Wednesday, December 8, 2010

Early Morning Thoughts

Stocks staged a seesaw session with the action turning decidedly negative by the end of the day. Volume was mediocre but the reaction from leaders and the reversal of many leading stocks intraday was not a positive sign at all. Was it attributed to a late dollar rally, or the government expanding its insider trading probe? I do not think the timing was a coincidence after Obama conceded defeat and gave in on the extension of the Bush taxes for all income brackets. Chinese stocks also took it on the chin on fears of an interest rate hike. COST has earnings today.

Stocks showing specific buy points include: VRSN @35.78, SIAL @66.11, AMP @55.16 all flat bases. KO sports a 65.06 buy point in a 3 weeks tight pattern.

50 day MAs that need to hold are: LVS @45, RIG @66, JNPR @33, RADS @18.60, YUM @49.50, LTD @30.30, DFS @18, CIS @18, MOTR @22. PM XXIA both finished strongly Tuesday in good volume after finding support at the 50 day. And both closed on their highs of the day after the market squandered nice early gains. PSA can be bought thru 100.25 its 50 day. VNO which we recently flagged at 80 for 200 day support, now lets see if it can challenge its 50 day on the upside. Buy spot would be thru 86, its 50 day.

CVS broke away from its 200 day MA Tuesday on decent volume. NUE can be bought thru 41.70, its 200 day MA. It was stopped there today. Wait for it to break thru. Energy names which performed admirably on a weak tape, which is bullish are, CVX CMI WLL.

Short opportunities could come from stocks showing negative outside reversal days. These include: PAAS ORLY CRZO. SLW which has had 2 major reversals days in the last month now. SWN is failing at its 200 day MA. CP can be shorted under 64, its 50 day MA. TTM can be shorted under 29, also its 50 day. TTM has had some wild action recently after hitting all time highs, not a real good sign. DTV which we flagged after losing its 50 day at 42, and we then said 200 day support looks likely next is happening. 200 day support for DTV @38 needs to hold. BBD looks very similar to DTV. It couldnt hold 21, its 50 day, now 18 its 200 day needs to hold.

Changes in portfolio include: Long DE after its flat base breakout in heavy volume @79.76. And MCD @80.10, also breaking out from a flat base on good volume. For protection the SDS looks overdone. We bought some today, and could see it challenging its 50 day MA @27.

Good luck.

The author owns CAKE NVDA ARMH X CHRW GPS DE MCD SDS.

2 comments:

  1. I expected, if anything, that the extension of the Bush tax cuts would have added to the upward momentum in the equities market. What is the correlation between the tax rate extension and the negative pressure felt by the markets yesterday that you are alluding to?

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  2. The tax rate extension was already built into the market prices in my opinion. Markets seems slightly overbought here and due for a healthy rest here. The market sold off Tuesday near the close for any number of reasons. The dollar showed strength, Pelosi and Reid showed their opposition to Obamas Bush tax cut extension, and the government decided to announce further investigation into insider trading probes. Creating uncertainty which the markets abhor.

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