Daily Market Comments - March 2006
3/31 - Stock Market Comments
The selling in the Dow was not confirmed with selling in the NASDAQ. The pullback in the Dow now appears to be a relatively slow process. This has become evident with the bullish Harami in Wednesday's trading. At the same time, the NASDAQ has broken above an obvious sideways trading channel. The Dow is mildly pulling back and the NASDAQ is continuing to show strength, indicating sector rotation occurring in the markets versus any major selling. These periods of consolidation provide rest for a slowly uptrending market. The resting stages provide much more health for a bullish market. Continue to stay predominantly long with a few short positions in the portfolio.
3/30 -- Stock Market Comments
The Dow had indicated a pullback possibility for the past week and a half. The pullback occurred when the Feds raised the expected quarter-point interest rate. Wednesday's bullish trading made it clear that the Bulls had not left the markets. At worst, any pullback was going to be slow, with intermittent buying on the way down. The NASDAQ, showing that it might have fizzled out once again at the top of the trading channel, clearly revealed that the trading channel was now not acting as a deterrent. Continue to hold the long positions that are not showing confirmed sell signals. Short positions need to be monitored with more diligence in view of the fact that the Bears are not yet the dominant influence in this market. Crude oil prices and interest rates do not seem to be creating a major deterrent in investor sentiment. Watch the gold stocks as well as the high-tech and biotech sectors.
3/29 -- Stock Market Comments
The sell signals that were becoming apparent in the Dow over the past couple of weeks finally took hold with the "surprise?" announcement of another increase in interest rates. The trend line that had been coming up through the recent tops could have acted as support on a pullback in the Dow. But, as was seen on Tuesday, the selling in the Dow brought prices well below that possible support. The Dow could be supporting at the peak prior to the latest uptrend. At the same time, the NASDAQ failed to break out of its sideways trending channel. The NASDAQ formed a variation of an Evening Star signal at the top of this current channel. Both indexes appear to have the probabilities of moving sideways or down over the next week or so until the stochastics get toward the oversold condition. Be prepared to liquidate the long positions in your portfolio that are showing weakness and add more short positions.
3/28 -- Stock Market Comments
The Dow sold off mildly on Monday, consistent with the sell signals that have formed in the Dow over the past week of trading. The NASDAQ has still shown some mild strength. The combination of these factors reveals that there is no selling of any magnitude in the markets, just a shifting of funds from one sector to another. Crude oil is trading in a flat trading range, bond prices also, and the US dollar appears to be in a choppy range. None of these factors appear to be influencing investor sentiment. The NASDAQ is trying to push through the top end of a trading range that has developed over the past two months. If it breaks out to the upside in the next few days, look for new strength to come into all of the markets.
3/27 -- Stock Market Comments
The potential weakness in the Dow over the past few days has been greatly moderated by the strength showed in the NASDAQ. The sell signals that were forming in the Dow were occurring when stochastics were starting to roll over. However, the past few days of trading have made the stochastics start to curl up. Continue to stay predominantly long with a few short positions in the portfolio. At this point, the sellers have not been able to take control. But keep an eye open for the possibility of a strong selling day. That would indicate it's time to take some longs off the table.
3/24 -- Stock Market Comments
The Bullish Engulfing signal of Wednesday in the Dow, which represented the possibility of seeing a candlestick sell signal soon, was followed Thursday with a bearish Harami. This would indicate a strong probability of a pullback in the Dow. Lower futures in the Dow this morning appear to be confirming that analysis. The NASDAQ on the other hand appears to be moving sideways, well entrenched in this sideways trading channel. It didn't show any great weakness on Thurday. The Russell 2000 actually showed some strength. The scenario makes the analysis somewhat flat. There may be some selloff in the Dow and the S&P 500 while some moderate strength remains in the NASDAQ and the Russell 2000. This is more of an indication of sectors rotating versus a full-fledged selloff. Be prepared to lighten up on long positions that are showing signs of weakness, holding the strong long positions, and having a small number of short positions in the portfolio. This is not a forceful portfolio stance but right now the markets are not showing any decisive move one way or the other.
3/23 -- Stock Market Comments
Be careful, Wednesday's signal in the Dow was a Bullish Engulfing signal in the overbought area. This usually indicates "last gasp" buying. Continue to hold the long positions but be prepared to see a candlestick sell signal. Holding a few short positions would not hurt at this time. At best, the markets could start seeing some rotation versus a major selloff. Bond prices are slowly rising, Crude Oil prices are stable to slightly negative. Currently, there doesn't seem to be any major influences on the markets other than normal investment sentiment changes such as profit-taking.
3/22 -- Stock Market Comments
Tuesday’s formation after the previous Doji in the DOW shows that the sellers are starting to take control. Expect a few days of the market pulling back, which means to take profits on long positions that are showing ‘toppy’ charts.
The NASDAQ also appeared to fail at the top of it’s trading channel with a Bearish Engulfing signal and two Doji signals in the last three days of trading. Adding a short position or two would be prudent.
3/21 -- Stock Market Comments
On Monday, the Dow formed a Doji with the stochastics in the overbought area starting to curl down. This morning's futures reveal weaker trading on the open this morning. This creates an extremely high probability that the markets will start pulling back at least for a few days. The first logical target for the Dow would be the peak level of late February. The next target would be the 50 day moving average. As mentioned in our chat sessions, the NASDAQ appears to be in a trading channel. It is currently trading at the top end of the trading channel and forming some candlesticks sell signals. In the last three trading days, a Bearish Engulfing signal has formed followed by two Doji signals. This is all occurring at the top of the trading channel. A pullback to the 50 day moving average could be very feasible. This scenario would warrant taking profits on chart patterns that are getting toppy. The oil sector is a prime example. However, the biotechs continue to show good strength.
3/20 -- Stock Market Comments
The markets appear to be opening relatively flat this morning. Friday's trading did not show anything significant due to the Triple Witching of options. Currently there is no great market trend in any of the indexes. The Dow is consistently moving higher which should be an indication that the uptrends are still intact. This creates an environment for allowing the candlestick patterns to continue in their current trends. Expect more movement to the upside.
3/17 -- Stock Market Comments
It's Triple Witching day, options expirations. The morning futures do not indicate any dramatic changes in the current market trend. Do not expect any great market movement today, being a Friday and St. Patrick's Day.
3/16 -- Stock Market Comments
We are in a rally. Continue to ride the long positions until the stochastics get into the overbought condition, which should be in another day or two. Expect some profit-taking in the near future but, as of yet, the uptrend is still intact.
3/15 -- Stock Market Comments
Both the Dow and the NASDAQ displayed much stronger strength than anticipated. The Dow is now attempting to move to all-time highs. The last time the Dow moved to all-time highs was in early 2000. The fact that it closed at a recent high reveals that the Bulls are still in control of the market and the stochastics indicate there's still more upside movement to come. The NASDAQ came up through the 50 day moving average with its strength on Tuesday. Its current uptrend should test the upper end of the trend channel that has developed since the first of the year. Continue to hold the long positions until a severe candlestick sell signal appears in the markets.
3/14 -- Stock Market Comments
The markets did nothing on Monday to change the scenario of a slow uptrends in progress. Continue to hold the long positions. Any short positions still being held should be done so very nimbly. Expect the markets to continue in a very slow uptrend for the near future.
3/13 -- Stock Market Comments
The buying strength seen on Friday was a good confirmation that the probes toward the 50 day moving average this past week indicated the lows in the Dow. Now the probabilities indicate that an uptrend should still be in the works. The recent short positions should be closed upon seeing strength in today's market. The long positions can continue to be held. The uptrend in the Dow should be targeting the recent highs of late February. The uptrend breaking out through that level was showing a healthy uptrend with backing and filling as the trend moves upwards.
3/10 -- Stock Market Comments
The weakness in the markets on Thursday indicated that the uptrend has not started. The NASDAQ looks like it still has more downside potential, the stochastics are heading down and there has not been any buy signal to indicate that the downtrend has stopped. The Dow has the possibility of testing the 50 day moving average one more time before the stochastics get into oversold conditions. Continue to hold both long and short positions in the portfolio.
3/9 -- Stock Market Comments
The Dow appeared to have bounced right off the 50 day moving average or got very close to it. The NASDAQ showed strength also. At least the selling should have stopped. Although there may not be any great buying strength, the uptrend should have a very slow upward movement. This type of trading environment is conducive to having both long positions and short positions established in the portfolio.
3/8 -- Stock Market Comments
The downward trend maintained its direction on Tuesday. Anticipate further downside movement for the next few days while the indexes test the 50 day moving averages. Short positions can be added as there are sectors that are showing severe weakness, the steel stocks and the mining stocks for example.
3/7 -- Stock Market Comments
The weakness in the markets is probably because of the rising interest rates. Both the Dow and the NASDAQ appear to be pulling back to test their 50 day moving averages. The stochastics appear to need another few days before they get into the oversold conditions. Expect a few more days of weak trading in the markets before they become oversold. Although Crude Oil prices continued to drift lower, interest rates are now becoming more of a concern. Be prepared to lighten up on the long positions if their charts are turning over.
3/6 -- Stock Market Comments
The markets showed strength on Friday but finally closed at the weaker end of their trading ranges. This continues the scenario that the current trends in the indexes will remain relatively slow in movement. The Dow appears to be moving slowly to the downside and has not shown any candlestick signals that would alter that direction, although it did form a large Doji on Friday. A positive trading day today would indicate the possibility of a slow uptrend starting to occur. The NASDAQ also had the possibility of showing strength on Friday. It formed a Shooting Star formation by the end of the day, giving up all the gains it had produced during the day. It is also revealing a slow trend channel to the upside. Under these market conditions, it is still recommended to continue to hold the long positions.
3/3 -- Stock Market Comments
The morning futures are weak. The Dow still has the possibility of moving slowly lower until the stochastics reach the oversold area. The NASDAQ appears to be opening lower today but any pullback in this index would probably further indicate that the uptrend will be trading in an uptrending channel, a day or two of weaker trading should not affect the slow uptrend. Do not expect any major buying in the markets until the Dow gets the stochastics to the oversold conditions. That may be another four or five trading days. Crude Oil prices may have an additional few days of upside movement. This should put a damper on bullish equity buying for a few days.
3/2 -- Stock Market Comments
The Dow formed a Bullish Harami indicating that any selling in this pullback would be very moderate if any at all. The bullish candle that formed in the NASDAQ also indicated that the uptrend was still intact but the trajectory of that uptrend would be very slow. However, a slow steady trend in the markets makes candlestick signals work all that much more effectively. As long as a severe change does not occur in the markets, the bullish charts of individual stocks will usually move in a positive direction for an extended period of time. Continue to hold the long positions in the sectors that are still performing well. Biotech stocks and the semiconductor stocks are still moving with good strength.
3/1 -- Stock Market Comments
The hard selloff on Tuesday negated the possibility of a strong breakout from these levels. Although that may seem to be overstating the obvious, the potential breakout that had occurred in the NASDAQ chart, a gap up and strong bullish candle on Monday through the descending trend line, was an indication that new buying strength had come into the market. The obvious trend line resistance was not a concern anymore. The 50 day moving average for both the Dow and the NASDAQ can now be a target for a pullback. If the uptrend is still intact, that moving average should act as support. Continue to hold long positions provided that there is not strong selling in the markets today. The morning futures indicate a positive open. Witnessing a Bullish Harami in the Dow today would be more of an indication of the markets moving sideways until the stochastics get pulled back and get some new outside strength.