Market Commentary for Wednesday January 16th:

All the major market indexes fell again today. It wasn't a jaw dropping drop, but just another cut deeper into a bleeding wound (I apologize for the anology). However, it seems that it has been the same old story since Dec. 27, 2007 as the market has taken one hit after another. I believe that it is important to notice that it is not the news that is bringing this market down. For example, if we finished on an up day, the headlines would have been "JPM limits losses and acts as a market catalyst", but since it was a down day it can be blamed on Intel guidance (earnings were up) or a negative spin on JPM. Regardless, stocks are being sold and this creates a market trend. Stories are made to sell papers, but they are not the reason for the market trends that we see. Stories and headlines are simply an explanation of them.

Analysis: After a strong sell-off early in the day we saw a bullish turnaround late morning that was eliminated in the last 1/2 hour of trading. After all of that, we have a downtrend clearly in place with all of the indicators we follow currently pointing lower. Maybe we will see a bounce tomorrow, maybe a strong sell-off. Regardless, the trend is pointing lower and if we dip below some previous lows made over the past 3-6 months we could be heading down a very slippery slope. I am eager to see a trend change, but there are no current signs of it.

Today's Trade: I had intended on purchasing QID (Ultrashort QQQQ - creates double the move in the opposite direction of QQQQ), but resisted after it had a strong jump due to the early sell-off in the Nasdaq. However, I was watching DXD (Ultrashort DIA - doubles the move in the opposite direction of the Dow) and as it began to slide I purchased at 57.20 . It closed at 56.50 and my stop loss is currently at 54.60. If it turns profitable I will put a tight stop loss on it as we can easily experience explosive bear market rallys after such large sell-offs. I am also considering executing a DIA or QQQQ credit spread tomorrow which would expire on Friday for potential profits of 3%-9% in one day.

As we look forward to a positive trend change I have noticed that the following stocks have held up strongly and could be in a great position to break-out to new highs if we see a trend change. All have exceptional earnings growth and solid consolidating chart patterns with one exception (CMED - which recently broke to new highs)
CMED
HDB
TEF
EJ
GMCR
I am sure we will have an exciting new list of opportunities by the time the markets turns directions. Until tomorrow, Safe Trading!

Market Commentary for January 17th, 2008:

Another round of heavy selling and another down day for all of the major indexes. All of our indicators confirm the current downtrend that we have seen in the markets. It is possible that 11,900 to 12,000 in the Dow, 1300 to 1320 in the SP, and 2310 to 2330 in the Nasdaq could provide some resistance, but we have slipped through resistance before and this market is moving powerfully to the downside. No sense in guessing or trying to time the markets - Just wait for them to display a trend and then follow it. The slippery slope mentioned yesterday might continue, but a powerful bear market rally could happen at any time! However, I would not try to guess when it is in hopes of making a few percentage points while risking further decline. A better strategy would be to take some profits if you have them from the downside and consider selling into any rallies.

Yesterday's trade: I purchased DXD yesterday at 57.20 and promptly put a stop on it in case of a market reversal. Today I cashed out at $58.53 near the end of the day for a few percentage points and I executed a credit spread selling QQQQ 47 Calls at 8 cents and buying QQQQ 48 Calls at 3 cents. It will net about 4% after commissions for just one trading day and the risk involved requires the QQQQ's to jump more than $1.59 .

Safe Trading!

Yesterday I called for a rebound on my website http://www.advancedtrendanalysis.com

I have reposted my reasons here:


IBM traded up after hours after posting earnings inline with their announcement a couple of days ago.

Aside from write offs, AMD beat estimates by almost double.

NYSE has agreed to buyout AMEX.

The mortgage industry has eased terms on 54,000 loans, and worked out a new repayment plan on another 183,000.

Bush is set to announce his stimulus package.

Even though the A/D Ratio is not below 1, I now think the market has bottomed, or is very close to it

Whether or not this is a permanent reversal is unknown to me because the trend is still down.

Hi everyone. Just thought I would put up my first post and say hi. I'm a technical trader exclusively and i watch the major indexes for direction and keep things as simple as possible. I watch the RSI for divergences against the current trend, the adx for the strngth of the current trend, and the channels (made famous by those crazy Turtles) for direction in case i don't want to believe what my eyes are seeing (it's surprising how often that happens.

Here's the chart for the SP. Hopefully it comes through...

http://i75.photobucket.com/

From the chart it's clear to me that the direction is still down.

Volume looks strong. Could be capitulation bottom which is a final wave of selling as fear begins to set in. Watch for a monster volume key reversal day to signal a reversal. Key reversal day means we open lower, trend lower, but close the day positive on big volume.

RSI, yes it is overbought but it can stay that way for awhile. That's why I mainly use this tool to spot divergences. When price is dropping and making new lows and RSI is rising and not making corresponding new lows you have a divergence. Many times a reversal will follow.

ADX: trend strength: looks like it's getting stronger, but negative DI is the highest it's been in awhile. Look for it to turn down and cross through the black rising ADX line.

In an environment like this I would say why not go with the trnd and trade short? And if you don't like going short, look at some of the inverse ETFs. These rise as the market declines. For a longer term picture we have this:

http://i75.photobucket.com/

Looking at price, 3 strong support levels have been taken out. Wow. Looks like a waterfall. You might actually be a little late to the party for going short here.

Thanks for listening!

David John Hall

Thanks to David John Hall for the recent post. Additional information from our growing list of readers is always welcome and desired.

Trading Analysis for Friday, January 18th, 2008:
The trend continues to point lower. The 7 Day Exponential Moving Average (EMA) is below the 21 Day EMA, stochastics continue to hold their downward turn and the MACD made a negative cross long ago and has displayed a continual trend lower for the SP, Dow, and Nasdaq indexes. We continue to follow the trend for general market direction knowing that we will not be able to accurately predict short term direction changes along the way. While our trend is clearly pointing down, I am closely watching for a near term capitulation day as described in the earlier post. Just when it seems like everyone is on one side of the fence the market can quickly turn direction. Volatility is still lower than it was at November's low and still significantly lower than the low we saw in August, further confirming our current downtrend. I am very interested to see if the markets will fall off and drop immediately lower from current resistance levels that we are sitting on (+ or - .5% to 1%) or if we might see a small bounce in the near term followed by another strong decline over the next few weeks. I would view a moderate bounce as a selling opportunity and the potential to add a few short positions or inverse funds previously mentioned.

Trade Disclosure: Portfolio is 100% cash over the weekend after making 4% in one day on a Bear Credit Spread selling QQQQ 47 Calls and buying QQQQ 48 Calls. Although my portfolio was stopped out of several stocks early in January (AMZN, GEOY, ISRG, ARGN and others), following the trend has provided profits with LDK, FRE, and QQQQ Bear Credit Spread as well as using ETF's like DXD. Closed January trades have profitted approximately 16%.

Trade suggestions for next week coming later in the weekend.

Safe Trading!

Trade Suggestions:

After my Credit Spread expired worthless on Friday and netted 4% in 26 hours I am 100% cash. We discussed that the markets are in a steep sell-off, but a bounce can happen at any time and it could be very strong and sharp. A bounce could sustain itself for a while or just present another opportunity to set-up for a run to the downside. Regardless, the market points to the fact that it will go lower, we just don't know exactly how and when it will happen. As a result, I will presents some specific trading ideas for the forum and follow them with performance information.

As we look ahead to a trend change (markets don't go one way forever), whenever that may be, I have put together a list of stocks to watch from a variety of sectors that we can be ready to purchase when the market moves to the upside. The list below is a watch list with the strongest stocks listed at the top. I will make suggestions from the group over the coming weeks.

Watch List 1/20/08 - Potential LONG Positions (Top 7 based on strength)
1. CMED (recent break-out and in buying range)
2. TEVA (strong - broke out of 2 year base - good volume)
3. VMW (nice consolidation - has not fallen with general marke crash over past 2 weeks)
4. AAPL (strong stock - will participate in most market rebounds)
5. ISRG
6. HDB
7. GMCR
8. MA
9. HRBN
10. EJ
11. IRIS
12. OSIP
13. LIFC
14. DWSN
*These are not buy recommendations, but rather positions to watch for future opportunities

Watch List 1/20/08 - Potential SHORT Positions
1. FRE
2. FNM
3. DXD
4. SDS
5. QID
*I will update with specific price information with stop levels. Notice that DXD, SDS, and QID are Inverse ETF's that go up when the market goes down. Many shares that I have attempted to short with Zecco have not been available (BSC, FRE, CFC etc) and the ETF's have been a nice alternative.

**Specific Trade Suggestions Will be posted before Monday Morning

Trade Suggestions:

Much depends on how the markets open on Monday. We will wait to suggest LONG stock positions for a trend change, but we have a nice watch list mentioned previously. Please add some LONG position suggestsion for whenever we see a turn in the markets. Let's just wait for a capitulation day!

Short Term Trend Trade:
DXD, SDS, QID - These ETF's follow the double inverse of the market. For example, if the Dow goes down 1%, DXD goes up approximately 2%.

Recommendation: If the markets do not gap up or down by more than 1/2% on Monday morning I would purchase DXD, SDS, or QID a little after the opening and follow the trend channel that began last Monday. I am wary of a quick turning bear market rally so stops must be tight on this trade. Once profitable, stops should ensure a positive gain.
DXD - Buy near $60. Stop at $59. 2% Risk. 4% to 15% potential profit!
SDS - Buy near $66. Stop at $65. 2% Risk. 4% to 15% potential profit!
QID - Buy near $48. Stop at $47. 2% Risk. 4% to 15% potential profit!
**I will update this forum specifically 30 minutes after tomorrow's opening bell

Intermediate Term Short Position:
I have attempted to short FRE and FNM, but shares are rarely available with Zecco. However, I recommend doing the Bear Credit Spreads detailed below.

FRE Credit Spreads:
1. February Expiration: Buy FRE BG (35 Call) and Sell FRE BF (30 Call) with a Limit/Credit of at least $1.45 for a Potential Profit by February of 30% minus commisions.
2. April Expiration: Buy FRE DF (30 Call) and Sell FRE DE (25 Call) with a Limit/Credit of at least $2.20 for a Potential Profit by April of 40% minus commisions.

FNM Credit Spreads:
1. February Expiration: Buy FNM BH (40 Call) and Sell FNM BG (35 Call) with a Limt/Credit of at least $1.00 for a Potential Profit by February of 20% minus commisions.
2. March Expiration: Buy FNM CG (35 Call) and Sell FNM CF (30 Call) with a Limit/Credit of at least $2.20 for a Potential Profit by March of 40% minus commissions.

Safe Trading to All! We'll be back after the market opens!

It seems that I wrote Monday instead of Tuesday for our trade suggestion blog. We will see you tomorrow morning with what could be a large scale sell-off on hand!

Blessing or a Curse? Did the absence of trading due to a holiday give traders the time to relax or will Tuesday bring a pent up reaction that could be historic.

Our Forum achieved over 1000 views today! Our next goal is 5000.

Remember the First Three Rules of Investing:

1. Don't Lose Money

2. Don't Lose Money

3. Don't Lose Money

If you follow those three rules, making money is a lot easier.

Entering a Short trade today could be kind of tricky. I have never been successful trading based on the equity futures, but I did check them out today. It seems US equities are set to open up to 4% lower and we will see what happens from there. I am tempted to buy some DXD, SDS, or QID at the open for a short term trade, but I would only purchase 1/2 a position, use a stop loss to limit risk, and add the 2nd 1/2 position once the first position is profitable while maintaining a stop loss. I'm only looking for a few percent on this trade. Regarding the FRE and FNM Credit Spreads: It is likely that they will gap lower making it hard to execute at the suggested limits. If that is the case I would wait on them!

As the equity markets get pounded today I wanted to present our first post and the reason for this Forum:

12/17/07 - US Equities fell hard again today and most of the key
indicators that I follow have turned negative or are about to turn. I
follow the 7, 21, and 50 day exponential moving averages as well as
stochastics and the MACD both on individual stocks and on major market
averages. These are lagging indicators, but confirm trends and
direction of the market movement. Today the 7 day EMA crossed below
the 21 day EMA on the Nasdaq and the SP 500. It is about to make
a negative cross on the Dow. Stochastics have gone negative on all
three and the MACD has turned negative on the Nasdaq and the SP
500. As a result of the trend, I see the market testing
December and August lows and potentially falling past them in another
wave of a correction. These trend changes usually indicate trends of 2-6 weeks but can go turn quickly in markets with neutral action.

Safe Trading!

Mid-Day Trading Update:

I am holding off on trading for the time being. With a dramatically lower opening and a quick move by the FED we could easily see a quick bounce and just as easily see the markets fall off the table. Regardless, the trend is still lower, but short term trades are too risky for me at this point. Still 100% Cash, but watching and waiting.

Trade Recommendation:

Markets seem to be stabilizing short term, but no easy decisions at this point. Bought a 1/2 position of QLD (Doubles Result of QQQQ) at 74.00 and placed a tight stop loss at $72.40 . If the bounce runs it should create a tight short term profit and if we fall further the positon only has 2.2% risk plus commission costs.

Safe Trading!

Market Analysis for January 22nd, 2008:

A unique and crazy day. Down 4% at the open with a 75 basis point rate cute in hand the markets rallied back. The emergency rate cut by the FED was the largest cut they have made since 1982 when rates were at 20% as they were trying to kill inflation. The market rebounded, but did not finish with a strong day. All Indicators show that the trend for the Nasdaq, SP, and Dow is still lower. I attempted to play the bounce with a 1/2 position of QLD, but could not catch the falling knife and will be burnt by today's lower opening. Unfortunately, I could not place a profitable stop in when my position ran up in the later afternoon (I had real work to do) so it is likely to lose 4% on the trade for the 1/2 position. With AAPL's guidance it should be another interesting day today. Maybe a chance to profit to the downside?

Trading Update:

Stopped out of QLD at $68.44 for a 7.8% loss. It might be a bit late, but decided to go with the flow and bought QLD at $53.99 and will put a $52.24 stop loss on it. If profitable, I will move the stop loss to guarantee a 1% profit or so. Profits are hard enough to come by in this market. In addition, I will probably average up if the market continues to go lower.