9/5:Market Analysis

SPX...horrible week but ended on a very bullish note. Never before have we seen a candle or intraday movement like this without followthrough. The volume was good and strength in commodities and financials make for good reasons to believe in this short term rally



QQQQ...intraday it was strong coming off of lows, but as financials and commodities made new highs, big tech fell back down again and at the end of the day, it closed in the middle of its range. Definitely don't short this now as the market should rise, but i would also look elsewhere for a long as this is the laggard, not he leader...NOTICE how we have the dreaded doji on huge volume at potential support (noted on thursday's blog)...these are always good reversal signals so be on the right side of this trade if u are to play it into this week


QQQQ weekly...puts into perspective how much further QQQQ can fall. it broke a huge symmetrical triangle support and is now technically very bearish. be ready to short this for a fortune in the coming weeks...


XLF...nice bullish candle as it ended nice and positive. this is the leader but as its still fundamentally very weak, i don't expect much upside in this sector. go long for a very very short trade if u like, but stay cautious


XLF weekly...shows that a nearterm bounce is still possible but overall, XLF is very bearish and possible of testing lows of july...Definitely shows that any bounce is still just relief and not reversal rallies


UUP....dollar remains very strong...looking at this chart, its tough to think commodities have any chance of a continuation to friday's rally..


Euro...broke the trendline but at potential support. would make sense to give a false rally then continue its fall...


GLD...was a great early indicator on thursday that commodities would have a bounce on friday. Looking at this chart, if GLD continues to lead commodities, a very nice swing rally in commodies should occur in the early part of this week. But keep stops tight as it is a countertrend trade.


Analysis: Everything is very very bearish with major support broken. BUT we do have one very bullish candle made on friday from commodities, SPX, and financials. As we are oversold in the shortterm, especially in commodities, i do believe that a relief rally is definitely due. This whole year we have seen bullish action very similar to what we had on friday, and EVERYTIME, we rallied for a few days up to even weeks. With good resistance at the breakdown levels nearby, i really expect this possible rally to be very short lived but very ferocious. The best areas to go long would be dollar weakness commodities or financials. commodities as they sold off the most lately and because they have the easiest to read charts and financials because of its relative strength in the last week and the news in FRE and FNM. If wondering what i believe will be the result next week due to the FED's move to takeover FRE and FNM, i beleive that finacials and the market will rally due to the fact that it reassures mortgage holders, future homebuyers, and college loan applicants that affordable, government sponsered loans will remain. And of course, the whole bullshit bailout will mean more debt to the government, which in turn should drop the dollar vs. other currencies, which should give commodity names a nice sizeable rally.

Game Plan: As commodities erased early losses friday, i was able to get in on some names during lunchtime to participate in the bullish activity, but as everything looks very sound, i have been kicking myself for not buying more. I plan to get in on one more long commodities play tomorrow but everything still makes sense technically. Good luck and monitor all positions carefully as countertrend rallies are the most difficult.

My Gut Says: Markets will rally based on FRE and FNM news. It will be strong but with decreasing volume in the coming days. Commodities will do well and dollar will weaken. Analysts will be calling bottoms in financials and forgetting about the weakness of last week. Then by the end of the week, there will be signs of slight weakness, starting of course with tech. then would be the time to flip positions again and get very bearish on EVERYTHING!

Bias: 80% bearish on the market with 80% short term bullish bias for the upcoming week.

Long Ideas:

refiners (tso, vlo)
homebuilders
airlines
oversold oil (rrc)
nat gas (apa)
mining and materials (nue, aa)
agriculture (ipi, agu)

Short Ideas:

tech (rimm, aapl, intc, jnpr)
pharmaceuticals (ilmn, mygn)
casinos (wynn, penn, lvs)
china (sina, sohu)