Tuesday was a day that started off with a gap-down, due partially to China showing weakness and ending with all eyes on the outcome of the Fed’s meeting. The bulls were looking for signs that the Fed was going to take more action to assist the economy rather than take the perspective that no more needs to be done. While we did not get a stimulus, it seems the bulls got enough to work with.
The Fed is going to continue to supply cheap money due to concerns over the economy and unemployment. Due to these concerns, the Fed is going to start buying up government debt as well. Economists are not overly optimistic that this will help much since $10 billion of debt in a $14 trillion economy is relatively small. Still, the good news is the Fed is willing to help but not going overboard too soon. Too much too soon could cause concerns over inflation and future pain from all the debt being accumulated. Also of importance, this is not another stimulus, contrary to what some headlines have said. The Fed is not pumping in any new money, which is exactly what a stimulus would do. However, that is not to say we won’t see a stimulus in the near future if the economy continues to drag.
The bulls quickly ran with the news even though we still closed in the red. I expect the news to be further digested over the coming days and debated a bit more but ultimately, the bulls are still in control. The charts are healthy but the low volume is concerning. Fortunately, we are still above the 200-day moving average in the S&P 500 even though we closed below the 100-day moving average today. The question is can the bulls continue to press north now that we know the Fed is willing to assist if the economy continues to drag. Tomorrow should be a good indicator of how the rest of the trading should be during this historically slow season in the markets. The bulls need to first work above the 100-day moving average again before finding a way to break the top of the trading range at June’s highs. If we can manage to break those highs, we should be able to bring in more underinvested bulls to continue the move north. In doing so, we would officially turn into an uptrending market. I’m not holding my breath over this but I won’t fight the current trend either. I’ll look to add to my longs but keeping a tight leash on them.
In portfolio news, I added some more Orexigen Therapeutics (OREX) as the chart continues to make higher lows for now. I’m keeping my stop loss just above $5. I also added some more NVIDIA Corp (NVDA) late today during weakness and will likely hold this position or trim a bit leading into earnings. The expected bad earnings should mostly be baked into this price but any unexpected negativity on the conference call could send this stock below the current 52-week lows. I still see too much upside potential here to not give it a shot, especially with all that cash and little debt. The concern is if I am buying too soon so I am keeping my position still relatively small until after earnings.
Below are the most requested charts over the past week:
Sirius XM (SIRI)
A/D line: Current uptrend since late July
ADX line: Bearish trend but a very weak trend at the moment
MACD: Positive but downtrending, needs a solid green day
CMF (21): Bullish but not overly strong. .5 and higher is very bullish
OBV: Confirmed all moves in the PPS, normal. Current trend indicates this price is a good buy point
RSI: Neutral territory and in an uptrend since mid-July. If trend continues, this is a good buy point but if it breaks below 50, trend could quickly change to the downside.
Support: $1.01 (100-day moving average)
Analysis: SIRI almost broke the chart setup today but managed to stay above $1.01 (low of $1.015 today) therefore making continued higher lows since mid-July. That is very bullish but we are in desperate need of a green day with good volume. If the trend continues, we should be buying at these levels and looking to shave some off near resistance at $1.06. If we can break resistance, than we can consider adding back at that time on a breakout north. The problem continues to be the low volume. SIRI has had declining volume over the past few months and this makes resistance levels much tougher to break. If the question is can we break them, the answer is absolutely yes. However, the opportunity cost is what we must consider. If SIRI stays in a tight trading range, we must hold our position and waste opportunities to make money in better moving stocks that have bullish volatility to capitalize on. That is where your own personal investing style much come into play as you must make your own decision based on the time and tolerance you have.
If we break below $1.01, the uptrend is broken and we can expect to fall a bit before finding solid ground to mount an offense again. With the A/D line showing good accumulation, this makes me feel more comfortable with SIRI even though the ADX line is bearish. If the markets are favorable tomorrow, I’d look to add to SIRI at these levels and see if we can make some quick profits towards $1.06 and hopefully higher. However, I’d keep my stop losses tight just in case we break support.
Verde Media (HMIT)
A/D line: Current uptrend since mid-July
ADX line: Concerning bearish trend that is still a weak trend but growing stronger
MACD: Signaled buy today
CMF (21): Growing more bullish and close to becoming very bullish if it can hit above .5
OBV: Confirmed all moves in the PPS, normal.
RSI: Neutral territory closer to oversold territory and recently broke out of the bearish trend.
Resistance: $.0009 (20-day moving average)
Support: $.0008 (200-day moving average)
Analysis: HMIT is a chart which continues to grow stronger in the short-term. It is recently turning bullish and has had strong accumulation for a while now (mid-July). As long as we can stay above the 200-day moving average, HMIT has significant upside potential. I increased my position in HMIT today at $.0008, but will be concerned if we cannot hold this level tomorrow. The bids on the Level 2 Quotes became thin at this level numerous times today. Resistance at $.0009 did not seem overly strong; we just lacked sufficient volume to break it. If we can break that level, we should see some beneficial volatility to shave some shares off and profit into.
As always, do your own homework to see if you agree. Have a good night and I’ll see you in the morning. Good luck out there.
Disclosure: Long NVDA, OREX, HMIT, and SIRI but positions may change at any time