Another 666 Bottom
Friday, February 5, 2010 at 02:03PM 
Last night I felt the McClellan pic I posted was worth a thousand words. In relation to a trending market, these divergences are spot on. Normally, I'd post a picture with more longer term data to substantiate my claim, but its Friday. Therefore, I'll leave a few tid bits and start my weekend smiling.
I bought into this dip today, and have even held a handful of longs through most of this weakness, with only a small number of puts to offset the losses. Aside from the bullish divergence I posted last night, there are 3 main reasons why the market was going to crush the shorts today, and why this was a great spot to be a buyer.
1: Copper would not go down today.
2: Panic Selling / Forced Liquidation in Crude Oil. Equities don't go to new day lows on this move.
3: Take Your Cues From Goldman, as Goldman leads the way.
Also, I loved the action in the XLF. Covered my JPM puts near the 200 day MA.
Through my buying efforts, I focused specifically on the materials sector, and have a few tech names I am dying to buy on Monday. The reason I like materials stocks was due to the oversold names in this group, the price action today as stocks like AKS, XRA, and PCX did not go to new day lows as the indices did, and the technical set-ups like you see in PCX. Easy to manage if it don't pan out.
In closing, going back to Goldman's 2010 forecast of a 2004-like range-bound market in stocks, you've gotta be a buyer here. If we do manage to fluctuate up 5% and down 5% over the next few quarters, you've gotta buy low and sell high.
I'll be back this weekend to provide you, the reader, my shopping list for next week.
Have a good weekend,
OA
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Response: Follow ThroughBefore I start, allow me to digress. The divergence and "bottom" I called for last Thursday
Reader Comments (11)
UUP looks like its probably topped for a while, that's a shame.
Good stuff all week. Thanks Jeff. Looking forward to the watchlist.
OA, I'd like to say thanks for the detailed explanation for your decision to continue purchasing material stocks..
New visitor to your website and I am adding you on my favs !
Looking forward to learn some trading from you.
Thanks !
Got out of GS short the moment SPX touched its 200 day moving average. That one trade saved my porfolio for this week's downturn. (AMZN short saved it during last week's).
Jeff, when you say take your cues from Goldman, what cues? What is GS telling us here?
Thanks for everything you do.
And by the way, what charting software are you using up there? Do you have any cheap (preferably free) software recommendations?
Smug, that is how I am feeling this morning. Cash went to work with a flurry Friday. Goes to show you, you don’t have to trade all the time – for me, it is a case of keeping my active mind and ideal hands away from the ‘click and send’ button. All said, when I do trade – during these rocky periods or when I am late to the party, I cut my trades back by half to two-thirds.
Did a >90 and < 10 RSI search this morning. Nothing on the >90 but here are the less than 10: PHI, MANT, DST, LNN, GVA, CW, AIRM, GCO, UNFI, SXE, PENN, AIG, NRG, HE, CXW and so many more . I will look randomly over the week-end at these. Course there are so many bottoming hammers that took on volume late Friday – I view this as a dead cat bounce on Monday. The trend remains down (lower lows) & that is on my keyboard ‘posted note’ – so, my play on Monday (as I am positioned in my thoughts today) is up – with caution.
Jeff,
loved the bear trap on the xlf chart.
ive said it before and will say it again. you are an absolute magician with the charts and very talented.
take care,
I agree with F2T. Looking at UUP, it looks like an inverse head and shoulders, targeting ~24.20, but there was a topping candle on Firday, so I'd expect it to pull back to 23.10-23.20 first before it moves up again. This could lift equities and commodities.
Looking at Free 2 Trade's list:
LNN looks like a HandS, if it could retest 40, it could be a decent short. If you look further back, it's an unconfirmed double top.
GCO kinda a double or triple top, needs to retest 23-24
Super Bowl prediction – food and booze (for me, I will start out with a fine Hefeweizen beer). At our party, we serve deep fried appetizers (breaded zucchini, mushrooms, onion ring and shrimp prepared in various fashions). For the main course barbecued chicken and polish sausage.
So, my decision is based on food and refreshments. With that, my vote goes to the southern hospitality town of New Orleans which puts the Saints as the Super Bowl XLIV winner. The score - who cares! Go Saints.
I expect the Colts to win, but would like to see the Saints pull an upset, I'd especially like to see Reggie Bush have a standout game. Still pretty bummed that the Chargers didn't make it.
WHY IS IT? Other trading blogs have so much fun! Not here! To serious! Anyway, time to get ready for the Super Bowl! Be happy!!!!!