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Monday, August 29, 2005
Market Recap
Oil gapped up at the open today to a level slightly above $70 a barrel and the stock futures were down significantly before the open. Hurricane Katrina was the cause of this early activity but wouldn't you just know it, stocks reversed and went higher and oil reversed and went lower almost immediately and they continued in those respective directions for the rest of the day. This is why we do not react with the crowd at the open. Professional oil trader's shorted oil this morning as it gapped up $4.00 and oil closed the day at $67.20, down over $3.00 from its high. This opening gap in oil was filled immediately and may have been the blow-off top in oil. Meanwhile, stocks rallied after opening lower with the DOW gaining 65 points, the NASDAQ was higher by 17 points and the S&P was up 7 points.
Expect the Unexpected
Or should we say “expect the expected”? Stocks did exactly what they should have done based on the charts in last nights commentary. We said that there were many charts sitting at support and that a bounce should be near based on the 50 SMA lines. Please review last nights commentary and charts again just to see how accurate they were. We also mentioned this morning in a market update alert, not to panic sell at the open because we expected a bounce later in the day. This expected bounce came like clock work and the market and many individual stocks were strong all day long despite $70 oil. Who would have believed that the stock market could go up on a day like it did and in the process, created some incredible reversal hammers on most stocks, with closes at or near highs after being down big at the open. Although this reversal rally and solid closing candle are short term bullish action, we must still remember that all indices are still below there respective price resistance and down trend lines. This could just be a snap back rally to the next resistance level so do not get your hopes up just yet. This rally today could have just been the oversold bounce that we have been long over due for.
Katrina
God bless all of those who lives will forever be affected by this massive hurricane. There has been tremendous structural damage done by this force of nature but hopefully the loss of life will be limited.
There is going to be some long and short term ramifications from the storm. Oil is the obvious issue and with the oil platforms in the Gulf being shut down, it could be a long time before they are in operational condition. This will undoubtedly have a major effect on oil, as we have already seen with it opening north of $70 today. We hope that today's action in oil is the sign of a top and that oil prices have peaked but we cannot rule out higher oil prices as speculators try and get it to the next round number of $80 a barrel. Can you believe it, $80 a barrel is not that far away now? With $70 oil, rising interest rates and now catastrophic damage from this storm, this could be another blow to the economy. How much more can the economy take before it breaks down into a recession?
Trying Times
Those finding it difficult to trade this market are the ones that are overtrading or letting stocks move too far against them. It never pays to force trades when market conditions are uncooperative. As we have mentioned before, with volume being low the last few weeks, many professional traders are on the sidelines. This is a historically difficult season for stocks and the goal should be to emerge from it with your capital well-protected and ready for better trading ahead. That is not to say that there are no opportunities right now, only that they may carry with them higher risk and a greater chance of failure. Stocks on the whole have just not seen any follow through after good days or bad days (if short). It is best to remain cautious and raise some cash before the long holiday weekend coming up. Next week, we should have a better feel of market direction as volume will most certainly pick up.
STHQ Chart Index
If you go to the chart index in the left side menu, you can review and study charts that we have annotated for each stock listed in the past.
For New Members
For all of the new members with us, please make sure to read the link “How to use Bulletin” at the bottom of the Bulletin page on the website. It is critical that you know how to use this trading tool before trying to trade the stocks mentioned. The effectiveness of your trades will diminish if you do not completely understand how the information is presented.
Earnings Calendar
We have added the earnings link for each stock on the bulletin. To access the link for earnings, you can either use the link below or click the link on the bulletin for the corresponding ticker. Click the online bulletin in the left side menu for access to the earning calendar for each stock listed. It is not recommended to hold a position through earnings. You can always buy the stock back after the dust settles.
http://www.earnings.com
Stockcharts Listing
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