Actionable Trades: SPY, AAPL, BAC, AMZN, GLD, SLV,

All eyes are on the Jackson Hole Fed summit tomorrow.  Will Bernanke lay the groundwork for a QE3, or the FOMC just stay the course after the "failure" of QE2?  On a micro time frame, the SPY stalled at the macro downtrend line and gave a short term sell signal when it pushed through yesterday's high of $118.24, espcecially after a three day up-move.  On a macro time frame, the lower wedge is still intact but you don't want to see such a strong "distribution" day a few days into the new fledgling rally.  Traders should stay on their toes, and it's difficult to commit capital aggressively in either direction right now.          

Below is a short term view of the S&P.  So far the 1101 low has not been violated.  The S&P did hold the 1250-1255 area, which was important for bulls.  If we see a close below 1140-1145, this will be troublesome.




As traders, we know that it is best to 'sell the excitement' and 'buy the fear'.  Today we saw two perfect examples of that statement with BAC and AAPL.

AAPL continues to trade within the upper wedge on the daily chart.  This morning AAPL was gapped down about 2% (almost 7% at one point overnight) on the news that the company's visionary CEO, Steve Jobs, had resigned. However the stock took the news in stride.  AAPL did not close positive, but it was able to rally off lows to close the day down only 0.65%.  It would be constructive to see some sideways action before suggesting a new trade set-up.    



There had been relative strength in the financials this week, and when news that Warren Buffet was investing $5 billion into the company, it sent the banks soaring just before the open of trading today.  As traders, we don't buy the excitement, but rather sell into it. BAC was a perfect example of that.  It will be healthy to see BAC hold higher after this recent news to gain conviction on continued strength.  



AMZN had a strong reversal bar earlier this week as it started trading into the $175 support zone.  AMZN will need more time to set-up a better trade as there is no clear chart pattern for now.  AMZN is still holding above the 25% retracement level of the move from Tuesday.  To keep the upside momentum in place, it will be good to see AMZN stay above $187.




Gold was down this morning, but the weak stock market intraday sent investors back into Gold.  Yesterday SLV was the weakest of the precious metals, but today it was the strongest.    

GLD is a strong ETF, so after 3 days down into the 21-day moving average, it was prudent to cover shorts.  Some short-term active traders even bought this into support for a reversal trade.  GLD closed positive and on highs of the day.



Strong day for SLV, closing the day up 3.01%., but traders' focus should remain on GLD.

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Actionable Trades: SPY, AAPL, JPM, RIMM, LVS, SINA, GLD, SLV

Markets bounced around in a choppy trading session today, but posted the third straight day of gains.  Equities rose after a stronger than expected increase in July durable goods, faded mid day, but then rallied again to close on highs. SPY closed the day up 1.41%.  Technically speaking, it was constructive action to build on yesterday's gains.  Traders and investors are still waiting to see what the results will be from Bernanke's speech and whether he could being laying the groundwork for QE3.
    

AAPL was a good negative to positive trade this morning.  Yesterday AAPL had a strong move to the upside and played by the rules this morning when it went from negative to positive and pushed higher.  AAPL was a buy above $364-$367 with a target of $375-$378.  That target was reached today as the high of the day was $378.96.  It is important to take trades.  It would be constructive to see some sideways action in AAPL before breaking out of the upper wedge pattern.  



The banks actually helped the markets today for the first time in months.  That does not mean get aggressively long, however it is something to note.  JPM is acting best in the sector.  Yesterday it gave traders an 80/20 entry ($33.35) once it traded back through the previous day's low.  The stop was $32.31, which was the current low of the day.  80/20 trades give calculated, strategic entires when stocks become over extended on the short side or the long side.  Today JPM extended on the previious day's gains, closing up about 3.9%.  



RIMM Is highlighted as a buy through $27.50-$27.80.  This stock has been hammered on the downside this year, but it had surprisingly held up decently after crossing the mini downtrend line at $25.  RIMM is a laggard play, but that doesn't mean you can't make cash flow when it sets up.  Something to note, this is the first time RIMM closed above the 50-day moving average since April of this year.    



LVS gave traders a gap fill play today after a few days of consolidation.  It is trading below the 200-day moving average ($44.45).



SINA showed relative weakness to the market today as it closed down 4.52%.  It is still trading within the marco wedge and the range is getting pretty tight on the daily.  This should resolve soon.



It was a large down day for precious metals, as investors take profits ahead of the Fed meeting in Jackson Hole on Friday.  GLD and SLV were targeted on the Morning Call for follow through trades below the previous day's low.     

If you took the short trade today through $177.50, look to cover as the next support area for GLD is the 21-day moving average at $168.50.  This down move was fast and furious, however when you are in the right trade, you get rewarded. Margin requirements have been raised which is contributing to intensity of the sell-off.



SLV was weaker than GLD.  SLV closed down 4.43% whereas GLD closed down 3.39%. Avoid the lagging metal for now.

Actionable Trades: SPY, GLD, RGLD, AAPL, AMZN, BIDU, OIH, MS,

The market took the gap down in stride today, surging higher to fill the overnight gap before the SPY ended up closing down only 1%.  Selling intensified at noon after some early strength, but buyers stepped in to rally the market into the close. Today's gap down was handled better compared to the action over the two last weeks, where selling generally led to more selling. Today's weakness was led by financials and energy with tech and industrials not far behind.  Where will SPY go from here?  We have had a solid bounce but are trading in the middle of the range, making it difficult to get conviction on the long side or the short side.  Continue to monitor the action, take it slow, and we should get more clarity soon.  

Below is an hourly chart of SPY, so the retracement levels are easy to see.  Right now, the SPY is holding above the 25% retracement level from the bounce off lows.  The 38% retracement level is $116.77 and the 50% retracement level is $115.50.



The trade in the precious metals was largely driven by economic news in both the US and abroad.  GLD continues higher and closed on the highs today.  Last week's pullback in GLD was just a move into the 10-day moving average.  Everyone has an opinion on gold--either it's run is still just beginning or that it is very extended to the upside. If you stick strictly to technicals, GLD is showing tremendous strength as it flags at highs. For the active trader, look for a momentum scalp through highs for a trade, but do not look to get invested at these levels.    



Gold miners are starting to act better with the sustained strength in GLD.  They were highlighted this morning as a sector spotlight on the Morning Call.  RGLD has a solid chart pattern and could trigger for a move soon.  It has held above the previous breakout of $62/$63 and has an upper level consolidation forming.  Look for a move on volume above $70 for new highs.

 

AAPL could use some more horizontal work before setting up for another swing trade, but the dips are buyable in this stock.  AAPL closed down less than 1% today.  Use this as a gauge for the market.  



AMZN has been out of play for a few weeks now.  Is AMZN consolidating for a move higher or setting up for a clean break of this ascending channel?  It is trading below the 50-day moving average and trying to hold support of the 100-day moving average.  Today AMZN closed the day down over 2%. We are not ready to commit to a direction for AMZN, but will be watching it closely.



BIDU closed the day down about 5% but closed off the lows.  BIDU began selling off Monday after negative news was released, which coincided with a great short into resistance that was targeted in the Morning Call (8/15).  After 2-days of selling, is BIDU coming into a buy area? With potentially damaging news filtering out, we are not yet ready to commit to a buying strategy, but this is another one to watch closely as volatility is likely to be high.



OIH closed the day down around 2.5%, showing relative weakness to the S&P's, which closed down 1%.  Looking at retracement levels from the move down from $163 to the low of $122, OIH rallied into the 38% retracement level.  It looks like there is more downside action to come for the oil sector.



Financials continue to be a drag on the market.  A lot of financial stocks (MS, GS, BAC, C) are creating bear flags at much lower levels.  On one hand, banks are very oversold, but based on the technicals this sector is poised to move much lower. The sector could be adjusting to a new paradigm, and several prominent investors are starting to pare down stakes in financials.

Actionable Trades: SPY, QQQ, AAPL, BIDU, GLD

SPY opened positive and stayed positive until the Fed announcement. It initially popped just before the announcement, and then fell sharply to break lows of the day. But this time around, dip buyers stepped in aggressively and the market staged a historic rally, with the SPY rallying 7 points in the last 80 minutes of trading.  SPY closed the day around +4.7%.  The bounce that traders were looking for finally happened.  There was a clean 80/20 reversal trade in SPY on heavy volume.  Seeing how the market bounces over the next several days will be important to judge the intermediate-term outlook.  This should lead to a Day 1 in a short-term rally, and it's very possible this was the bottom of this move. Use today's low of $110.27 as the reference point.     Below is an hourly chart of the S&P with outlined Resistance Areas.  The Breakdown level is 1260-1250, which will be heavy resistance/"line in the sand."   We saw a rally across the board in the last hour of trading.  There was early strenght in high beta tech leaders, which never broke below the lows of yesterday.  Below is a chart of the QQQ's, which put in a reversal bar on the daily chart today.  The QQQ's were 16% off the yearly highs at the lows of today. AAPL was a stock that acted best when the market was getting hammered.  Although AAPL had a pull-off from highs, it held support of the 50-day moving average, whereas the S&P is trading far below key moving averages.  AAPL was 12% off the yearly highs at the lows of yesterday.  The stocks that acted best when the market was in correction, are the stocks to target for longs when the market rallies. BIDU showed relative strength to the market today, closing over +10%. This is a stock to play if the market rally can continue. GLD opened at new highs again this morning and was very extended on the longside.  As we saw a lot of reversal trades in stocks and indicies that were extended to the downside, there was also a calculated reversal trade on heavy volume in GLD through the 80/20 strategy, as GLD failed to hold new highs.  If this trade leads to more downside action, it could breed confidence to a bounce in the market.  STOPS in GLD 80/20 Trade: $173.15 (today's high.)

Three Reasons Gold Will Continue on Strong Upward Trajectory

Traders and investors worth their salt will always look to news, fundamentals, trends, and overall market sentiment before entering a position. My bullish take on gold is no different. I will not hypothesize on the precious metal’s year-end destination (I will for silver) as many exalted gold bugs, like John Paulson, have been stymied by the rapid growth in its value.

Check 1: Gold has been in a long-term uptrend and is in no danger of breaking this upward channel. Only a massive increase in supply or an exponential increase in the value of the dollar would knock it off its strong upward trajectory. I know it’s a cliché but when all else fails, the trend is your friend.



But when the trend breaks the cradle will fall, so it’s good to be prepared. With that in mind SmartStops has the short-term and long-term stops for the SPDR Gold Trust (GLD) at $150.55 and $143.12


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Check 2: As anyone who's taken an economics class can tell you, the fundamentals of market dynamics are supply and demand. The simple truth is the demand definitely exceeds the supply. That gap may very well increase substantially in the near future, when the Pan Asia Gold Exchange opens.

Speaking of Asia, the good citizens of China and India historically are buyers of precious metals in the second half of the year for their religious festivals and the height of their wedding seasons; this translates to more demand.

Check 3: On Tuesday, President Obama suggested that the “Gang of Six” US senators had created a plan that may be the way we overcome our debt ceiling impasse. I am a bit more skeptical, but regardless, the recent surge in gold prices has less to do with our debt and more to with the sorry state of affairs in southern Europe. As long as Italy, Spain, Greece, Ireland, and Portugal teeter on the abyss of default, this upward trend may well continue.

Editor's Note: For more, visit SmartStops.net.

Gold Speculators Lead Yellow Metal to New Highs, Gold and Silver Miners Surge

This past weekend I was watching Wall Street 2 on HBO. During the course of one of his monologues Gordon Gekko, played by Michael Douglas, said, “Bulls make money, Bears make money and Pigs get slaughtered.”

Did Gekko spell pigs P-I-I-G-S?

Over the past several months the world markets have closely watched the soap opera regarding European debt play out. Perhaps we have mistakenly fixated on the Greek and Portuguese characters when we should have focused on the 800-pound gorilla, Italy.

One group of people who did have their eyes on developments in Italy were safe haven investors, i.e., gold speculators. Physical gold and its exchange-traded funds had a strong surge, pushing gold above an important resistance level at $1,550.

This group of investors led gold to new euro/gold highs (something I mentioned previously in Silver Is Now a Value Buy). This was all before Tuesday’s news of the downgrade of Ireland and the possibility of another round of quantitative easing by the Fed. That's when the whole world started piling in.

Gold surged again, seeking out the all-time highs of $1,577.40 and falling just $10 short.


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SPDR Gold Shares (GLD) saw a similar surge, which may well continue in the days to come as the market begins to price in the Irish default and a possible QE3. The ETF is forming a short-term bull flag and holding well above the 210-day moving average. But with rapid price spikes come rapid declines. SmartStops has the short-term and long-term stops for GLD at $147.52 and $142.55. It is very likely GLD will take out the all-time highs of $153.61.


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A surprise development from Tuesday’s news was the revival of the gold and silver miners. For several weeks, during the commodity sell-off, which was sparked by increased margin requirements for precious metals, the miners were in decline and then range-bound. Silver Wheaton (SLW) was trading below its 210-day moving average, a fairly bearish indicator, as was the Market Vectors Gold Miners ETF (GDX). But on Tuesday that pattern may have changed. If SLW continues to rise it may keep going till the next resistance point at $42. SmartStops has the short-term and long-terms stops for SLW at $33.16 and $29.94.


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I’m less confident about GDX as it still below the 210 moving average but a few component stocks of the ETF, Goldcorp (GG) and Barrick Gold (ABX), saw impressive runs on Tuesday.

Editor's Note: For more, visit SmartStops.net.

Actionable Trades: SPY, DIA, OIH, AAPL, AMZN, GLD,

Yesterdays reversal trade was nothing more than a relief of some oversold pressure.  The Head and Shoulders Pattern in SPY took 8 months to build, but is achieving the measured move in just 3 trading sessions.  WOW!  This down move is fast and furious with weakness and technical damage across the board. This move is due to a combination of factors, with deteriorating economic numbers, escalating problems in Europe, and an absence of Quantitative Easing. Many pundits have opined that stimulus packages and QE artificially inflated the market, and now it appears the chickens are coming home to roost.  Tomorrow is the Jobs Number, and we will be watching close to see how the market reacts.

 

Below is a weekly chart of the S&P.  This week the S&P broke a multi-year trendline.  Composure has definitely changed in the market.  It is good to know retracement levels, so you can be prepared to test major support areas for oversold bounces.  From the lows of March 2009 to the highs of May in 2011, the 25% retracement level is 1195, and the 38.2% retracement level is 1102.

The DOW closed down more than 500 points today and had the biggest 10 session loss since March 2009 lows.  Below is the weekly chart of the DIA, the Dow Jones Industrial average.  This also broke a multi-year trendline.             

The OIH's, previously a market leader, has had a major composure change in the last couple of trading sessions.  It is now trading below key moving averages and traded with force through the 200-day moving average and closed on the lows.  Today, the OIH closed -8.81%, showing relative weakness to SPY, which closed the day -4.8%.    

   

Below is a weekly chart of the OIH.  It is good to look at weekly charts when daily time frames become invalidated by large price movements and extreme volatility.  When looking at a longer time frame of the OIH, something interesting to note is the the highs of April 2011 was the 61.8% retracement from the highs of June 2008 to the lows of December 2009.  

 

    

AAPL broke the earnings low today, not surprising when the market is under extreme pressure.  For the active investor, the next compelling level to test a buy is a retest of prior highs, $365 area.  For the active trader, continue to scalp AAPL for cash flow.

    

After the push through failure in AMZN on Monday (8/1), it was noted that it would be best to avoid AMZN for now as it would need more time to build a base.  If you did not lighten up on your position then, the next out was once it broke bigger support of $215.  Now AMZN is approaching more compelling levels to test an oversold bounce.  First level, $201.  If that does not hold, $195 is more compelling.  

Yesterday, it was noted that there could be a possible reversal trade in GLD as it failed to hold new highs.  The strategy used for this trade was an 80/20 reversal trade, which uses a calculated entry and stop.  This morning GLD gapped up, but gave a way out of the trade and set-up a new 80/20 trade.  Entry: $162.86, Stop: today's high: $163.83.  GLD could see a move down to $155.40, the 21-day moving average, without causing any technical damage to the recent move.

Actionable Trades: SPY, QQQ, XRT, AXP, NFLX, GLD,

Sellers came into the market early and faded the small gap up in the indices. The move was fast and broke some key support areas in the SPY, including the low from the Japan crisis, $125.28.  Going into today, the market had 8 straight days of selling, and with oscillators showing very oversold levels traders were looking for a bounce. When selling intensified early in the day and appeared climactic, it provided an 80-20 reversal entry. 

After the market was pressured for the first hour of trading, the leaders in the tech sector like AAPL, AMZN, NFLX, and BIDU started bouncing off the morning lows, giving some indications that the market could bounce as well.  A calculated way to buy the dip is with the 80/20 Reversal Strategy. In this case, it was a buy against the morning low, $125.53, with an additional add through the previous low of $125.49.  This reversal strategy is a way to capitalize on an oversold bounce when the market was extended on the downside.  The stop on this trade is $125.53.  Now that we have the strategy we need to see what this leads to. Is it the start of a new move or just a cash flow trade to relieve some short term pressure?  $127.50 is the first resistance area, which is the retest of the neckline in the macro Head and Shoulders Pattern, and the next major resistance area is $128.30-.80, a retest of the 200-day moving average.     

 

QQQ, the stronger index compared to the S&P, the DOW, and the Russell, gave an 80/20 Reversal trade as well.  This is a calculated strategy to buy a dip.   
         

The XRT, the retail ETF, gave an 80/20 entry today, as well.  After seeing a few days of selling, the prudent trader is patiently waiting for an opportunity to buy a dip for a potential reversal trade.  This does not mean the selling is over in the XRT, however it is a good, calculated trade for cash flow, when entering into oversold territories.

   

AXP is another example of an 80/20 trade.  ENTRY: yesterday's low: $48.50.  STOP: low of the day: $47.53.  This could be the start of a swing trade or it could just be an oversold bounce to relieve some short term pressure.  Watch the price action to take profits on the trade.    

  

    

In yesterday's newsletter, NFLX was highlighted as a market leader that started breaking the upside momentum before the market.  Also, NFLX had not closed below support of the 100-day moving average which was $250.92 in a few years.  It came into this support in the first hour of trading before bouncing and closing the day +1%, showing relative strength to the market.  NFLX is creating a steep downtrend line as it pulls off from highs, if it trades above the downtrend line on volume, that will be next entry in NFLX.  Use this as a gauge for the market.  

Today we saw a lot of 80/20 reversal trades as stocks and indicies were extended to the downside.  You can also use the 80/20 strategy to find a calculated short when a stock is extended on the upside.  Gold opened at new highs this morning, and gave a calculated short entry when it began to trade through yesterday's high of $161.62.  Stops are today's high, $162.86.  If this trade leads to more downside action, it could give more confidence to a bounce in the market.  GLD could see a move down to $155.40, the 21-day moving average, without causing any technical damage to the recent strength.