We are deeply oversold on a short term basis and although the market can get more oversold, the odds are favoring some sort of at least what we call a relief rally.

The most likely scenario is we see one of these countertrend rallies start this week, possibly as early as Monday or Tuesday.  What we should be looking for a rally that could last only a few days if it is a weak one (which is most likely) OR if some sort of news catalyst that the market reacts positively, it could last longer BUT be prepared that this may not last long and any long positions should be sold into that rally.

At this point, don’t let any of the slight losses you have in the long positions bother you.  The odds heavily favor us holding the long positions in anticipation that just a couple days’ rally would erase any of these losses

Uncategorized market commentary, online stock trading, stock picks

The stock market was down for two days in a row with the European and Asian markets and Hong Kong is particularly nervous about their own bank stocks including earnings and dividend reductions.  Hong Kong is down over 3% tonight and Tokyo down almost 3% the last two sessions.

So the headlines are focusing on the Bank of Japan, the 2^nd largest economy,  and how they are going to battle their recession with their interest rates already near zero as well as the USA’s.  Japan’s finance minister is also stepping down.  Now the Asian and European stock markets are setting the tone and will likely now be the leader the next couple of days for our market.  The S&P Futures indicates that the Dow30 will open down over 100 points tomorrow if it stays the same.

Some of the indicators that we look at are the VIX- CBOE Volatility Index, % Stocks above 40 day ma, sentiment indicators like the Put-call ratio, bulls vs. bears, S&P Oscillators, Investor’s Intelligence, Smart Money Dumb Money indicators and others.  There are no extreme signals now but we are heading in the direction of developing an oversold condition, but not yet.  The market drifts lower as the Dumb Money indicator is setting up to give us an obvious signal the first.  This is given by Sundial Capital Research and is a proprietary calculation and this indicator does well at extremes.

online stock trading, stock market commentary market commentary

February 5, 2009 Thursday Evening

It is nice to see an up day in the stock market and many of the stocks I sold earlier this week to prepare for a steeper sell-off have been going up the last couple of days. But the Dow30 is still on a downtrend and technical indicators continue to point downward. The Nasdaq Composite is noticeably stronger with a 2% rise today. Perhaps this could be the leader among the indices, which would be unusual.

Banking stocks did exactly what we wanted today especially with BAC-Bank of America, WFC- Wells Fargo and JPM, JP Morgan. The extremely high volume of 755 million shares with BAC, Bank of America was more astounding than the drop to $3.77 today but this is what we wanted in the whole sector. The bounce off the bottom was 22.5% profit potential and it is likely to move up to the mid $5s the next few days, in which this is excellent profit in 2 days (45% profit potential). The odds start changing against you holding this past this point so if this stock has good follow through tomorrow into the low $5s and higher, consider closing this swing.

BAC is still a dangerous stock and likely sees some profit taking tomorrow after any move up. JPM, JP Morgan was a short position that reached the target price listed on the stock list of $22-23 and was covered at $22.75 and then proceeded with a long scalp for another 12% profit. No further trades should be done with this now. USB-US Bancorp gave a 12% intraday trade; C-Citibank was a dog all the way around; GS-Goldman Sachs had higher highs and has a healthy daily chart pattern; IYF-Financial sector ETF looks awful; MS-Morgan Stanley gave a good opportunity to go long with the whole financial sector at the opening, like many stocks did today.

Friday, February 6, 2009
10:24am Pacific time

Hello!

The banking stocks are doing exactly what we want and have gone even higher than expected.  My strong recommendation is take your profits on Long swing trades with BAC, WFC, JPM, USB, and C, or at least sell half of your long positions in these banks today.  The stimulus package is scheduled to be announced on Monday and the financial market’s reaction could go either way but the odds are higher for a negative reaction.

I sure will have a better weekend when I have booked a 65% profit on stocks like BAC.  Now as of this writing at 1023am, pacific time Friday, February 6, 2009, BAC is at $6.34 and climbing and other banking stocks stocks are still powering up with no top in 3, 5 or 15 minute chart pattern but my strong suggestion is to look for the next top in the 5 minute chart to exit. Remember BAC came from $3.77 yesterday morning and has rebounded up 68% so far.  If the stock goes up on Monday, which is possible of course, don’t let it bother you if you are out of these banking stocks–you are playing the percentages in your favor.  This is NOT a time to get greedy by holding these banking stocks over the weekend.

Have a great weekend and sleep well, lol!

Mitch King

Uncategorized market commentary, stock picks, Stock Trading