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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: Bulls On A Tear--Is It Time To Jump Back In? -- October 30

    The strength of today's rally came as a bit of shock, at least it did to me. Much of the movement in the Dow Industrials (DJIA) was due to the surge in shares of Visa (NYSE:V) on the heels of a much better than expected earnings report. Sure, Visa accounted for a significant portion of the upside in the Industrials, but it couldn't account for the rallies in the Nasdaq, S&P 500 (SPX), nor the Russell 2000 (RUT). While the S&P and the Dow Industrials flirted with recent resistance levels (17200 for the Dow and 2000 for the S&P), they couldn't manage to close above them. Only the small-cap Russell was able to best its 1150 resistance level, and that's one plus for the bulls. The second mark on the plus side is that the VIX managed to close the day under 15, something it couldn't accomplish yesterday.

    However, the bears aren't without their own arsenal. There are several compelling factors in their favor:

    1. The Dow Transport Index (DTX)--a leader in market direction--was the only major index to close the day in the red. A break back below 860 (8600 on some data services) could mean a reversal in direction for other indices.

    2. Although today's overall market action was to the upside, the Trin (Arms Index) was solidly in bear territory. (A reading over 1.0 is considered bearish since, in general, there's more volume flowing into declining issues rather than into advancing ones.) While the Trin sometimes gives a false reading, in general it's quite reliable as a short-term indicator of market direction.

    3. While investors are piling into the stocks of those companies reporting better than expected earnings, they are ignoring the ones that don't have some sort of catalyst behind them. Why? One reason is that much of the market is over-valued and there are few bargains to be had.

    One of the places that we've been mentioning where investors are still finding value is in utilities, and those are precisely the issues that dominated today's New Yearly Highs list. The reason? The P/E's are not yet over-extended (most are in the 15-20 range) and they pay a decent dividend (in the 2.5%-3.5% range--a whole lot better than bonds!). This inflow of funds was reflected by today's 2% rally in the Utility etf (NYSEARCA:XLU) which shot up to hit a new all-time high (since 1999 inception). (Note: A 2% move is a big one for XLU.)

    Here are some of the more technically compelling utility names that populated today's New Highs List: Integrys (TEG, $73), Xcel (XEL, $33.5), DTE (DTE, $82), Ameren (AEE, $42.6), California Water (CWT, $25.5). All of these appear to have more room to rally and conservative investors may wish to add to their positions. Note that all of these issues offer options making them good candidates for covered call strategies. (Just remember not to write the option close to the ex-dividend date!)

    Oct 30 5:58 PM | Link | Comment!
  • 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!
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  • This market is so scary bullish it's almost spooky!
    about 15 hours ago
  • Intraday support/resistance: $SPX 2001.3/2023.8, $DTX 865.8/879.3, $DJIA 17210/17410, Nasdaq 4608.5/4641.5, $RUT 1166.7/1173.3; $VIX 13.7/15
    about 16 hours ago
  • Market Notes: Bulls On A Tear--Is It Time To Jump Back In? -- October 30 $XLU, $TEG, $XEL
    1 day ago
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