These projections are the result of screening for technically
significant retracement and momentum patterns that have been further screened
for value and bullish sector performance. In other words, the
projections are for long positions.
$INDU
$SPX
$COMPQ
Monthly Momentum Positive
Positive
Neutral
Weekly Momentum Positive
Neutral
Neutral
Daily Momentum Negative
Negative Neutral/Positive
Note: The trading ranges of late have been so narrow as to make
this indicator very sensitive to minor changes on a monthly basis. The bias
however is still fairly reliable, so it should be taken into consideration.
Equity markets ended the week modestly higher. One thing we are
noticing, particularly on the daily charts of the major indices, is that we
might be witnessing a very short-term reversal to the upside this week (it
could be spurred by almost anything with an element of buying pressure behind
it). These patterns are rare near recent tops (or recent highs), but we saw
them a lot in the late 1990s when markets hit higher highs. The problem is,
these kinds of patterns end up with extreme volatility (that is, fairly large
spikes up, then fairly large spikes down). We also note that even the tired and
somewhat lagging $COMPQ could be forming a bit of an ascending wedge (a bit of
a bullish sign). What that means is anyone's guess, but given the current
concerns over interest rates and energy prices, it is in everyone's interest
not to be surprised if we see some pretty crazy (up and down) market activity
over the next few days. Bond futures markets seem to be baking in a
Tuesday Fed Funds rate hike of 25 basis points along with another in May. There
is a ton of economic data coming out this week, from consumer confidence and
personal income to revised GDP. Why, there is even a solar eclipse this week
(so those of you with chicken entrails and secret rituals can do your own
forecasting). Traders will likely find the next few days interesting.
We believe that financials may be again attempting to move higher,
particularly the large regional or national brokerages (LEH, LM, and GFIG).
Petroleum refiners and producers, following the lead of RES the other day (GDP,
AHC) also appear ready to make another run up. Computer networks, memory, and
graphics (SILC, STX, and ANSS) seem to be ready for a bullish reversal, and
building products (AMWD, USG, EXP) may follow suit as well. Internet software
companies (TRAD, ARBA) also made the initial screens. Gold stocks may also be
making a temporary rally (ASA, AU) but we still believe that some of these
issues will hit price resistance once again as these stocks continue to
consolidate. The lone paper concern (VCP) moved up on pretty strong activity on
Friday. Single entries in retail, transportation, utilities, and REITs also
made the list (CONN, CP, CIG, and RAS). Metal processing and manufacturing
stocks (particularly steels like NUE) are making new highs currently.
What remained after the neural net screens was a mixture of
everything in the above list.
Here is what the nets saw today:
CP 12.90/1 93.8%
LEH 5.60/1 66.7%
CIG 3.82/1 67.6%
TRAD 2.68/1 60.0%
YCC 1.87/1 54.3%
On the bare fringes of acceptability:
USG 1.46/1 52.2%
AHC 1.49/1 54.5%
That's it for now. Leadership in this market is still fragmented.
All we can do currently is to wait and keep researching the patterns.
FOR FULL DISCLOSURE: The MrSwing Trading Team established a
position in RES on Friday.
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