Daily Market Comments - May 2006
5/31 -- Stock Market Comments
On Friday, the Dow just touched the 50 day moving average. Tuesday saw very strong selling from that level. This could be the set-up for a Blue Ice Failure, the next target on the Dow being the 200 day moving average. This would imply but there would be another week or so to the downside. But also be prepared for a Bullish Harami in the markets today. This would reveal that the selling had stopped, a Double Bottom could be forming. Watch to see how they close these markets today, it will reveal which direction they plan to take the trends.
5/30 -- Stock Market Comments
Buy before a three-day weekend, sell after a three-day weekend. That is likely what is going on so far today with the morning futures showing weakness. The Dow closed right at the 50 day moving average on Friday. Today will be an important indicator to see if the 50 day moving average was the first target but is going to fail. The NASDAQ closed positive on Friday and has some more room to the upside before testing the 200 day moving average. Expect a consolidation-type day today to see whether the markets were doing a bounce in a downtrend or whether a new uptrend is in progress.
5/26 -- Stock Market Comments
The strength in both the Dow and the NASDAQ confirmed the candlestick signals that have been forming over the past four days of trading. The stochastics were oversold in both indexes. This provided confirmation that the indecisive trading at the bottom was demonstrating a reversal. Now both indexes have their moving averages as targets. The Dow should come up and test the 50 day moving average and the NASDAQ should come up and test the 200 day moving average. This would imply that there should be a few days of positive trading. Short positions should have been covered or should be covered upon seeing confirmed buy signals. On Thursday, there were plenty of oversold stocks demonstrating strong buy signals.
5/25 -- Stock Market Comments
On Wednesday, the Dow formed a Doji and the NASDAQ formed a Spinning Top. The Dow has now had four indecisive trading days in a row with the stochastics in the oversold condition. The NASDAQ formed a Bearish Engulfing signal two days ago in the oversold condition which was an indication to start watching for a candlestick buy signal. Today's pre-market futures indicate a strong open. A bullish day today would be a strong indication that they will be taking the markets back up to test the recent moving averages. Be a buyer on strength this morning. Close out the short positions that are revealing bullish signals.
5/24 -- Stock Market Comments
There are two Doji signals and an Inverted Hammer in the Dow, and what appears to be a positive day in the futures so far. There is a Bearish Engulfing signal in the oversold condition in the NASDAQ. Start watching for a candlestick buy signal. Be prepared to start buying if the market acts strong today. The stochastics for both indexes are well into the oversold condition. The bond market rallied significantly off the economic news this morning. This could start adding strength to the equity markets.
5/23 -- Stock Market Comments
Both the Dow and the NASDAQ had another indecisive trading day. With Friday's Hammer/Harami's followed by Monday's Doji days, the indecision is becoming very apparent as the markets have now entered the oversold conditions. The probabilities now indicate a bounce back up from here. Where would be the logical targets? Probably a test of the moving averages that were recently breached. This should give us a few days of positive trading in the markets. This scenario, of course, is based on positive confirmation of the last two indecisive trading days. A bullish day in the market today would warrant adding to the long positions and covering some of the short positions.
5/22 -- Stock Market Comments
The indecisive trading of Friday has not indicated one way or the other any change of investor sentiment. Although the stochastics are showing that the markets are beginning to get oversold, continue to hold the short positions until a definite buy signal has appeared. This could still be a day or two away.
5/19 - Stock Market Comments
All indexes continued to sell off on Thursday. The Dow traded well below the 50 day moving average. The NASDAQ traded well below the 200 day moving average. The stochastics are now getting into the oversold condition. Anticipate another day or two of sluggish action until the stochastics get well into the oversold condition. Continue to hold short positions but start taking profits on partial positions. Also, start watching for long positions to become available, some good buy signals are beginning to appear. Last night's scans revealed 55 stocks overbought and 1437 stocks oversold. This simple observation indicates a bottom appearing soon.
5/18 - Stock Market Comments
The Dow came down to the 50 day moving average in a hurry and went below it. Any strength seen in the Dow today will probably be coming up to touch the 50 day moving average. However, expect another few days of the markets trying to form a bottom before any new buying comes back in. The stochastics in the Dow have not quite yet gotten into the oversold condition. The NASDAQ did not show support at the 200 day moving average. Although it is in the oversold condition, there is a gap to be filled at the 2150 level from early November. Continue to hold the short positions and start adding long positions taht are showing good buy signals.
5/17 -- Stock Market Comments
The lack of strength in both markets was not surprising on Tuesday. The Dow still has the target of the 50 day moving average. The NASDAQ closed right on the 200 day moving average. The NASDAQ stochastics are already in the oversold condition. Look for this area to act as support. The Dow probably will come down and test the 50 day moving average in the next couple of days. Continue to hold the new short positions and start looking for long positions with strong buy signals. Our scans are finding a decent number of bullish signals.
5/16 -- Stock Market Comments
Although the Dow showed some strength on Monday, there wasn't any reversal signal demonstrated. The stochastics show that there could be another two or three days to the downside. A small bounce may be possible but that should be all that it is, a small bounce. Until the Dow can get to a support level such as the 50 day moving average, anticipate a few more days of bearish movement in these markets. The NASDAQ bounced off the 200 day moving average on Monday. This could indicate that a bottom is near but anticipate that it would take a couple of days to firm up at these levels. Continue to hold some short positions in the portfolio.
5/15 -- Stock Market Comments
Both the Dow and the NASDAQ are moving toward their nearest moving averages. The Dow appears to be targeting the 50 day moving average while the NASDAQ appears to be targeting the 200 day moving average. The stochastics are still moving in a downward direction. Both indexes reversed after the confirmed Doji signals. Crude oil prices and gold prices are dropping hard this morning. This might become the reason for the markets to eventually bottom out and start back up. Short positions were recommended in the last couple of days. Continue to hold the shorts until strong buy signals appear. Continue to buy in the sectors that appear to be holding up well.
5/12 -- Stock Market Comments
Severe sell signals that were required to tell us that the investor sentiment had changed after a long uptrend was experienced on Thursday in all of the market indexes. Previously, when one index was down, the other indexes were flat or positive, demonstrating that funds were shifting from sector to sector versus selling in general. Thursday's trading showed selling everywhere. The Dow formed an Evening Star signal. The NASDAQ had a huge selloff day. This indicates that the sellers have taken control of the trend. Add short positions to the portfolio as your long positions should be closed out. Expect at least a few days to the downside.
5/11 -- Stock Market Comments
Although it is in overbought conditions, the Dow continues to show good strength. It should test its all time high level very soon. The NASDAQ is not showing the same strength as the Dow. As of yet, this still indicates sector rotation versus any major selling. Continue to hold long positions in the sectors that are still moving well. The mining stocks are acting strong.
5/10 -- Stock Market Comments
The Dow continues it's strength even though it's well into the overbought area. The NASDAQ consolidated also but the stochastics are still in an uptrend. Continue to hold the long positions until a severe sell signal appears in both indexes.
5/9 -- Stock Market Comments
The Doji-day in the Dow was not unexpected after the big move that we saw on Friday. However, it is still a Doji which creates the possibility of a potential pullback if the Dow closes more than halfway down Friday's bullish candle. The NASDAQ is trading in the middle of its trend channel. The stochastics are still at the lower end of the range in an upward trend. This indicates that there could be more strength in the NASDAQ while the Dow has the possibility of pulling back. This evaluation should conclude that there is market rotation versus any massive selling. Continue to hold the strong long positions. This is a market where specific sectors are performing very well.
5/8 -- Stock Market Comments
The bullish candle in the Dow came up through some important resistant trend lines on Friday. A large bullish candle seen at the top of a trend, in the overbought condition, usually is the forewarning to start watching for a candlestick sell signal, since there is exuberant buying at the top. However, the other indexes, the NASDAQ and the S&P, are still showing good upside potential. Even if the Dow starts pulling back, the market sector rotations that we have seen for the past few months are probably still in effect. Continue to hold long positions in the strong sectors. There are also some good weak sectors that can be shorted. The money is being made in this market by being in the correct sectors.
5/5 -- Stock Market Comments
The uptrend is still persisting. Continue to hold the long positions. There might not be a lot of activity on a Friday going into the summer. The slower job growth rate announced this morning has added strength to the premarket futures. The concept being that the feds will not be aggressive with the rate heights. The uptrend will be slow but persistent.
5/4 -- Stock Market Comments
The sideways movement of the markets are still evident. Crude oil prices dropped dramatically on Wednesday, down over two dollars. Continue to hold the long positions. There is nothing in the markets that have indicated any great change of investor sentiment. We are still in a slow uptrending market.
5/3 -- Stock Market Comments
On Tuesday the Dow was strong while the NASDAQ was sluggish. This morning the Dow futures are weak while the NASDAQ futures are positive. This continues to add to the evidence that there is a sideways movement in this market. This is an environment that keeps confirming that sectors are rotating versus any major buying or selling coming into the market. This scenario has been effective for the last two months. As of now, there are not any indicators that would change this sentiment. Continue to hold the stocks in the strong sectors.
5/2 -- Stock Market Comments
The Dow formed another Shooting Star signal in the overbought area. The NASDAQ closed below the 50 day moving average. The stochastics still have downward direction potential. Although the markets are openning with strong futures this morning, they have already indicated toppiness. Be careful of the positive open being followed by a selloff today. Continue to hold the long positions in the sectors that are maintaining strength. Be prepared to take profits in the stocks that are starting to show weakness.
5/1 -- Stock Market Comments
The Dow started showing some indecision at the end of last week, forming a Spinning Top and a Shooting Star/Doji. Also note that the high for both Thursday and Friday were at exactly the same, forming a Tweezer Top. Seeing a few days of weakness would not be out of the realm probability. Although the overall uptrend is still in effect, small pullbacks should be a constant occurrence. With all the uncertainty from Iran, the markets should have a fairly difficult time getting any steam to the upside. Continue to hold the long positions but be prepared to come out of them on the first signs of sell signals.