Closing Update for Tuesday, August 25: Dow Makes It Six Straight Gains

4:12 PM, Aug 25, 2009 --

-NYSE up 26.07 (0.4%) to 6,697.21.

-DJIA up 30.01 (0.3%) to 9,539.

-S&P 500 up 2.43 (0.2%) to 1,028.

-Nasdaq up 6.25 (0.3%) to 2,024.

GLOBAL SENTIMENT

Hang Seng down 0.49%

Nikkei down 0.79%

FTSE up 0.42%

UPSIDE MOVERS

(+) GOOG gets upgrade.

(+) HGSI gains on expectations White House could speed up flu vaccine supplies, speculation of possible M&A deal.

(+) VOD gets analyst upgrade.

(+) GNVC gets grant to support novel cell line development.

(+) AIS launches Tjet needle-free injector system.

(+) BIG beats with Q2 EPS.

(+) BKC tops with results.

(+) SAFM beats with Q3 results.

(+) SI gets upgrade.

(+) PLX gets FDA fast track status for Gaucher disease treatment.

(+) COCO beats with Q4 results.

DOWNSIDE MOVERS

(-) BCRX sees no upside from administration plans to speed up swine flu shots

(-) SYY schedules IRS payment.

(-) AIR guides for Q1 miss.

(-) MDT turns lower after initial gains when company beats with results.

MARKET DIRECTION

Stock averages end higher though in the bottom end of the day's range, boosted by consumer and housing data and the renomination of Fed chief Ben Bernanke. The Dow Jones Industrial Average has now advanced for six straight sessions.

Financial, retailers, homebuilders and other consumer stocks were firmer, while energy and utility shares fell. Tech shares were mostly firmer. The broader stock market held its upside after an auction of 2-year Treasury notes drew respectable demand.

Stocks started the day on firmer footing when investors reacted positively to President Barack Obama's reappointment of Federal Reserve Chairman Ben Bernanke.

Bernanke's new term, which still has to be confirmed by the Senate, removed a big block of uncertainty from the market. Bernanke, though not without his critics, has moved aggressively to limit the current financial crisis, which could have triggered a second depression. He's generally received good marks from Wall Street even though the S&P 500 is down some 20% since Bernanke took the helm at the bank.

Economic news also supported the day's advance.

The Standard & Poor's/Case-Shiller U.S. National Home Price Index rose 1.4 percent in the second quarter from the January-March period, the first quarterly increase in three years. Home prices, while still down almost 15 percent from last year, are at levels last seen in early 2003, the AP said. Prices have fallen 30% from the peak in the Q2 2006.

Improving news on the housing front was followed by the Conference Board's Consumer Confidence Index reading, which jumped to 54.1 in August from 47.4 in July, sending all the three major indexes higher. Economists polled by Thomson Reuters expected the index to rise to 47.5. A reading above 90 generally means the economy is on solid footing and consumers are happy.

Separately, the Congressional Budget Office projected the economy to grow at 1.6% in the second half of the year, although it will be down overall on the full year. GDP is expected to increase by 2.0% in 2010, according to the White House, which also projected a slightly lower deficit this year.

Crude oil closed down 3.1% at $72.05 a barrel after hitting the highs of the year above $74 a barrel on Monday.

Comments

[David White:]

Dr. Kris observed that the VIX had a rather dramatic candlestick hammer pattern for today on its daily chart. The shadow below the main body was very, very long. The DIA, SPY, and QQQQ had the reverse, a shooting star pattern for today. These candlestick patterns add to the likelihood that the markets are going down tomorrow. The VIX and the indices above usually move in opposite directions.

Last week the crude stocks were -8.4M barrels (Yahoo Finance). Often the deliveries get delayed by one day, etc. It seems likley that some of last week's decrease in crude stocks will be found this week. Also more might be bought before the "high use" Labor Day weekend. I expect the stocks will be up this week, perhaps dramatically. If so, they will tend to push oil prices down. Oil prices seem already headed that way after today. The oil heavy S&P500 will likley follow oil down.

Aug 25 04:55 PM

[Bill L.:]

David, saw that too. Let me add that sentiment is now above where it was in Oct '07, a major top. Not only were there upside VIX call buyers, but the dollar and the long bond were catch bids all day despite an up market. Veeery toppy and a very dangerous place to trade. I would be raising cash this week, and the more aggressive looking short setups. Personally, I am betting that we hit a major top this week.

Aug 25 05:48 PM

[Missing_Link:]

VIX is an irrelevant indicator and does not move opposite the market nearly as often as claimed.

I dare you to do actual backtesting on the VIX and prove that you can get a positive result with any trading algorithm that uses it.

Aug 25 07:14 PM

[David White:]

Missing_Link: The VIX works to some extent. It is not fool proof, but it does generally seem to work opposite the major market indices (not always). If you use a combination of indices, you can increase your chances of being correct. For instance in day trading, you might use the VIX, the pivot points, the sma's, the stochastics, the RSI, the ADX, momentum, DMA, #advancing and #declining stocks, up and down volume, volume of your stock, etc. When a lot of these indicators are telling you the same thing, your chances of making the correct decision are improved. Of course, there are never any guarantees. Money management is also an important skill.

The SPY, DIA, and QQQQ are all exhibiting topping patterns. That is another reason to believe they may go down. Of course, all that head and shoulders business of a few weeks ago is a prime example of why you cannot count on any one particular indicator or pattern making you "certainly" correct.

Aug 25 07:59 PM

[Missing_Link:]

On Aug 25 07:59 PM David White wrote:

> Missing_Link: The VIX works to some extent. It is not fool proof,
> but it does generally seem to work opposite the major market indices
> (not always). If you use a combination of indices, you can increase
> your chances of being correct.

You can say that for any indicator. Where is the evidence that the VIX works any better than chance? And I do mean EVIDENCE, not just you saying it's good.

Aug 25 08:35 PM

[Missing_Link:]

On Aug 25 04:55 PM David White wrote:

> Dr. Kris observed that the VIX had a rather dramatic candlestick
> hammer pattern for today on its daily chart.

Candlestick patterns are even more bogus. When we get to interpreting candlestick patterns on the VIX, we're way off in tea leaves and goat entrails territory.

Seriously, look at the VIX.

www.traderslog.com/sto...=$VIX&data=W

You're trying to tell me that even though the VIX has been dropping steadily since February, the appearance of a magical candlestick hammer means the VIX *might* go up soon, and the "soon" might be tomorrow, and that *might* have a negative effect on the markets?

That's a whole long list of "mights" and "maybes" based on an unproven indicator of an unproven indicator.

Aug 25 08:49 PM

[User 117558:]

There is a definite wingnut pattern that has developed which will cause the market to move in the most likely direction over the next few periods. Therefore in order to make substantial profits it is clearly important for all traders/investors to take their long and short positions in a most timely manner.

Aug 25 10:16 PM

[David White:]

Missing_Link: There are volumes extolling the virtues of all of the indicators I mentioned. I could not possibly do them justice here. The Candlestick method was developed by some Japanese rice traders. It worked very effectively for them (history backs this up). Modern day traders also believe it has merit. By that I mean it gives you better odds than chance alone. I do not have statistics on most of these trading signals. I have heard that using pivots points improves your odds of making the correct decision to about 2/3. If you use other methods on top of this you can improve your odds still further. For instance, if you are thinking of getting into a trade to the downside, it is helpful to have several indicators, which say what you are about to short is over bought. This does not guarnatee a correct decision. A stock could continue to be over bought for a long time. However, it improves your odds of being successful.

Even after you have mastered any number of these technical trading indicators, you can still lose money. Money management is important. Emotion is important. You may stay in a trade too long out of conceit. You may exit a trade too soon out of fear. Discipline is an important factor. Fundamental analysis also helps. On top of all this, some news item can appear unexpectedly to derail a well planned trade. You have to be willing to accept this as part of the process.

If you are having trouble with all technical indicators, it is likely that you are having emotional trading problems. Most traders have been afflicted by this at various times. You need to step back from what you are doing to get a better perspective. For you to blithely decry all technical trading methods because they have not functioned well for you is looking for a scapegoat. If you find all technical trading methods invalid, you are most likely the problem, not the technical trading methods (although some are questionable).

I don't think you will find many professional technical traders who have not found candlestick methods at least a little helpful once they have learned how to use them. As an exmaple, you might get to 67% accurate trades by only trading on pivot points (a day trading tool). You might up that by 5% to 10% by only buying at oversold positions (and only selling on over bought conditions). A candlestick pattern indicating a small lower body with a long upper shadow might help you make up your mind that the market wants to take this stock down. You might help yourself decide how long to stay in a trade by using DMA and/or ADX. This might increase your profitability still further. You can see how I am getting close to 80% or more. Even with this, you can still sabotage yourself with emotions. If you take big losses, you will have to have many wins to make up for them. You have to use money management to avoid big losses (i.e. use stops, etc.). I hope this has been helpful. Good luck.

Aug 25 11:54 PM

[467668:]

test

Aug 26 01:16 PM