Thursday, January 6, 2011

Financials at Potential Resistance

Stocks were led higher since December 1st by Financials. The leveraged Financial ETF (FAS) is now at a pretty important price extension. The uptrend does not have to terminate but be on alert for at least a pause in the uptrend.

The inverse of FAZ is FAS. You can see the cluster of support here. If it fails, then support is at $6.65

Wednesday, January 5, 2011

More Market Games

Here’s another example of how this market tries to actively trigger sell orders before moving higher.

On Dec 31st, it barely took out the low at the end of the day. You know guys got stopped out. It then ramped higher on the open Jan 3rd. The Dec 31 low was then marginally taken out yesterday (Orange Arrow). Again, you know people got stopped out.

There’s an investor conference call today to discuss the recent selloff and Cramer told you to buy the stock last night. In my opinion, that dip yesterday (price move, not Cramer) was designed to get people out of the stock. Period…

You Need to Keep Adapting

You need to be able to adapt or will be eaten.

Take a look at Netflix (NFLX) and how it has been trading recently. It’s held the 50-day (Black Line) for months and has been holding a low at $175. Monday it broke below the 50-day and took out the $175 low. The next day it opened above the 50-day on an “upgrade” from a “analyst” and no doubt hosed a bunch of people who got stopped out the day before.

That is today’s market. There is no way that the breakdown was not manufactured. It did exactly the same thing in November and October, breaking support a few days before ripping to the upside.

Here is the chart that I am now using. On it, you can see that there was support at $173 and there was timing on Monday for a low. I did not sell the shakeout. I would have been very upset if I had. NFXL is by no means out of the woods. It needs to clear $182 and then $190 to get the trend back up.

The point of this is now whether NFLX will go up. The point is that you need to use what is working and change as the markets change. How many times now has IBD gone to “Market in Correction” the day the market has bottomed? You need to keep adapting or you will be eaten.

Treasury Top and Dollar Low?

US Treasury Bonds (ZB H1-D) have been trying to find a low since they bottomed in mid-December. There is the potential that the last few weeks have only been a “two-step” rally into resistance and there is now timing for the downtrend to resume.

The currency markets have been moving in lock step with the US Bond market, because rising Interest Rates force money into US Dollars. The Euro (6E H1-D) has timing for a potential high. It needs to clear the 1.353 level to turn the trend back up.

The British Pound (6B H1-D) has a similar setup to the Euro. The 1.5362 needs to hold or another leg down may ensue.

The Canadian Dollar (6C H1-D) has been very strong and actually broke out of a 14-week base last week. It hit first resistance and is now retesting the breakout at 0.9989 Whoever would have thought of Canada as a safe haven currency… Sadly, it’s yielding 0.11%