Archive for January, 2009

How did Robin do this week with the market call?  Comments from the weekly blog posted 1/24/2009:

“The INDU is trying to break resistance at 8348.  The index has shown me that it wants to go higher as evidenced by a “Tweezer like” candlestick formation on Thursday and Friday.  The DOW will have significant difficulty breaking below 7900 and staying there.  It is much more likely to go up, but must show us conviction with strong volume.  If it breaks resistance at the 8340-8350 level and closes above this mark, the index will likely continue up to test the 8900-9000 area.”

What Happened?

The index closed at 8375 on Wednesday with unconvincing volume.  Robin sent the following email to several trading partners on Wednesday:

                                                                                                                               Jan 28 (3 days ago)

“ I would be a little concerned regarding the gap down from 1/13-1/14.  Although it is small , any gaps can be formidable as far as support/resistance.  In this case, the gap is resistance.  There are also swing lows from 12/12, 12/22 and 12/29.  Final thought, yesterdays’ volume was not overwhelming, so there is not yet consensus in this move.  Be careful.  M, aka Robin”

The DOW then proceeded to drop from the close on Wednesday at 8375 to close on Friday at 8000.

The week in summary:

Monday posted a small gain of 38 points in the DOW as job cuts took center stage.  The effect of the deflationary spiral is being felt in Corporate America as the likes of PFE, CAT, HD, and GM announced job cuts.

Tuesday followed through on yesterday’s move to post a 59 point DOW gain, despite poor consumer confidence and home price numbers.  As one would expect, when home prices declined, existing home sales rose.  A handful of better than expected earnings reports contributed to the days’ positive gain.

Wednesday was all about the “Bad Bank” and hopes of passing the $825 billion stimulus package.  The DOW surged over 200 points. 

Thursday gave back all of Wednesdays gain and then some as the DOW dropped 226 points.  The house passed Obama’s stimulus plan but was overshadowed by continuing corporate job cuts and massive unemployment numbers.

We closed out the worst January on record dropping 8.8% and 776 points on the DOW.  GDP was not as bad as expected.  PG, normally a safe haven stock in dire economic times, guided poorly for 2009 and was severely thrashed contributing to a DOW loss of 148 points on Friday to close out the week and the month.

Week over week, the DOW fell 77, the SPX was off by 8 and the COMPQ worse by 1.  The week was not as bad as one would first assume.  The early week gains offset, to a great degree, the declines in the last two trading sessions.

Come join the pros at www.marketamer.com.

 

 

 

-7900-8000 has exhibited remarkable support.  Once again, there does not appear to be strong conviction to drive the INDU below support as evidenced by decreasing volume.  We are in a trading range between 7900-8405.  We may linger briefly at this level and confirm support before once again making another attempt to breach immediate resistance at 8340-8405.  The index must close above this level and stay for a few sessions.  After breaking this level of resistance, the INDU may retest the 8400 area as support and then move up to challenge 9088.  I am bullish bias.  It is just a matter of time before the INDU breaks immediate resistance and moves up.

-This is the same story as the INDU.  The SPX could test the lows at 800 but won’t stay for long.  It will move up to challenge 877.  If the SPX closes and stays above this level for a few sessions it may then reconfirm that old resistance is new support by bouncing off 877 on its’ way up to the 918-944 area.

-The COMPQ will likely retest support at 1434 before moving back up to challenge the 1493 level.  If the index breaks through 1493 on strong volume, it will start moving up with the next target at 1666.

TOOLS OF THE TRADE

THE BEAR PUT

The Bear put is the mirror image of the Bull Call.  It is a debit spread which means that the trader must pay to initiate the trade.  The strategy optimizes a bearish trend and is comprised of two trading instruments. 1) the long put and 2) the short put.  Each of the trading instruments has a purpose.  The long put will gain in value as the underlying stock falls and the short put reduces the cost basis of the trade.

With the high cost of protection in our current trading environment, it may be prudent to consider reducing the cost of the long put by shorting a put against it.  The configuration can either be vertical in the same month of diagonal in different months.  The debit is equal to the cost of the long put minus the credit brought in by the short put.  The debit is the maximum risk and the reward is the difference in the strike prices of the spread minus the debit.  Example: $5 spread minus a debit of $2 equals a $3 maximum reward. 

If you should decide to implement this strategy, it is important to know that the trader has limited downside protection if using this spread to hedge against a bearish move in the stock.  The protection ends at the short put strike price.  For that reason, the short put is best place at or below well defined support, if support is available.

Study the risk graph and you will understand the risk and reward of the position.  Best, Robin

ECONOMIC REPORTS

MONDAY 2/2

Personal Income, Personal Spending, Construction spending, ISM Index

TUESDAY 2/3

Pending Home Sales, Auto Sales, Truck Sales,

WEDNESDAY 2/4

ADP Employment Change, ISM Services, Crude Inventories

THURSDAY 2/5

Initial Claims, Productivity-Prel, Unit Labor Costs, Factory Orders

FRIDAY 2/6

Average Workweek, Hourly Earnings, Nonfarm Payrolls, Unemployment Rate, Consumer Credit

 

 

EARNINGS OF NOTE

MONDAY 2/2

AFL, APC, HUM, PJC, ROK, SNDK, GRA

TUESDAY 2/3

ADM, AVP, CTX, CME, CMI, ERTS, EMR, FISV, GLAD, HIT, MRO, MEE, MRK, MET, MOT, MYGN, NETL, NOC, SGP, DOW, PTRY, TZOO, TYC, DIS, YUM

WEDNESDAY 2/4

AKAM, ALU, BHP, CSCO, HMN, ITT, KFT, NVLS, PM, RL, PHM, SLE, TWX, TUP

THURSDAY 2/5

BKC, BG, CAH, DO, DUK, ELNK, RDEN, ESLR, XIDE, GSK, JDSU, K, MA, EL, TBL, VRSN, WU, ZFSVF.PK

FRIDAY 2/6

AOC, BAIRY.PK, MTU, NUS, TM, WY

 

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Hello Friends!

I am pleased to announce a Free ‘Live Trading Workshop’ on Thursday January 29th at 7pm EST.  Two of my friends, Gareth Feighery and Ron Haydt who are both accomplished traders and educators, will be conducting the event.  This will be a great opportunity to look over shoulder of two experienced traders.

The webinar will last approximately one hour.  Gareth and Ron will go through the mechanics of how they select one trade over another.  This will include fundamental, technical and sentimental analysis.  They will also go over the importance of having a ‘Target Exit Point’ and ‘Contingency Exit Plan’ in place before the trade is initiated.  Since Risk Management is critical to a trader’s long-term success, they will also cover this component in great detail as well.  This will be a live and interactive session and you are encouraged to ask questions during and after the presentation.

You can register by clicking on the link below:

https://www1.gotomeeting.com/register/592925305

We would love to see you there!

Robin & Friends

If you’d like to find out more about our phenomenal educational program , please click here.

THE MARKET REFUSED TO CO-OPERATE THIS WEEK.  ROBIN CALLED FOR 8348 TO BE STOUT RESISTANCE AND IF REJECTED WOULD RE-TEST THE 7995-8110 LEVEL.  IN FACT, THAT IS WHAT HAPPENED AS THE DOW FAILED TO BREAK 8348 AND RETRACED TO TEST 7909.  WE HAD A BULLISH BIAS BUT A LITTLE PREMATURE ON THE CALL.  THE MAGNITUDE OF THE BEARISH MOVE ON TUESDAY WAS MORE SEVERE THAN ANTICIPATED ALTHOUGH NOT TOTALLY A SURPRISE.  INAUGURATION DAYS ARE TYPICALLY BEARISH.  THE REST OF THE WEEK WAS SPENT ATTEMPTING TO RECOVER WHAT WAS LOST ON TUESDAY.  THURSDAY AND FRIDAY WERE SIGNIFICANT IN THAT THE DOW REJECTED LOWER PRICE LEVELS ON DECENT VOLUME. 

WHEN ATTEMPTING TO MOVE THROUGH A SOLID AREA OF RESISTANCE OR SUPPORT, IT IS LIKE TRYING TO SMASH THROUGH A PHYSICAL BARRIER.  PRIOR TRADING ACTIVITY CREATED A BARRIER THAT WAS A LITTLE MORE FORMIDABLE RESISTANCE THAN INITIALLY ANTICIPATED.  THE MARKET AT THE END OF THE WEEK TOLD ME THAT IT DOESN’T WANT TO GO LOWER AND IS PUSHING AGAINST RESISTANCE AND WANTS TO GO HIGHER.  KEEP AN EYE ON THE PREVIOUSLY MENTIONED 8340-8350 LEVEL.  WHEN RESISTANCE FINALLY SUCCUMBS TO THE BULLISH PRESSURE WITH VOLUME AND CLOSES ABOVE THAT LEVEL, THEN WE WILL RUN TO 9000.

LAST WEEKS’ INDU COMMENTARY:

“8348 will be important resistance in the INDU.  If the index breaks that level on volume, look for it to run to 8900-9000.  If it has difficulty breaking through, it could head back to retest the 7995-8110 level.  My best bet is that we are going higher”.

The market was closed on Monday in honor or Dr. Martin Luther King’s memory.

Tuesday was true to form as the market put in a bearish performance on inauguration day.  SST was hammered losing over 50% of its’ value.  Citi also had a bad day as we ushered in the Obama administration.  The DOW declined a whopping 332 points.

Wednesday, IBM stepped to the earnings plate and posted a solid report.  Timothy Geithner was tamely interviewed by the Senate Finance Committee, which shed little light on the pending Obama Economic Stimulus Package.  For that matter, little understanding was revealed on how a man so apparently qualified to be considered as the next Secretary of the Treasury has the inability to pay his own personal taxes.  The DOW regained 279 points.

Thursday, MSFT missed its’ number and announced job cuts to boot.  The DOW came well off its’ low for the day to close 105 points down.

Friday, GE contributed to a negative market in early trading even though they met their numbers.  Concerns over projected credit losses in 2009 and a speculated downgrade on their credit rating was an anchor on the market.  The DOW once again came well off its’ low to close down 45 points. 

Week over week, the DOW was down 204, the SPX worse by 18 and the COMPQ negative by 52.

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