bullbearinvestor.com

Friday - July 29, 2005

Nasdaq Groups

This is an excerpt from today’s Daily Swing at TDTrader.com. I divide the Nasdaq 100 into five groups to see which are leading and which are lagging. The more the merrier. For example, when the Nasdaq 100 advances without help from Semis or Sofware, I become suspect. When the Nasdaq 100 advances with all groups participating, it shows broad strength and makes the advance more sustainable.

All five groups are in bull mode, but some signs of dissent are starting to emerge. The Semiconductor HOLDRS (SMH) is stalling and the Software HOLDRS (SWH) is looking vulnerable to a minor support break. Should SMH break minor support (see chart below), the Nasdaq 100 would likely retreat back towards 1600. The Biotech HOLDRS (BBH) and Networking iShares (IGN) are holding their own, but looking overbought and ripe for some backing and filling.

The Biotech HOLDRS (BBH) stalled yesterday, but the gap and minor support at 183 have yet to be challenged. The stock is still overbought and at channel resistance. This increases the odds of a sideways move or a correction.

For the Internet HOLDRS (HHH), I have added a gray trendline extending up from the early July low. The May gray trendline defined the upswing and the June gray trendline defined the downswing. The July gray trendline defines the current upswing. Watch this trendline and minor support at 58 for a reversal of this upswing.

The Semiconductor HOLDRS (SMH) is holding up progress. This group helped push the tech sector higher in May and early July. SMH is now consolidating with a flat flag and a break above 38 would signal a continuation higher. Conversely, a break below 36.5 would argue for a pullback towards the June resistance breakout and have consequences for the Nasdaq 100.

The Software HOLDRS (SWH) is also weighing on the Nasdaq 100 as the stock opened strong and finished weak. Weakness can be attributed to CA and MERQ. In addition, SYMC lowered its outlook due to foreign exchange issues and is down sharply after hours. A minor support break at 36.3 would argue for a pullback towards the falling flag breakout and blue trendline (35.5).

The Networking iShares (IGN) managed a small gain. The stock looks overbought, but shows no signs of weakness yet. Watch minor support at 28.5 for the first signs of trouble.

By Arthur B. Hill - Fri 29-Jul-05 at 06:17AM in Industries
Email to friend | Permalink | Home | Comments (0)

Thursday - July 28, 2005

Divide and Conquer

This is an excerpt from today’s Daily Swing at TDTrader.com. I find it quite helpful to divide the S&P 500 into sectors and the Nasdaq into key industry groups. Analysis of these parts tells me which sectors/groups are strong or weak. More important, which sectors or groups are driving the S&P 500 (SPY) and Nasdaq 100 (QQQQ).

As the table above shows, five sectors are bullish and three are neutral/bullish. It is important to see the Consumer Discretionary SPDR (XLY) and Information Technology SPDR (XLK) bullish as strength in these two bodes well for the overall economy. Until some of these sectors turn bearish, the overall outlook for the S&P 500 must be bullish. Tomorrow, I will post an overview of the key Nasdaq 100 industry groups.

The Consumer Discretionary SPDR (XLY) is hugging the upper trendline of the rising price channel. Despite being overbought with waning upside momentum, there are no signs of weakness as the stock crawls higher.

The Consumer Staples SPDR (XLP) remains within a triangle over the last five months and the surge above 23 provides a bullish bias within this neutral pattern. Watch key resistance at 23.5 for a breakout and minor support at 23 to turn the bias bearish.

Despite some hesitation in the Energy SPDR (XLE) over the last five weeks, the overall trend remains bullish. A rising price channel has taken shape since mid May and the upside target is 52. Watch key support at 44.4 for a trend change.

The Finance SPDR (XLF) certainly has become boring over the last two weeks. The stock gapped higher on 14-July and then pulled back into a tight trading range. Watch support at 29.9 for early signs of weakness.

The HealthCare SPDR (XLV) remains one of the strongest as money moves into pharma and biotech. The stock broke resistance at 30.8 and this area turned into support. The May-July period looks like a big consolidation and I expect a breakout at 31.8.

The Industrials SPDR (XLI) broke above minor resistance at 29.9 and the upper triangle trendline for a bullish bias. These breakouts give the stock a bullish bias, but it would take a new reaction high to turn fully bullish. Watch minor support at 29.8 for a failure and to turn the bias bearish.

Perhaps my bearish bias in the Materials SPDR (XLB) was a little premature. After all, the stock formed three white soldiers in May and July to solidify support around 27 (gray ovals) and broke above trendline resistance. There was a gap down on Tuesday, but the stock firmed on Wednesday. A break above 29 would turn this chart bullish and a move below 27.7 would put the bias back with the bears.

After a bullish breakout at 20.5, the Information Technology SPDR (XLK) consolidated with a flat flag. These are bullish continuation patterns and a move above 21.3 would signal a continuation higher. Watch flag support at 20.8 for early signs of weakness.

No change in the Utility SPDR (XLU) as the trend remains clearly bullish and there are no signs of weakness. A lot of black candlesticks have started to appear, but there are no worries as long as minor support at 31 holds.

By Arthur B. Hill - Thu 28-Jul-05 at 07:44AM in Sectors
Email to friend | Permalink | Home | Comments (0)

Wednesday - July 27, 2005

Chart Setups

Here are potentially bullish setups from a recent screen. Standard disclaimers apply: use at your own risk.

CHIR - Chiron can't quite make up its mind. A triangle formed over the last six months. Watch 37.5 up and 34 down.

EDS - Well, what's it going to be boy? EDS surged in May and then consolidated in June and July. A break above the May high (20.1) would be bullish and a break below the June low bearish.

NWAC - This is still a bottom picking play, but signs of a rebound are appearing. The stock recovered after the move below 4, surged on good volume in early July, formed a falling flag and broke the upper trendline with good volume.

NWAC - This is still a bottom picking play, but signs of a rebound are appearing. The stock recovered after the move below 4, surged on good volume in early July, formed a falling flag and broke the upper trendline with good volume.

NYB - After basing around 17.5 for the last seven months, NYB broke resistance with good volume. This bank has a nice dividend and the breakout signals a move to 21.

RSAS - Here is a nifty little trendline break on above average volume. The stock held firm at 11 after the 30-June and 22-July down gaps. A break above 13.5 opens the door to 17-18.

By Arthur B. Hill - Wed 27-Jul-05 at 08:54AM in Stocks
Email to friend | Permalink | Home | Comments (0)

OEX Labors

While the small and mid-cap dominated indices recently moved to new all time highs, the S&P 100 (large-cap) Index is struggling with its June high. The price relative (OEX relative to SML) peaked at the end of April and declined to a new low in July. This chart is similar to the Dow chart posted two days ago.

OEX consolidated around 575 the last two weeks. A move below the consolidation low (570) would be short-term bearish. For the medium-term, a rising wedge is taking shape and a move below 557 would signal a continuation of the March-April decline.

By Arthur B. Hill - Wed 27-Jul-05 at 08:53AM in
Email to friend | Permalink | Home | Comments (0)

Q Moto

Motorola (MOT) unveiled its new Q Smartphone to compete with Blackberry and Treo smartphones. The Moto Q is RAZR thin, runs Windows Mobile 5.0 operating system, features a qwerty key board and is the lightest voice/data device on the market. Look out RIMM and PALM. You know that Nokia (NOK) and Ericsson (ERICY) will also follow one day.

As this chart shows, the day belongs to MOT, which recorded a 52-week high and is challenging resistance from its April 2004 high.

The stock is getting a little frothy with the high volume surge and gap. However, the advance since April is strong and I would expect higher prices. A pullback into the 18-19 support region would offer a better opportunity for new longs.

By Arthur B. Hill - Wed 27-Jul-05 at 08:48AM in Technology
Email to friend | Permalink | Home | Comments (0)

Tuesday - July 26, 2005

Symantec Stalls

Before even starting to comment, Symantec (SYMC) reports earnings on Thursday and this will most likely move the stock. On the price chart, the stock surged in May, consolidated in June and broke resistance in July. Upside volume was strong and broken resistance turned into support around 23.7. The price chart is clearly bullish.

Earnings season is a difficult time for trading, but recent price action suggests a bullish report. A move below 23.5 would negate the breakout and call for a reassessment. For now, the breakout is holding and further strength towards 25-27 is expected.

By Arthur B. Hill - Tue 26-Jul-05 at 07:37AM in Stocks
Email to friend | Permalink | Home | Comments (0)

Vodafone Rings

Vodafone (VOD) formed a classic correction and the recent bounce increases the odds of a bigger breakout. The Dec-Jul decline retraced 62% of the prior advance with a falling price channel. Both the pattern and the retracement are typical for corrections.

After a high volume dip below 24 in early July, the stock recovered with a bounced back above 25. Volume has started to pick up over the last five days and a break above 26 would be most positive. This would signal a continuation of the Jul-Dec advance and target a move above 30.

By Arthur B. Hill - Tue 26-Jul-05 at 07:36AM in Stocks
Email to friend | Permalink | Home | Comments (0)

Japan Consolidates

The iShares MSCI Japan Index (EWJ) is showing signs of life and a break above 10.4 would be most bullish. After the March-April decline, the stock formed a triangle over the last few months. These are neutral consolidations and a breakout is required for the next directional signal. EWJ broke above the upper trendline with a gap, but immediately fell back and we need to see some follow through before turning bullish.

A failure to follow through above 10.4 and a break below 9.9 would be most bearish. This would signal a continuation of the prior decline and target a move to around 9. The Japan ETF is noticeably weaker than the other Asian ETFs. While the Singapore, Malaysia and Hong Kong are breaking out to new highs, Japan was turned back at its June high.

By Arthur B. Hill - Tue 26-Jul-05 at 07:36AM in International
Email to friend | Permalink | Home | Comments (0)

Gold Finds Support

While the Dollar surged in June, gold also surged and this challenged the inverse relationship that held sway over the last few years. However, gold came down quite hard in July and has yet to fully recover. Perhaps this relationship is back on.

The overall pattern looks like a triangle and GLD is bouncing off support from the lower trendline and May low. Upside volume is outpacing downside volume. The early June advance featured above average volume. After the decline below 42.5, upside volume picked up again. This is positive, but GLD needs to break above the early July high (42.7) to solidify this reversal attempt. A failure and break below 41.5 would be most bearish and target a move to 40.

By Arthur B. Hill - Tue 26-Jul-05 at 07:35AM in Gold
Email to friend | Permalink | Home | Comments (0)

Dollar Power

Despite a revaluation of the Yuan, the US Dollar Index remains strong overall and the current trading range looks like a pennant. After an advance, these are bullish continuation patterns and a break above the upper trendline (90.5) would signal a continuation of the advance.

A move below the pennant low (88) would be negative, but not enough to reverse the current uptrend. For that, I would wait for a break below the March trendline and June low. Even though the relationship is under challenge, I would view Dollar strength as bearish for gold.

By Arthur B. Hill - Tue 26-Jul-05 at 07:35AM in US Dollar
Email to friend | Permalink | Home | Comments (0)

Monday - July 25, 2005

Valero Candlesticks

Serious selling pressure hit Valero (VLI) in early July, but the lower channel trendline and recent candlesticks suggest a reversal in the making. Over the last four days, the stock formed a hammer (19-Jul), a white candlestick, an inverted hammer (21-Jul) and a bullish engulfing on Friday. Upside volume was big on Friday and there is not lots of support between 57 and 58.

By Arthur B. Hill - Mon 25-Jul-05 at 09:26AM in Stocks
Email to friend | Permalink | Home | Comments (2)

RIG Breakout

Here is a classic setup. Transocean (RIG) is clearly in an uptrend and consolidated over the last five weeks. The stock closed above its June high on big volume. The pattern looks like a flag and the breakout targets a move to 68-69. Flags are said to fly at half-mast and the flag represents the mid point of the move. Key support is set at 53 and a move below this level would be bearish.

By Arthur B. Hill - Mon 25-Jul-05 at 09:26AM in Stocks
Email to friend | Permalink | Home | Comments (0)

Small Is Beautiful

Once again, small caps are taking the lead as the Russell 2000 ($RUT) broke to a new all time high this month. There is a steep rising price channel working and the bulls have little to fear as long as last week’s lows hold (658). A move below 658 would break the rising price channel and argue for a retracement – but not a moment sooner.

By Arthur B. Hill - Mon 25-Jul-05 at 09:25AM in Indices
Email to friend | Permalink | Home | Comments (0)

Nasdaq and 200-day SMA

Does it make sense to be bearish when the Nasdaq is trading above its RISING 200-day simple moving average? No. The index consolidated around 2050-2100, held the 200-day SMA and broke resistance at 2100 with a bang. The 200-day SMA and consolidation support now mark key support at 2050 and this level holds the key to the current uptrend.

By Arthur B. Hill - Mon 25-Jul-05 at 09:25AM in Indices
Email to friend | Permalink | Home | Comments (0)

Dow Underperforming

It looks like surge and consolidate again for the Dow. Notice that the average also surged and consolidated in May. The breakout at 10600 failed to hold, but the average rebounded in July and is trading above its June high.

Despite this rebound, the Dow is underperforming the other major indices. The S&P SmallCap Index (SML), S&P MidCap Index (MID), S&P 500 and Nasdaq are all trading above their March highs, but the Dow has yet to better this high.

For now, the trendline break and higher high are bullish. As such, I would expect the Dow to work its way towards 10800. The consolidation lows hold the key. A move below 10550 would signal a failure and call for a pullback to the lower trendline extending up from mid April.

By Arthur B. Hill - Mon 25-Jul-05 at 09:24AM in Indices
Email to friend | Permalink | Home | Comments (0)

Wednesday - July 20, 2005

On Vacation

I am on vacation this week and updates will resume on Monday 25-July.

By Arthur B. Hill - Wed 20-Jul-05 at 11:21AM in General
Email to friend | Permalink | Home | Comments (0)

Thursday - July 14, 2005

Imgram and Price/Sales

John Dorfman of Bloomberg, thinks that Ingram Micro and Sonoco look cheap based on price/sales. Not only is IM cheap on price/sales, but the stock is bouncing off support with good volume. The first gap at the end of April failed, but the stock held support in mid June. The late June bounce off support occurred on good volume and this stock looks headed higher. Support from the April-June lows now holds the key.

By Arthur B. Hill - Thu 14-Jul-05 at 10:46AM in Stocks
Email to friend | Permalink | Home | Comments (0)

Broadband Power Line

Speaking of Google, the company just made an investment in Current Communications. As the name suggest, this company offers broadband over power lines (BPL). Cinergy, ConEd and Duke Power are also looking into BPL. As if the baby bells (SBC, VZ, BLS) didn’t have enough trouble from the Cable Companies (CMCSA, CVC). Should the electric utility players roll out BPL in mass, look for even cheaper broadband and thinner margins at the regional bells.

By Arthur B. Hill - Thu 14-Jul-05 at 10:46AM in Industries
Email to friend | Permalink | Home | Comments (0)

Ga ga over Google

Lehman is raising its target on Google to $350. Lehman thinks that the paid search portion of the business will fuel higher than expected revenue growth. On the price chart, this means a run to the upper trendline of the rising price channel. This is definitely doable as long as 288 holds.

By Arthur B. Hill - Thu 14-Jul-05 at 10:45AM in Stocks
Email to friend | Permalink | Home | Comments (0)

Wednesday - July 13, 2005

Notable Charts

ADLR - After a long consolidation, Adolor broke resistance with a four day surge on big volume. The first target is 15 and a move below 9 would be bearish.

ATK - Alliance Tech Systems broke triangle resistance over the last two weeks and shows good relative strength.

CDN - Cadence Design Sys broke consolidation resistance by advancing for 10 days straight.

CTB - Cooper Tire is at its make-or-break level. The stock remains in a falling price channel (blue trendlines) and the current advance retraced 50-62% of the prior decline. Either the stock breaks the June high and moves to 23-24 or break the June low and moves to new lows.

FINL - Finish Line retraced 62% of the April decline with a move back to 21. This level marked resistance and the stock broke support at 19 with increasing volume. The next target is support around 15. Watch for a move above 19.5 to negate the signal.

HD - Retail is hot and Home Depot broke consolidation resistance with a surge in volume. The next target is the November high around 44 and a move below 38 would be bearish.

JDSU - Can JDS Uniphase do it? The stock surged in May with good volume and then consolidated in June/July. Volume perked up again yesterday and a break above 1.8 opens the door to 3.2.

NOVL - I have been following Novell since the inverse head-and-shoulders started forming. The stock failed to hold the first resistance breakout, but managed to firm after the late May gap down. The stock consolidated just above 6 and moved higher on good volume the last two days. The first target is 7.7 and a move below 5.9 would be bearish.

SBC - SBC Corp is part of a lowly telecoms group that is about to get broadband competition from the electric utilities. The stock consolidated from mid March to now and needs to break above 24.5 to turn the price chart bullish. Notice that On Balance Volume already broke to new highs as upside volume outpaces downside volume.

SKWY - Skywest is locked in a triangle and the trading range narrowed over the last two months. Watch 19.5 up and 17.5 down.

TLCV - For the second time in three months, TLC Vision is bouncing off support at 8 with good volume. The key is follow through and the stock needs to move above 9 to complete a breakout and trend reversal.

By Arthur B. Hill - Wed 13-Jul-05 at 10:44AM in Stocks
Email to friend | Permalink | Home | Comments (0)

Thursday - July 07, 2005

Small Caps Continue to Rule

Large-caps continue to underperform small-caps. The S&P 100 held up pretty well from October to April. However, when the rally began in May, it was all small as the S&P SmallCap Index left OEX in the dust (blue line). OEX broke rising wedge support and formed a flag over the last seven days. A break below flag support opens the door to the April lows - at least.

By Arthur B. Hill - Thu 07-Jul-05 at 11:29AM in Indices
Email to friend | Permalink | Home | Comments (0)

DIA Volume

Downside volume has been swamping upside volume in DIA over the last two weeks.

By Arthur B. Hill - Thu 07-Jul-05 at 11:29AM in Indices
Email to friend | Permalink | Home | Comments (0)

Dow In Trouble

The Dow looks in trouble. The Average retraced 62% of its prior decline with a rising price channel (magenta trendlines). There was a sharp decline in late June and then a consolidation near trendline support. Even though the trendline break is a result of the London events, the groundwork was already laid and the next target is the lower (blue) trendline around 9700 by early August.

By Arthur B. Hill - Thu 07-Jul-05 at 11:28AM in Indices
Email to friend | Permalink | Home | Comments (0)

Transports Leading Lower

You can also see that the Dow Transports started moving ahead of the Dow Industrials. While the broader market held firm or even moved higher in June, the Dow Transports fell apart and broke trendline support in late June. The Average would have to move above the mid June high to undo the technical damage. The Dow Transports is targeted to around 3100 by early August.

By Arthur B. Hill - Thu 07-Jul-05 at 11:25AM in Indices
Email to friend | Permalink | Home | Comments (0)

Wednesday - July 06, 2005

Notable Charts

AMD - Advanced Micro Devices surged in May and consolidated in June. The consolidation looks like a big flag and a break above 18.5 would be bullish. Conversely, a break below 16.5 would be bearish.

AW - Allied Waste is showing some good relative strength in June and July. This is a turnaround play with positive insider buying. The chart sports a bullish bias and a move below 7.5 would be bearish.

CKP - Checkpoint Systems broke triangle (magenta trendlines) and flag (gray oval) resistance at 18. Volume could have been higher though. Watch support at 17 for a failure.

HAS - Hasbro broke flag resistance with a surge in volume. Watch the June lows (19.8) for a failure.

JCOM - J2 Global Comm dropped sharply in March, consolidated and the broke consolidation support in June. This signals a continuation lower with a dowside target below 30. Watch the mid June highs (36.1) for proof otherwise.

NSIT - Insight shows good relative strength with a pennant breakout around 20. Watch the June lows for a failure and trend reversal.

By Arthur B. Hill - Wed 06-Jul-05 at 11:17AM in Stocks
Email to friend | Permalink | Home | Comments (0)