1. The Stochastic Oscillator
The stochastic oscillator is a common technical tool that sends an overbought or oversold message, particularly helpful in a non-trending market. Trading ranges typically have neutral momentum characteristics, so we must turn to an overbought/oversold indicator to aid in identifying low-risk entries and exits. We have found the 12-3-3 stochastics to yield a desirable number of signals, registering an oversold reading (or "buy" signal) when the two lines that comprise the oscillator crossover below 20%, and an overbought reading (or "sell" signal) when they crossover above 80%. The stochastics do not lose validity in a trending environment, but their interpretation becomes more subjective.
2. The MACD Indicator
The MACD indicator sends objective trend-following signals that work best, naturally, in a trending or momentum-driven environment. Using the standard 12-26-9 parameters, a bullish crossover occurs when the signal line crosses above the MACD line in a lagging indication of a turnaround, and vice versa for a bearish crossover. Oftentimes, the stochastics have signaled a turnaround before it is confirmed by the MACD indicator, making them complementary indicators. The best "buy" signals seem to occur when momentum is positive based on the uptrending nature of the MACD indicator, and the stochastics are near oversold levels.
3. Relative Strength Comparative Analysis
Once a directional bias is derived from the stochastics and MACD indicator, relative strength comparative analysis can be used to provide additional confidence. A relative strength comparative line is simply a price-to-price ratio, often applied to a stock relative to a sector or major index (i.e., CELG versus the BTK). The line can be evaluated in the same way as price, using trendlines or simple moving averages. An uptrending relative strength line would add confidence to a bullish bias, suggesting the underlying financial instrument is poised to outperform the index it is being compared to, and vice versa.
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By InTheMoneyStocks.com on April 23rd, 2010 3:15pm Eastern Time
At 9:40 am EST Exxon Mobil Corporation (NYSE:XOM) was trading down at a price of $68.20. Since that time Exxon Mobil Corp has rallied to $69.10. When this stock gets going it can single handedly move markets as it has the largest market capitalization in the stock market.
Chevron Corporation (NYSE:CVX) is another major energy stock that is rallying today. This stock along with Exxon Mobil Corp is one of the key names in Dow Jones Industrial Average. Chevron Corp is trading higher today by $1.18 to $82.37.
Schlumberger Limited (NYSE:SLB) is also a leading energy services name that is soaring right now. This stock is trading higher today by $4.76 to $72.95.
Today's catalyst for energy stocks taking off to the upside seems to be the U.S. Dollar Index, PowerShares DB US Dollar Index Bullish (NYSE:UUP). This morning the dollar was trading above $82.00, and at a new high for the year. Once the opening bell rang at the NYSE the dollar plunged lower by more than 0.60 cents. When the dollar is lower, commodities and commodity stocks are higher - its just that simple.
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EUROs CHART on REQUIRED UPSIDE TARGETS http://chart.ly/dhxw4q THIS WEEKEND will see a cacophony of statements about Greece and aid during the World Bank/IMF meetings in Washington starting today going into Monday. But watch out for remarks any further conditions imposed on Greece activating the package as potential dampeners on this latest wave of EUR optimism. France and German are in favour of disbursing aid but this wont be executed until 1st week of May. Will need to a see a break of $1.34 and $1.36 in order for any extended gains to follow-though. WATCH ASHRAF on CNBCs Closing Bell at 19:15 GMT (15:15 EST) discussing the Baltic Dry Index, commodities and FX.
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By Gareth Soloway on April 23rd, 2010 12:46pm Eastern Time
A recovery on the economy from massive amounts of stimulus and market propping is still a recovery according to retailers like Polo Ralph Lauren Corporation (NYSE:RL), Bed Bath & Beyond Inc. (NASDAQ:BBBY), Urban Outfitters, Inc. (NASDAQ:URBN), Target Corporation (NYSE:TGT), The Gap Inc. (NYSE:GPS), Guess?, Inc. (NYSE:GES), and Nordstrom, Inc. (NYSE:JWN). After a brutal last couple years of consumer spending, it appears pent up demand is spilling over in a massive way. While this seems bullish, the question is, will it last?
These and other retailers are partying like it is 2007 according to their stock prices. Polo Ralph Lauren Corp. and Bed Bath & Beyond Inc. are at, near or above their 2007 highs. This may seem crazy to many out there considering government reported unemployment still hovers at 9.70% and real unemployment is near 18.00%. In 2007, unemployment was much, much lower.
To see these stock prices approach their 2007 highs or even eclipse them in the case of Bed Bath & Beyond Inc. is a wonder and a sign of just how much stimulus and pent up demand there was from the previous two plus years. As a Chief Market Strategist, I must look at all angles. With unemployment as high as it is, interest rates rising in the next couple years and pent up demand eventually slowing, can these stock prices be justified? The only saving grace for these retailers is competition. In the last few years, some competition has vanished and that has helped sales. Still, it is hard to believe that is enough to justify 2007 highs.
Gareth Soloway
Chief Market Strategist
InTheMoneyStocks.com
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By Nicholas Santiago on April 23rd, 2010 11:22am Eastern Time
Since February 5th, 2010 the major market indexes have had one of the most impressive rallies in an incredibly short span, trading higher by more than 15 percent. The SPDR S&P 500 ETF (NYSE:SPY) traded as low as 104.58 on February 5th, 2010 and is now trading at 121.25. That is almost 17 points higher in less than 3 months. The SPDR Dow Jones Industrial Average ETF (NYSE:DIA) , and the PowerShares QQQ Trust, Series 1 (ETF) (NASDAQ:QQQQ) have traded higher in the same fashion. Rarely do individual high flying stocks make this type of a move in a year’s time, let alone individual indexes in less than 90 days.
The news is wonderful, fantastic, and outright bullish. Stocks such as Apple Inc. (NASDAQ:AAPL), Goldman Sachs Group, Inc. (NYSE:GS), JPMorgan Chase & Co. (NYSE:JPM), and countless others have reported blockbuster earnings numbers. New 52 week highs have increased recently. The Retail Holders Trust ETF which tracks the retail sector is at new highs for the year and near its all time high which was in 2007. These are moves that are off the charts and impressive by all standards.
While everything looks great in the stock world there is one problem with this rally. Why is the Federal Reserve Bank keeping the Fed funds rate at zero percent? This rate allows the liquidity to flow endlessly. It allows the major banks to make money without lending due to the steep yield curve. They can simply borrow interest free money and buy the stock market, U.S. Treasuries, and issue high interest credit cards. What a business to be in when you can get free money.
The last time the Fed funds rate was lowered to unprecedented levels was in 2001 when Alan Greenspan lowered rates to 1.00 percent. At that time the economy was recovering from the dot com bubble and the 911 tragedy. In just five short years that action by former Fed Chairman Greenspan caused the greatest credit bubble since the Great Depression in 1929. Currently Ben Bernanke has the Fed funds rate at zero percent for well over a year now. One can only wonder what kind of bubble this is creating. In a few more years we could be looking at the next great bubble. However, this time it could be worst as unemployment is still high and the housing crisis is still intact.
Yes, the stock market is in bull mode right now. Why wouldn't it be when you think about it? The artificial stimulus is running wild. Everyone lives for the moment and never thinks about tomorrow. The only problem is tomorrow's bubble may not be so easy to come back from. Lowering the Fed funds may not work the next time around. You have been warned.
Nicholas Santiago
Chief Market Strategist
www.InTheMoneyStocks.com
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By Gareth Soloway on April 23rd, 2010 11:58am Eastern Time
Housing stocks are rocketing higher today on the back of New Home Sales data. The Commerce Department alerted the markets that sales of new homes jumped 27% in March to a seasonally adjusted annual rate of 411,000. This is the biggest percentage jump in sales since April 1963.
Housing stocks shot higher with Lennar Corporation (NYSE:LEN), Toll Brothers, Inc. (NYSE:TOL) and Beazer Homes USA, Inc. (NYSE:BZH) leading the way. While this might make the average consumer feel another piece of the puzzle is complete for the recovery, caution must be used. The new and current home buyer tax credit is set to expire Friday. This is causing a rush to buy a home for many and creating an artificial jump in home sales that may not truly reflect a real recovery. Real estate friends have mentioned that as many as five home sales have occurred in the last week or so just purely based off the tax credit coming to an end.
This fact tells us that while the New Home Sales data will be pumped on the nightly news and across the media, it is likely to drop slightly next month as only half of April will have the push, then the following month it is likely to fall off a cliff. Taking a look at the markets today, it seems like the markets realize this as well. On that spectacular New Home Sales number, the markets are actually flat to down slightly today.
Housing stocks like LEN, TOL and BZH have all had big runs in recent days. In addition, technically speaking, there is a possible topping tail forming on all three of them today. This could be marking the top for these stocks in the near term. For more information, guidance on the markets, insight, calls and education, join the Research Center.
Gareth Soloway
Chief Market Strategist
InTheMoneyStocks.com
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Here are 1H and 10m Cable charts. 1H shows me a possible entry is coming, 10m gives entry. I also have a trendline on 4h which would indicate possible support in the 15295 area.
GREEK AID TALK FUELS EURO: Greek PM confirms that Greece WILL ask for EU/IMF aid. More volatility to come in the next 2-3 hours as markets set for a POSSIBLE BUY THE RUMOUR-SELL THE NEWS. EURUSD rallied 1.5 cent to $1.3346 on the news, but is failing to act as PM Papandreou begins his live statement. SIZE MATTERS: All we know now is size of aid is at EUR 45 bln ( EUR15 bln IMF and EUR30 bln from EU) so watch out for any surprisingly big amounts (announcement effects have been key), such as the EUR50 or EUR70 bln as has been indicated last week before these were dismissed as rumours. - $1.34 will be the level to break, but the next key barrier stands at $1.3550, which is the top of the 4-week channel. - EURGBP rallies off the key support (mentioned in yesterday's analysis 100-week MA); especially after disappointing UK GDP. 0.8750 stands as next substantial ceiling.
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I have been getting good results on Cable with MACD,i am looking for divergence within the inicator and with price. Also i look for confirmation on other time frames. Here is my trade this morning.We have price moving lower but the historgram is moving to the 0 line. At the same time the MACD signal line is also diverging with the histogram. Look on 10 mins and you will also see diverdence on the 2 swing lows.
By Gareth Soloway on April 22nd, 2010 2:24pm Eastern Time
SPDR S&P 500 ETF (NYSE:SPY) dropped sharply early in the morning on the back of a downgrade of Greek debt and earnings from eBay Inc. (NASDAQ:EBAY) that surprised the market on their negativity. However, like so many other days in the last few months, the markets just will not stay down. Again, the credit must be given to the bulls as the market has reversed coming up underneath gap fill on the SPY. This will be a significant resistance level and may work as a solid shorting opportunity for a short term intra day trade.
The bears continue to get smoked as every significant attempt at a drop gets thrown in their faces with a late day light volume rally. The culprit aside from light volume seems to be the dollar. The PowerShares DB US Dollar Index Bullish (NYSE:UUP) is trading just slightly off the lows of the day after falling in the last hour. Notice how the markets have jumped to the highs of the day and to gap fill.
The markets await Amazon.com, Inc. (NASDAQ:AMZN) earnings after the close today. Amazon is strong today, higher by 2.00%. I expect earnings to be in the range of $0.70 to $0.75 per share. If earnings come in this range, and the future outlook is improved, Amazon may be able to trade higher. If it comes in lower, the stock may fall sharply after the recent run up. Watch for comments on the Kindle and sales projections. With Apple and the IPAD as a major competitor, people may assume sales of the Kindle will fall sharply.
Gareth Soloway
Chief Market Strategist
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