Thursday, January 15, 2009

End of Day 1/15

CNN I reporter photo:

Okay that was a wild close! The U.S. Airways crash in New York sparked some selling which may have been a knee jerk reaction (thinking possible terrorism?). Once it turned out that everyone evacuated safely and that it was likely due to geese, the market picked right back up into a more bullish close and I got a little bit long biased for tomorrow as that’s what the close was saying. Miraculous that everyone survived the ditching, terrific job on the part of the crew as well as the boats on the Hudson river to get everyone out! Way to go!

Having geese take out both engines on takeoff is obviously a very dangerous thing. It seems to me that the pilots kept their cool and kept the airframe under control to guide it to a water landing in an otherwise very populated area. Then the flight attendants and passengers did a good job getting everyone out once they were in the water… that’s why you don’t want to always choose who you fly with based solely on cost!

Back to stocks… For the day the DOW managed to close UP 12 points, which wasn’t much of a gain, but it was a big reversal. The S&P closed up .13%, the NDX was up strongly with a 1.7% gain, the RUT led the way up with a plus 2.1% showing. Notable is the XLF which lost 4.6% and split from IYR today which closed UP 2.9%.

The VIX, which was up 10% early in the day closed up 3.8%. Bonds closed mixed on the day, still above the channel they had been in.

Okay, here’s the DOW daily so you can see we posted a “green” doji on higher volume. That one looks a lot more bullish than the one I posted in my last update. We hit 8,000, bounced, did a perfect 50% retrace of that bounce and then made a move back up into the close:

It’s the same basic picture on the SPX daily, a doji, but the NDX and RUT candles look stronger, the NDX was darn near engulfing, but not quite.

Let’s take a look at the 10 day, 10 minute SPX chart. You can see that we broke that ending diagonal and that’s when I "ditched" the last of my short positions and went long which turned out to be an excellent play. The stochastic is mixed, on the 60 minute there’s a lot of room to run higher but the 20 minute is overbought. Also note that there’s what looks like a potential small inverted Head & Shoulder on this chart with the neckline at the 850 level (dark green double line). A break of this neckline higher would target about 875 or so:

From an Elliott Wave perspective it looks like we either just began wave 2 up of 5 down, or we may have just began wave ‘c’ up of the larger wave ‘B’. The break higher out of that ending diagonal looked impulsive and is steep like what you would expect for either of those two possibilities.

Another news item today is that the House Democrats offered up an $825 billion stimulus package that would include money for the states and tax cuts. Lovely.

Intel reported a 90% decline in earnings after the bell which met their already lowered expectations and that has the NDX futures up a little. RIMM was a big winner today, too, up 9.2% on the day.

So, overall it looks like a possible reversal day. We’ll need follow through tomorrow which is Opex and then we can start to look at how long the rally could last or go. This has the potential to be a good sized retrace as it’s most likely the start of either wave 2 or wave ‘c’… either of which could run. Of course I caveat that with the fact that it’s a technical rally if it goes, the fundamentals have NOT changed and this is still very much a bear market. Consumer sentiment comes out tomorrow morning and now that we’re into earnings season the possibilities of a tape bomb can come at any time.

Did you see that AIG is paying out more than $150 million more in bonuses to retain their “top people?” That would be our money, yours and mine rewarding their risk taking and bad behavior! Isn’t that grand?

Let me bounce this idea off everyone to see if the idea sticks… A trading friend and I spend the day chatting on a very fast and cool instant messenger service that allows us to communicate and trade charts in real time – boy is that ever helpful for spotting things you otherwise might miss. It’s like doubling your vision of the market. It really helped today and we caught every corner by using teamwork. I’ve always said that investing is a TEAM sport, there’s no reason to be a loner when it comes to trying to make money. So, we think it’s so cool that we’re talking about maybe opening up the conversation to people to view (for only a very small fee). If that interests you, drop me an email and let me know, it would be experimental to start and later we may make it a formal service and even invite certain experienced traders to contribute.

Good communications are important to staying wealthy, as is communicating well with a lot of crewmembers while piloting a large aircraft. I have always said that flying the aircraft, for me, was the easy part, communicating well with everyone else was the hard part… Thank goodness the people on board that flight were okay, you never know what might happen, so let’s appreciate the time we have! You never know, you could lose it all in a New York minute.

Don Henley – New York Minute: