Weekend notes on the market and weekly calls

TA on Major indicies

On Weekly Charts: positive momentum declining for the 3rd straight week; stochastic show developing pullback of over-bought condition; volumes came in high for the second week in a roll; MA10 turning down for all major indices for the first time since the Mid-March bottom; candle formations mostly indecisive for the week.

On Daily Charts: bearish short-term MA bow-tie formation in nascent form for NASDAQ/Russell2000 and fully developed for DOW/SP500; negative momentum stalled for the last 3 sessions as the market rebounded; all show signs of over-sold rebound; MACD in solid down trend formation; volume/candle patterns remain bearish bias; NASDAQ/Russell2000 following the footsteps of DOW/SP500 as they decisively broke their May lows and MA50, but reclaimed those key levels by last Friday.

Thoughts and observations about the current market conditions and near-term outlook:

1. Technically speaking, all major indices have broken their uptrend that started Mid-March, and now in the process of resuming the primary down trend that started last November.

2. The market is oversold, and more rebound is possible for next week.

3. Something with deep and fundamental long-term impact on the market occurred this past week: Big Ben and Fed sounded alarm of raging inflation, with a never-before-heard hawkish tone. The inflation picture is becoming gloomy as major Asian economy (China and India) started raising rates this week amid the signs of run-away inflation. Some of those inflation will be exported to US, and with out-of-control energy and commodity prices domestically, Fed may be forced to raise the rate much sooner than they would like to. This is the key reason for my overall bearish view of the US stock market throughout this year, if not longer.


Overall Trading Strategy for Next Week

Once again, while some technical rebounding will occur next week, the market/economic conditions are increasingly unfavorable to SW longs. I will use short-the-rebound approach during this oversold rebound, in addition to seeking initial SW short positions in energy and other commodity sectors. My expectation for the rebound: NASDAQ 2490-MA200; SP500 1375-MA50; DOW: 12500-12750. A close above the top of those resist zones will prompt me to reconsider my TA.

Weekly Swing Trading Calls (holding time 2-5 days for the most)

1. AAPL
SW-L2, ez=155-161 (MA200), IDS <150, CSSW-S3, if it spikes towards 180 in the early part of the week, IDS>MA10, CS>180, IT=170.

2. BIDU: CTT between 300 and 360 with a 1-2% stop, don’t trade the mid range.

3. CME: SW-S1, ez=439-459, IDS>462, CS>MA50, IT=400.

4. DRYS: CTT between 65/68 and 84/88 with a tight stop just across the boundaries, don’t trade the mid range.

5. EWZ: SW-L2, ez=85-88, IT=MA50.

6. GS: CTT between 185/195 and 160/163, don’t trade the mid range.

7. MA: CTT between MA50/270 and 300/310, don’t trade the mid range.

8. PCLN: CTT between 120 and 132 with tight stops.

9. FCX: speculative S3, ez=125-127, IDS >130, CS>128, IT=MA50.

10. Steel sectors:
AKS: speculative S3 around 72, IDS/CS>73, IT=66.
X: speculative S3, ez=180-185, IDS/CS>186, IT=MA50.

11. Energy sectors:
APA: SW-S2, ez=142-150, IDS/CS>150, IT=132
CLR: speculative S3, ez=72-76, IDS/CS>77, IT=65
OIH: SW-S1, ez=215-220, IDS/CS>221, IT=MA50.
RIG: SW-S1, ez=149-152, stop just above 152, IT=140

12. Fertilizer/agriculture sectors:
CF: speculative S3 just under 160, CS>160, It=MA50
MON: speculative S3 around 140, CS>141, IT=132
With the lead of AGU, these names may well break to new highs next week, be patient and any setups must be initiated at least in overbought (daily/60 min) with stalled momentum/topping candle formations.