Rebel Traders - Stock Market and Economic Analysis

There was nothing surprising about the up day in the markets today. I mentioned in my market analysis from Friday that so many indices were sitting at support that is was expected there would be some kind of bounce. The issue that still remains is how will this and any more advances hold up.

The DOW ended the day up 92. That gain was really from only four companies. Of the 30 companies that make up the DOW index Boeing, Alcoa, American Express, and General Motors made up most of the gains on the DOW today. The remaining 26 companies were flat, down, or only up slightly. The advance today was weak and the reason I say that is because I am looking at the ADX indicator. Notice on the chart shown here the +DI (buying pressure) was only flat at best today. A healthy upward advance will be reflected by good buying pressure and today the buying pressure was almost non existent. The saving grace today was that the selling pressure (DI-) tapered off somewhat. Kind of makes me think the big sellers are sitting in the bushes waiting to strike again.

Ok.. now that we had an advance on the DOW where is our overhead resistance? Using the trusted Fibonacci numbers we will encounter resistance at 13560. We also have some minor resistance at a slightly lower level at 13480. Also note that we are still under the 50 day moving average and once under that important moving average that then becomes resistance as well.

The S&P 500 did a little better today but major resistance is still overhead.

Another chart to show is a sector analysis of the precious metals. See the chart here. Notice that it closed very close to the 50 day moving average (moving averages provide support during pullbacks). This sector needs to now advance from here otherwise it will drop down to the 200 day average. A drop in this sector will have a negative impact on the S&P.

So now where are we here in all this. We had a bounce today and it was no surprise. Actually if there was no bounce today that would have been a surprise (and scary). As with all bounces following a huge sell off the next few days and weeks will determine where the markets are going. There are still swing trades out there to be had but the risk is high because the market can drop again and take our swing trades along with it. Recall the trade idea I provided on Friday morning, Abb Ltd (ABB) today did exactly what I predicted it would do. It was a perfect bounce from strong support and in a company that has little exposure to the US economic problems. Today ABB gained 6% in one day. A good swing trade that worked as expected but one sneeze in the broader markets and this could fall back down. So while there are some good trades out there we have to trade them with even more caution. Protection of your capital is the most important part of trading in the markets, making money comes next.

A couple of stocks I like here:

Varian Semiconductor Equipment Associates (VSEA)

Intel (INTC)

Please remember my fellow Rebels… all swing trades while the market is in this very volatile condition are risky. Added risk can create added gains if the market goes up but think of it this way. Swing trading while the market is volatile is like trying to ride a roller coaster without a seat belt. It is tough to stay in the seat and if the car goes around the loop you could fall out and come crashing down. Hold on tight if you take a swing trade. As I said this morning I would not be taking any trades today. I need more signs of where this is going. will I make any trades tomorrow? I’ll know after I see the earnings reports that are released pre market and the economic data tomorrow (lots of economic date to be released tomorrow – personal income & spending, Core PCE and the PMI).

Never be too anxious to make a trade. There are good times to trade and bad times to trade. Right now is not the best of times.