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Daily Insight - July 2, 2009 3:30 pm Our "cause of concern" was validated with the SPX.X's "decisive" downward breakdown vector today, tracing out a good portion of the "right shoulder" of a potentially toppish "head and shoulders" pattern. In addition, COMPX is now confirming its wide sideways consolidation pattern into early July. The fact that the markets are selling off in front of a seasonally stronger "holiday" session does not bode well for next week and especially into the earning releases slated to start in mid-month. "Day Trader" had no trades with RIMM as it gapped below Wednesday's low at the opening. He will discuss his selections after the close as sellers dump unabated and are pressuring markets lower. Weekly Summary - Friday July 2, 2009 Illustrated below is how broad market index SPX.X is tracing out the "right shoulder" of a toppish "head-and-shoulders" pattern and with a close at the low of the day, the 888.00 trendline is the first immediate target. A reflex bounce should then materialize and after that, a "decisive" break of 888.00 will be devastating for the marketplace. Buyer beware!
As expected, tech and bio-tech index COMPX is shown below trending in its sideways consolidation and should have some support between its lower baby blue-colored trendline and the 1770.00 horizontal line. A breakdown of this 1770.00 area will give us a "double top" formation and will coincide with the SPX.X's "head-and-shoulders" pattern. Which is to say, all the ducks are lining up for a new down-leg.
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"View from the Top" are macro comments made on a timely basis about the markets or significant "items of interest" during the trading year. These "non-technical" observations are not guaranteed to be right and is the personal outlook of our head-trader, (with over 30 years experience in the markets), at that point in time. June 23, 2009. Core position AXP was stopped out yesterday at $23.25 for a profit of $10.42 or plus 81% as the stock was purchased for $12.83 on March 30, 2009. We have now sold 4 out of our 5 positions, will monitor them for a future repurchase, and are keeping GE for now. [WL] June 22, 2009. Some of the market analysis that we have been reading is affirming our decision to exit 3 of our 5 core positions and initiate a workable stop on AXP. When we purchased our core positions on March 30, 2009, everyone was negative, investors were underweight equities, and we expected a rush to own stocks with President Obama's policy changes. And now as we exit, this news is on the horizon and is why when "everyone is in," it's time to consider leaving the party: "Fund managers have moved to overweight equities for the first time since December 2007 as hopes of an economic recovery remain intact despite a sell-off in bonds and rising yields, a survey showed on Wednesday. The monthly poll by Banc of America Securities-Merrill Lynch showed a net 9 percent of the respondents are overweight stocks. This means the difference between equity overweights and underweights is 9 percentage points. In May, fund managers were a net 6 percent underweight stocks ... The survey found that global growth expectations rose further, with the growth composite indicator hitting a six-year high of 78. A net 7 percent of investors believe global recession is likely in the next year, compared with 70 percent just two months ago ... 'While investors are finally overweight equities, risk appetite remains relatively constrained. Investors seem happy to underweight defensives at this point, but overweight conviction is tightly concentrated on just two sectors; energy and technology,' said Gary Baker, the bank's head of European equity strategy." June 19, 2009. We have taken some profit on 3 of our 5 core positions and should repurchase them when the time is right. US Steel [X], Alcoa [AA], and CitiGroup [C] were all sold at today's opening prices of $37.66, $11.12, and $3.21 for gains of 75%, 66%, and 39% respectively. We still believe in these issues but feel that they are fairly valued for the next several months in both a fundamental and technical standpoint. Kudos to all the subscribers that saw what we saw! [WL] |
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DisclaimersWe have to use actual market quotations to illustrate exactly what we are doing and why we are doing it. Otherwise, the diaries and its entries of daytrader1.com will be misleading and not educational. The spirit of this website is to teach the market daytrader how to trade successfully by using real-time quotes and any attempt to duplicate these trades is not a guarantee to make money. These trades are our teaching "tools" and at the end, are only examples. Copying these trades are in fact beyond our control and we are not responsible for any trading losses borne out from this type of action. |
