By InTheMoneyStocks on May 7th, 2010 3:55pm Eastern Time
When traders and investors are euphoric they will follow and lean towards the fundamentals and the story. They will talk about the p/e ratios, book value, and earnings per share and the new contract or product that a company may get.
In bear markets or despair many traders will leave the story tellers and revert back to the charts and the technicals. Price action is the KING not the story that you will hear from your stock broker or some economist on the television. LEARN THE CHARTS.
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GBP RECOVERS ON DAVID CAMERONs offer to the LDP to form a coalition and build a majority government. If a deal goes through between these two diametrically opposed parties (Conservatives with Liberals), we expect the pound to garner further gains towards $1.53s even though passing policies would be complicated by the demands and conditions required by the Liberal Democrats. In anticipating further volatility ahead for today and next week, we see AUD bounces to be shortlived, with particular focus for more upside in GBPAUD and GBPNZD towards 1.69 and 2.0850. GERMANY PASSED the bill on Greek aid, helping to break euro high above 1.27. Rumours of ECB liquidity injections have not been confirmed but these are likely to materialize in the form of system-wide liquidity as opposed to country-specific aid (Greece) from the central bank.
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By Nicholas Santiago on May 7th, 2010 3:26pm Eastern Time
Technology stocks have been one of the leading sectors of the market since Mach 2009. Leading Nasdaq 100 stocks such as Apple Inc (NYSE:AAPL), and Amazon Com Inc (NYSE:AMZN) have lead the index higherthroughout the rally. However, they have been crushed over the past two weeks and lead the decline of this stock market correction..
Apple Inc is now down over 14 percent since making a high on April 26th, 2010. The stock will have near term support on the daily chart at 220.00, 210.00 and 201.00. In a correction or panic sell off as we have seen since yesterday these levels are now in play.
Amazon Inc broke out to new all time highs in 2010 and topped out on April 22nd at a price of 151.09. The stock is now trading at 124.30 which is more than 17 percent off it's recent high. This stock has some near term support on the daily chart at 120.00 and stronger support at 116.00.
When the major indexes are in bullish mode many investors and traders will look to fundamentals such as p/e ratios and book value. However, when panic and sharp corrections set in traders and investors will look to the technical levels. Continue to use caution in this market as things are just starting to heat up. The leading stocks in technology are already speaking to us on the charts.
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The major indexes are trading sharply lower today again. Yesterday's crash was blamed on the so called fat finger trade. That is simply very hard to believe since the source cannot be found. In a day with modern technology everything can be traced. Today the markets are declining by more than 200.00 points on the Dow Jones Industrial Average. The SPDR Dow Jones Industrial Average (NYSE:DIA) is lower by 1.50 percent today. The moves in the market are violent in fashion today.
Today the IPath Vix Short Term Future (NYSE:VXX) is higher by more than $3.60 to $30.00. When the volatility spikes like this in the market it is usually a sign of fear in the stock market. The VXX is a bit extended on the daily chart, however, it can continue higher should panic set in.
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By Nicholas Santiago on May 6th, 2010 3:48pm Eastern Time
The stock market rally from March 2009 has been nothing less than spectacular. However, while every talking head in the media is cheering the stock market this resembles the same type of action in 1930. Back then the stock market rallied 50 percent from the 1929 stock market crash and then sold off to new lows into 1932. This action today may not be exactly the same as 1930; however, there are many similarities.
Since December 2008 the United States central bank called the Federal Reserve Bank has kept the fed funds rate (overnight lending rate to the large major banks) at zero percent. Honestly, we have been saying for quite sometime now that if things in the economy were all back to normal why would they have this key lending rate at zero percent? The answer is that they needed to keep the markets inflated. By the Federal Reserve Bank adding this massive liquidity to the system the markets have rallied and the major bank stocks have all soared higher. In reality all of the banks have been bailed out along with countless of companies.
This is not how capitalism is supposed to work. Believe it or not failure is how capitalism is supposed to work. Capitalism rewards survival of the fittest. Since the 2008 stock market crash it has been government bailouts and taxpayers that have been on the hook for all this corporate greed on Wall Street.
What does the Fed do now? The Federal Reserve Bank can always do different things to help stimulate the economy. However, the Fed funds rate is their main tool. Fed Chairman Ben Bernanke has been very creative since 2008. He has surprised the bears countless amounts of times including cutting the discount rate an hour before the stock market opened on an options expiration Friday. However, if the stock market falls when the Fed funds rate is still at zero percent this is a serious problem. This is truly a worst case scenario and the Fed's worst nightmare.
Nicholas Santiago
Chief Market Startegist
www.InTheMoneyStocks.com
To get more in-depth analysis, along with exact entries/exits, swing trades, and scalp trades, join our Research Center or Intra Day Stock Chat NOW and join the ranks of the Pros!
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YEN STRENGTH TAKES OVER FROM SOARING USD as USDJPY breaks thru key 92.80 support to 92.20, but needs to close at or below to confirm the break of the 92.40 support38% retracement of the rally from the 88.2 low to the 94.96 high. USDCAD breaks above 100-day MA, now eyeing its ALL IMPORTANT 200-day MA of 1.05. But 1.0455-60 stands as the 61.8% retracement of the 1.078-.9923 decline. As risk aversion eases into NY Lunch, we may see a temporary retreat in USD and JPY after which fresh rallies to emerge at around 18:00 GMT (14:00 EST). CAD shorts must be cautioned ahead of a potentially favourable jobs report from Canada, which is due (11:00 GMT Friday) 90 mins before the US report.
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WHAT CAN THE ECB DO TODAY? Euro hit the 5-year trend line support of $1.2730-50 as dealers pressure the ECB into action ahead of todays interest rate announcement (11:45 GMT) and important press conference (12:30 GMT). Following Mondays decision to abolish the minimum credit rating requirements for Greek govt debt, the bank could be expected to do something. The choices it faces could be (1) create a new long term financing facility (2) purchase government bonds to contain yields or (3) cut interest rates. In normal times, any of these options would have a negative impact on the euro, but in this case, such measured would be seen as somewhat of a solution and help stabilize the euro. Either way, the single currency remains in a lose-lose vicious circle. Yesterdays IMT calling for a lower USDNOK did not materialize, but bear in mind that resistance remains at 6.12, which is the 100-week MA a level not broken since September. We continue to deem USDNOK shorts as viable hedge for the USD long trade against high yielders. GBP & UK ELECTION ANALYSIS to follow later in the day. Also, join our 5,100 followers on TWITTER for breaking news & insights http://twitter.com/alaidiRead more…
