Weekend Overview (April 06, 2012)
Market Thoughts
It’s difficult to do a real “Strategy Session” this weekend because of a few different factors. First, the jobs number wasn’t good and futures are down big time. But traders have three days to digest those numbers, so this situation could change by Monday morning. Does a bad jobs number (and the number of people who have stopped looking for jobs is the big disappointment — it artificially lowers the unemployment figure) put QE3 on the table? The Fed minutes say “no”, but “Helicopter Ben” didn’t get his name because he is into aviation. So we just don’t know how the market will react.
Earnings growth estimates for Q1 are 3.2%. But without Apple, those estimates are at just 1.8%. That’s a swing of about 44% — not an insignificant number. So as earnings are reported, any disappointment is likely to spark selling/profit-taking.
But will the earnings come in below estimates? Only the fools and the liars know for sure.
Alcoa announces earnings on Tuesday. That’s the big one that everyone watches (I see some sources (Yahoo! Finance) that have Monday as the release date. Since I am not on Alcoa’s Board of Directors, I have no edge. I’ll see the report at the same time you do.
Soooo…Monday morning could be a big drop that will give us a buying opportunity. Or not. It’s just impossible to say on Friday as I work on this Weekend Update.
Let’s just manage our risk together on Monday. There is risk of getting hurt on a big decline; and there is risk of missing a big upside move. Let’s find a healthy balance between the two, OK?
S&P SHORT RANGE OSCILLATOR
Here are last week’s oscillator readings.
S&P Oscillator
Monday: +1.7
Tuesday: +2.5
Wednesday: +0.8
Thursday: +1.5
Friday: Holiday
These readings are about as neutral as I have seen in a long time. The only “edge” here is knowing that you have no edge! Neutral readings tell us one thing — that the market is neither overbought nor oversold. Follow the trend!
How to Use the Oscillator Data as a factor in developing your trading plan: The Short Range Oscillator is not as much predictive as it is informative. That is, it informs us when the conditions are ripe for a reversal…when the market is leaning very hard in one direction. Extreme oversold readings reveal that the biggest risk is to the shorts. Shorting during an oversold market environment can be tempting because everything looks so weak, right? But this is actually the time to be covering those shorts — to refrain from selling. Conversely, during a market environment where the oscillator readings are extremely overbought, we should not be buying aggressively. Rather, we should be selling into strength…taking profits as the market becomes more extreme.
Remember that oscillators are useful only at extremes. When an oscillator is not at an extreme, its usefulness is limited.The typical rule is that areading of +5.0 or greater indicates a very overbought market, and a reading below -5.0 indicates a very oversold market. Whileextreme conditions areindicative oftremendous buying or sellingstrength, they also reveal a significant risk that the prevailing extreme in the trend will reverse.
VIDEO ANALYSIS
 |
Chart of the Day AAPL |
 |
Market / Index Overview T2122 T2108 SP-500 MDY IWM DJ-30 DJ-20 LSTR JBHT NDX–X DXY0 UUP GLD |
 |
Sector Spotlight XME XOP DVN COP XLE EP APC XRT XLI EMR TEX XLF BAC JPM GS IYZ AMT VZ T SMH INTC XHB PHM DHI LEN KBH BZH TOL |
|
Stock Watch WYNN LNKD GRPN DANG BIDU QCOR PAY BWLD SXCI NUS HLF V TRIP ALXN LULU DLTR PCLN TSCO |
Have a good weekend. We’ll go get ’em on Monday morning!
–Dan
Free Chart