGU, FCX, AKS and X charts you displayed will present great opportunities if and when we get a pullback and they make higher lows. I'm in trades where the charts were already stronger than the SPX, e.g., AKAM, BRCM, UAUA, EEM & EWZ, which is an approach I know you recommend. I'll echo Shortstar's comments and ask that you spend more time with us in the ATAs and AITs teaching how to better control our exits, timing when and when not to sell calls against our long calls to hedge our positions on pullbacks, and JUST AS IMPORTANTLY, when to close out those hedges and the longs. I too have given back too much on the pull backs. This last pullback points out how easy it is to find good long trades when following your rules for entries (which I do), but the devil is in knowing when to hedge and when to just close the trade out. The trick is managing the exits (not a trick easily mastered so far)!
Thanks,
Brian
Sadly, I let my Investools subscription expire. I really miss your teaching sessions. Thank you for your consistent analysis of the market. Your explanations are extremely beneficial.
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