Monday, September 7, 2009

Potential Bases Keep Building

Here is Friday’s intraday trading of The US Dollar (UUP) versus US Stocks (SPY), Emerging Market Stocks (EEM) and Gold (GLD). UUP gapped up (Green Circle), then sat around until 1:30 (EDT) and then imploded for about 35 minutes.

SPY, EEM and GLD sat around and then ramped at 11:30 (EDT). It is pretty simple, when the Dollar falls, risky assets appreciate. Therefore, watch the Dollar closely. If the correlation disconnects, I will let you know.

I wrote the following about a China tracking stock (CAF) –

“Here is the chart of the China “A Shares” Closed End Fund (CAF). It has broken support and now sits below its 5-month trading range. It seems to be an ideal short, but there have been so many of these false breakdowns lately that have led to massive short squeezes. I would not short anything until the markets top and roll over. Watch what happens if CAF trades above $32.50 over the next few days. I will be watching it closely!”

CAF opened trading on Friday at $32.49! It then sold off -4% in less than an hour, but ended up having a strong day as the Dollar got hit. Another miracle goal line save from the button pushers. Have we grown to expect anything les… Just a hunch, and I am not taking any action on it, but I would not be surprised to see CAF gap up hard again tomorrow morning.

I know this is a recap of Friday, but it is obviously the controlling theme in the Markets. Therefore, if the Dollar is the key, and it is in a trading range, crowded right up again resistance, then you would expect something to give soon and either resistance is broken, or another leg down initiates for the Dollar.

My favorite stock screen is to look for strong Companies and ETFs that have lost their uptrend and have been sitting around for a month or for several months. This pause allows moving averages to catch up with price and gives me a breakout buy point and a breakdown stop loss point. There are a lot of high growth names and key market Sectors and Indexes in these types of consolidations.

I have listed several the last few days –
Countries
South Korea (EWY), Emerging Markets (EEM), Singapore (EWS), Taiwan (EWT), Hong Kong (EWH), China (FXI), Canada (EWC), Brazil (EWZ)

Sectors
Real Estate (IYR), Regional Banks (RKH), Banks (KBE), Materials (IYM), Semiconductors (IGW), Metals (XME), Agriculture (MOO), Energy (XLE), Transports (IYT),Biotech (IBB)

Companies
Royal Gold (RGLD), Kinross Gold (KGC), Agnico Eagle Mines (AEM), Freeport McMoran (FCX), Salesforce.com (CRM), Research In Motion (RIMM), BIDU, SOHU, Life Technologies (LIFE), Fuqi Int’l (FUQI)… I could list another 100 names

Commodities
Gold (GLD), Crude Oil (USO)

My point is not for everybody to go put in limit orders and buy everything. My point is that you do not see this many manes set up with potential buy points in a Bear Market.

Many of these names are extremely violent and you can literally get stopped out within minutes of buying things. That is the market we are in. Do not get married to something. Understand that my opinions can reverse on a dime and that I cannot post about my thoughts for potentially days after things change. These are not recommendations, just a list of my thoughts every couple of nights. I stew about this stuff most every waking moment, but can only write about them a couple times a week.

The bottom line is this –

THE SETUP IS THERE TO GO HIGHER. IT HAS BEEN THERE FOR A WHILE. IF THE BIG BOYS COME IN AND SPEND ENOUGH MONEY, THEN KEY SECTORS, COUNTRIES AND STOCKS WILL BREAKOUT FOR ANOTHER LEG HIGHER. IF THEY DO NOT, THEN WE MAY GET THE CORRECTION EVERYBODY HAS BEEN TELLING YOU WILL HAPPEN.

LET THE BIG BOYS TELL YOU WHAT TO DO. IF THEY REALLY WANT IN, THEN YOU WILL SEE STUFF BREAK OUT. THEY CANNOT HIDE THEIR BUYING, NO MATTER WHAT THEY SAY THEY ARE THINKING ON TV.