Moment of Truth for Stock Investors

[Do Or Die 10]

The signs right now are that the motor of the European economy is starting to slow down significantly. That was confirmed with the release of second-quarter figures that showed gross domestic product growth of a mere 0.1% at a quarterly rate in the second quarter of the year, significantly lower than the 0.5% most economists had been predicting.

 

Germany will lead the global downturn

[zdo 20]

c'mon peeps , challenge the media paradigms just a little bit !!!

 

For example, how could Germany "lead" the global downturn when the global downturn started years ago and Germany has actually held up quite well ? ... up til now, at least...

Germany ain't leading the "downturn". They are following it. Jeez luise, Japan has been leading them into the downturn for some 20 + years now...

[Do Or Die 10]

LOL, I just glanced that article. But I think they were talking something like troubles have been around for decades but Germany just signaled the crash. The US Equity markets affects everyone globally and it was rising happily all this time.

[Do Or Die 10]

As mentioned in first post, I'm out of almost all of my investment stocks (avg holding 18 months) and currently most trading is short-term.

 

 

Buyers are stepping in and the market on both Thursday and Friday was relatively stronger than Low of August 8th. On Thursday, the the day began with a large drop, but prices in afternoon reached a balance area supported by buyers; there was also a short-lived test at 3pm while yesterday the market closed near lows which may signify exhaustion. More importantly, buyers were willing to participate at prices generally higher than last Monday’s and Wednesday’s (August 8-10) low closes.

 

The bottom line is that market in last two days has been trading relatively stronger than prior week. As expected RSI has shown a considerable improvement as marked in the chart. Prices have certainly been taken to levels that are normally viewed as very attractive.

 

This was about internal relative strength of the broad market itself. I will look forward to buy stocks on Monday which have been trading relatively stronger than the market.

 

Ticker	Date/Time	Change Since 8/10	
^GSPC	8/19/2011	0.3636	
XLB	8/19/2011	0.5973	
XLE	8/19/2011	1.5414	
XLF	8/19/2011	-0.2467	
XLG	8/19/2011	0.0614	
XLI	8/19/2011	-1.3211	
XLK	8/19/2011	-1.9164	
XLP	8/19/2011	2.6755	
XLU	8/19/2011	7.2517	
XLV	8/19/2011	2.8164	
XLY	8/19/2011	-0.0294

 

The leading sectors of Financials, Technology, Consumer Discretionary and Industrials (XLF,XLK,XLY, XLI) continue to trade relatively weaker than market.

 

Hence my current strategy is to buy stocks for gains in 3-5 days while carry shorts initiated on 3rd August. I will take long trades on Monday only IF the market shows strength. What can be the reward for such anticipatory trading? (acting at the first sign of a double bottom). The move up can be dramatic – and fast. The risk is that selling once again overwhelms buying, driving would-be buyers back to the waiting room once again.

 

Some strong stocks which have been trading relatively stronger than the broad market in last 2 weeks and belong to the defensive group are:

Ticker	Date/Time	Change Since 8/10	
ADM	8/19/2011	5.7648	
AES	8/19/2011	5.1653	
CAG	8/19/2011	2.4648	
CCE	8/19/2011	4.7158	
D	8/19/2011	3.5160	
DTE	8/19/2011	5.1804	
ED	8/19/2011	5.5739	
EXC	8/19/2011	4.8731	
FE	8/19/2011	5.1902	
GIS	8/19/2011	2.4607	
KMB	8/19/2011	4.4430	
KO	8/19/2011	4.9093	
MAT	8/19/2011	2.7778	
MO	8/19/2011	5.5419	
PCG	8/19/2011	5.0497	
PEP	8/19/2011	2.9012	
PG	8/19/2011	4.1873	
SO	8/19/2011	5.1012	
TE	8/19/2011	5.6034

[Do Or Die 10]

This is market state for same day - 19th August. ETFs representing Consumer Staples, Health Care, and Utilities (XLP,XLV,XLU) and Financials, Technology, Consumer Discretionary and Industrials (XLF,XLK,XLY, XLI) are mentioned.

 

• Trend Strength refers to mid-term trend (similar to 50 day moving average)
  
• RS Internal refers to immediate expected movement
  
• RS (S&P) refers to how well the sector is performing relative to overall market
  
• -100 means extremely bearish and +100 means extremely bullish
  

 

It can be seen from chart that RS internal turned positive for all sectors.

 

[Do Or Die 10]

Updated chart:

 

See the performance of sectors last week- the defensive sectors underperformed the market (or the leading sectors out performed). This indicates value buying at lows.

Ticker	Change in past week
XLB	6.03
XLF	5.28
XLI	6.18
XLK	5.68
XLP	2.1
XLU	1.88
XLV	3.9
XLY	6.08

 

The chart for mid-term trading indicates indecision- there is no clear direction.

 

There has been support established as I anticipated in previous post. Also the price of Gold dropped very sharply, and will be curtailed now because of margin requirements; and gold has negative correlation with stocks.

 

[Do Or Die 10]

I'm using trailing stops for longs because of indications mentioned in above post.

[Do Or Die 10]

Hardly anything changed last week.

 

[Do Or Die 10]

The Utilities are still strong- XLU trading close to 40 day moving average, and the average is slightly sloping upwards. The Financials are the best bet for directional trading, because it is leading the overall market.

 

[Do Or Die 10]

XLU is back to 3-year highs. The overall market is much more stabilized with upwards bias.

 

Markets have been up 5 days in a row so there is room for correction immediately.

 

 

[Do Or Die 10]

Europe, Hange Seng, Indian Nifty have been badly hammered.

 

I remember vividly the scene in Rogue Trader where Nick Leeson tries to support the falling market with his buying. Obama government seems to be in Leeson's shoes, but they of course have much larger power to influence the market.

[Do Or Die 10]

S&P trading below 1140 is very bad.

 

The best weekly gains for this year was in last week of June which marked the end of bull market as well as was shadowed by monster sell-off in mid-July (see first post).

 

We've just seen the second best week of the year (past week) and it may be 'engulfed' today- one hell of a engulfing bear pattern.

[Tams 20]

Life is beautiful..........

[Do Or Die 10]

Such times tend to be the best times for daytraders particularly. The most profitable (%) year so far in my career remains 2008.

[Do Or Die 10]

XLB,XLF and XLI have already broken down from their past month's range. Technology has shown relative weakness over this week (http://www.traderslaboratory.com/forums/stock-trading-laboratory/10662-stocks-model-2.html#post128956) so it may be the best bet when the market breaks down.

 

[Tams 20]

Europe, Hange Seng, Indian Nifty have been badly hammered.

 

I remember vividly the scene in Rogue Trader where Nick Leeson tries to support the falling market with his buying. Obama government seems to be in Leeson's shoes, but they of course have much larger power to influence the market.

 

the market is brutal... just don't argue with it.

 

an example of artificial government support, and the result:

Black Wednesday

Black Wednesday - Wikipedia, the free encyclopedia