Fallond Stock Picks

Dow top?

2008-05-15T21:04:00.008+08:00

The Dow bullish percents look to indicate a top in the short term. I am watching Fibonacci retracements, which based on prior 'sell' triggers and Fibonacci interceptions suggest downside targets of 12,583 or 12,296.

Markets off to a relatively quiet start.

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Declan Fallon is contributing to the development of stock alerts, stock charts, and trading strategies for Zignals

Where next?

2008-05-14T21:00:00.007+08:00

At the start of February after breadth indicators reached all-time lows I gave a guesstimate as to what the S&P would do over the coming months. Other than the larger than expected dip in March it has remained relatively ontrack:

But where does the market go next?

S&P Breadth indicators are getting a little toasty which favors some modicum of weakness over the coming weeks. This would shake out the weak hands and leave the index better prepared for an upside break of the 200-day MA.

The alternative is a straight break and run - with barely a pause at the 200-day MA.

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Feedback request: Alerts

2008-05-13T17:52:00.004+08:00

I'm looking for a quick-and-dirty feedback request for market alerts. "Market Alerts" encompass price alerts (e.g. stock price alerts), stock fundamentals (e.g. P/E drops to 10), portfolio alerts (e.g. a stock holding in my portfolio drops by $200).

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Use the comments section to add your wishlist for market alerts (type, frequency, subject matter, etc....).

Don't hold back on what you would consider the 'dream list' of features you would want for an alert. Particularly if what you want is not currently available, or you are someone who doesn't use alerts but would if you could do x, y and z.

Also consider delivery options; email is the main one, but what about iphone, sms, twitter? Would you use alerts if they could be routed to you in different ways?

Your wish may come true and it won't cost a you a penny to get it!

What holds for Copper prices?

2008-05-13T17:07:00.003+08:00

What goes for copper, goes for technology stocks (and the market as a whole). After what looked to be a triple top for the commodity in 2007, the ever weakening dollar helped push an upside breakout of $375. Broadening wedges are hard to spot and if this is what's at play then a move back to $250 would appear the best case for the metal.

However, as long as $375 holds then a run-of-the-mill breakout is to hand, with a projected target closer to $500 than $250.

Election years are traditionally viewed as bullish for the market. However, the previous two have been anything but. The protracted Democratic nomination doesn't help given it's only the warm-up to the main event. Wall Street hates uncertainty and it's by no mean clear cut who has the edge coming into November (irrepsective of who wins the Democractic nomination).

Political uncertainty and a strengthening dollar, both painted on the background of a weak global environment, suggests copper prices are likely to fall. This can be good and bad for technology stocks; falling prices imply falling demand (bad), but given this decline will likely be attributed to a rising dollar it should help technology products be more price competitive and help stimulate a recovery which would be good for the markets.

The problem with this is it just might not happen until November's fight is done and dusted.

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Stockcharts.com Weekly Review

2008-05-12T16:13:00.003+08:00

May as well try and get a review post up before Monday's open. Feeling very sleepy... 2 hrs sleep on a red-eye is not good for the soul.

Dr. Joe raises the issue of "Agflation". Interesting thought - but I think commodities have peaked for this stage of the bull cycle, although the best may yet be to come.

Joe is looking at a potential breakout for oil companies - but commodity-based stocks tend to lead commodity prices, so if they fail to break it would be bad news for oil:

Not marked, but there is a 'sell' trigger in the Dow's PPO:

Maurice Walker has jumped up the league table - his weekly review is worth the price of entry. Maurice looking for a breather in the markets, his closing paragraph pretty much echoes what I think will play out. Follow his link to get his charts:

There was contest held a while back called the wacky warning label contest. Second prize in the competition went to a certain warning that was written on a kitchen knife that said 'never try and catch a falling knife.' Have you ever tried to catch a falling knife? It is very dangerous for obvious reasons. Sometimes as traders, we try and take positions when prices are falling, we refer to this as buying the dips. In the early stages of a trend this is a profitable strategy , but new money entering a long position at these levels does present a higher risk. The point is, that if we don't heed the message that the market is sending and chose to ignore obvious warning signs, we may end up with a nasty cut.

We've made a lot of money since the March lows and now is the time to pare down long position sizes and tighten stops, until a directional move has clearly been decided. A defensive posture is best, if wave A is concluding and wave B is forming. If strength is revealed here, then those of us who are swing trading, by playing the weakness on the intraday charts, will be forced to cover and take new long positions. I'm not saying that the advance has concluded, but since the breakout of the intermediate trendlines, we have run into a massive amount of resistance.

The stock market is in a bit of a quandary, being in a most awkward predicament after the breakout of the intermediate trendlines. The intraday charts have produced some very bearish signals, while the daily indices still have some technical support. The rising trendlines on the DJIA and the S&P 500 60-minute charts were tested and slightly violated on Friday. But the violation was not a decisive breach. Therefore, we find ourselves at a crucial level of support resting right on the 20-day EMA. If the S&P 500 breaks down further, it will not only break rising support, but it will also violate the recent minor low at 1383.

Prices have already broken below the intermediate downward trendline and horizontal support at 1396. If 1383 is violated, prices will run into more support at the 50-day EMA, and likely test the lower support of the recent handle formation near 1369. Should the 1369 support not hold up, then the last significant minor low at 1324 comes in play.

Last week the daily charts broke down as the MACD tipped lower producing a bearish cross, and the stochastic rolled over and is now hovering near the value of 50. If both indicators continue to breakdown, prices may resemble a falling knife. However, if buyers were to show some conviction at these levels, then the S&P 500 might get a third touch to its minor trendline, which would allow it to be reclassified as intermediate trendline. But with the S&P 500 having already tagged its 50 % fibonacci retracement from its October high, and the 200-day SMA looming above our current prices, the deck is stacked against the rally continuing. In addition to that, the S&P is running into overhead resistance from the December lows on its weekly chart.

During the course of the week, 10-minute traders of the SPY got some excellent signals that prices were breaking down. On Tuesday prices put in a second top at 142. The following day a head and shoulders top appeared, having broken down and backtested during the same session. Prices sifted lower breaking the double bottom confirmation line at 1397. That also allowed the rising wedge on the SPY 60-minute chart to breakdown. An attempted recovery occurred on the SPY 10-minute chart, as prices pulled back above the confirmation line, but resistance was found at the 50-period EMA. This marked another lower high that evolved into a descending triangle (1st chart down). On Friday prices gapped lower breaking the below the descending triangle, which has now become resistance. The SPY 10-minute chart continues to get lower highs and lower lows.

I've drawn some speculative Elliott wave counts on the SPY and QQQQ 60-minute charts, which shows that wave 5 was a truncated fifth (5th and 6 th chart below). Meaning that it failed to rise above wave 3 producing a double top formation. If my speculative count is correct, then we could be witness an abc move. The SPY already broke down from its descending triangle, but the Qs just formed one on the 60-minute chart. On a smaller scale of the Qs 10-minute chart you can even see that a small pennant has been carved out. Pennants usually are continuation patterns of the current trend, which happens to be down right now in that timeframe. These counts should not be treated as anything more than speculation on my part, because I have found that Elliott wave counts often need revision.

We have had a huge percentage run up since the March lows, and are over due for a corrective move. If the current rising trendlines break on the index daily charts, I believe that we will fall to test the 1324 minor low on the S&P 500. But I do think prices will stabilize near the 1340-45 area, which is the 50 % Fibonacci retracement off the March low (9th chart below). All I'm saying, is that if buyers don't step up to plate here soon, I would count on a short term corrective phase to transpire.

The VIX, which is the gage of fear, has a bullish falling wedge and apparently broke out on Friday (3rd chart below). I believe that prices will break down and cause the VIX to rise back up to its broke 2007 trendline in the form of a backest. If this occurs it will drive the market down. I remain long-term bullish but am short-term bearish (cautious). The inverse complex head and shoulders pattern on the S&P 500 has a minimum target of 1536. The same pattern on the Nasdaq has a target of 2683. Both price objectives would take us back to the December highs. thechartpatterntrader.com

Ted Burge's charts show tight resistance and support, nothing which makes decision making easy. Moving averages perhaps best guide.

His Qs point-n-figure chart is bearish:

Yong Pan has the S&P at Fib resistance:

Weekly chart at bearish resistance:

Richard Lehman on relief rally mode:

5/11 -- The major indexes for both large and small caps continued in downward minichannels Friday, but all held within their larger still-upward trending ST channels. The Dow and Naz actually touched support and held so far. Meanwhile VIX didn't even move, so the ST trend is still up -- at least for the moment. The longer term action is still heading higher in minis that actually broke LT declining trend lines, though they all have reversed since -- but that may just mean they are they are retesting the breakout. So despite fundamentals that will not get better for a while, the market is still in a 'relief rally'

5/9 -am- Dow and RUT have just about hit their lower green uptrend lines. Others still have some downside. Even the techs and other strong points are coming down to the lower part of uptrends. The big question will be if those green uptrend lines hold.

5/8 -- Its getting to be a bit of a mixed bag right now. The Dow and SPX lean toward being in ST downchannels, but the small caps aren't quite on the same page. Oil and gold continue up and VIX continues down.Best to see what happens in the next day or so.

5/7 -- Today's turn not only took away any new mini uptrend scenario for the short term, many indexes came down through the channels and broke them to the downside. The short term uptrends from mid-April are now suspect and perhaps even history. Long terms are all intact -- and isn't it interesting where the SPX came to and turned on the daily chart (my line at 1425 - not 1400 as everyone expected). This break will likely carry the short terms lower, though new channels or minis cannot be drawn yet.

Finally (and back to oil), Jack Chan has the Energy Select Sector SPDR (XLE) in rally mode and has ignored the April MACD 'sell' trigger:

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Next update next week

2008-05-11T08:56:00.000+08:00

Back from Washington D.C. next week - update then.

Bullish Percents getting a little toasty

2008-05-07T15:45:00.003+08:00

Although not of immediate concern, some of the bullish percents are about to enter bear market (but not bull market) top territory. If January lows represent the start of a bear market then these breadth indicators should top soon. If the current rally is a continuation of the cyclical bull market then there is room for another 15-20% of gain (perhaps as much as 50% for the Nasdaq Bullish Percents).

How this impacts on the market remains to be seen, but the likely outcome would be a negative divergence between breadth indicators and the market; indices make new highs as bullish percents fall. Time will tell.

I'm traveling to D.C. so there will be no update tomorrow. INS appointment Friday.

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Zignals blog post

2008-05-06T20:13:00.003+08:00

Running tight for time, but I do have a strategy test post for on-balance-volume up on the Zignals blog.

As for the markets, the Dow has perhaps the most interest given the struggles at its 200-day MA.

Can it follow the lead of the Nasdaq 100? Although it may have its own problems given the 'Hanging Man' just after its 200-day MA break.

Both indices show healthy bull trends as measured by ADX.

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Stockcharts.com weekly review

2008-05-04T21:03:00.003+08:00

Running a little late on everything this weekend. The MSFT-YHOO fun and games may have some dampening influence on proceedings for Monday, but how went the week?

Dr. Joe is watching daily machinations:

Although the dollar is attempting a run of strength (which will hurt gold prices); oil looks to have found a point of strength:

He has called a breakout in the Dow:

Ted Burge is watching the Q's. A positive test of support?

The point-n-figure chart is looking for $53.59 off the May 1st Ascending Triple Top Breakout:

Maurice Walker has called an end to the correction. His fan chart shows it nicely:

Maurice's commentary is a(nother) good one, although I disagree with him on the market not closing in bear market territory; in January of this year breadth indicators reached levels comparable to Sept 11th and the Asian Currency Crisis. We may have got strong bull markets from them, but the action which led to these lows was certainly bearish. However, what he says fits well with what Richard Lehman suggests:

The Correction Is Over

In 58 BC Julius Ceasar started his conquest of Gaul. It took 7 years for Ceasar to conquer Gaul and it was only due to his strategical talents the campaign was so short. After this campaign, Ceasar decided to stay in Gaul with his army until he would be chosen as the new consul. His political opponents wanted him to get back to Rome and be prosecuted for the things he had done when he was a consul. Ceasar had made a decision, which resulted in the fall of Roman republic. He lead his armies across the river of Rubicon and said the well-known ' Alea iacta est' and started his march towards Rome on January 10th of 49 BC. Alea iacta est is Latin for 'The die has been cast,' meaning Ceasar was throwing the dice on his invasion of Rome like a crapshoot.

The decision to cross the river of Rubicon was a risky and uncertain venture. But the fall of Roman Republic occurred because Ceasar made a decision to cross. As a result of this war, Ceasar became the conqueror of Italy. Once he crossed the river Rubicon there was no turning back the decision had been made. Ceasar made a conscious decision to conquer Rome. Ceasar's opponents were over thrown because of a decision that he made to cross a river, likewise this market has made a decision this week to cross a river and there is no turning back. As we had anticipated, the intermediate downtrends are now broken and the birth of a new intermediate upward trend has been born. The changing of the trend has propel the bulls to power. Ceasar found little in the way of resistance in his march against Rome, and so will this market. The stock market is not a playground it is a battlefield and the bears were defeated this week. The decision to break above the declining trendline caused the market to over throw its opponents allowing the bulls to conquer the correction.

Since last summer, the bears have been telling us that the economy was in a recession and that the stock market was in a bear market. Every single so-called 'expert' that told us that US was in a recession was wrong. Those that told us that the stock market was irrefutably in a bear market were also wrong. The 1Q real GDP came in with a positive number, therefore during the first three months of 2008 the economy was not in a recession. Furthermore, the stock market failed to close in bear market territory. Yes, it's true, the economy actually grew during the first quarter of 2008 at 0.6 %. The important thing about this number is that it is positive. Now grant it, the US is growing at a snails pace, and I will concede that the economy is contracting. But just because the economy is growing below trend, doesn't mean that we are in a recession. It takes two consecutive negative quarters of GDP to academically define a recession. These 'so called' experts have ignored the economic facts and have caused a lot of hysteria among the masses. I don't think we will even get a negative quarter of GDP in 2008.

The bad news bears also told us that inflation would soon be spiraling out control, and that high energy prices would spill over into core inflation bringing the economy to its knees, causing stagflation. This week the year over year Personal Consumption Expenditures (PCE) core inflation rate for March came in at just 2.1 %. Proving the bad news bears wrong again. If you still think there is an inflation problem, then go to your local tire dealer and have him check your tires, because that is the only inflation problem you could possibly be experiencing.

Because inflation is not out of control, when you have a slowing economy you have a deflationary impact on inflation, disinflationary as long as prices continue to decelerate their rate of increase, while having a positive number above zero. You don't become deflationary until your under zero, in which prices drop and stop increasing. So right now there is a disinflationary effect in the economy. Disinflation is a decrease in the rate of inflation, a slowing of the rate at which consumer and wholesale prices increase. Inflation was lower in 2007 than in 2006, not higher. Additionally, inflation is expected to further drop in 2008 and 2009.

This week the Fed slowed the pace at which they had been lowering the federal funds rate, cutting it just 25 basis points. The market originally sold off on the news, with fear that the Fed would have to start raising rates to combat inflation. Then the next day the stock market shrugged off the news and rallied. But this approach by the Fed is actually a plus for the economy, it is good news that the Fed no longer feels that it is necessary that they have to aggressively lower rates, because the turmoil in the economy has mostly been stabilized.

Even the jobs report this week showed a better than expected outlook for the economy. The unemployment rate dropped in April back to 5 %, as the US only lost 20 K jobs rather than the 75 K that was expected. A recession has never occurred with a 5% unemployment rate, because a 5 % unemployment rate is consider full employment. But don't tell that to the obsession recession crowd, they won't believe you.

The federal government has promoted fiscal activity that is running counter to economic trends, by passing the stimulus package, while the federal reserve has aggressively cut rates. These two actions should have an impact on the economy by the second half of this year. The Democrats and Republicans should be praised for passing the stimulus package during this economic slowdown.

The breakouts could find some resistance here near the 200-day simple moving average. Which could allow prices to backtest the broken trendline. Once our current wave A has concluded, we should see wave B develop. After that, I think prices will rise to chanllege the October highs in wave C. However, I dont think that will transpire until the end of 2008 or the early 2009. The DJIA and the S&P 500 both got follow-throughs on the breakouts of their intermediate downtrends with acceptable volume, but the Nasdaq closed lower. Look for a backtest of the broken trendlines next week.

During wave B, I fully expect the bears to reemerge with their recession rhetoric and bear market rally talking points. Which will present another buying oppertunity for the bulls. Trend traders can either take a long term hold approach, while swing traders can sell into the rally once wave A concludes and then look for another entry point once wave B concludes.

Lastly, the DJIA monthly chart got some positive technical last week. The monthly chart got a bullish cross of the stochastic line and a higher MACD histogram bar, changing the slope. That should allow the MACD to get a bullish cross and then ultimately get negative divergence by 2009. If this scenario were to play out, the DJIA would exceed its October high. thechartpatterntrader.com

His inverse head-and-shoulder patterns are a thing of beauty:

Richard is looking at new (strong) short term rising channels which are challenging long term downward channels.

5/3 -- Friday's blip (which was probably exacerbated by the short covering of folks who were watching the SPX pass above 1400) made the short term picture challenging, but I think its fairly clear now with the new channels I've drawn on the short term charts. The new channels encompass the moves of the past two weeks, which essentially were all mini channels. The larger channel shows a strong uptrend in the short term that is now pushing through the longer term declining lines from last year. (Except perhaps for the SPX, which I show as just now hitting its long term line from last September.) So, the picture remains up, though toppy for the major indexes.

5/2 -am- Sorry, my 5/1 post disappeared somehow. The breaks from Wednesday & Thursday turned into slope changes on the existing uptrends rather than new downtrends. A drop in gold and crude further fueled a rally back to the top of that uptrend, and now we may be reaccelerating upward as money pours back into stocks based on the S&P closing back over 1400. VIX hit the upper line on its hourly nad collapsed, remaining in its downtrend (though June and July futures expect it to turn upward by then). You have to go with this rally as extended as it is since that's where the money is going.

4/30 -- Breaks expanded today. The Dow, Naz, QQQQ, and SPX all following suit. The Dow's been right up against upper long term lines and today's touch was picture perfect! I couldn't buy the puts fast enough when the Fed announcement pushed things up to +150. Now we'll see what kind of follow through we'll get as we don't have enough data to draw new down channels yet. Remember the old Wall STreet adage 'Sell in May and go away'.

Finally, Yong Pan has taken a more cautious view on the markets:

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Forrester Research (FORR)

2008-05-02T20:16:00.004+08:00

Forrester Research Inc. (FORR) featured in my newsletter [$] as a stock testing triangle support at the 200-day MA. A couple of days after it's initial feature the stock created a bullish hammer at triangle support. What followed was a steady rise to resistance, with the breakout completing earlier this week on the back of earnings. Yesterday followed with a successful backtest of $28.35 support.

The point-n-figure chart fell a penny shy of a triple top breakout, with a current upside target of $43.

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Dow and Nasdaq 100 are indices to watch

2008-05-01T19:18:00.005+08:00

The Fed reversal started late in the day, although futures suggest a higher open. The Dow flashed a (bearish) gravestone doji on higher volume, with the 200-day MA lurking overhead to act as resistance. A push back to the 50-day MA looks the most favored response to relieve overbought conditions, but any close higher today would make a strong case for a 200-day MA breakout. Why? The current set-up looks picture perfect from a bear's perspective, so if it didn't play to expectation you would have to be worried (from the bear side).

The Nasdaq 100 has inched its way to the 200-day MA. The gap created at 1,850 looks a logical downside target, but it wouldn't take much buying to push it above its 200-day MA.

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F-day

2008-04-30T17:14:00.003+08:00

How will the market react to whatever the Fed decides to do? Because of the tight trading for the past few days the expectation will be for a sizable move one way or the other. The 200-day MAs are a logical upside target, with the 20-day and 50-day MAs lurking below.

Markets have effectively traded sideways since the January bottom and it would be good for this pattern to be put to rest. The best action for the bulls comes from the Transport index (even with all the woes in the airlines). The ADX confirms a bull trend and the "Golden Cross" between the 200-day and 50-day MAs shows a long-term bullish shift. Given this, I suspect we will see higher prices over the coming weeks even if the Fed 'disappoints'.

Points [1] and [2] on the chart mark likely retracement points (based on Fibonacci and support) for a negative reaction to the Fed.

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Link reading

2008-04-29T21:28:00.002+08:00

Not expecting too much for today, so took a look at what's going on my feed reader:

CXO Advisory takes a look at AlphaKing:

In summary, testing indicates that the AlphaKing Trading Indicator may have some value for timing the Nasdaq Composite index, but the duration of the live data sample is much too short for reliable inference.

Financial Week looks at blogmining.

Econoblogging as a step towards a job.

Vix and More on High Implied Volatility.

Wall St. Warrior always has a great pre-market warm up. Not expecting much today

Herb Greenberg's five lesson's learnt. (Via Maoxian via TraderMike)

Why things cost $19.95 (Via Maoxian)

How to monitor websites that don't have RSS feeds - handy (Via Maoxian)

Bill Rempel's Seven Quantifiable Ways to Define Trend. The Average Directional Index is my favorite.

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Stockcharts.com weekly review

2008-04-27T07:39:00.003+08:00

A week which has mostly passed me by with respect to the market. So what did happen?

Dr. Joe is looking to nest week's figures:

Dollar looks ready to make some headway north, possibly to 77-78 level:

He has given the new Stockchart's charting features a go:

But there looks to be a breakout in the Dow (Joe doubts it another chart - but it looks good to me). PPO looking strong:

Maurice Walker is now second ranked Stockchart public list; his weekly review makes it one of the best. I like his analogy for this week:

I've been following the a recent news story about John Darwin, who was a canoeist that faked his own death. He and his wife committed insurance fraud as he went into hiding in Panama. Darwin claims he had amnesia for the past five years. If he is found guilty he could face up to 10-years in prison. Darwin had been written off as dead by everyone, only to come to find that he wasn't dead after all, he was only on a short hiatus. John Darwin was alive, and so is this market. The bull market is not dead, nor is this a bear market. This bull market was only faking it's own death, perpetrating fraud against those who are short this market. Whom will ultimately pay the price for this deception.

A week ago the DJIA broke out from overhead resistance. This week both the S&P 500 and the Nasdaq followed suit, with the Nasdaq closing above 2419 on Thursday and the S&P 500 closing above 1396 on Friday(see 1st chart below). The averages are all resting right below their intermediate declining trendlines, which they need to clear in order to change the trend. The Nasdaq erased losses by the end of the day on Friday, despite a disappointing earnings report from Microsoft. The averages all declined for the first part of the session as the University of Michigan consumer sentiment reading fell to 62.6, a 26 year low. However, the market once again shrugged off bad news and moved higher. You may recall that the market has been rising on bad news, like when that terrible jobs report came in, when the housing starts hit a 17 year low recently, and even when CPI headline inflation rose to 4.0 %.

I have now re-classified all the major index daily charts as complex inverse head & shoulders patterns (1st chart below). I did so with the Dow and Nasdaq last week, and then the S&P 500 was re-classified this week. They still meet the double bottom criteria, but they possess certain technical attributes that are better suited for an inverse H & S pattern.

I was previously perplexed in doing so based on the shallow first right shoulder on the averages, which appeared to be more part of the head than a individual shoulder. But the guidelines don't require each shoulder to touch the neckline and therefore it has been properly assessed. Now that the indices have broken out of overhead resistance, they are forming handles. I expect the handles to breakout by Monday or Tuesday. Handles form on many patterns, for instance a cup with a handle.

On Friday, the average directional index (ADX) (14) crossed above the negative directional index (-DI) on the daily charts of the S&P 500 and the Dow. While the positive direction index remains above both the ADX and -DI lines. Additionally, the ADX has moved 4-steps off of its low on both averages. Signaling that a new trend to the upside is being born. The Aroon (2nd chart down)on the S&P 500, has also signaled that we are in a new up trend, as the Aroon up has a reading of 100. The Aroon oscillator is at the value of 100 as well.

There will be a lot of important economic data next week. President Bush informed us that the rebate checks will be going out as early as next week, just prior to 1Q advance Gross Domestic Product (GDP) being announced on Wednesday. If the Fed holds steady or only cuts a quarter-point it would be good for the dollar and bring oil prices down from the stratosphere. A few days ago fed fund futures were at .50 %, but have since dropped to .38 %. I think if the Fed makes some positive comments regarding the economy, implying that it isn't necessary for them to take such an aggressive stance in cutting rates, it will send a positive signal to the market. It would be interpeted as if it was the Fed's opinion, that the worst is behind us. Additionally, the effects of stimulus packages tend to work when they are used, and that should cause the 2nd and 3rd quarter GDP to significantly rise.

The Democrats and Republicans are to be praised for their joint effort in passing the stimulus package, which will be targeted to 130 million middle class families with the propensity to consume. Thus, that should help corporate earnings and the retailers.

The dollar broke out of its downtrend this week and has likely put in a bottom (pg 2). The dollar has positive divergence on its daily chart, while crude oil has negative divergence. On Friday, oil prices (pg 2)spiked on news that the US fired on a Iranian vessel. The dollar is not collapsing or is it in a free fall, the dollar has put in a bottom and now should start to gradually rise. We continue to see a rotation out of commodities and into the financials. Which allowed the financials to break their intermediate downward trend one week ago, getting a follow-through this past week. The financial weekly chart continues to be extremely bullish.

The indices weekly charts are extremely bullish at these levels, and we are poised for a rally that could last for the next 6 or 7 months. The Dow, the Transportation average, and the Nasdaq are backtesting their major trendlines on the weekly charts, (charts 5,6, & 7 below)that broke down in early January. The bears will tell us that this is a backtest, but they are wrong. Because a seismic shift has now taken place in favor of the bulls. The market tide is turning as the 13-week EMAs have changed their slope, and are now on rise. Meanwhile the MACD histogram continues to have a rising slope. Market breadth is positive according to the advance/decline line (pg 2), the VIX (pg 2, the gage of fear) broke below it's 2007 rising trendline last week, and the S&P 500 bullish percentage is on the rise.

I predict that we will breakout on Monday, and then backtest the broken trendline on Wednesday when the GDP data is released. Then from there it is up, up, and away. But if I'm wrong and we suffer a reaction here, I am confident that a breakout is imminent. thechartpatterntrader.com

The complex head-and-shoulder patterns look good:

I have been watching Ted Burge's semiconductor index. He has it at resistance:

But the upside P-n-F target is 517.5 - part of the April 21st double top breakout:

Henry Ford of the Tradesniffer.com has some interesting measured move stock plays.

Yong Pan has his summary. Sees a chance the Fed will not cut next meeting. Negative divergence between large and small caps? Relative strength for the Dow suggests chance for bear market reversal:

But double bottom projection to Nov/Dec levels:

Richard Lehman is more cautious and favors a reversal (down):

4/26 -- The short term charts are fairly strong, but the Dow has already hit its declining three-year trend line and is about to hit the one-year. Others will hit these declining lines soon as well. By the way...do you realize that the Dow has now retraced 50% of the entire decline from October? Everyone appears focused on SPX at 1400 (primarily because they think only in horizontal planes, but we know better!)... my chart says 1425 is really where upper resistance lies. Meanwhile, the golds and oils have lost their luster as people gravitate back into stocks, but I sense that will soon come to an end. I also see VIX bracing for another move back up (and the futures say so). So, its up until things break for the major stock indexes, but that break may not be far away.

4/24 -- Gold and oils are now both faltering as the equities pick up strength. Techs and financials are strong. Money is clearly moving 'back in' to the things that were low and out of the ones that have risen sharply. Weak earnings are almost irrelevant. We're toppy in the short terms but still heading up. My biggest concern is the three year lines coming down as we're pretty much there on the Dow and others. That's one to watch closely.

4/23 -- The short term action of the last 4-5 days is now rather uncommitted. The Dow and SPX turned upward, breaking a small downward mini, but a larger picture is still unclear. It leans downward, though, while the small caps, led by strength in the techies leans more upward. Bear in mind that long term resistance lies ahead from declining upper lines on the one-year charts.

4/22 -- The breaks did lead us into small downchannels, but somehow they aren't looking that negative to me...at least not yet. This could turn out to be a very mild little short term decline and take off, but we'll know that soon enough if it breaks upper lines. Otherwise, its heading lower.

Finally, Robert New has a neat NYSE wedge breakout with backtest:

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200-day MAs fast approaching.

2008-04-24T19:42:00.001+08:00

Bulls will have to be pleased with the last few days of action. Volume has definitely sided with them and breakout gaps for the Nasdaq and Nasdaq 100 look to be holding.

The next likely stumbling block for the averages looks to be the 200-day MAs. Any weakness should relieve overbought conditions, but not enough to close those key breakout gaps.

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Top-10 (9!) stock blogs

2008-04-24T18:20:00.003+08:00

Thank you to Fiona King at CurrencyTrading.net for listing me as part of their top-9 stock blogs.

Also thank you to all who have sent their respects by email. I very much appreciate the support.

Next update Thursday

2008-04-22T05:19:00.001+08:00

Due to the death of my mother the next update will be on Thursday.

Thank you.

Stockcharts.com weekly review

2008-04-20T07:35:00.002+08:00

A big push on Friday looks to have given bulls an edge. How did the Stockcharter's see it?

Dr. Joe kept an eye on Oil as it continued its march ever higher.

What do stochastics say here for the Dow? Will the next backtest reset support/resistance for this indicator?

Considers the Nasdaq and S&P as contained by resistance:

The Maurice Walker homily favors further gains:

The daily DJIA got a break above its double bottom confirmation line of 12,767 on Friday. The pattern measures 1133 points having a target of 13,900. I expect the other daily index charts such as the S&P 500, the Nasdaq, and Russell 2K to follow the Dow's lead, and eventually move above their confirmation lines. Once the double bottom patterns breakout, prices will challenge the intermediate downtrends. However, the Russell 2K must break above its intermediate downtrend before it can break above the double bottom pattern. The S&P 500 rose 4.31 %, the DJIA increased 4.25 %, and the Nasdaq climbed 4.92 % for the week.

The market conditions continue to be favorable, as the market continues to rally on bad news. Two weeks ago the market held on to gains after the worst jobs report since 2003. This past week more bad news occurred as housing starts hit a 17-year low, the consumer price index rose by 0.3 %, taking headline inflation to 4.0 %, and Citibank reported a 5.1 billion dollar loss for the first quarter and a 12 billion dollar write down. Meanwhile, earnings continue to flourish as intel, J.P. Morgan, Coca-Cola and Google reported better than expected earnings. The Volatility index (VIX), which is a gage of fear, decisively broke down this week below the 2007 rising trendline, which signals less volatility going forward. Market breadth significantly improved as measured by the Advance-Decline line.

Last Tuesday, the S&P 500 daily chart got a backtest to its trendline that developed off the December highs. The backtest was contained at 1324, just one point above our target of 1323. From there, prices surged above two resistance levels at1367 and 1386, continuing to make higher highs and higher lows on the 60 minute chart. Prices rose right up to key resistance at 1396 and stalled there. This is the confirmation line of the S&P's double bottom. Once the pattern breaks out it measures 140 points with an objective target of 1536.

Just above the DB confirmation line is the intermediate downward trendline, once prices exceed that level it will mark the breaking of the third fan line (1st chart down). This will signify two things, first that the intermediate bottom of the correction has been seen, and that the correction is over. Parenthetically, come see the video on the fan principle at thechartpatterntrader.com. Moreover, the RSI now has multiple points of long term positive divergence on the daily chart of the S&P 500. And subsequently, the RSI moved above 60 for the first time since the October high, suggesting that a change in trend is about to take place. The RSI has had a difficult time, in each attempt it has made to rise above the value of 60. If it manages to rise above 66.67, the RSI mathematical ratio will shift the odds in favor of the bulls. Changing the RSI ratio from 1:1 to 2:1, meaning that there are twice as many up days as down days.

The trend-based indicators on the index daily charts remain positive. The ADX, Aroon and the MACD each have produced positive signals that a trend is developing, as this weeks low produced a minor trend channel. The DJIA monthly chart (2nd chart down) is starting to turn positive once again, as the MACD histogram got a bullish P-p-P signal, in addition to positive divergence. The full stochastic (14, 3, 3) is just two-points away from getting a bullish touch. Its RSI is in the process of rising to test its previous peaks. If that occurs the DJIA stands a good chance of testing the October highs.

The index weekly charts continue to be favorable as the MACD histogram got a higher bar for the second week in a row. The force index moved back into positive territory shifting the balance of power to the bulls. The S&P 500 has currently stayed above the previous descending triangle pattern on the weekly chart, for five-weeks in a row. Incidently, last weeks candlestick was a bullish engulfing bar.

On the Index charts, the double crossover method of the 10- and 20-day EMA continues to empower the bulls. Watch for both of those EMAs to cross above the 50-day EMA. This hasn't occurred since the triple bearish cross occurred in early-November. The 60-minute charts are now overbought, but still could go higher, and the 10-minute charts have not flashed a sell signal. I continue to believe that the market will do well until April 30, when the figures of 1st quarter real GDP are be released.

I believe that report will bring about the next major reaction that occurs, which should only be a contra-trend, and that the market will go higher based on the daily and weekly charts at this time. A fresh rally above resistance would be extremely bullish and bring new money into the market. Please come join me at thechartpatterntrader.com

The Walker Fan lines are back in play and it looks like the correction is almost done:

His monthly Dow chart is nice for its simplicity:

Ted has a very nice chart for Google (GOOG). Google Finance readers need to check it out. Note the tightening of Bollinger bands on the 15-minute time frame:

Semiconductors are looking a lot healthier here:

Richard Lehman is liking small caps over large caps. Sees the market as "unrealistically bullish here" and that was before Friday's gains:

4/17 -- Here's my view of what's happening. The market is extending its rally off the bottom, fueled I suspect by gobs of money on the sidelines (cash held back + cash frustrated with low rates + pension money that comes in at this time of year) and by the view by some that the worst is over for the economy. (Even the Economists seem very divided on that issue.) Chartwise, the short term uptrends are still fairly steep but are more well defined in both 5-min and hourly charts. There are a number of charts crawling up along the lower lines of steep uptrends. They could bounce upward off those lines for another good rally or they could potentially break. We should know pretty soon (like Friday), despite the expiration day games. Even another spike upward, however, will soon meet major resistance from declining long term lines on one and three year charts. So...we're heading higher until we break short term charts and the small caps look even more bullish than the large right now. But then watch out when reality hits that we've got a ways to go on the recession.

4/16 -- Seems to me the market is unrealistically bullish here, but the market is always right -- right? Probably just too much money on the sidelines that is scared to miss the recovery. Anyway, new ST uptrends are now in place, though the current legs are too steep to sustain, so things should flatten somewhat tomorrow. It now looks like the market wants to head back up to the long term downtrend lines on the one-year and three-year charts. For the short term, we will need more data for more realistic upchannels.

What happens when the Dow meets resistance will be interesting:

Although my favorite is his simple gold chart:

Finally, I will leave you with Yong Pan's summary. Looking for a short-term pullback:

His SPY notes make for interesting reading:

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Zignals Blog

2008-04-19T00:18:00.004+08:00

For the next couple of months (or at least until it shifts hosts) I will be writing articles for Zignals. This is a new endeavor and I will use the opportunity to publish articles relating to financial blogging and strategy development. Fallond Stock Picks will remain focused on technical aspects of the market. I hope to get my first article on a MACD strategy test on the next Festival of Stocks this coming Monday.

If there are particular queries relating to the new blog then I can be reached at declan-at-zignals.com.

The new blog's feed can be found here.

New KIVA loans

2008-04-18T18:02:00.015+08:00

The latest KIVA loans come courtesy of first month subscription payments from M. Siegel and J. Mercer. If you are interested in contributing please subscribe to my newsletter using the [Subscribe] button under the header.

Allow 24 hours to set up site access and add your name to the email distribution list.

The first loan goes to Amidu Jalloh:

Amidu is 54 years old and married, with 19 children. He is an accomplished and experienced tailor, but he lacks the capital to purchase enough supplies to allow him to meet customer demand. He learned tailoring 10 years ago and has been sewing clothes ever since, especially for women in Makup Bana village. His service is very vital and saves women from travelling long distances to Makeni town to seek sewing services. Amidu would like to expand his business and is requesting a loan of approximately $700 US to purchase more cotton material, buttons, and other supplies for this purpose.

The second is to Abdul Kargbo:

Abdul Kargbo is 39 years old and married, with 4 children. He sells cassava, sweet potatoes and vegetables such as eggplant to wholesalers from Freetown, who then resell the produce. Because he does not sell directly to the customers, Abdul earns very little profit. He would like to expand his business by purchasing and selling the foods directly to Freetown. He needs additional capital so that he can bypass the middleman and go directly to the market in Freetown himself. He is requesting a loan of approximately $350 US for this purpose.

The third loan is a re-loan following an earlier repayment and goes to Alime Velulaeva:

Alime has a small business selling women’s clothing at the bustling Central market in Simferopol, Ukraine. She sells a selection of day-to-day wear as well as dressy clothes. Alime is single and has been in business for four years. She is an energetic, enthusiastic entrepreneur who operates her business simply but wisely. An example of this is times when she has needed to purchase new clothing inventory. Rather than close her business and travel herself to buy inventory, she has paid other clothing vendors to buy for her so that she can stay and keep her business open. Alime has expanded her business by opening a second sales kiosk and is thinking of opening a third kiosk in the future.

Alime has requested a short term loan to help renew her supply of clothing inventory. The change of seasons means a busy time of year for clothing vendors like Alime. This loan will help her purchase a good supply of inventory so she can maximize her profits and continue working to develop her business.

Exponent (EXPO)

2008-04-17T23:11:00.004+08:00

I had featured Exponent (EXPO) in early March. The past three days have created what looks to be a short term blow-off top and is reason enough to take some money off the table.

Up 20% from March.

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Google Stock Screen

2008-04-16T18:03:00.004+08:00

I took the Google Stock Screener for a test drive. It's got a very plain, simple interface compared to that of MSN's Advanced screener, but lacks some of MSN's (excellent) functionality. One thing I do like about Google's is that there is a neat graphic showing the distribution of stocks across the various parameter settings.

I wanted to look for stocks which were showing discounts in dividend yield. I like to be getting something back from the stock while I hold for the long term so screening using yield as a filter is a good place to start.

The idea is to buy 'decent' stocks to take advantage of oversold market breath indicators when such stocks should be trading at a 'discount'. I'm not looking for the next high flyer as momentum plays tend to emerge 1-2 months after a bottom is in place and markets still appear to be feeling for that bottom. This is a scan more suited to the retirement account where capital loss tax write-offs aren't an option, so whatever you buy better be good.

Dividend Yield: Set to a min of 5%
5y EPS Growth Rate: 20% Respectable near term growth
10y EPS Growth Rate: 10% Established company with positive long term growth
Min market Cap of $500m

Twenty stocks were returned:

Filtering by bullish Point-n-Figure 'Buys' gives you:

Astrazeneca PLC (AZN), Banco Bilbao Vizcaya (BBV), Deutsche Bank AG (DB), Frontline (FRO), Permian Basin Rlty (PBT), Terra Nitrogen Co, L P (TNH), and Zenith National Insurance (ZNT).

The boat looks to have past on Permian Basin Royalty Trust (PBT) unless it makes at least a 3-box reversal. A push back to the 50-day MA would be interesting. For the financials on the list it is a matter of dollar-cost-averaging; assuming the worst is behind the sector, but allowing time for the volatility to calm as a position is built into the stock (volatility is what you need for momentum stocks, but here were looking for more conservative growth). Frontline Ltd. (FRO) has been quietly going about its business with the stock breaking from a 9-month consolidation in the $35.00-47.50 range. The question is how much is left in the tank (sorry) given it emerged from effective penny status in 2002? (Yahoo! shows lows around $4 which looks more accurate than the sub-$1 of Stockcharts.com). Terra Nitrogen Co, LP (TNH) has enjoyed a great run, but it is looking a little tired around its 200-day/40-week MA. Perhaps put it on a watchlist for now. Zenith National Insurance Corp. (ZNH) looks an excellent dollar-cost-average candidate as it works its way through a $34-50 base. Worst case would look to be a push back to $18 (2002 high) although it would have to get past 2004 highs of $30 first. With the current yield at 5.3% it is unlikely to drop far enough to allow this to happen. Good prospects.

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Keep an eye on those Transports

2008-04-15T16:26:00.004+08:00

The Transport sector (and therefore the outlook for the economy as a whole) didn't have it easy over the past few days. UPS disappointment was enough to break the low volatility slumber markets had enjoyed for the best part of a week. However, the Dow Jones Transportation Average continues to hold firm at its 200-day MA with the 50-day MA on course to trigger a "Golden Cross" - a significant long term bullish signal.

How this gets reflected in the Dow is more difficult to predict. The UPS related sell off brought the index back inside its triangle consolidation. There is still plenty of room for a move back to consolidation support which should be viewed as bullish - no doubt bears will see this as a confirmation of their position, but they will be wrong unless March lows break.

So bulls could endure another 450 point loss in the Dow and still maintain the upper hand, especially if Transports can keep above rising trendline support connecting Jan-March lows (c4600, or 230 points from where the index sits now).

For stock buying this means building up positions slowly. Momentum plays are unlikely to get the traction to suceeed so stocks providing value on techni-fundamental levels like P/E and dividend yield are the best bet forward.