NASDAQ Hits New High

By Jim Farrish | March 08, 2010 | 9:06 AM |  0 CommentsTweet This

The NASDAQ index moved to a new high last week. The move pushed the index up 3.6% for the week. The question mark is will it hold the move and regain the previous uptrend? The volume has been above average on the move and the leadership has been broad based. The small cap stocks have been the highlight more so than the large cap. In fact the NASDAQ 100 index has not reached a new high. That is something to watch short term.

Technology stocks were up 3.1% and semiconductors were higher by 3.1% as well. Software gained 3.9% and networking was up 4.5% to lead the sub-sectors. Apple up 7% and Google up 7.1% both posted solid weeks to lead the NASDAQ higher.

How much more gas is in the tank so to speak? For me the key is the large cap stocks stepping up and joining the party. I am looking for the NASDAQ 100 index to break to a new high and assist to the upside short term. However, the solid move from last week will need some room to digest and consolidate the move higher. If the pullback is orderly and on lower volume it could be an opportunity to add to positions in the index.

Using (Nasdaq: QQQQ) as a benchmark ETF I would define the test/pullback at $45.74 this week. If we have a low volume test down use an entry off the test say $46. The initial stop would be $44.70 and I would set the initial target at $50.35. This is a short term outlook obviously and the longer term view for the index could be much higher depending on the economic growth.

As with any investment be sure to define your strategy, your risk and your objective. Don’t risk money without each defining them prior to investing.

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Interest Rates Continue Climb (TBT)

By Jim Farrish | February 19, 2010 | 5:09 PM |  0 CommentsTweet This

Treasury bond yields continue to move higher. The 3o year rates now stands at 4.75% at the high for June 2009 and August 2008. The creep higher is in anticipation of the Fed raising the overnight Fed funds rate later this year. The move last night in the discount rate was the first in a long series of actions to be taken by the Fed to unwind the stimulus to keep banks liquid and healing from the crisis. Taking it back will be a delicate process, but rates will move higher in time.

As you can see on the chart below, TBT, ProShares UltraShort 20+ year Treasury bond ETF has moved higher on the rise in yields. The impact of higher yields is negative to bond prices and thus the fund is short Treasury bonds. The leverage of the accelerates the upside, but also carries equal risk. TBF is the same short Treasury fund without the leverage.

There have been several trading opportunities with the move in interest rates with this ETF. The latest is the bounce off the trendline at $46.80 and the clearing of the resistance at $48.60. The next level of resistance is $51.09. If the negative sentiment gains traction from the Feds action on the discount rate we could accelerate towards the previous high of $54.50. Use caution investing in this ETF due to the leverage.

As with any investment the key is a strategy to your entry point, stop to protect against the downside and target to know what your objective is in owning the fund. This all points to risk management of your money whether investing short or long term.

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Looking for Leadership in Semi's (IGW)

By Jim Farrish | February 10, 2010 | 4:52 PM |  0 CommentsTweet This

The push lower in the broad markets starting in January was led by the semiconductor sector ETF (NYSE: IGW). The comments from analyst concerning peak earnings were the catalyst to the downside. That was long ago (four weeks) and many other problems have surfaced since. However, a technical look at the chart below shows a potential bottom developing on the chart. I have outlined what could be a double bottom and potential move higher.

The second leg higher off the second test of support is in play and a move above $45 would be the point to watch. Of course volume will be important on the move higher. As you can see on the chart volume has been lagging the last couple of trading days. Watch and plan your strategy according to the risk you are willing to accept in any play taken.

The down trend line (purple) is still in play and a break above this line would be important as well. Watch the 10 (green) and 20 day (red) moving averages as key break points as well to the upside. Be patient and let any potential plays develop. I would also pay attention to a failed breakout on the sector as well. A move below the previous lows (support) could provide a short opportunity as well. The current volatility in play can influence this sector over logic. Be patient and define your entry, stop and target before putting your money at risk.

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Energy at a Decision Point

By Jim Farrish | February 08, 2010 | 12:44 PM |  0 CommentsTweet This

The chart below of (NYSE: XLE), SPDRs Energy ETF shows the importance of the $54.25 level for the sector ETF. There is a convergence of trendlines and support at this level acting as a key level to hold for the sector. Friday the level was broken intraday but managed to rally back at the close. I would watch this level to hold and bounce back into the trading range or break lower towards the next level of support near $51.90.

The strategy to play this move is purely technical in nature and the entry, exit and target should be defined accordingly. Since this is a day chart I would use intraday charts for the entry point and weekly charts to confirm the risk of any trade resulting from the directional move.

There are plenty of opportunities similar to this resulting from last weeks selling. Scan the sectors for the opportunities, put them on a watch list to determine how to trade, and them put them into play based on your strategy with defined entry, exit and target.

Be cautious this week as the volatility is likely to continue until a trend is defined.

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What Can We Learn from the S&P 500?

By Jim Farrish | January 27, 2010 | 2:23 PM |  0 CommentsTweet This

Market sentiment has turned negative quickly and investors are still not ready to commit capital on this pullback. I thought it would be good to take a look at one of the broad market indices the S&P 500 index for some insight technically. As you can see on the chart below the high was near the 1150 mark just last week. We closed yesterday at 1091 taking 59 points or 5.1% off the index in effectively three days.

Short term support is 1085 (white line) and 1070 (red line). Take these levels out and we are looking at 1030 as the next level of support. We have moved below both the 20 and 50 day moving average as if they didn’t exist and the volume was well above average on the selling. The VIX index spiked 10 points up near the 28 level during the selling. Technically plenty of short term damage was done.

The last three days the market has calmed and the index held support, but the big question mark is do we move lower from here? While prophet is not in my job description, we do need to look at the probability of a move lower or a bounce back near the previous high. The play here, if there is one would be on the bounce back towards the high. The break below would likely be a result of news and some frustrated investors. I would not be surprised to see an intraday sell off with buyers stepping in and pushing the index up short term. Don’t get me wrong, there is plenty to be concerned about, but technically speaking the probability of a bounce is higher.

The last thing to note on the chart below is the Fibonacci retracement lines off the off the October low (green). !090 is the 50% retracement level for support along wtih the bottom of the previous trading range (white).

Be patient and let this play out before commiting money at risk. Define your entry, stop and target first.

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