Jack Steiman, On Extreme Caution Here (SwingTradeOnline.com)
The masses are now wondering if the downtrend is over. A brief interlude to the down side to unwind things and now that this has taken place, it's all good from here. I wouldn't get too bullish too fast here. We're still below the 20- and 50-day exponential moving averages across the board and those will need to be taken out with force before you can get too bullish. A move off of oversold, which we talked about on Friday, was expected. RSI's are in the low 30's on the daily charts and oversold on the 60-minute charts. You don't want to get in until you can understand just what type of bounce it is. The only thing clear is we had our first move down out of a move lower in one year.
Monday saw a bounce on light volume but still well below important resistance. Not a reason by any means to be getting long. All Monday did was unwind the oversold 60-minute charts way back up and bring the daily charts back to a more neutral position. The trend up held throughout the day, although it stalled near the top of its range for the last half of the trading day. Stochastics on many 60-minute charts unwound quite a bit and the Dow chart has worked off 80+% of its MACD off the bottom without hardly any price appreciation. Not the best of behavior if you're a bull at this moment in time.
Please keep in mind folks that when a market changes its behavior after a long run up, you have to respect it. We had our first bearish engulfing monthly candle in January in over a year. We had our first continuation pattern out of a bear flag on the daily charts for the first time in over a year.
Both are strong changes in the previous trends in place where any selling was gobbled right up without hesitation. The monthly engulfing stock and the daily follow through to the down side raise red flags that say extreme caution is warranted here.
The PowerShares DB US Dollar Index Bullish (UUP) did get overbought with an RSI tag of 70 on Friday and thus pulled back today. This allowed some extremely annihilated commodity stocks to get a nice bid. Long overdue. The UUP, however, would have to lose 23.21 with force to break its up trend, and thus getting bullish on those types of stocks as the UUP back tests the breakout is not the best of ideas.
The market can turn back up for sure but the onus is now on the bulls to take back those critical 20- and 50-exponential moving averages lost on their daily charts. The levels being 1109/1107 S&P 500; 2233/2221 Nasdaq and 10,357/10,343 Dow.
Mike Paulenoff, On Not Getting Caught Long in Gold (MPTrader.com)
In the last 2-3 sessions, spot gold prices have rocketed over $40 (4%+) after testing key Nov-Dec support at $1074, which held the onslaught from the Dec high at $1227.20. Is the rally the start of a new upleg within gold's longer term bull trend? As of this moment, my work is warning me not to get sucked into the long side of gold, especially into strength.
Let's notice that the DXY (cash dollar index) has come off of Monday afternoon's high by only 0.5% as compared to the 4% spike in gold. Which market is telling the truth, and which is throwing us a headfake? Furthermore, unless and until gold prices inflict some damage to the Dec-Feb resistance line, now at $1125.50, and unless and until gold follows-through ABOVE its prior rally peak at $1162.40 (from Jan 11), and, finally, unless and until the DXY breaks below 78.45, I will watch gold and the SPDR Gold Shares (GLD) from the sidelines for a while longer.
Jerome "Mel" Hickerson, On Short-Term Bullish, Intermediate-Term Bearish (MarketsPath.com)
A Monday morning gap upward, imagine that. The week began not a whole lot different than Friday's session began. The big difference today was follow-through; there was no large 10:30 reversal today. Instead, the SPX rode a multi-wave move sideways with a higher bias into the close. A final surge ended the session at the highs for the day.
The low was at the open and the high of the day came at 15:57. The bulls ruled this low volume affair.
The way the bulls ruled the tape Monday is as important as the fact that they ruled: The sectors that led the way today were Basic Materials, Financials, Energy, and Industrials. Any broad based rally is usually led by these sectors.
We continue to see a chart pattern of declining tops and declining bottoms; until this changes, bulls need to be cautious. But there is hope within the daily bar charts. Today's inside day upward is a common signal of a short-term reversal; Tuesday needs to confirm a reversal by creating a higher bar on the chart. But the index did regain the 100 DMA and closed above it today; an important technical event.
I remain short-term bullish and intermediate-term bearish. Tuesday needs follow-through with increased volume to indicate that this pullback is really completed; conviction was obviously lacking today. Our signals for Tuesday are mixed; we have a swing signal long over a longer timeframe but a short signal for tomorrow as well as a zero indicator for Tuesday. My guess is that we see a low range choppy day of trading, with both bears and bulls having false starts. (The model suggested January 5th as the most recent example with similar data.)
Harry Boxer, On Six Charts to Watch (TheTechTrader.com)
Some new ideas today, a few old ones, and reviews of several that we have been following.
Acorda Therapeutics (ACOR) has a long base pattern and has formed a head and shoulders type bottom, but the significant action about the recent price performance here is the recent spike up followed by a slight pullback and beautiful little 5-6 day flag. On Monday it popped 1.11 on more than 1 million shares, up 4%, and closed right at key resistance at the 29.20 area. A move though that Tuesday could lead to a quick move up to the 31 1/2 zone, and beyond that I'm looking for a more significant move that takes it back up to test the 35-36 area, which was the 2008 high.
Eastman Kodak (EK) has had really nice action of late. A price-volume surge resulted in a 2-day follow-through, albeit not a big one, probably because up against resistance in the 6 1/2-6.70 zone. We'll see if it can pop through here, but next trading target 7 1/2. Beyond that possibilities down the road exist in the low teens.
Energy XXI (EXXID), which did a 5 for 1 reverse split, formed a beautiful rising flag, was up 95 cents today on nearly 900,000 shares and if it breaks through this flag it could pop into the low-to-mid 20s. We'll be looking to take advantage of that for a trading opportunity.
MAP Pharmaceuticals (MAPP) is in a very unique pattern. Last May it had a huge gap followed by a multi-month consolidation. It broke out in early January for a 2-day flag and strong 4-day run.
Look at the beautiful bull coil - narrow low-volume price action, yet On-Balance Volume actually increasing, and Balance of Power holding up well and Money Stream at top of the window. Augurs well for pop that moves to 17 1/2-3/4, my short-term target, and beyond that something close to 20.
Momenta Pharmaceuticals (MNTA) after breaking out of a beautiful one-year base, formed a mini-flag, exploded out of that, backed off and now formed a little mini-flag in here with low volume and good technicals. This one certainly looks like it could retest the 16 1/2 area very soon and make it up towards 18 or 19.
RXi Pharmaceuticals (RXII) also in the midst of a beautiful flag formation, good technicals, nice volume patterns. Looks like another leg up is due that'll take this one up toward 7 - 71/2 range.
Other stocks to view on Chart of the Day are Conolog (CNLG), Callon Petroleum (CPE), Ceragon Networks (CRNT), Integrated Silicon Solution (ISSI), McMoran Exploration (MMR), Mindspeed Technologies (MSPD).
That's it for today and for the ideas for this week. The market appears to be in a bounce-back mode and I think it could last another 2-3 sessions. We'll see how it goes tomorrow.
