The DOW put in another strong leg higher and tested both the 50 and 200 day MAs, which I suggested yesterday was something I thought would happen. A couple weeks ago I said, "there's nothing bullish about the technical structure of the market." And now, there's very little if anything that is remotely bearish about the market.
Sure, the markets could roll, but given the sharp impulse rise, it's a low probability. We have gone from oversold to overbought in no time. We are due for a little consolidation. I'm thinking if not today, than tomorrow we'll put in a short term high. A pull back, if we get it, of 3-5% might just be a great buying opportunity. I really don't want to chase this market.
The two things I'm watching closely are IBM and JNK as indicators of market health. Both continue to look good to the upside.
IBM: Big move higher, the entire leg up looks impulsive. RSI has plenty of room to support higher prices. A little consolidation is a buying opportunity.
JNK: Continued higher. It covered one gap, and has one more left. Hard to tell if we need a little pull back first.
If IBM and JNK are going higher, I can't see how the market doesn't follow. I put a little more weight on IBM because it's 8.92% of the DOW.
Watch List: Besides IBM as a long side trading candidate, these are the other stocks that show promising patterns.
BRCM: Broke higher and still the best performing chart on the list. It made a little Doji today. A move lower might provide a little Evening Star.
CTSH: It tested its prior higher, and its close to a break above.
KO: The stock gapped above its downtrend line, but it made a DOJI. Follow through after the break out is needed to confirm bullish view. I could also see a back test of the downtrend line.
MCD: Stock is still moving higher out of an Elliott Wave flat pattern. It's at resistance. If the market consolidates, this may too right below resistance. I expect this too eventually break higher.
Tech Stocks: 4 out of the 5 big tech stocks had a good day. I like to watch these like IBM because they indicate market health and risk appetite for the market.
AMZN: We had bearish divergence, but the stock has moved up and maybe finished a little zig zag down. Too early to tell though.
PCLN: Stock is moving out of little bottoming pattern.
GOOG: A big inverse head and shoulders pattern in play. It's so big I'm skeptical, but more upside seems likely.
BIDU: Look at the RSI for the past several months and you'll notice the stock is higher and then has traded sideways which has let the overbought nature of the RSI to unwind. That's not very bearish. It's still in a range, but looks like a consolidation pattern with higher prices to come.
AAPL: What's up with Apple. Everyone else moves higher but it's off in price today. Very odd for this market favorite. Price chart is convoluted, but if the market is ready for some consolidation, AAPL might pull back.
From My Trading Desk:
Today we sold the GLL ETF. I'll admit I got a little stressed with the leveraged ETF, especially since I have gold stocks short. When I'm on a leveraged ETF, it's pure trading. I can hold a trade on a stock and be more patient because the price doesn't have repricing every night nor does it have the leverage. Just a little risk and stress management. My final thought process was this: We had such a big gain on SRS a week ago, I wanted to make sure I held most of that gain compared to the smaller loss on GLL.
RGLD: The stock fell today. I highlighted last night, I'm expecting another push lower to the lower Bollinger Band. The stock has made a little bearish flag. We might add to our half position tomorrow. I should have done it today, but I was out of the office.
The bear flag occurred right below the trend line, that should be bearish.
ABX: We have a short going on this stock. It rolled over today. Needs follow through though.
NEM: The bid daddy of gold stocks is holding up strong. We have a short going, and this could trade a little higher, but the channel is just above, and I'm expecting it to hold.
LPTH: A little follow through today. The move up has been impressive and has pierced outside the upper Bollinger Band. My thought process is to sell tomorrow if it trades higher early, and then look to buy back if it trades back inside the Bollinger Bands. I may not get that, but I like the way this one is shaping up.
NANX: Sliding in price negates the bullish flag pattern. No reason to add to this one, especially when LPTH looks much better.
Hope all is well.
J.D. Rosendahl, Rosey