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Dr. Kris has two degrees from MIT because one just wasn't enough. Her life goal was to figure out the universe and having done that (at least to her satisfaction), she decided to tackle something even more difficult—the stock market. Applying the scientific method along with an insatiably... More
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  • Market Notes: Is The Market Oversold Or Are We In For More Pain? -- October 15

    The past couple of weeks in the market have been a seat-of-the-pants rollercoaster ride but today's action was the wildest. To wit, we saw the VIX spike to a three year high, a 458 point swing in the Dow Industrials, an extremely bearish Trin (Arm's Index), and wild swings in both the positive and negative VWAPs (a measure of buying and selling pressure). Going into the close, the mean positive VWAPs were in the +350 area--a level I haven't seen in, well, I'm not sure I've ever seen them that high.

    Is there some sense to be made from these market dramatics? The bears believe that today's capitulation is just the pause that refreshes before the next leg down while the bulls are looking at it as a buying opportunity. So, who's right? Unfortunately, my crystal ball is on the blink and the only thing I have to go on are today's compelling technicals:

    1. The spike in the VIX and VIX volatility is contrarian. Sure, the VIX closed over 26 which is still very bearish but the fact that it plunged going into the close offers a ray of hope for the bulls.

    2. Most of the major sector etfs found footing today. The bottoming tails seen in the candlestick charts of many of them indicate that selling pressure has dried up--at least for now.

    While I don't think one should step in and buy stocks with abandon, I do think that taking a baby-step approach to buying isn't a bad idea, especially if a stock is entering over-sold territory. Where can we look for value right now?

    Here are two such areas that attracted buyers today:

    The first is the oil producers and oil service companies. Many of these stocks have sold off hard and buyers are starting to step in. Witness today's firmative action in some of the Oil & Gas producers/services exchange-traded funds: XOP, XES, PXJ, OIH, IEO. All of these rebounded on heavier than normal volume.

    The other battered area that is heating up is the homebuilders. The Homebuilder etf (NYSEARCA:XHB)was today's bullish winner among the major sector etfs. Today, its candlestick chart formed a bullish engulfing bar on twice normal volume. Individual names in this showing strength today were Lennar (NYSE:LEN), D R Horton (NYSE:DHI), KB Home (NYSE:KBH), and Pulte (NYSE:PHM). All saw gains of 3% - 4% on twice normal volume.

    The big X-factor in the market is the status of the Ebola virus. Should more cases arise (especially in the US), this could likely trigger another market sell-off. It is mainly for this reason that I recommend dipping your toe back in the water rather than doing a full-body cannonball. Don't let exuberance trump prudence!

    Bond Alert!: Bearish candlestick "hanging man" formations formed in the charts of many Treasury and investment-grade corporate bond funds today. If you're long this trade, you may wish to tighten-up your stop-loss point and/or take profits.

    Trade Update: The Long US Dollar (NYSEARCA:UUP)/Short Euro (NYSEARCA:FXE) trade recommended back on 7/30/14 may be over. Today, the UUP closed just under $22.60 support while the FXE rose above $126 resistance.

    [Note: I know that "formative" is not a word but it's the one I want here.]

    Oct 15 6:02 PM | Link | Comment!
  • Market Notes: How To Profit From A Sinking Ship -- October 1

    The bears continue to dominate and were able to push the major averages below recent support levels with many of them on the verge of testing new ones. Here are the next support levels:

    Dow Transports (DTX): 820, 800
    S&P 500 (SPX): Just broke 1950, 1900
    Dow Industrials (DJIA): Just broke 17000, testing 16800, 16400
    Nasdaq: Testing 4400, 4200, 4000
    Russell 2000 (RUT): Testing 1080 (a major level), 1000

    While today's down draft was depressing, bulls should take some comfort in the fact that market internals are moving strongly into the bearish contrarian zone. What with the Trin pushing above 1.6 and VIX volatility spiking, we could see a relief rally as early as tomorrow. But don't party yet--this could be the pause that refreshes before the next leg down. With only three stocks populating today's New High list, this market is still firmly in control by the bears.

    Relief rallies in bear markets provide a good time to initiate bearish bets. If you need inspiration, there's a lot to choose from as pretty much every sector is showing weakness. Many sector exchange-traded funds and notes broke support levels today with the most compelling (technically) being the following: Water (PHO, PIO, FIW), Timber (NYSEARCA:CUT), Agribiz (NYSEARCA:MOO), Financials (NYSEARCA:XLF), Insurance (NYSEARCA:KIE), Retail (NYSEARCA:RTH), Regional banks (IAT, KRE), and Shippers (NYSEARCA:SEA).

    Regarding the shippers, Navios Maritime (NM, $5.52) broke below $6 support to touch a new yearly low. The bearish momentum is indicating that the stock could sink much further--possibly to the $3 level. If you're considering shorting this stock (or any of the other shippers), note that many of them pay a dividend which short sellers are required to pay when the stock goes ex-dividend. As an alternative to the inherent risk of shorting as well as being obligated to pay the dividend, if the stock offers options (as does NM) you could buy a put instead.

    Oct 01 7:29 PM | Link | Comment!
  • Market Notes: Raise High The Roof-Beam, Investors! -- September 29

    Today's notable movers to the upside

    NiSource (NI, $40.85): The stock leapt to a new all-time high, tacking on 6% to its closing price on Friday on more than 4 times normal volume. Over the weekend, the company's board decided to spin off its natural gas pipelines from its utilities business. The split is expected to occur in mid-2015.

    Federated National Holding (FNHC, $26.89): This Florida-based residential property insurer gained 4% on twice normal volume to break above major resistance following a big move on Friday. There was no discernible news to account for the move.

    ClubCorp Holdings (MYCC, $19.85): This company manages and operates golf, sports, and business clubs. Today, the stock hurdled out of an eight month consolidation stage, gaining nearly 6% on twice normal volume to notch reach an all-time high. Investors cheered the news that an activist investor is urging the board to consider converting the business to REIT status. According to the company's Press Release, the spun-off assets could offer shareholders an upside of 65% to 90% from Friday's closing price of $18.74.

    Beacon Roofing (BECN, $26.18): This New England based supplier of roofing materials has been in a major slump since January. It sunk to a new yearly low on Friday but got a big boost today from a favorable article appearing over the weekend in Barron's. (You need to be a subscriber to access the article.) According to the article's author, improving demand along with ongoing consolidation in the roofing space could boost the stock 40% from current levels. If you're looking to take a bullish stake in this one, I would recommend using options (perhaps selling a put to take advantage of heightened options volatility or using a call credit spread) to reduce risk.

    Sep 29 5:37 PM | Link | Comment!
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  • Intraday support/resistance: $SPX 1931/1961, $DTX 833.75/855.75, $DJIA 16470/16770, Nasdaq 4421.5/4473.5, $RUT 1105/1125; $VIX 15.6/16.6
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