Surprise...SPX Support Bounce Bullish Engulfing...Were You Ready?

DJIA                          10,2.29.96  +75.53  +0.74%
SP500                         1,083.48   +12.23   +1.14%
COMPQ                      2,222.49    +24.26  +1.10%
Russell 2000                  624.24    +11.16  +1.82%

Exchange                  NYSE             NASD
Advancing                 2,476              1,853
Declining                      559                 773

Oil           $77.58      +0.68
Gold   $1,191.70      +9.70
SOX        358.13      +0.19
VIX            23.93      -2.04

Index  Direction      Confirmation
VIX      Down           Yes – SPX
SOX    Up                 Yes – COMPQ

Leading stocks on Tuesday included CLF, X, SKX, AKS, WLT, FCX, LVS, MA, UAUA, GES, ATI, DECK, ICE, BUCY, CAM, IPI, MOS, CRUS, HAS, TIE, URE, FAS, ATW, V, BYI, GMCR, JEC, CMG, HANS, WMT, NTRI, TSL, POT, CREE, CAT, CSTR, AIV, NYX, VECO, GS, FLS, AMD, AMX, GME, UCO


I want you to be a better trader. I want you to focus on the charts. I want you think better, more accurately and think like a master chess player.  I want you to buy where you are supposed to buy and sell where you are supposed to sell.

Monday night in my AT webcast, I placed a virtual trade on AA for an entry if AA rose above 10.78. I stated that I wasn't advocating a trade in AA rather just demonstrating a trade in a stock that had already reported earnings and that was setting up a potential entry.  I even said there may be better stocks to trade, but AA was making a potential higher low and that it made a good example of a potential trend reversal and trade setup.

One of the viewers suggested since IBM and TXN were down the market may be down. My response was I didn't know if the market would be down or not. That it might or might not. I also stated that the limitation with not taking a trade setup on a stock in a trader's list because one thought the market may go down was not the right way to think.

I pointed out that even if tech stocks went down, that did not mean basic material stocks would go down. I also said if a trader focuses in on the thought that they know the market will go down that they may miss a move up later in the day.

Well the market started down but basic material stocks were stronger from the open. XLB actually finished as the strongest sector up 3.01% and the market did reverse early with many stocks opening low and then rising almost from their opening price.

Tuesday is the perfect example of why a trader should not let news commentators, others' opinions or their own imagination dictate trades. Rather they should follow their rules and set trades up according to their rules.

You just don't know what is going to happen and even though Tuesday progressed almost exactly as I described Monday night, I don't know either and I said that loud and clear. I just know that good traders follow their rules and take the setups and trades that they are supposed to take.

Monday's bullish harami was confirmed on Tuesday with a bullish engulfing pattern and an entry was give with a break above the high of the low day on the SPX and many stocks.

You might even remember that I wrote Monday night, “A break above Monday's high is a new entry off of what could be a higher lower flag pattern. Monday is a Yellow Alert for a potential entry into a bullish trade.”

And so it was...I hope you were ready.

If you weren't I hope you learned to listen to an objective voice that is consistently focused on teaching you principles that when followed can lead a trader to trading success.

If you have access to the Monday night AT webcast I encourage you to listen or re-listen and learn once again how objective thinking and the technicals really do give the best insight to the opportunities that will likely appear.

Our Yellow Alert turned Green on Tuesday.  

PEP, UAUA, BTU all rose on earnings and AAPL after rising +6.31 during regular trading rose another +7.31 after the close after reporting 3.51 earnings vs. 3.11 estimates.

Earnings of interest of leading companies include:
Wednesday – ALGT, AMR, AMLN, BIDU, CA, CHKP, KO, EBAY, FFIV, FCX, GENZ, NFLX, QCOM, SWK, SBUX, LCC, UTX, WFC, WDC, XLNX
Thursday – MMM, ALK, AMZN, AMX, AXP, T, BUCY, CAT, CMG, CAL, DHR, DECK, FLEX, FLIR, HSY, ESI, KEY, MHS, MSFT, MOS, NUE, PNC, PCP, SNDK, SIAL, STI, TRV, UNP, UPS
Friday – DLR, F, HON, MCD, OSTK, SLB, SKX, VZ

Guidance:

SPX confirms Monday's bullish harami, forms a bullish engulfing and breaks the high of the previous low day...
The SPX closed above its 30 DMA.
The VIX did confirm the higher close in the SPX.
Breadth was strong as advancers led decliners 4 to 1 on the NYSE.

Enter strong stocks up with a break above the high of the low day. Stay with stocks in a bounce continuation.

Tighten stops on weak stocks down trending, if you did not already exit on Tuesday .

The VIX fell -2.04 and closed at 23.93. Volatility closed below the important 25 level on Tuesday, confirming the move to the upside.

The short term 3 day trend is neutral.
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 +6.31
QCOM -0.02
GOOG +15.41
BIDU +1.14
NDX 100 stocks stronger than the NDX include: SHLD, URBN, ADSK, WYNN, FWLT, JOYG, FSLR, GOOG, PCAR, HANS, CERN, AAPL, NVDA, BBBY and NWSA.

Stocks weaker than the NDX: FLEX, HOLX, MRVL, ILMN, HSIC, CELG, ESRX, TEVA, XLNX, MXIM, CMCSA, AMGN, BRCM, DELL and LRCX.

Stocks to Watch on Tuesday
Holding Above 30 DMA
TLT, CRUS, GMCR, HANS, TSL, ACN, BUCY, CAT, CREE, CRM, DLR, FFIV, MA, NETL, NFLX, PCLN, TIE, VMW, AGU, MCD, NTRI, DE, GS, IPI, AKS, MOS, POT, CAM, UCO, USD, USO, VECO
Moving Above 30 DMA = 16
AIV, ATW, CHL, DOW, ESI, FCX, FLS, GES, GME, LVS, PCP, UAUA, URE, WLT, WMT, X
Moving Below 30 DMA = 2
FAZ, HSY
Staying Below 30 DMA
AMX, BAC, CSTR, FAS, GR, HLF, MHS, PNC, SPG, STI, UNP, WFMI, ZION, BA, HAS, SWK, V, WHR, SNDK, UNG, CLF, CMG, DECK, NYX, SKX, SWN, ICE, A, AMD, LXK, ATI, DHR, BYI, JEC

Intermediate Term Market Trend: Neutral
Short Term Market Trend: Neutral