Mistakes Yesterday:
1. downplayed the importance of the bearish indicators in XLF
2. Forgot that a small doji meant indecision and might possibly also mean a change of trend.
3. Put too much emphasis on the strength in qqqq's breakout while i should have known that qqqq's alone cannot move the market. It has less pull in the markets than SPX, DJIA, XLF, and USO.
4. I threw out my entire sell list all based on one day's action. I forgot that yesterday could have been a fake out since it did not have a continuation confirmation day
5. I mistaken that today was AIG's earnings, not FNM
6. Gave too much credit to the rally yesterday despite unremarkable volume (especially to the breakouts in SPX and QQQQ)
ok....on with the charts...today we have many charts as i try to figure out where we will be heading next
SPX...strong, strong pullback today on good volume. Doesn't seem to be breaking down yet as support is still in tact...good to watch and wait...
DJIA...this index is the most dependent on financials and today, it was its biggest victim. The bad news in AIG and AXP crushed DJIA. We are either testing support now or very soon in the future. Very neutral here as the volume was very big and bearish.
QQQQ was again the strongest sector. It was able to stay relatively strong despite all the turmoil in the financials. Big tech lost less than 1% and it is still safely above the breakout point. I remain bullish...
XLF is like the old XLF. It once again brings down the market with its weakness in its big names. With FNM reporting earnings tomorrow, i will have to stay very cautious here. With a position in the financials, i am either looking to sell or hold tomorrow depending on the intraday action. One thing i won't do is add to my long position.
VIX rebounded back to the neckline today. Judging on just price, i am guessing VIX has much more to fall. It doesn't look able to break back above neckline, but in such a volatile market, anything can happen...
UUP showing big strength once again. I wonder about the importance of the dollar as it didn't seem to have affected oil nor the indexes one bit...
USO was relatively strong when comparing to its performance in the past week. I don't see it breaking much higher than 100 and would not be surprised if it just resumes it downtrend tomorrow. But if anything is to spoil the bull's ascending triangle would be a strong rally of USO. I once expected it to go back to the 108-110 level. With a strong day in oil tomorrow, i will be much more bearish on the indexes and might decide to cash out and be sidelined going into the weekend
Analysis: I am feeling much more neutral today than yesterday. I am still bullish neutral though. There are just too many conflicting signals as we analyse all the charts. I am bullish because of big tech's relative strength and breakout yesterday. RIMM and AAPL even was able to recover most of their losses at the last 10 minutes of trading...maybe its short covering, but based on their daily charts, i am still bullish on them. Bearish reasons include XLF and USO. As the two biggest market movers, we should always be on the lookout for them. I really hate how USO is oversold and the lack of good fundamentals in the financials...it just doesn't make sense logically and fundamentally for XLF to rise above resistance and USO to keep falling. But the market isn't logical...so none of that might even matter. It was a bad idea to jump to go long financials yesterday and today it was a bad idea to add a couple of long positions in the middle of the day...
Game Plan: I am expecting tomorrow to either be very slow and consolidate into a small spinning top doji at SPX support area or for us to surprise the bears with a huge rally to recapture today's losses...XLF definitely needs to see strength come in soon or else it will lose too much steam to break resistance. With FNM reporting, i am very very skeptical that we will have much good news in terms of the financials. But if they somehow surprise and beat estimates, we might get that catalyst XLF needs to breakout. Definitely tomorrow will be a watch and see kind of day. I don't plan on buying anything tomorrow but leave myself the option to trim a couple of my positions if i see very bearish intraday action, especially in the financials...
Conviction Buy List:
Strong Retail (shld, rost)
Strong Financials (ibn, bk)
Pharma (bmy, ilmn)
Strong Tech (msft, aapl, goog, rimm, ibm)
Oversold Energy (mee)
NDAQ
Conviction Sell List:
Water Transportation (drys, osg, fro)
Some Energy (anr, btu, wlt, snp, oih, su, xle, xom, hal, slb)
Materials + Mining (clf, wlt, abx, cx)
Agriculture (agu, mon)
Weak Financials (leh,mer, nly)
SNDA
YGE
MRK
MNST
BNI
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