The market is resilient and the buy on the dip mentality is still alive and well. The same pattern has continued for weeks of buying on dips as well as investors focusing on economic data that may give clues the economy is turning around.

We are starting to see headlines in business news stating that a certain economist stating the recession bottom may have passed. Along with the rosy picture the White house and other politicians are painting about the economy, the fact is the rebound from such problems as the USA (along with most countries) has had is likely to quite some time to return to a healthy state.

Is real estate going to be profitable soon– not likely. Can we make money in stocks? Very likely.

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We are getting economic data that is well received and this should fuel the market rise from here. Any little pullback will likely be met with “buy on the dip” which creates shallow dips and higher highs after that (assuming no negative world news occurs).

The sentiment is likely to be very bullish with this kind of economic data coming out and the thinking that will prevail is to ignore that the numbers are still awful but the focus is on that it is improving and the extremely bad news is not in the cards.

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The stock market reacted very positively to the better than expected earnings of INTC after the market yesterday.   So we have had a string of events that have ignited the market that started with the Goldman Sachs’ earnings (GS), Intel (INTC), CSX (railroad) the last few days and the favorable press on China’s successful stimulus plan and the disclosure of their monies invested in US Treasuries.

If we have additional positive news for the market, this could give support to stock prices although it is prudent to assume that the previous pattern in the stock market will likely resume and to trim our positions in the many stocks that we have had long this last week.

What we should watch for is any other important news that may affect the markets from more positive surprises in earnings to government announcements or favorable economic data.  The talk on CNBC about having a super rally from this bottom is very unlikely but a big spike up in indices like we saw today is often a beginning of a larger move upward.

The oil stocks are in full swing moving up and could go for several days up before cooling off.  The best approach to these stocks is to sell these long positions at the top of this first run and not to hold them when they correct.  If you are taking a longer term approach to these and are willing to hold them through the first correction after this upward run we are having now, it is possible to get higher profits but at a high risk of them correcting and not going back up. 

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ANNOUNCEMENT:  We are planning an intense 1 day workshop in Portland, Oregon Embassy Suites Airport on Friday, August 14^th.   The emphasis will be on real-time trading for intraday trading (scalping) and swing trading.  We will show you how to set up your intraday charts and daily charts.   I will personally teach this workshop with real-time trading on a large screen so you can learn how to scan for ideas and trade the very profitable techniques of intraday trading and swing trading.  Cost is $597, lunch will be included, free shuttle to hotel (1/2 mile away from terminal).  Those of you who have purchased Day Trading Secrets’ Advanced Scalping will get a $100 discount to the workshop.  Email us at seminars@tradestocksamerica.com to express interest and we will be posting a link for registration in the next 2 days on the website home page.

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Stocks were buoyant on Friday as the market reacted in a positive way toward earnings exceeding the extremely low expectations set by analysts for this first quarter of 2009. The positive reactions are likely to be muted compared to normal earnings seasons where companies who beat expectations are normally doing so by increasing and growing top line revenue and bottom line profits.

It is temporarily sort of a Goldilocks situation where the market wants to react favorably to anything good as mutual fund money wants to get back to work into the market yet there is underlying fear that a trap door can open anytime. We still are at an exact technical point where the case can be made for stocks to move either way.

A downward direction would just continue the downtrend that has been established for 9 months or so and a move upward would have to be triggered by a series of positive news events as powerful as economic reports showing the government actions taken these last 6 months are starting to work. If PROOF of such actions are quantifiable and convincing, a whole new wave of buying is conceivable. Data such as housing starts regaining strength, housing inventories decreasing, unemployment rates improving, lending activity increasing substantially or large unexpected gains in profits would be examples of such news but this it is way too premature to see such data right now.

So the question that remains is what stocks will do at the end of the earnings seasons, which mostly ends this week. We have the professional money managers who still want to get invested because a rising market while a mutual fund has large cash positions is a career ender for managers. So we have that force playing as well.

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The technical indicators are definitely signaling a short term sell signal for any long positions, which is the reason why many stocks listed below have notes to sell half of long position.  There was not much change in the market on Friday but take a close look at the Telechart Daily chart of VIX—X, the Chicago Board of Options Volatility Index as well as the T2108.  The S&P Oscillator, put to call ratio and the Smart Money-Dumb Money index are also flashing danger signals to our long positions.

Even though various indicators may be signaling to reduce positions, they can stay at an extreme level for some time before eventually being “equalized” by the market’s tendency to balance extremes but it is wise to pay attention to these indicators throughout your investing and trading career.

Stocks in this situation of coming out of a deep low in early March can peak by making a slow rounded top as opposed to a sharp drop and that’s what many of these stocks appear to be doing. 

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The stock market looks like it is on a runaway bull run with more and more money being put to work by mutual fund managers.  It looks like we are mostly past the short covering and actual investors are starting to buy.  Many different sectors are moving up and stocks that were harshly punished are being bid up.  Even goofy stocks like specialty retailers have been moving up, which were stocks that were treated like leprosy a couple of weeks ago.  So we could see further uptrend in the indices and sectors that have been severely punished.  Anticipate that we have some pullback, particularly in the banks.

The focus is on the good news events like positive earnings, improved economic data, and investors are ignoring the bad news at the moment.  It is becoming that any bad news events are having less and less effect on stock prices.

 We could even start to get into a panic buy situation on the short term yet the banking sector is still mostly down today, even through the close.  There are quite a few sectors that we didn’t notice were moving up so much because we were focused so much on the short side of the banks and life insurance companies looking to profit on our 4^th cycle of trades with these sectors.  My apologies, it’ll never happen again.

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March 16, 2009  Monday Evening

The Dow30 had a nice run caused by the Bernanke comments on 60 minutes last night, until the last two hours of the session.  It was probably a staged talking head ordered by the Commander in Chief himself and the very statement of “the end in sight” is like guessing an end game of a chess game after the first few moves are made.  For decades, the Federal Reserve was insulated from influence by other politicians but we saw Greenspan be President Clinton’s puppet a few times in the late 90’s but Bush seemed to leave them alone for most of his 2 terms.

The trading strategy that we have been taking the last 4 weeks on the banking stocks may seem aggressive to many of you but this is how you rack up serious profits.  Anytime you follow the chart of a single stock or sector as we have in the banking stocks JPM, USB, BAC, WFC, KEY, STI, and even GE with three round-trip trades starting with long, short, long and now short again is extremely profitable. 

Remember we came from intraday trades (aka scalping) most of September, October, November and part of December to swing trades with a few failed attempts at intermediate trades (that last for more than a week).  So we are using the techniques that work for the current market conditions.  If you are only a long term buy and hold investor, you may be waiting a long, long time before market conditions are conducive to making that a profitable strategy.  We go with the strategies that work and even though this may be a fast pace for many of you, this is what is working now.

You could always sit out this current cycle of short positions if you are tired or exhausted mentally.  OR a good fix for that is to have a very small position than normal so it won’t stress your nerves but keeps you alert and your head in the game.  A rest is fine by having no positions at all but keep monitoring what happens so you don’t totally get stale and indifferent to what is happening in the market.  Even someone as good as Tiger Woods will take some weeks or months to get back into tournament play after a 9 month layoff from golf so it is wise to be somewhat updated as to what the market is doing even though you may not have any positions.

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March 10, 2009  Tuesday Evening

We had the big news out of C, Citibank and its chairman on making money in January and February so stocks took off like crazy moving up 5.8% on the Dow30, 7.1% on the Nasdaq Composite and 6.37% on the S&P 500.  World markets are up now on Tuesday evening and this will likely carry over into tomorrow and probably into Thursday.

On top of that news, Barney Frank Democrat out of Massachussets, said they will likely reinstate the zero plus tick rule on short selling, which means the stock has to go up before selling short a stock  This will reduce volatility and not encourage short sellers to sell the market down for profit.

Seriously consider half of your stock positions or more tomorrow and remaining the next day or two (Thursday and Friday).  Don’t try to make all your last 2 or 3 years of losses up in a short period of time but we have made serious money with just the banking stocks alone by going long, then short, now long.  Ignore the idea of selling short on this top unless you are really proficient at trading and have a very small position at the most.

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Finding the Right Solution:  http://www.cnbc.com/id/15840232?play=1&video=1056768419

Comments on the Big 3 Automakers:  http://www.cnbc.com/id/15840232?play=1&video=1056749605

Banks Should Get Back to Banking:  http://www.cnbc.com/id/15840232?play=1&video=1056717135

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