On Earnings Season and Market Direction

The post is here.

Considering the Dow at 10,000

I've been taking a sabbatical from blogging lately. For a variety of reasons, I'm trying out a new platform, so you can find today's post here.

Happy trading!

Charts for Tuesday

So far the bulls are still buying. Looking at SPY, we have a rising wedge running into resistance:



Even so, we made a new closing high today. Here are some charts to watch for tomorrow:

- XTEX



- ENTG



- OREX



- SAIA



- GOK



- LPX

Charts for Friday

With the market closing at new highs today, there seems every reason to be bullish. Even so, I found myself closing out most of my positions at the end of the day today. Most of the best charts appear extended, and would benefit from a general pullback.

Taking a look at the SPY two year chart, we can see price forming a rising wedge, with today's close near the upper trendline. Also notice the long term trendlines, creating overhead resistance. To top it off, we have five straight positive closes on mediocre volume. All things considered, this seems like a good time to watch and wait. If we can pull back to the 100.00 area and find support, there should be an abundance of good setups.



If price breaks down below the rising wedge, it will be a different story.

Looking at individual stock charts, there are only a few I really like going into tomorrow. LPX has huge volume, and looks ready to continue higher.



- RTI has struggled a bit during the past two days, but has found support when it needed to.



- OSUR is an interesting bottom fish.



- TBV appears to be finding support after breaking out.



Some of the charts of gold miners look very attractive here.

- ANV



- EGO



- NGD



- SA

Charts for Thursday, Comments on Gold

Today we saw the market make an attempt at new highs, only to fall back in afternoon trading. We still finished solidly higher on good breadth, and the bulls only need to make a short push to get us to a new high. Here's a look at SPY:



Given the nature of the current market, we could very plausibly see the push come tomorrow. On the flip side, we are somewhat overbought, and have seen four straight positive closes on average volume. Furthermore, we are hitting the same level that saw the market sell off last week. Looking at five year charts for SPY and QQQQ, we can see price running into some resistance as well.




In other words, this isn't a place to get overly anticipatory.

Corey Rosenbloom discusses gold, and links to a helpful video by Adam Hewison. Hewison is projecting a price target of around 1250 for gold. Here are the charts for GLD and GDX. I am currently holding a long position in the latter.




While gold has lost some steam during the past two days, I get the sense that this is a real move in the making (i.e., not a head fake). And why is gold making the move now? The best explanation I have seen so far relates to China's shifting reserve strategy. Ambrose Evans-Pritchard reported on Sunday that China intends to reduce dollar reserves:

Cheng Siwei, former vice-chairman of the Standing Committee and now head of China's green energy drive, said Beijing was dismayed by the Fed's recourse to "credit easing".

"We hope there will be a change in monetary policy as soon as they have positive growth again," he said at the Ambrosetti Workshop, a policy gathering on Lake Como.

"If they keep printing money to buy bonds it will lead to inflation, and after a year or two the dollar will fall hard. Most of our foreign reserves are in US bonds and this is very difficult to change, so we will diversify incremental reserves into euros, yen, and other currencies," he said.

China's reserves are more than – $2 trillion, the world's largest.

"Gold is definitely an alternative, but when we buy, the price goes up. We have to do it carefully so as not to stimulate the markets," he added.

The comments suggest that China has become the driving force in the gold market and can be counted on to
buy whenever there is a price dip, putting a floor under any correction.

Looking toward tomorrow, here are a few charts that look good for long trades:

- CIEN



- LPX



- TBSI



- TBV



- FRP



- DOX



- RTI

Charts for Friday

With the market trading sideways, there does not appear to be any strong advantage long or short going into Friday. The morning employment report could be a catalyst in either direction. Looking at the 60 day chart of SPY, we can see a picture of indecision.



Considering that the bears have been unable to follow through convincingly after Monday's distribution day, the advantage has perhaps shifted to the bullish side. Technically, we are still trending higher. Moreover, there remain an abundance of good long setups. Here are some current positions, and a few on watch for long trades (scroll down further for short picks):

- JDSU



- CPO



- OVTI



- MRVL



- ELON



- ARUN



- TXT



- BTM



- CDE



- GXDX



- TBSI



I am holding nearly an equal amount short as long. However, I am not finding the charts compelling, which provides more reason to think we are due for a rally. In fact, a rally would provide us some better short setups. At any rate, I am trying to keep my portfolio balanced in the absence of a clear direction, and here are some current short positions:

- ISLE



- PFCB



- PBY



- GPI



- ODP



- EAT

Regarding Gold

Gold was the story of the day. I have been looking around, but haven't found any great explanations for the breakout. In any event, from a technical perspective, gold and gold miners are buys. It is worth noting, however, that back in May we had a high volume break higher, albeit under somewhat different technical circumstances. After two days of buying, price moved steadily downward before hitting a bottom three weeks later, well below the breakout price.



I'm not saying that's going to happen here, but simply advising caution. The investment landscape looks rather poor overall at this point, and perhaps investors are seeing gold as the best place to park their cash. In any event, should gold continue higher, gold miners will benefit from not only the rising price of gold, but also from the deflationary trends relating to their costs of production (labor, oil, etc.). Today I started positions in AUY, NGD, and GFI. Basically all of the miners were breaking higher with heavy volume. I just liked these charts the best.