8/12 - Market Analysis

SPX had a nice pullback today back to the breakout line. If that support holds, we will look back at today as a perfect opportunity to enter more longs. With below average volume, it certainly does look like today might have been more of a buy opportunity than a sell situation. But in a bear market, supports are made to be broken...XLF will be the key...


SPY 30 min...looking at this chart, we can see that SPY is right on track to bounce up tomorrow. Watch how similar it looks to last week's pullback...(it feels like deja vu how similar today was to last week...the tone of cnbc, the moves in SPX and the levels on the oscillators are so similar...i am of course guessing that it will move up huge tomorrow)



QQQQ...still good relative strength vs SPX today...but while its at strong resistance after a huge run up, it seems very likely to see a bigger pullback before moving higher...


XLF was the laggard yet again. News on JPM's bad investments in july and downgrades on GS brought down this major sector. We are right at the trendline support, so if we close below this line, it might just bring more down to come for the market. Will the financials let down the market? or will it bounce back huge tomorrow to finally break out? Tough to call...


USO again fell...but for the first time in a long time, SPX fell big...might this show that oil is no longer as important for the market? hope so...but i doubt it...my guess is that XLF + OSO = the market...not exactly just USO...


XRT looks bearish...but still within the uptrending channel...with earnings around the corner and huge volume today and yesterday, i am expecting big moves in XRT in the coming days...


Analysis: Overall, today was what i wanted. Actually i wanted this yesterday. Today was the opportunity i was waiting for to add to longs and to open up short positions in materials and commodities. As you look at gold and ag stocks, today was merely a dead cat bounce with no technicals behind it. Tech wavered but was able to stay relatively flat throughout the day. As i saw it weakening on sub-average volume, I decided to open another long position in tech today. But it was bad timing and quite risky now that i look back on it. I am hesitantly bullish as technicals look fine but oil seems to be finding support and financials continue to weaken.
The 30 min chart looks beautiful for the bulls and the weakness in XLF and XRT are wonderful for the bears. As tech and IWM (not pictured) remain strong and oil weak, the signs are mainly pointing to a continuation of the uptrend. Be careful though with XLF as if it breaks support, no matter how strong QQQQ get and how much USO falls, the market overall will not be able to sustain a rally.

Note to Self: Yesterday would have been a good day to take some gains and the stocks on the watchlist performed incredibly well.

Game Plan: Don't add to any new long positions but instead, watch out for possible breakdowns of support lines. Charts can turn bearish very quickly, and if it does, i will look into getting rid of a couple of my longs. If dollar keeps strengthening and markets rally early, i might add one of the bolded shorts to my portfolio.

Conviction Buy List:

Strong Retail (rost, amzn, shld, coh)
Some Financials (ibn, bk, mbi)
Pharma (bmy, ilmn)
Tech (aapl, goog, rimm, vmw)
Exchanges (nyx, ndaq, ice)

Conviction Sell List:

Transports (osg, fro, ba, unp, csx, exm)
Some Energy (anr, slb, apa, drq)
Materials + Mining (clf, wlt, abx, abx, nem, pkx, cf)
Agriculture (agu, mon)
Weak Financials (leh,mer, nly)
DE
CTRP