SPY Fills Thursday's Gap and Bounces...PCLN New High Close...

The SPX formed a black candle that closed at Thursday’s S1 -9.83 at 1,321.15 on Friday.  The SPX continues a short term consolidation or sideways trend identified in Tuesday's post.  A breakout above 1,332 will generate a SPX price target of 1,362.  The potential breakout did not occur on Friday.

(click image to enlarge)

SPX black candle, Thursday’s S1 holds

INDU black candle, Thursday’s S1 holds

COMPQ black candle, Thursday’s S1 holds

RUT long lower shadow spinning top, close above Feb 28 close and Thursday’s S1

Breadth weakened on Friday as decliners led advancers 1.87 to 1 on the NYSE and 1.85 to 1 on the NASDAQ …

Exchange       NYSE          NASDAQ

Advancers      1,035                 922

Decliners        1,945              1,710

Index              Chg.    Close    Direction      Confirmation

VIX                +0.46       19.06     Up                 Yes – SPX

SOX               -4.95     459.82     Down            Yes – COMPQ

Leading stocks > +2% on Friday included A, JDSU, SINA, UCO, ARUN, RVBD, FAZ, CMG, SLW, SOHU 

Losing stocks < -2.0% included CF, FAS, UAL, CREE, STI, JEC, F, ESI, GS

Positives – SPX S1 holds, NFLX, PCLN, BIDU, Euro, RUT strongest of broad indexes

Negatives – TNX, bonds rose, breadth dropped significantly, all sectors lower

Each day Chart Signals list the positives and negatives of the technical action.  As you can see from the past posts, the action is seldom only positive or negative.  Most days the technical action has both positive and negative attributes.  Friday is not any different.

I want to make mention of the Euro breakout.  While no two assets have 100% correlation, over the past 24 months there has been approximately a 71% correlation between the Euro and the SPX, meaning they have moved in the same direction most of the time.  There is an even stronger correlation between the SPX and financial stocks.

The Euro breakout suggests a price target close to 1.4300 (see below).  Both the SPX and financial stocks are consolidating sideways.  The Euro correlation suggests if the Euro moves higher that it is likely the SPX also moves higher.  The financial stocks correlation suggests that the SPX is NOT likely to move higher if financial stocks fail to move higher.

So one of two outcomes would be likely (not certain), either US interest rates, financial stocks and the SPX begins to rise or the Euro breakout fails.  Since the SPX is in both a long term and intermediate term up trend, the larger technical probability is for the SPX to rise.

Good technical traders should position for the more likely scenario, but stay mentally flexible if the lower probability begins to unfold.

Interest rates moved lower on Friday and bond ETF TLT formed a bullish engulfing pattern rising 75 cents.  The Euro rose 23 pips to 1.3963 at 5 pm ET continuing above its Feb 1 horizontal resistance.  The Euro breakout signals a multi-week price target of 1.4296.

All nine sectors fell on Friday with Financials XLF -1.23% and Industrials XLI -1.16%, the weakest of all sectors.

Friday's Movers and Setups

Thursday nights review stocks included Friday big movers and movers A, ARUN, RVBD, PCLN, PCX, WYNN and NTES.  Others stocks listed CAT, CRUS, DISH, DOW, JOYG, NETL, QCOM and VLO had modest down days and stayed above their 30 DMA.

Only SOHU from the 30 DMA setups crossed above on Friday.  The following stocks could cross their 30 DMA on Monday: BAC, FWLT, JEC, STI, TBT

Breakouts SLW, CAM, RVBD, IL and VRTX moved higher.

Setups

Bull Flag – NDAQ, VLO, NYX, ATI, URE, TSL, DLR, HANS, HUM,  SLB, STI, SOHU, XL, NFLX, SWKS, BIDU, LULU, CMG, OPEN, ARMH, CHK, HLF

Breakout – JNPR, JSDU, CLF, GLW, NTES, NETL, CAT, ATW, SWK, ICE, CIEN, PCLN, AAPL, SMH

SPX

Resistance: 1,330, 1,344, 1,362

Support: 1,321, 1,311, 1,300

The short term 3 day trend is neutral.
The six-month trend is up.
The twelve-month trend is up.

Trade with the trend of the chart you are trading.

Bullish entry signal is a bounce off support and a break above the high of the low day or a break out of horizontal resistance.

Bearish entry signal is a break of short term support or a bounce down from the 30 DMA or other resistance.

AAPL +0.44 – doji approaching horizontal resistance

AMZN -1.12 – hammer at horizontal support

NFLX +7.35 – bullish engulfing confirms hammer at earnings gap support

QCOM -0.69 – black candle in bull flag support bounce

GOOG -8.94 – large black candle back to support

BIDU +0.49 – spinning top at short term resistance, 9 day new high close

NDX 100 stocks stronger than the NDX include NFLX, EXPE, VRTX, CTXS, GILD, GRMN, YHOO, DLTR, WFMI, PCLN, XRAY, ADBE, MU, VMED and ATVI.

Stocks weaker than the NDX include MRVL, CA, SPLS, RIMM, EBAY, CEPH, APOL, PCAR, CHKP, VOD, STX, FLIR, MYL, ESRX and GOOG.

Stocks to Watch on Monday
Holding Above 30 DMA

NDAQ, VLO, CLF, JDSU, CRUS, GLW, NYX, URE, DLR, HUM, NTES, CAM,  SLB, CAT, NETL, ATW, SWK, ICE, JNPR, AMD, DHR,  ARUN, CIEN, DECK, GMCR, RVBD, SLW, ESI, HLF, UCO, MOS, SWKS, AGU, POT, MCP, CMG, HAS, MHS, SMH, V, VECO, A, ACN, CSTR, DE, DOW, GES, IPI, PCX, TIF, UNP, WLT

Moving Above 30 DMA = 3

FAZ, SOHU, TLT

Moving Below 30 DMA = 3

ATI, CF, FAS

Staying Below 30 DMA

AKS, SWN, CRM, LDK, SNDK, STI, TSL, BAC, FWLT, GS, JEC, LVS, NVDA, TBT, UAL, X, SINA, ZION, VMW, UNG, F, CHL, FCX

Deleted = AIV, BA, CREE, DISH, FDX, GME, HANS, HSY, LCC, LXK, MA, PCP, PNC, SKX, SPG, TIE, WHR

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

2011 Your Best Year Ever... 

Week 9 is over as is February.  The broad indexes are up slightly for Week 9 and are still up YTD.  There are just 43 weeks left as we continue towards our objective to make 2011 your best year ever. 

Again evaluate your trades for the week.  Did you buy, hold and sell where you were supposed to according to your rules? 

Give yourself an A+ or 10 for each trade that you did follow your rules.

How is your portfolio doing YTD compared with the following indexes?  If you outperformed the SOX give yourself an A+, the INDU, NDX or SPX give yourself an A.

 

                         Week 9              YTD

SPX                    0.10%              5.05%

NDX                   0.58%              6.41%

SOX                  -0.83%            11.66%

INDU                  0.33%              5.12%

Take your annual goal that you sent in to Chart Signals and divide that goal by 52 weeks and multiply by 9.  How does your week 9 results compare to your goal?  If you are at the goal or higher give yourself and A+.

If you are underperforming your goal or the broader market you should take the time to determine why.  Are you not following rules?  Have any of the stocks you are trading changed to a sideways or down trend and you failed to exit?

The review and evaluation of under performance can lead you to making the changes that you need to make so that you can outperform the market and achieve the goal you have set for your portfolio.