Here’s the Deal:
Well, here we are, it is September and the
market isn’t down. Forget the fact we are only one day into the
month, so far September is looking pretty good, and a lot of
folks are thinking we will see an atypical September. Note:
Seasonally speaking, the first few trading days of September
are typically positive. Seasonality turns against the bulls
around the end of the week.
The Dow needed to close above 13,425 to target
the 13,700 level. We got it with the Dow pushing above and
closing well above 13,425. Watch 13,350 as a near-term support
level for now. Bottom line, the technical price action is such
that we should expect the Dow to come very close to if not
exceed 13,700 during this leg of advance.
For the bears, first they need to see a
sustained move below 13,400. Then they will need a more serious
break of 13,300 support. While the tone of the market could
quickly change due to some unforeseen “event.” It is clear that
folks are content buying stocks in a very low volume
environment. More importantly, stock that is for sale right now
appears to be for sale at higher price level and the buyers
don’t mind going up there to get it.
Wednesday we get “Pending home sales” for
July. Now that one ought to be interesting. The Fed’s Beige
book comes out at 2 PM. In theory, the Fed will use the current
Beige book at the FOMC meeting on the 18th. Everyone
is expecting a rate cut, but the mystery is how much of a cut
will we get. If the debt markets continue stabilizing then the
odds of a scant ¼ point move, which could easily upset the
market as being too small, could increase – especially if the
bulk of economic data remains healthy between now and then.
Here’re the Details:
The Dow was down 40 at the low of 13,317 and
it rallied 176 to a high of 13,494 when it was up 136. The
final half hour was spent consolidating the day’s gains and the
Dow closed at 13,448, up 91 on the day. The high was reached
around 3:30 PM and the Dow gave back about 45 in the final half
hour of trading.
IBM, XOM, and AXP added a collective 41 points while HD removed
15 Dow points.
The HUI, AMEX Gold Bugs Index: was up
big on Tuesday. Gold (as represented by ticker GLD) is up big
over the past few days and is flirting with its 2007 highs
around 69. With the recent moves I revisited the HUI index
which was a powerful mover from May 05 to May 06.
The HUI has built a fifteen month base
formation. The bottom of the formation is roughly 300 and
aligns well with the second Fibonacci upside extension line off
the old base formation. The top of the range is about 380,
which also aligns with a Fibonacci upside extension from the
previous base formation. The range of the current base
structure projects a move up to 530. That is in line with 525,
which is targeted by the third degree Fibonacci upside
extensions from the 04 base structure. Once an upside breakout
above 370 – 380 is clear, a move to the target range, 525 –
530, should take about a year, maybe a little less, to
complete.
Not shown on the chart are Huge Fibonacci
upside extension lines off the 12-00 lows, which run through
227 (the middle of the 04 base structure); 341 (the middle of
the current base structure); with the next major extension line
at 530. The large wide and lose base structure from the 06
highs is most likely just that, a base structure rather that
some sort of elaborate high.
Interest rates were higher across the board
on Tuesday: The IRX closed at 42.80. The hope is the IRX
will stay low. The reality is the IRX should be between 45 and
50.
S&P 500 has its sights set on the highs
just above 1500: Friday’s close above 1472 pointed the way
towards 1500 and the SPX took a healthy step in that direction
pushing above 1490 on Tuesday. At this point, with the SPX up
almost 60 non-stop points, we need to be alert for a pullback
of some sort regardless of how minor. A break of 1450 would be
much more than anything the bulls can reasonably allow while a
pullback into the high 1470 area would be considered normal.
From an upside target stand point, 1503 is the mark and after
having reached 1496, the next 6 points should not be too
difficult. 1475 is the main line of chart support to watch.
Ideally, once the SPX reaches 1500, if THE LOW is in, then we
should see a choppy consolidation that is somewhat lacking in
measurable pullbacks.
The Russell 2000: finally managed to
push through 800 resistance and then some. We have been
watching the 800 level for a while as it is potentially a
reverse head and shoulders neck line. If that proves to be the
case the natural upside target is about 840 to 860, effectively
the summer highs. The Russell seems to be lost amongst the
large indices. If not for more substantial strength in the
other indices I would be less inclined to go with this
seemingly very high expectation based on the chart in hand.
The NASD has a similar reverse head and
shoulders pattern look to it. The move above 2600 smashed the
neckline with a vengeance. The upward thrust off the lows now
projects a Fibonacci upside target price of 2700, which is just
below the summer highs. Now that it is above 2600, it needs to
stay above 2600.
Tuesday we got some significant signs of
improvement from the trend table. The Quarterly trend on the
NASD turned up, and this is a major near-term development. In
addition, the NASD and NDX both turned their Monthly trends
back up, which also generated new Weekly Buy Signals. The S&P
and NYSE need to rally only another 1% to turn their Monthly
Trends back up while the Dow needs about 1.8%. Seeing the
Monthly trends turn back up will be a major upside confirmation
signal. Note: the Monthly upturns are positive but sometimes a
minor pullback will develop a day or so after a monthly trend
turn to alleviate the excesses that typically build up going
into a monthly turn.
In addition to the longer-term trends, we have a constructive
near-term condition as well. With notable moves on Tuesday, the
daily trends are unlikely to turn lower until at least
Thursday.
The Detailed Trend report, CLX Charts, Weekly Trend Signal
Count Charts, have been moved to a new location at this link.
This link now has a Chart of NYSE 8-day Buying and Selling
pressure, plus a few others.
Total breadth was very good at +2183.
Directionally everything was to the upside, but volume remained
light on Tuesday. In hind sight, I can remember many post Labor
Day Tuesdays that were slow. It appears traders need a day or
so to get back into the groove. Trading volume should rebound
over the balance of the week.
On a 10-day basis the market has become
somewhat overbought within a contracting / low volume
environment.
8-day Buying pressure continues to improve marginally while
selling pressure remains categorically low. The low selling /
selling pressure readings are almost as good of a buy signal as
low buying pressure readings are, (60% success rate vs. 65%
success rate.) Characteristically, we have sound rally action.
The low volume environment suggests a delicate environment, but
the rally action is sound.
We have one H-buy from 8/28 that runs through
the 7th and a second one from 8/30 that runs through
9/11. They show gains of 57 and 31 points respectively and
protecting those gains to a reasonable extent should make sense
at this time.
With no major disasters over the weekend,
(provided you are not a Michigan fan) the market put on a fine
show Tuesday. The indices have done enough upside work to
target higher price points and while we must allow for some
sort of very minor near-term pullback / consolidation that
could begin at any time, an uptrend remains on track that
should carry the indices up to their early August highs.
We have a lot of data to get through over the
balance of the week. In addition, numerous companies have large
investor conferences this month where companies will discuss
recent earnings reports. With an overall firm economic
background, these gatherings should for the most part be
constructive for stock prices.
Jim Patterson
Most Obvious chart resistance levels:
()
Dow
13,000, 13175, 13,295, 13,350,
13,490, 13,580, 13,630,
13700, 13,825
SPX
1420, 1439, 1455, 1460,
1470, 1480, 1489, 1496,
1504, 1517, 1527, 1535, 1547
NASD
2490, 2500, 2520, 2558, 2580,
2605, 2629, 2649, 2664,
2680, 2700, 2735
NDX
1855, 1895-1900,
1920, 1945, 1954, 1962, 1982,
2000, 2018, 2038, 2056, 2100
NYSE
9189, 9340, 9395, 9470, 9530, 9620,
9730, 9860, 9920 10,000,
RUT-2K
765, 772, 789, 794, 800,
813, 822, 832, 838, 842, 848, 854-856, 861, 876
Most obvious Chart Support levels:
Dow
13,580, 13,400, 13,300, 13,200 -
13,175, 12,985, 12,815, 12,677, 12,547
SPX
1483, 1475,
1470, 1453, 1444, 1428,
1418, 1400, 1395, 1380, 1360
NASD
2655, 2635, 2606, 2592, 2578, 2570, 2558,
2529, 2498, 2450, 2423, 2400
NDX 2000,
1973, 1965, 1954, 1945, 1923,
1896, 1875, 1860, 1838, 1810
NYSE
9800, 9720, 9610,
9585, 9525, 9405, 9308,
9220, 9186, 9025, 8925, 8800
RUT-2K
834, 828, 820, 808- 810, 803, 794, 787,
782, 777, 772, 765, 760, 746, 736
Here’s where we are now:
NASD 100 Index (NDX) Trading System,
trade the QQQQ:
The NDX is on a roll having advanced over 100
points in less than a week. It is a low volume move, but we
have gone through a time when we should expect low volume.
Long-term 3-peaks
and domed house pattern target, 1720.
S&P 500 (SPX) Trading
The H-Buy signals remain in effect for a
couple more days. With the significant run over the past few
trading days we need to be alert for a corrective pullback, but
any weakness isn’t expected to be significant at this time. Big
near-term weakness = big problems for the intermediate-term
bulls.
Tactical Stock Trading Powered by the PRS Stock report
BBD rec long 5/31 @ 25.39, stop 23, Target
29.5, closed at 25.27
CHINA rec long 6-14 @ 8.56, stop 8.01, closed at 8.67
WFR rec Long 8/22 @ 58.95, stop 54 closing, closed at 58.33
BRLC rec Long 8/24 @ 6.38, stop 5.80, closed at 6.80, Got above
6.70!
WFR reported they will come up about 5% short
of their revenue estimate for the 3rd Quarter. The
reason, they cited a power outage. A hiccup in revenue due to
an issue like that, provided it doesn’t happen again, should
not be a significant issue for the company or the stock.
**
PRS Open Actives making noise:
Upside Momentum Movers to watch, ATNI, KCI,
EXPO, and ZUMZ.
Jim Patterson
Editor
Tactical Trading Outlook
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