Read for the week of Dec 19-23

Last week the 200d MA proved to be too much resistance and we fell back into a melee of moving averages. The daily chart of the SPY is forming a triangle consolidation, which is very positive in my opinion. Price is consolidating, the daily ATR is decreasing, and volatility has also been decreasing. It seems to me that a breakout or breakdown of this triangle consolidation could lead to a possible trending environment! I don't want to get excited too early, so just watch that triangle! A great r/r trade can be taken at either of those trendlines. I'm looking ~120 this week to possibly get long for a test of the upper trendline.

On the 15 min chart, wait for a break of this descending channel or wedge for a move to the upside. Alternatively, one can play the trendline bounces. Notice that we're forming a mini-bear flag, so a breakdown of this (level ~121.40) would signal more downside for now.

Also, check out the sentiment chart on Laser Trader's blog; the similarity with the SPY chart is uncanny!
http://lasertrader.wordpress.com/2011/12/18/are-we-ready-to-return-to-the-highs-justin-mamis-sentiment-cycle-may-think-so/

cI found a lot of pretty good setups, which has been a warning sign for me lately, so just be careful out there. A lot of breakouts are failing, so I have been trying to buy in anticipation of a b/o, and if the b/o fails, then I get out around breakeven... Here's a few stocks I'm watching this week:

Long: BANR, FSII, KFN, SKH, LDK, RAS, MENT, SUNH, SNTA, OCZ, CTCT, AUDC, TRGT, GTIV, CX, AVID.

Short: ECPG, GMCR, CVGI, STI

Bounce: I'll be watching gold and gold miners for a possible relief bounce this week... check out NUGT a 3x ETF for Gold miners. Also watching these for potential bounces: MELA, ITMN, LRN, SGI, LPS.

Read for the week of Dec 12-16

It's pretty simple this week: we're still stuck in the same box that I had drawn last week... That is, we're stuck there until we breakout of it, one way or another! I'm thinking we're likely to breakout to the upside, because it seems like all the moving averages are lining up underneath price and starting to turn up. The only thing stopping us it the 200d, so we really have to get above the 200d and hold it.

There is a move coming in GLD and SLV, so keep an eye on those two this week. I feel like it will be a significant move, and it will pay to be on the right side of the break for a swing... I'll be watching those closely: my intuition is telling me there will be a break down. The only thing not supporting this hypothesis, is that the indices look poised to break out, and recently the correlation of the market vs gold has been positive. This is the opposite of what happened in Aug, where the correlation was negative (ie when the market went lower, gold went up). So if the correlation stays positive, then gold and the market should breakout in the same direction... We'll have to see what happens.

Other than that, I'm seeing a lot of great setups, and I went long a bunch of stuff on friday, in small sizes... I'm long some ZINC, GTIV, COOL, TQNT, GMXR, SANM, I think, and still short INHX, MBI, NLST.  Here's a few charts that look good on the long side: AKS, GTIV, STP, TQNT, MERC, BZH, BZ, OCZ, CTCT, HPQ, UCTT, HCBK, CVGI, NTSP

And here's a few that look good on the short side: CF, TIF, WYNN, ZAGG

Read for the week of Dec 5-9

We had quite a nice bounce last week after being oversold and finding support near 116 on the SPY. The 200d MA provided resistance on firday, and I'm expecting some consolidation after this big move. We have several moving averages underneath which are likely to provide support for now. The unfortunate thing about the move this week was that most of it happened overnight and it was not easy to get long after big >1% gaps up! I think a lot of traders are in this situation, and because of this, not many people have been involved in this bounce and people might end up chasing the idea of a santa claus rally...  which means that we might have a nice end of year, but it's still no reason to go all in! Overall, the econimic picture remains bleak in my opinion, especially in Europ, and despite the central intervention this week, my longer term outlook is pretty negative.

So, all this to say that I'm going to try to position myself long~ish for the rest of december, but it will be in small size and short time frame! I'm also looking to take advantage of the some of the parabolic runs that are happening in some of the junk small cap stocks... I remember this happened last december as well, and you can make decent gains if you can find shares to short! I sold out of the few longs that I had this week, and right now, I'm short: MBI, NLST, INHX.

Here's a few stocks I'm watching this week:

long: PCX, ARAY, TRGL, GTIV, BPZ, ECA, JNS, LEAP, SRZ, XCO, AFFY

short: MAKO (on a break of 28), QCOR (if it breaks below the 20d MA), ZAGG (on a break of ~10.6), OSG (on a break of 9.79), ARNA (possible parabolic play) 

The week ahead

No matter how you look at it, charts look awful this week. News coming from Europe and around the world is bad, bond yields are soaring, and the markets are tanking... We've filled that gap at ~116 on the SPY, that I had posted last week, and we are quite oversold on many measures here, so I wouldn't be surprised if we get some kind of bounce pretty soon. However, I'm getting the feeling more and more that this might just be the tip of the iceberg in terms of correction... see my weekly chart below:

That is just one possibility... but it's a very possible scenario... Needless to say, I'll be taking a much more cautious stance going forward, and instead of 'counting' on a Christmas rally, I might be looking for some short exposure into the end of the year, especially if we can bounce back up to the area around the 50d MA on the daily chart... And of course, this could all change if there are any futher bailouts or intervention in Europe!

For the week of November 19-23

There isn't much to say since my last post: we've broken some important support levels and it looks like we're headed lower. We're forming a bear flag on the hourly SPY chart, and I would expect 120 to be tested. The measured move from the breakdown of the triangle is ~115-116 on the SPY, and there's also a gap to fill at around those levels. I'm not sure if we'll get there, but it is possible. The market has been fooling everyone lately, so if it looks awful, it's possible that we rally from here... Last week was looking great, with tons of beautiful setups, and we broke down, so stay on your toes!

A few charts look good, but I'm seeing a lot of broken charts, so be careful this week. It is also going to be a low volume week, with markets closed on thursday and 1/2 day friday. Here's a few of the better looking charts: VHC, KWK, SONS, AFFY, MTG, IMAX, CISG, GTIV, LNG. I have a small position in VHC and LNG already.

Update on the box

The selling that started yesterday continued today, with a significant mid-day flush! We've now broken the triangle and the box (the box could be debated here, it's borderline), and we're below the 10, 20 and 100d MAs. Things are not looking good for the bulls, and with such a fast move, we could be headed to the 50d or the 120 level on the SPY in no time at all! If we get a gap down tomorrow (3-day selling), I will look to buy some 3x ETFs for a bounce at least. Keep in mind the selling might not be over, as we still have a nice gap to fill at around 117. And look at the increased selling volume in the last few days.

Also, and this is interesting to note, the QQQs broke down significantly as well today, but the IWM and DIA are still within their consolidation patterns. Importantly, the EUR/USD is bear flagging and looks like death and so we could see more pressure coming from the USD$.

Here's one of my favorite charts that is holding up through all this mess: LNG. The company sounds like it's doing well (but I know nothing about fundamental analysis, so don't take my word for it), and the chart looks great. It is in a bull flag on the daily, and on a weekly timeframe, it is setting up to breakout of that 12$ resistance! With a big volume gap above, it has free air up to 25$. Although it's not a good time to be buying anything long-term right now, if I had to buy something, this might be a good candidate... I think building a long-term position in the 10s, with a stop just at 9.90 would be a ecent strategy here, in my opinion.

Same box as last week

So we're still in that box that I drew last week on the SPY... I'm expecting more consolidation in this range, and I suspect we will eventually break out of this range, probably in time for a christmas rally. I'd like to see us drop down again one more time to the 123-124 area in the SPY, bounce off support on the 100d MA again, and then push higher. If we do, I'll be looking to go long some 3x ETFs for a rally into the holiday season (actually, I'll be looking to short the inverse 3x ETFs, to take advantage of the decay in those).

Also keep an eye on the USD or the EUR/USD. The EUR/USD broke down from a bear flag on the daily chart, and on friday it retested the bear flag support line (now resistance). If this resistance holds, we could see some weakness in equities next week.

There are a lot of stocks setting up nicely on the daily charts. It's still not time to swing trade full size positions, but there might be some decent opportunities nonetheless. Here's a few that I'm watching:
ALR, AMKR, CIEN, GNW, HLIT, JDSU, NTCT, S, VHC, VMW.