Jack Steiman, On Critical Levels 1426 and 1441 (www.SwingTradeOnline.com)
1426 and 1441 . . . yes, two simple numbers, but two numbers that are very critical to the stock market. Why? It's simple really. 1441 is the 20-day exponential moving average, while 1426 is the 50-day exponential moving average. The S&P 500 has decided to part itself in between, although with a strong close Monday it's now on the edge of breaking above 1441. A gap up and hold on Tuesday would do the trick.
Big earnings coming out Tuesday could be a mover one way or another. When you're dealing with Intel Corporation (INTC) and International Business Machines Corp. (IBM) after hours and Goldman Sachs (GS) before the bell, there's risk for sure. Earnings is really what's left for this market in terms of future direction. Events from around the world are pretty muted right now. You just don't hear much anymore regarding defaults or Euro headaches. With the Fed governors around the world promising cash at all costs, it seems those issues are more on the back burner now.
So now the market turns its attention to those big earnings reports that start in earnest this week. Many CEO's have lowered the bar of expectations. In this very forgiving market environment, they know they'll be rewarded far more heavily if they raise guidance than they'll be hurt when they warn. The time is upon us and now we get to see if those CEO's made some very smart decisions taking a little pain three months back in the hopes that they'll be given a big cheer this time around.
The market hasn't been fun for quite some time now. Five weeks without sustainable upside can really play on the psychology of this market, which is why I'm very anxious to see that bull-bear spread report come Wednesday morning. My guess is we've gone from 30% four weeks ago into the upper teens this week. I am hearing more and more folks talk negatively about the stock market, how it really never goes anywhere in the bigger picture. This sour attitude helped the S&P 500, Dow and Nasdaq at their lows intraday today to post stochastics on their daily charts as low as 2.
These are daily, not 60-minute, chart readings, and tell me the job is getting done in terms of unwinding sentiment and getting the oscillators set up to try and move higher in the not-too-distant future. Yes, we can still fall another few percent, but that's no guarantee any longer. RSI's are neutral now to even a bit below neutral. MACD's have unwound fabulously. Now is not the time to be getting bearish, even if we do fall another few percent lower in the coming weeks. The job is getting done step-by-step, folks.
So again, it's all about 1426/1441. Whichever gets taken out with some force will allow, one would expect, a more directional move for the short-term at least. Either way, even if it breaks lower, it doesn't make for a bear market environment. It simply allows more unwinding, which, in the bigger picture, is never a bad thing. The next few days will be critically important.
Avi Gilburt, On October Correction Completed? (www.ElliottWaveTrader.net)
On Sunday night, we hit the minimum target we had for the conclusion of this corrective decline: the 1415ES region. The only way to consider that the bottom is in is that wave c of (v) completed as an ending diagonal. PLEASE do not discount this possibility at this time, especially since each and every pattern we have seen since the lows in June have all left us wanting for just "one more low" for the perfect EW pattern. But, as we know, the pattern from June has been such that we have not had any perfect patterns within that structure. So watch to see if 1447.50 is broken to the upside, and then we will look to buy pullbacks if that does happen before a new low is made.
However, if we are still going to maintain the more likely scenario that we have one more low to still see, the question remains as to whether the ES is tracing out a very large ending diagonal, which will target the 1405ES level, or if we are in the middle of the yellow c-wave of a larger wave iv, which seems to be taking the shape of an ending diagonal itself. A move over the high made today would strongly argue for the larger c-wave scenario, as that would take us beyond the declining trend-line I mentioned to watch as resistance for today.
Ultimately, we are looking towards another rally in the market, and that rally can still take us to the 1520 region based upon our next larger Fibonacci extension. In fact, if the market plays out in the same pattern as we saw last year into the year end, we can even see that top within the first week or two of November, with a decline to follow into Thanksgiving, followed by the well-known rally that Santa always seems to bring to town. But, in our EW parlance, we simply will view that as wave a-b-c of wave 5!
Mike Paulenoff, On Three Heavy Hitters to Watch (www.MPTrader.com)
Monday's market action brought to our attention three heavy hitters in their industry whose charts appear poised for upside action.
Ford (F) has a potentially powerful upside technical set-up here. The 4-hour chart going back six months shows a rounded, accumulation type of pattern that needs to do additional work to confirm completion. For that to happen, F must claw its way up to 10.60/90, which will position the price structure for a powerful multi-month advance that projects above 12.00, towards 12.50.
For the time being, as long as F remains above 10.00-9.95, the current upleg off of the October 2 low at 9.71 will remain in a very healthy condition, and poised to thrust above key near term resistance at 10.28. If sustained, this will trigger the potential to assault heavy resistance at 10.60.
Petrobras (PBR) appears poised for upside re-acceleration exactly one month after its multi-month recovery rally peak at 24.83. Let's notice that PBR corrected 11%, right to its dominant intermediate-term support line just above 22.00.
It has since pivoted to the upside to confront initial near-term resistance at 23.30/40, which, if hurdled and sustained, should trigger upside acceleration towards a revisit of the Sept high.
Apple (AAPL) is very constructively positioned heading into Tuesday's opening bell. From 1:35 pm Eastern until the bell, AAPL climbed from 626 to 635, which triggered an up-column of blue X's on the point-and-figure chart right to the upside breakout point at 636. If AAPL prints 636 after Tuesday's opening bell, it will trigger a triple-top at 634, which should unleash upside quickly to 644-646.
Failure to do so will create conditions for a plunge that breaks the triple bottom at 624-626, on the way to 612-608. But for now the bulls have the upper hand.
Sinisa Persich, On Free Stock Picks: ARNA, CP, MCK & SEAC (www.TraderHr.com)
Arena Pharmaceuticals, Inc. (ARNA) has been in a rising triangle pattern for the last two months, and appears poised to break out above the resistance line at the 9 1/2 level. The stock, which broke out from the 2 level in April to nearly 12 at the start July, may resume the uptrend after selling off sharply from its high. Targets are 9.91 and then 11 should a breakout occur.
Canadian Pacific Railway Limited (CP) is up against resistance at its rising tops line, and appears ready to accelerate higher. The stock, up 97 cents to 89.68 on Monday, is at a new 52-week high, continuing its uptrend from the 45 level in September of last year.
Targets on a breakout would be 91.19 and then 93.70, with a stop loss below the low of its recent flag at around 88 .
McKesson Corporation (MCK) broke out of its flag on Monday, with a gain of 1.60 to 90.88. The breakout puts the stock up against its rising tops line from August. Target is 93.00.
SeaChange International Inc. (SEAC) has been in a steeply rising triangle pattern since its July low. The stock, up 33 cents to 8.63 on Monday, is pressed against its horizontal resistance line that has twice contained prices in this area in the last two months.
A breakout would lead to our short-term target close to 9.00.
Harry Boxer, On 4 Longs to Watch (www.TheTechTrader.com)
It was a pretty good day on Wall Street on Monday. We're going to go over some longs here, as some of these stocks did very well.
Aegerion Pharmaceuticals, Inc. (AEGR) has been in a basing pattern for over a year and a half. It headed up to key resistance on Monday, broke through it with a breakaway gap across short-term resistance, and then moved through the June highs. It spiked up as high as 18.21, backed off, and closed up 1.50 to 17.46, or 9.4%, on 1.7 million shares. Although it didn't close ideally, it did close in a good range. If it follows through, look for a test of 19-19.25, and beyond that, it could get up into the 22-range.
Cyclacel Pharmaceuticals, Inc. (CYCC) had a clean-cut breakout on Monday of a year and a half base. First, it took out the declining topsline, spiked up to resistance, backed and filled, formed a wedge, and on Monday, it exploded 1.23 to 6.70, or 22 1/2%, on 2.3 million shares, and reached as high as 7.93 at one point. The breakout is clean. We'll have to see if it has a follow-through. If it does, look for something up around 8.00, and then up around 13.00.
DigitalGlobe, Inc. (DGI) ran up to the top of the channel, formed a rising channel within a channel, held the 50-day, and then popped on Monday, up 1.29 to 22.50, or 5.08%, on 828,000 shares. It looks like it's headed to the top of the channel around 24, and then the next target is up around the 27 area.
Eli Lilly & Co. (LLY) had positive drug news regarding the developmental Alzheimer's drug. It popped last week, came back toward the end of the week, held support, and popped again on Monday, up 2.08 to 52.53, or 4%, on 12.8 million shares. If this stock gets up to 53 1/2, it could accelerate and get to even higher levels, 61 potentially.
Other stocks in our Charts of the Day are Aegerion Pharmaceuticals, Inc. (AEGR), Amgen Inc. (AMGN), Alpha Natural Resources, Inc. (ANR), Clearwire Corporation (CLWR), Cyclacel Pharmaceuticals, Inc. (CYCC), DigitalGlobe, Inc. (DGI), Heckmann Corporation (HEK), James River Coal Co. (JRCC), Eli Lilly & Co. (LLY), Merck & Co. Inc. (MRK), REEDS, Inc. (REED), and Sarepta Therapeutics, Inc. (SRPT).