MARKET THOUGHTS (3/2)

Do not go around searching for the next NUVA. You'll be wasting so much time. Instead, try to stay focused on your daily trading plan. I hate it when people ask me "How high do you think XYZ is going to go?" or "How do you find the next lottery winner?" Truth is, they just come on rare occasions and you either catch them, or you don't. Constantly expecting that you'll make a killing is comparable to the guy that goes to his local Wawa to buy a lottery ticket everyday. You may win big, but most likely you won't. I want to remind you to remain focused and aligned with your goals with reasonable expectations.

As for the market, it is still range bound, regardless of today's move. The SPX and DJIA are trading in rising wedges, both above the 50-day MA and also back within intermediate-term consolidation zones. The RUT looks the best with the highest chance of testing the January highs, followed by the COMP, both of which broke out of bull flags.






Most of the sectors are trading in consolidations.

Channels/wedges - XLV, XLK, XLF
Triangles - XLB, XLI, XLU, XLE

The best one that is holding daily highs and flagging is the XLP (staples). The number of consolidations indicate that there is a much, much greater move coming soon. Personally, I'd pay attention to the symmetrical triangles with near apex completions.










It is March, and I'm ready to buy some gold (IT/LT) on a successful break of the channel. There are multiple consolidation patterns, tight MA ranges, and a neutral range to consider - all of them indicating that a consolidation breaking move should be coming soon.



I always found Doug's work very interesting over at dshort.com, especially the "Road to Recovery?" diagram. I believe we will mimic the S&P 500 Oil Crash Recovery and the S&P 500 Tech Crash Recovery. Repeating the 1929 crash is unlikely.




I am neutral on the general market on all time-frames and continually stress selection of individual equities as the main way to go.

EPIC TRADE OF 2010 (so far) = NUVA

Order: 13:25:57 (2 sec fill)

Entry 13:25:59 $31.2699

Scale Outs:

1/2: $36.92

1/4: $41.89

1/4: $41.18

Suffice to say, I am done for the day. This is a news driven power spike that I was fortunate to catch. I don't regret getting "only" 1,000 shares because I stick to my rules on position sizing specifically for intra-day spikes.

1st Target: $31.68 (high of day prior to spike)

2nd Target: $33.63 (100-day MA, kept spiking higher)

3rd Target: $37.08 (200-day MA, I always cut here)

4th Target: $40.54 (November highs - sell everything at this point)

...

Charts are for "Idiots"? Think again.

BREAKOUT SETUPS

I like to scan the 52-week highs list regularly to see if there are some sweet swing setups. I did find a few that 1) broke and closed at or above resistance, 2) all made 52-week highs. It is an obvious sign of strength when stocks are breaking out to new 52-week highs while the market remains in a neutral range. In addition, follow up checks on a stock's sector group is encouraged as you may find those stocks mimicking the same patterns.

First chart is a 3-mo of the SPX. It is still caught between the 50/100-day MAs.

CAUGHT BETWEEN MOVING AVERAGES

The general market as well as most sectors are caught between MAs. For the SPX, it's the 50/100-day. For the XLV ,it's the 20/50-day. For the XLU, it's the 20/100-day. They are all different. I expect more chopping today as the market continues to test the 50-day MA. On the 2-mo/60-min SPX chart, it's clear that we are back inside the neutral range that was created from December. Look for breaks above the 50-day or below 1102. As always, individual stocks should be carefully selected based on the best setups.